1965 (2) TMI 85 - HC - VAT and Sales Tax

Issues Involved
1. Constitutionality and validity of Section 28-A of the Mysore Sales Tax Act, 1957.
2. Legislative competence of the State Legislature to enact Section 28-A.
3. Whether Section 28-A imposes unreasonable restrictions on fundamental rights under Article 19(1)(g) and (f) of the Constitution.
4. Whether Section 28-A affects the freedom of trade, commerce, and intercourse under Article 301.
5. Whether the procedural aspects of Section 28-A are reasonable and provide adequate safeguards.

Detailed Analysis

1. Constitutionality and Validity of Section 28-A
The petitioners challenged the constitutionality of Section 28-A of the Mysore Sales Tax Act, 1957, introduced by the Mysore Sales Tax (Third Amendment) Act, 1961. The section aimed to prevent tax evasion by establishing check posts and requiring documents like a bill of sale or delivery note for goods vehicles. The court analyzed the provisions, including the power to seize and confiscate goods not covered by the required documents.

2. Legislative Competence of the State Legislature
The petitioners argued that Section 28-A was beyond the legislative competence of the State Legislature, as it purported to regulate activities not involving the sale or purchase of goods, which are beyond the scope of Entry 54 of List II of the Seventh Schedule of the Constitution. The court held that the legislative power under Entry 54 includes incidental and ancillary powers necessary to make the collection of tax effective and complete, including steps to prevent tax evasion.

3. Unreasonable Restrictions on Fundamental Rights
The petitioners contended that Section 28-A imposed unreasonable restrictions on their fundamental rights under Article 19(1)(g) and (f) of the Constitution. The court examined whether the restrictions were reasonable and necessary in the public interest. It found that the substantive part of Section 28-A, which required carrying specific documents, was reasonable and not impossible to comply with. However, the procedural part, which allowed for the confiscation of goods, was found to be unreasonable due to the lack of clear guidelines and effective safeguards.

4. Impact on Freedom of Trade, Commerce, and Intercourse under Article 301
The petitioners argued that Section 28-A impeded the freedom of trade, commerce, and intercourse protected by Article 301. The court noted that the President's previous sanction under Article 304(b) had been obtained for the amendment, and the restrictions imposed were regulatory measures intended to prevent tax evasion, which did not directly impede the free flow of trade.

5. Reasonableness of Procedural Aspects
The court found that the procedural aspects of Section 28-A, particularly the provisions for confiscation of goods, were unreasonable. The section failed to provide clear guidelines for the circumstances under which confiscation could be ordered, making the opportunity for the affected person to be heard ineffective. The lack of clear points for enquiry and the potential for arbitrary exercise of power by officers of inferior status made the procedural part of the section unconstitutional.

Conclusion
The court upheld the validity of sub-sections (1), (2), and (3) of Section 28-A, which required carrying specific documents for goods vehicles. However, it struck down sub-sections (4), (5), (6), and (7) as unconstitutional due to the unreasonable restrictions they imposed and the lack of adequate procedural safeguards. The court also ordered the refund of Rs. 900 to the petitioner in Writ Petition No. 1375 of 1964, as the recovery was deemed illegal. The other writ petitions were dismissed without costs.

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