1968 (10) TMI 89 - SC - VAT and Sales Tax

Tax liability - Held that - Appeal dismissed. The tax is at the same rate and therefore the tax cannot be said to be higher in the case of imported goods. It may be that when the rate is applied the resulting tax is somewhat higher but that does not offend against the equality contemplated by article 304. That is the consequence of ad valorem tax being levied at a particular rate. So long as the rate is the same article 304 is satisfied. Even in the case of local manufacturers if their cost of production varies, the net tax collected will be more or less in some cases but that does not create any inequality because inequality is not the result of the tax but results from the cost of production of the goods or the cost of their importation. This ground, therefore, has also no substance. Thus it necessary to set down here the provisions of the Haryana Amendment Act because they follow the scheme of the Punjab Amendment Act in substance and what we have said in regard to the Punjab Amending Act applies mutatis mutandis to Haryana Amendment Act also.

Issues Involved:
1. Validity of the Punjab General Sales Tax (Amendment and Validation) Act, 1967.
2. Validity of the Punjab Sales Tax (Haryana Amendment and Validation) Act, 1967.
3. Conflict with Section 15 of the Central Sales Tax Act.
4. Violation of Articles 14 and 19 of the Constitution.
5. Retrospective application of the amendments.
6. Alleged discrimination between different categories of dealers.
7. Delegated legislation and its limits.
8. Discrimination between imported and local goods.

Issue-Wise Detailed Analysis:

1. Validity of the Punjab General Sales Tax (Amendment and Validation) Act, 1967:
The petitioners challenged the validity of the Punjab General Sales Tax (Amendment and Validation) Act, 1967, on the grounds of conflict with Section 15 of the Central Sales Tax Act and violation of constitutional provisions. The court examined the amendments, particularly the changes to Section 5 and the introduction of Section 11AA, concluding that the amendments effectively addressed the issues identified in the Bhawani Cotton Mills case. The court found that the amendments clarified the stage at which the tax is to be levied and provided sufficient mechanisms for dealers to determine their tax liability, thus aligning the state law with the Central Act.

2. Validity of the Punjab Sales Tax (Haryana Amendment and Validation) Act, 1967:
Similar challenges were raised against the Haryana Amendment Act. The court noted that the Haryana amendments followed the scheme of the Punjab amendments and applied the same reasoning to uphold their validity. The amendments were found to be in compliance with the Central Act and did not violate constitutional provisions.

3. Conflict with Section 15 of the Central Sales Tax Act:
Section 15 of the Central Sales Tax Act imposes restrictions on state sales tax laws concerning declared goods. The court found that the amendments to the Punjab and Haryana Acts addressed the issues of multiple-stage taxation and provided clear guidelines for determining the taxable stage, thereby resolving the conflict with Section 15.

4. Violation of Articles 14 and 19 of the Constitution:
The petitioners argued that the amendments violated the equality clause (Article 14) and the right to trade (Article 19). The court held that the amendments did not create any discrimination among dealers and provided equal opportunities for all dealers to seek reassessment or refunds. The court also found that the amendments did not impose unreasonable restrictions on the right to trade.

5. Retrospective Application of the Amendments:
The court addressed concerns about the retrospective application of the amendments, noting that the amendments provided mechanisms for dealers to seek reassessment and refunds for past transactions. The court found that the retrospective application was within the legislative competence of the Punjab and Haryana legislatures and did not violate any legal principles.

6. Alleged Discrimination Between Different Categories of Dealers:
The petitioners argued that the amendments discriminated between different categories of dealers. The court found that the amendments provided equal opportunities for all dealers to seek reassessment or refunds and did not create any discrimination. The court emphasized that the intention was to give dealers the option to decide whether to seek reassessment or accept the existing assessment.

7. Delegated Legislation and Its Limits:
The petitioners contended that the amendments involved unguided delegation of legislative power to administrative authorities. The court held that the Central Act itself allowed the state legislatures to choose the tax rate within a specified limit and that the amendments did not involve any unconstitutional delegation of legislative power.

8. Discrimination Between Imported and Local Goods:
The petitioners argued that the amendments discriminated between imported and local goods, violating Article 304 of the Constitution. The court found that the tax rate was the same for both imported and local goods and that any difference in the resulting tax was due to the cost of production or importation, not the tax rate itself. The court concluded that the amendments did not violate the equality clause or Article 304.

Conclusion:
The court dismissed the petitions, upholding the validity of the Punjab General Sales Tax (Amendment and Validation) Act, 1967, and the Punjab Sales Tax (Haryana Amendment and Validation) Act, 1967. The court found that the amendments addressed the issues identified in the Bhawani Cotton Mills case, complied with Section 15 of the Central Sales Tax Act, and did not violate constitutional provisions. The petitions were dismissed with costs, and the court awarded one set of hearing fees.

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