1970 (7) TMI 70 - HC - VAT and Sales Tax

Issues Involved:
1. Liability under the Central Sales Tax Act.
2. Constitutional validity of the Central Sales Tax (Amendment) Act, 1969.
3. Infringement of Article 301 and Article 303(1) of the Constitution.
4. Violation of Article 19(1)(g) of the Constitution.
5. Retrospective operation of Section 6(1-A) and its impact on Article 19(1)(f).
6. Violation of Article 14 of the Constitution due to retrospective operation.
7. Section 10 of the Amendment Act and its classification under Article 14.

Detailed Analysis:

1. Liability under the Central Sales Tax Act:
The petitioner, a partnership firm dealing in commodities, was assessed under the Central Sales Tax Act for inter-State turnover. The petitioner argued that the turnover should be exempt under the Central Sales Tax Act as it would be under the U.P. Sales Tax Act due to a notification under section 3-A. This contention was rejected by the sales tax authorities.

2. Constitutional Validity of the Central Sales Tax (Amendment) Act, 1969:
The Amendment Act introduced changes to the Central Sales Tax Act, including Section 6(1-A), which made dealers liable to pay tax on inter-State sales even if no tax would have been levied under the State law. The petitioner challenged the constitutional validity of this Amendment Act.

3. Infringement of Article 301 and Article 303(1) of the Constitution:
The petitioner argued that the amended Central Sales Tax Act hampered inter-State trade and commerce, thus infringing Article 301. It was contended that the Act was not saved by Article 302 and contravened Article 303(1) by giving preference to one State over another. The court, referencing the Supreme Court's decision in The State of Madras v. N. K. Nataraja Mudaliar, held that the Act did not violate Article 301 as it did not directly impede the free flow of trade. The court also found that the Act did not contravene Article 303(1) as it was a Central statute operating uniformly across all States.

4. Violation of Article 19(1)(g) of the Constitution:
The petitioner claimed that the levy of tax under Section 6(1-A) and Section 9 imposed unreasonable restrictions on their right to carry on trade or business. The court, citing Khyerbari Tea Co. v. State of Assam, held that the exercise of the power to tax is presumed to be in the public interest and is a necessary attribute of sovereignty. Therefore, the tax was not deemed confiscatory or extortionate, and the contention was rejected.

5. Retrospective Operation of Section 6(1-A) and its Impact on Article 19(1)(f):
The petitioner argued that the retrospective effect of Section 6(1-A) unreasonably deprived them of their property. The court noted that retrospective tax laws do not per se violate Article 19(1)(f) and that the retrospective operation was necessary to remove uncertainty in the law. The court found that adequate machinery existed for the assessment and collection of the tax and rejected the contention.

6. Violation of Article 14 of the Constitution due to Retrospective Operation:
The petitioner contended that the retrospective operation of Section 6(1-A) created an unreasonable classification among dealers. The court held that the classification was due to the expiry of the limitation period and not because of the enactment of Section 6(1-A). The court found no violation of Article 14 as the section applied equally to all dealers.

7. Section 10 of the Amendment Act and its Classification under Article 14:
The petitioner argued that Section 10 of the Amendment Act violated Article 14 by creating an unreasonable classification among dealers. The majority opinion held that the classification was related to the object of the Act, which was to relieve dealers who had not collected tax based on the Supreme Court's judgment in Yaddalam L. Setty and Sons. However, one judge dissented, arguing that the classification was arbitrary and had no relation to the object of the Act. The majority opinion prevailed, and the petition was dismissed.

Conclusion:
The court dismissed the petition, upholding the constitutional validity of the Central Sales Tax (Amendment) Act, 1969, and rejecting the contentions of infringement of Articles 301, 303(1), 19(1)(g), 19(1)(f), and 14 of the Constitution. The majority opinion found that the retrospective operation and the classification under Section 10 were reasonable and related to the object of the Act.

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