1962 (10) TMI 42 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the notification dated 5th August 1954.
2. Whether the Punjab General Sales Tax Act, 1948, was ultra vires due to delegation of legislative powers.
3. Impact of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952, on the Punjab General Sales Tax Act, 1948.
4. Severability of Section 5 from the rest of the Punjab General Sales Tax Act, 1948.

Issue-wise Detailed Analysis:

1. Validity of the Notification Dated 5th August 1954:
The primary issue was whether the notification issued by the Punjab Government on 5th August 1954, which abolished the sales tax exemption for certain edible oils produced in ghanis run by mechanical processes, was intra vires. The court found that the notification, which imposed a tax on edible oils declared essential for the life of the community, was invalid as it had not received the President's assent as required under Section 3 of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952. The court answered in the negative, stating that the notification did not constitute law made by the Legislature of the State.

2. Whether the Punjab General Sales Tax Act, 1948, was Ultra Vires Due to Delegation of Legislative Powers:
The petitioners contended that the East Punjab General Sales Tax Act, 1948, was ultra vires from its inception because it delegated unfettered legislative powers to the executive, which was unconstitutional. The court noted that Section 5 of the Act gave unlimited power to the executive to levy sales tax at any rate, which was considered ultra vires and unconstitutional as per the Supreme Court's ruling in the Delhi Laws Act case. The Act was deemed invalid until it was amended by Punjab Act No. 19 of 1952, which limited the rate of tax to not exceed two naye paise in a rupee.

3. Impact of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952, on the Punjab General Sales Tax Act, 1948:
The court examined whether the provisions of the Central Act No. 52 of 1952, which required the President's assent for any state law imposing a tax on essential goods, applied to the Punjab General Sales Tax Act, 1948. It was determined that since the Act was amended in 1952, after the Central Act came into force, any notification issued under the amended Act would require the President's assent. The impugned notification of 5th August 1954 did not have such assent, rendering it invalid.

4. Severability of Section 5 from the Rest of the Punjab General Sales Tax Act, 1948:
The court considered whether Section 5, the charging section of the Act, could be severed from the rest of the Act. It was concluded that Section 5 was the kernel of the entire enactment, and without it, the remaining provisions would become inchoate or ineffective. The court applied the tests for severability laid down by the Supreme Court in R. M. D. Chamarbaugwalla v. Union of India and found that the invalidity of Section 5 rendered the entire Act ineffective until the defect was remedied by the 1952 amendment.

Conclusion:
The court concluded that the notification dated 5th August 1954 was invalid and ultra vires. The Punjab General Sales Tax Act, 1948, was initially unconstitutional due to the delegation of legislative powers to the executive, and the Act only acquired validity after the 1952 amendment. The court answered the reference in the negative, indicating that the impugned notification could not be justified without the President's assent as required by the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952.

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