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1973 (4) TMI 77 - SC - VAT and Sales TaxWhether a State Legislature has the legislative competence to pass a law for the deposit of that amount in the Government treasury? Held that - Appeal dismissed. A trust is an obligation annexed to the ownership of property and arises out of confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner (see section 3 of the Indian Trusts Act, 1882). It is plain that a law compelling deposit of money wrongly realised as sales tax cannot in pith and sub- stance be considered to be a law relating to trusts. The mere use of the word trust in sub-section (2) of section 29-A would not make the impugned law to be one relating to trusts.
Issues:
1. Constitutionality of section 29-A of the U.P. Sales Tax Act and section 17 of the amending Act. 2. Legislative competence of the State Legislature to pass a law for the deposit of wrongly realized sales tax amount in the Government treasury. 3. Interpretation of entries in List II and List III of the Seventh Schedule to the Constitution in relation to the impugned law. Detailed Analysis: 1. The judgment of the Supreme Court dealt with the constitutionality of section 29-A of the U.P. Sales Tax Act and section 17 of the amending Act. The Allahabad High Court had held these provisions to be unconstitutional. The court referred to previous decisions, including Commissioner of Sales Tax v. Ganga Sugar Corporation Ltd., to analyze the legality of similar provisions. The court examined the amendments made by the amending Act, particularly the substitution of section 29-A, and the transitional provisions contained in section 17. It was argued that if section 15 of the amending Act was unconstitutional, section 17 would also be invalid as it was interlinked with section 15. The court upheld the High Court's view on this matter and dismissed the appeal challenging the constitutionality of these provisions. 2. The issue of legislative competence of the State Legislature to pass a law for the deposit of wrongly realized sales tax amount in the Government treasury was thoroughly discussed. The court analyzed the provisions of section 29-A, which mandated dealers to deposit such amounts, even if not due as tax, into the Government treasury. The court emphasized that the wrongly realized amount did not fall under the purview of entry 54 in List II of the Seventh Schedule to the Constitution, which pertains to taxes on sale or purchase of goods. The court cited precedents, including Abdul Quader's case and Ashoka Marketing Ltd. v. State of Bihar, to reject the argument that such provisions were incidental to tax collection legitimately due under the law. The court concluded that the impugned law could not be justified under any entry in List II or List III of the Constitution. 3. The interpretation of entries in List II and List III of the Seventh Schedule to the Constitution in relation to the impugned law was a key aspect of the judgment. The court rejected arguments that the impugned law could be covered under entry 7 in List III related to contracts or entry 10 in List III related to trusts. The court emphasized that the impugned law compelling the deposit of wrongly realized sales tax amount did not relate to trusts as defined in the Indian Trusts Act, 1882. The court cited Ashoka Marketing Ltd. to reject the argument that the impugned law could be justified under entry 7 in List III. Ultimately, the court dismissed the appeal, upholding the unconstitutionality of the provisions in question and emphasizing that they did not fall under any relevant entry in the Constitution. In conclusion, the Supreme Court's judgment addressed the constitutionality of section 29-A of the U.P. Sales Tax Act and section 17 of the amending Act, analyzed the legislative competence of the State Legislature, and interpreted entries in List II and List III of the Seventh Schedule to the Constitution in relation to the impugned law. The court upheld the unconstitutionality of the provisions and dismissed the appeal, emphasizing that the impugned law did not fall under any relevant constitutional entry.
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