1967 (7) TMI 126 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Ultra vires of the U.P. Legislature regarding interest provision.
2. Violation of principles of natural justice in assessment orders.
3. Constitutionality of 18% interest rate under Article 14.
4. Competency of subordinate authorities to disregard stay orders.

Issue-Wise Detailed Analysis:

1. Ultra vires of the U.P. Legislature regarding interest provision:
The petitioner argued that entry 54 of List II of the Seventh Schedule only pertains to tax on the sale and purchase of goods, not interest, making the interest provision in the Act ultra vires. The court held that the matter of interest is incidental to the recovery and collection of tax, thus falling within the competence of the U.P. Legislature and covered by entry 54.

2. Violation of principles of natural justice in assessment orders:
The petitioner contended that the assessment orders violated principles of natural justice as no notice was issued before making the best judgment assessment. The court examined Section 7 and Rule 41, which require dealers to submit returns. If no return is submitted, the Sales Tax Officer can make a provisional best judgment assessment without issuing further notice. The court concluded that the principles of natural justice were not breached as the petitioner had the opportunity to file returns but failed to do so. The court emphasized that natural justice does not mandate a hearing at every stage, especially when statutory provisions provide adequate opportunities.

3. Constitutionality of 18% interest rate under Article 14:
The petitioner argued that the 18% interest rate is discriminatory and usurious, violating Article 14 of the Constitution. The court clarified that the Code of Civil Procedure and the Sales Tax Act operate in different fields. The provision for 18% interest in the Act is not discriminatory as it pertains to tax defaulters, unlike the 6% interest in civil cases. The court also noted that considering the market rate of interest, 18% per annum is not usurious.

4. Competency of subordinate authorities to disregard stay orders:
The petitioner claimed that subordinate authorities were not competent to disregard stay orders passed by the Judge (Revisions) Sales Tax. The court found that the petitioner was a defaulter for not paying the demanded tax. The stay order merely suspended the realization of the amount temporarily and did not eliminate the liability. The court noted that the last order by the Judge (Revisions) Sales Tax was not a stay order, thus superseding any earlier stay orders. Therefore, the subordinate authorities did not disregard any valid stay orders.

Conclusion:
The court dismissed the writ petition, concluding that the provisions for interest were within the legislative competence, there was no violation of natural justice, the 18% interest rate was constitutional, and the subordinate authorities acted within their powers.