1954 (4) TMI 31 - HC - VAT and Sales Tax

Summary

Issues:
Validity of the Pepsu General Sales Tax Ordinance, 2006 Bk.
Interpretation of the Covenant entered into by the Rulers of former Covenanting States.
Sovereignty of the Rulers in relation to their former States.
Effect of the Supplementary Covenant on the Original Covenant.
Authority to amend or alter the Original Covenant.
Validity of the Ordinance under the Constitution of India.

Analysis:
The judgment concerns a petition under Article 226 challenging the validity of the Pepsu General Sales Tax Ordinance, 2006 Bk. The petitioner argues that the Ordinance, promulgated under the Covenant entered into by the Rulers, is no longer valid as its six-month period expired. However, the court examines the history of the Covenant, noting that the Constitution of India adopted in 1950 saved existing laws, including the Ordinance in question, making it valid under Article 372 of the Constitution. The court concludes that the petitioner's contention lacks validity based on this analysis (Pirthi Singh and Others v. State of Pepsu and Others).

The judgment delves into the interpretation of the Covenant entered into by the Rulers of the former Covenanting States. It highlights that the Covenant resulted in a complete surrender of sovereignty by the Rulers to the new State, vesting all power and authority in the new State as provided by the Covenant. The court emphasizes that sovereignty is indivisible, and the Rulers ceded their sovereignty fully to the new State, leaving no room for shared sovereignty or retention of sovereignty by the former Rulers.

The court analyzes the effect of the Supplementary Covenant on the Original Covenant. It opines that the Supplementary Covenant could not alter the powers granted under the Original Covenant, particularly the authority to make Ordinances. Despite differing views in previous cases, the court, following precedent, holds that the Supplementary Covenant validly amended the Original Covenant, thereby upholding the validity of the Ordinance until the enforcement of the Constitution of India in the State.

Regarding the authority to amend or alter the Original Covenant, the judgment discusses conflicting opinions from previous cases. While some opinions suggested that the Rulers retained the power to modify the Covenant, the court asserts that once sovereignty was surrendered, the former Sovereigns could not regain that sovereignty at will. The court aligns with the view that the Supplementary Covenant validly amended the Original Covenant, settling the matter conclusively.

In conclusion, the court dismisses the petition challenging the Ordinance's validity, citing the precedent and legal reasoning discussed. The judgment affirms the continued validity of the Ordinance under the Constitution of India, emphasizing the comprehensive surrender of sovereignty by the former Rulers to the new State under the Covenant.