1979 (5) TMI 134 - SC - VAT and Sales Tax

Whether any of the provisions in sections 33(6) and 35 of the Bombay Sales Tax Act, 1959 which are in pari materia with sections 14(6) and 15, respectively, of the Bombay Sales Tax Act, 1953 offend article 14 of the Constitution and, as such, are void? Held that - Appeal allowed. Section 33(6) of the 1959 Act and section 14(6) of the 1953 Act do not violate article 14 of the Constitution and are valid.

Summary

Issues Involved:
1. Constitutionality of Sections 33(6) and 35 of the Bombay Sales Tax Act, 1959, and Sections 14(6) and 15 of the Bombay Sales Tax Act, 1953, under Article 14 of the Constitution.
2. Overlap and arbitrariness between Sections 33(6) and 35 of the 1959 Act.
3. Procedural fairness and limitation periods in Sections 33(6) and 35 of the 1959 Act.

Detailed Analysis:

1. Constitutionality of Sections 33(6) and 35 of the Bombay Sales Tax Act, 1959, and Sections 14(6) and 15 of the Bombay Sales Tax Act, 1953, under Article 14 of the Constitution:
The Supreme Court examined whether Sections 33(6) and 35 of the Bombay Sales Tax Act, 1959, and Sections 14(6) and 15 of the Bombay Sales Tax Act, 1953, violate Article 14 of the Constitution. The High Courts and Tribunals had previously ruled that Section 33(6) of the 1959 Act and Section 14(6) of the 1953 Act were violative of Article 14 due to their arbitrary nature and lack of limitation periods.

2. Overlap and arbitrariness between Sections 33(6) and 35 of the 1959 Act:
The Gujarat High Court held that Sections 33(6) and 35 overlap, allowing the assessing authority to arbitrarily choose between them, making Section 33(6) more onerous due to the absence of a limitation period. The Supreme Court, however, found that Section 33(6) specifically targets unregistered dealers who evade tax by not registering and not paying tax, while Section 35 deals with general cases of escaped assessment or under-assessment. Thus, there is no overlap, and Section 33(6) does not apply to registered dealers.

3. Procedural fairness and limitation periods in Sections 33(6) and 35 of the 1959 Act:
The Supreme Court noted that the lack of a limitation period in Section 33(6) is justified due to the clandestine nature of tax evasion by unregistered dealers, making it difficult to detect within a fixed period. The Court emphasized that the assessment under Section 33(6) must be based on "best judgment" but not arbitrarily, ensuring procedural fairness. The Court found that the differential treatment of unregistered dealers under Section 33(6) is based on rational criteria and has a direct nexus with the objective of preventing tax evasion.

Conclusion:
The Supreme Court concluded that Sections 33(6) of the 1959 Act and 14(6) of the 1953 Act do not violate Article 14 and are valid. The Court found that these sections are special provisions for unregistered dealers who evade tax and are not subject to the general provisions of Section 35. The Court allowed the appeals, set aside the judgments of the High Courts and the Maharashtra Sales Tax Tribunal, and remitted the cases back for further proceedings. The respondents were given the liberty to file or refile appeals against the assessment orders, with the expectation that any delay would be condoned due to the ongoing proceedings. The parties were directed to bear their own costs.