1966 (4) TMI 69 - HC - VAT and Sales Tax

Summary

Issues:
Validity of rule 28 of the Delhi Sales Tax Rules, 1951.

Analysis:
The judgment concerns the validity of rule 28 of the Delhi Sales Tax Rules, 1951, in a series of Civil Writ Petitions. The petitioner, a building contractor, was assessed for sales tax and penalized for non-filing of returns. The assessment was based on rule 28, which allowed deductions based on cost of materials and labor. The petitioner challenged the rule's validity, citing various precedents where similar provisions were struck down for unconstitutional delegation of legislative power. The petitioner argued that rule 28 conferred excessive discretion to the executive, leading to arbitrary assessments not based on actual sales. The court examined the definition of "sale price" and concluded that the rule indeed constituted an impermissible delegation of legislative power to the executive, lacking guiding principles or standards. As a result, the court held rule 28 to be invalid legislation.

In the judgment, the court referenced previous cases where provisions allowing taxation on artificial bases were struck down for exceeding legislative competence. Notably, the court highlighted instances where rules attempting to tax goods supplied in contracts were found to be outside the legislative authority. The court emphasized the importance of legislative control over taxation matters and the need for clear standards when delegating law-making powers. The court underscored that while there is no strict separation of powers in India, the primary law-making function lies with the Legislature, and delegation must be within defined parameters to be lawful. The court concluded that rule 28's lack of specific standards or guiding principles rendered it an impermissible delegation of legislative power, leading to its invalidation.

The court granted the petitioner's request for a writ of certiorari, quashing the assessment order and demand notice based on rule 28. Additionally, the court issued a writ of prohibition against future assessments using the invalidated rule. The authorities were directed to conduct fresh assessments in compliance with the law. The judgment also outlined the relief granted in other related writ petitions. Ultimately, the court held that rule 28 of the Delhi Sales Tax Rules, 1951, was unconstitutional due to the excessive delegation of legislative power, thereby annulling the assessments made under its provisions.