1967 (9) TMI 134 - SC - VAT and Sales Tax

Whether the provisions of sub-section (3) of section 11A of the C. P. and Berar Sales Tax Act, 1947 contravene Article 14 of the Constitution in so far as they affect proceedings under sub-section (2) of section 11 of the Act? Held that - Appeal dismissed. From a plain reading of section 11(2) independently of section 11A(3). Neither section 11(2) nor section 11A(3) is violative of Article 14. A notice under section 11(2) is issued in a pending proceeding, whereas a notice under section 11A(1) initiates a new proceeding. There is a reasonable basis for classification and differential treatment of the notices under sections 11(2) and 11A(1) for the purposes of limitation.

Summary

Issues:
Validity of provisions of sub-section (3) of section 11A of the C. P. and Berar Sales Tax Act, 1947 in relation to Article 14 of the Constitution.

Detailed Analysis:

1. Background and Facts:
The appellant, a registered dealer, carried on the business of winning and selling manganese ore. The appellant filed quarterly returns showing nil taxable turnovers for the period in question. The Assistant Commissioner of Sales Tax issued notices to the appellant under section 11(2) and section 10(3) to produce evidence in support of its returns.

2. Contentions and Arguments:
The appellant contended that the notices were barred by time and challenged the validity of the newly introduced section 11A(3). The appellant argued that the differentiation between dealers who submit returns within the prescribed time and those who do not is unjustified and discriminatory. It was claimed that the classification lacks a reasonable nexus with the Act's objective and treats law-abiding dealers unfavorably.

3. Judicial Decisions:
The Full Bench of the Bombay High Court and subsequently the Division Bench considered the contentions. The Full Bench held that the impugned sub-section did not contravene the equality clause. The Division Bench partially allowed the writ petition, quashing notices for certain quarters of the year 1953.

4. Supreme Court Ruling:
The Supreme Court, in Ghanshyamdas's case, overruled the decision of the Bombay High Court and clarified that section 11(2) deals with pending proceedings, while section 11A concerns matters not pending. The Court held that the two sections cover different fields and do not overlap. It was emphasized that a case under section 11(2) can never fall under section 11A.

5. Classification and Differential Treatment:
The Court highlighted that generally, law prescribes limitations for initiating proceedings, not for disposing of pending proceedings. It was concluded that there is no discrimination between cases falling under section 11(2) and those under section 11A. The Court found no violation of Article 14 in sections 11(2), 11A(3), and 11(4).

6. Final Judgment:
The appeal was dismissed with costs. The Court concurred that there is no limitation for issuing a notice under section 11(2) and that the differential treatment between notices under sections 11(2) and 11A(1) for limitation purposes is reasonable. The Court upheld the validity of the relevant provisions of the Sales Tax Act.

7. Conclusion:
The Supreme Court's judgment clarified the distinction between sections 11(2) and 11A, emphasizing their different scopes and applications. It affirmed the constitutionality of the provisions in question and upheld the differential treatment for limitation purposes. The ruling provides clarity on the legal framework governing sales tax assessments and proceedings under the Act.