1967 (9) TMI 132 - SC - VAT and Sales Tax

Whether section 11(4)(a) of the Central Provinces and Berar Sales Tax Act, 1947 is ultra vires Article 14 of the Constitution and consequently the notices impugned in the writ petitions from which these appeals arise are liable to be struck down and the respondents restrained from levying sales tax on the appellants for the period May 1, 1952 to October 31, 1955? Held that - Appeal partly allowed. The notices issued on July 8, 1959, under section 11(4) are valid in respect of the entire period from Ist November, 1952 to 31st October, 1955. As regards the alternative contention of the respondent that the notices issued in 1955 validly initiated proceedings under section 11(4) for the period from 1st February, 1953 to 31st October, 1955, we are glad to find that the majority has accepted this contention. The irregularities, if any, in the notices do not invalidate them. However, for the reasons already mentioned, we are of opinion that the impugned notices issued on July 8, 1959, are valid.

Issues Involved:
1. Constitutionality of Section 11(4)(a) of the Central Provinces and Berar Sales Tax Act, 1947, under Article 14 of the Constitution.
2. Validity of notices issued under Sections 10(3), 11(4)(a), and 11A(1) of the Act.
3. Period of limitation for issuing notices under Section 11(4)(a).

Issue-Wise Detailed Analysis:

1. Constitutionality of Section 11(4)(a) under Article 14:
The principal question was whether Section 11(4)(a) of the Act is ultra vires Article 14 of the Constitution, thereby making the notices issued under it invalid. The appellants argued that Section 11(4)(a) discriminates against registered dealers by not providing a period of limitation, unlike Section 11A(1), which prescribes a three-year limitation period for reassessment. This, they claimed, violated the principle of equal protection under the law.

The court noted that Section 11(4)(a) applies to registered dealers who fail to submit returns, while Section 11A(1) deals with both registered and unregistered dealers whose turnovers have escaped assessment. The court held that the classification between registered and unregistered dealers is reasonable because registered dealers have certain advantages under the Act, such as exemptions from tax on specific sales. Therefore, the differential treatment does not violate Article 14.

However, the court found that Section 11(4)(a) became discriminatory due to the inclusion of Section 11A(3), which excluded the application of the limitation period to proceedings under Section 11(4)(a). Consequently, Section 11(4)(a) was struck down as being violative of Article 14.

2. Validity of Notices Issued:
The appellants challenged the validity of the notices issued in 1955 and 1959 under Sections 10(3), 11(4)(a), and 11A(1). They argued that the notices were invalid as they did not comply with the prescribed period of limitation and were issued for incorrect assessment years.

The court held that the notices issued in 1955 were valid for the period from February 1, 1953, to October 31, 1955. The court also noted that the defects in the notices, such as incorrect assessment years and the short notice period, did not prejudice the appellants. The court emphasized that the notices should be read together, and when considered collectively, they provided the appellants with a reasonable opportunity to be heard.

3. Period of Limitation for Issuing Notices under Section 11(4)(a):
The court examined whether the period of limitation prescribed under Section 11A(1) should apply to notices issued under Section 11(4)(a). The court concluded that Section 11(4)(a) does not prescribe a period of limitation for issuing notices. The court referred to the retrospective application of Section 11A(3), which explicitly states that the limitation period under Section 11A(1) does not apply to proceedings under Section 11.

The court also addressed the argument that the absence of a limitation period for Section 11(4)(a) is discriminatory. The court held that the differential treatment is justified due to the statutory obligations and advantages conferred on registered dealers. Therefore, the absence of a limitation period for Section 11(4)(a) does not violate Article 14.

Separate Judgments:
The judgment was delivered by two sets of judges. The majority judgment, delivered by Hegde, J., concluded that Section 11(4)(a) is discriminatory and struck it down. The separate judgment by Bachawat, J., upheld the validity of Section 11(4)(a) and the notices issued under it, emphasizing that the classification between registered and unregistered dealers is reasonable and does not violate Article 14.

Conclusion:
1. Section 11(4)(a) was struck down as discriminatory due to the inclusion of Section 11A(3).
2. Notices issued in 1955 were valid for the period from February 1, 1953, to October 31, 1955.
3. The absence of a limitation period for Section 11(4)(a) was justified due to the differential treatment of registered dealers.

The appeals were partly allowed concerning the turnover from May 1, 1952, to January 31, 1953, and dismissed in other respects. No order as to costs was made.

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