1964 (2) TMI 76 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of Notification No. S.T./117/X-293-1948 dated 8th June 1948.
2. Retrospective effect of the U.P. Sales Tax (Amendment) Act (No. 40 of 1952).
3. Compliance with Article 286(3) of the Constitution regarding the imposition of tax on essential goods.
4. Validity of assessments and demand notices issued based on the notification.
5. Impact of the dissolution of the partnership on the assessment.

Issue-wise Detailed Analysis:

1. Validity of Notification No. S.T./117/X-293-1948 dated 8th June 1948:
The petitioner challenged the validity of the notification on the grounds that it specified the point of taxation without being prescribed by a rule under the U.P. Sales Tax Act. The court noted that Section 3-A initially required the single point to be determined by a rule. However, the State Government issued the notification directly specifying the point of taxation. The court acknowledged that if the matter had stood there, the notification would have been invalid. However, the U.P. Sales Tax (Amendment) Act (No. 40 of 1952) retrospectively amended Section 3-A to allow the State Government to specify the point of taxation by notification. Consequently, the court held that the notification was valid and must be deemed to have always been valid.

2. Retrospective Effect of the U.P. Sales Tax (Amendment) Act (No. 40 of 1952):
The Amendment Act substituted the words "as the State Government may specify" for "as may be prescribed" in Section 3-A, with retrospective effect. The court emphasized that the legal fiction created by the amendment meant that the notification issued in 1948 must be treated as if it was validly issued under the amended provision. The court cited Lord Asquith's statement in East End Dwellings Co. Ltd. v. Finsbury Borough Council, emphasizing that the consequences of the legal fiction must be treated as real. Therefore, the notification was validated retrospectively.

3. Compliance with Article 286(3) of the Constitution:
The petitioner argued that the amendment was invalid as it did not receive the President's assent under Article 286(3) of the Constitution, which was required for laws imposing tax on essential goods. The court clarified that Section 3-A did not impose or authorize the imposition of sales tax; it was merely an ancillary provision to effectuate the Act's purpose. The actual imposition of tax was under Section 3, the charging section. Therefore, the amendment was not hit by Article 286(3).

4. Validity of Assessments and Demand Notices:
The assessments and demand notices were challenged based on the invalidity of the notification. Since the court upheld the validity of the notification retrospectively, it also validated the assessments and demand notices issued based on it. The court rejected the petitioner's contention that the assessments and demand notices were invalid.

5. Impact of the Dissolution of the Partnership on the Assessment:
The petitioner contended that the partnership's dissolution affected the validity of assessments for subsequent years. However, the court noted that this plea was not raised before the single judge and was not pursued during the appeal. Consequently, the court did not address this issue in detail and dismissed the appeal on this ground as well.

Conclusion:
The court dismissed the appeals, upholding the validity of the notification and the subsequent assessments and demand notices. The retrospective amendment to Section 3-A was deemed to validate the notification and the actions taken under it. The court also clarified that the amendment was not subject to Article 286(3) as it did not impose or authorize the imposition of tax.

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