1967 (9) TMI 118 - SC - VAT and Sales Tax

Constitutional validity of section 12A(4) of the Bombay Sales Tax Act, 1946 - Held that - Appeal allowed. The order of the High Court is set aside and a writ of mandamus will be issued to the respondents to comply with the refund orders set out in the petition filed before the High Court and to refrain from proceeding against the appellants under section 12A(4).

Summary

Issues Involved:
1. Constitutional validity of Section 12A(4) of the Bombay Sales Tax Act, 1946.
2. Compliance with Article 19(1)(f) of the Constitution.
3. Procedural fairness and natural justice in the forfeiture process.

Issue-Wise Detailed Analysis:

1. Constitutional Validity of Section 12A(4) of the Bombay Sales Tax Act, 1946:
The primary issue in this appeal is the constitutional validity of Section 12A(4) of the Bombay Sales Tax Act, 1946. The appellants challenged this provision, arguing that it is void as it violates Article 19(1)(f) of the Constitution. The Court agreed with the appellants, stating that Section 12A(4) is unconstitutional because it infringes upon the right to hold property guaranteed under Article 19(1)(f). The Court did not find it necessary to examine other contentions raised in the appeal due to this conclusion.

2. Compliance with Article 19(1)(f) of the Constitution:
The Court emphasized that the appellants' sales outside the State of Bombay were protected by Article 286(1)(a) of the Constitution and were not subject to tax under the Act. Despite this, the Sales Tax Officer assessed and levied tax on these sales. The Court found that Section 12A(4) of the Act, which mandates forfeiture of any amount collected by a dealer by way of tax in excess of the amount payable under the Act, prima facie infringes Article 19(1)(f). The Court held that penalizing a person without a proper enquiry violates the principles of natural justice, which are integral to the concept of reasonable restrictions under Article 19(5).

3. Procedural Fairness and Natural Justice in the Forfeiture Process:
The Court highlighted that Section 12A(4) does not provide any procedure for ascertaining whether the dealer had indeed collected any amount by way of tax from purchasers outside the State, nor does it provide for any enquiry to determine the amount collected. The Court noted that the Act is silent on the machinery and procedure to be followed in determining contraventions of Section 12A(1) and (2). This lack of procedural safeguards renders the provision arbitrary and unreasonable. The Court stated that the power conferred under Section 12A(4) is "unguided, uncanalised and uncontrolled," making it an arbitrary power that cannot be considered reasonable.

Conclusion:
For the reasons mentioned above, the Supreme Court allowed the appeal, set aside the order of the High Court, and issued a writ of mandamus directing the respondents to comply with the refund orders and refrain from proceeding against the appellants under Section 12A(4). The appellants were also awarded costs in both the Supreme Court and the High Court.