1956 (7) TMI 46 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Section 7(4a) of the Bengal Finance (Sales Tax) Act, 1941, under Article 19(1)(g) of the Constitution.
2. Interpretation and applicability of the term "payable" in Section 7(4a).
3. Compliance of Rule 6 of the Bengal Sales Tax Rules, 1941, with the principles of natural justice.

Issue-wise Detailed Analysis:

1. Validity of Section 7(4a) under Article 19(1)(g) of the Constitution:
The petitioner contended that Section 7(4a) of the Bengal Finance (Sales Tax) Act, 1941, infringes Article 19(1)(g) of the Constitution by imposing unreasonable restrictions on the right to carry on business. The court held that Section 7(4a) does not confer unfettered and arbitrary power upon the Commissioner. The Commissioner can only demand security "for good or sufficient reasons," which are objective and justiciable. Additionally, the security demanded must be "reasonable." The court explained that the power to levy a tax includes the power to impose reasonable safeguards in collecting it. Therefore, Section 7(4a) imposes reasonable restrictions and does not contravene Article 19(1)(g) of the Constitution.

2. Interpretation and Applicability of the Term "Payable" in Section 7(4a):
The petitioner argued that security could only be demanded for the payment of tax "payable" under the Act, which could only occur after assessment and service of notice. The court rejected this argument, stating that the word "payable" in Section 7(4a) must mean "that will become payable." The court clarified that at the time of applying for registration, there can be no assessment or notice of demand. The court distinguished this case from the Recols (India) Ltd. case, emphasizing that the term "payable" should not be construed to mean only after assessment and service of notice, as it would render the section unworkable.

3. Compliance of Rule 6 with the Principles of Natural Justice:
The petitioner contended that Rule 6 of the Bengal Sales Tax Rules, 1941, violates the principles of natural justice by allowing ex-parte enquiries. The court held that the enquiry under Rule 6 does not necessarily violate natural justice. The authorities must verify the information provided by the dealer, and while it may not be feasible to notify the dealer at every stage, the dealer must be given an opportunity to respond to any adverse findings. The court noted that in this case, the petitioner was present during a significant part of the enquiry and had signed the report. The court concluded that Rule 6, when construed to provide the dealer an opportunity to explain any adverse findings, does not violate natural justice.

Conclusion:
The court dismissed the petition, holding that all the points raised by the petitioner failed. The Rule was discharged, all interim orders vacated, and no order as to costs was made. The application was dismissed.