1971 (5) TMI 61 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Infringement of Article 14 of the Constitution.
2. Excessive delegation of essential legislative function and power.

Issue-Wise Detailed Analysis:

1. Infringement of Article 14 of the Constitution:
The petitioners challenged the validity of sub-sections (1) and (2) of section 3-A of the U.P. Sales Tax Act, 1948, arguing that they infringe Article 14 of the Constitution. The petitioners contended that the discretionary power conferred on the State Government to select any goods or class of goods and to subject the turnover to taxation at an enhanced or reduced rate results in a lack of uniformity and equality in the incidence of taxation. The court noted that taxing laws are not immune from attack based on Article 14 and that the validity of a tax law can be challenged on grounds of discrimination. The court referred to several Supreme Court judgments that established the principle that a taxing statute must not infringe the equality clause in Article 14. The court concluded that the impugned sub-sections of section 3-A provide the State Government with an arbitrary and unguided power to impose higher taxes on certain turnovers without any rational basis, thereby violating Article 14.

2. Excessive Delegation of Essential Legislative Function and Power:
The petitioners argued that section 3-A of the Act amounts to excessive delegation of legislative power to the executive, which is unwarranted and negates the basic injunction enjoined by Article 14. The court examined the legal position on delegation of legislative power, noting that while the Legislature can delegate subsidiary or ancillary powers, it cannot delegate its essential legislative function. The court referred to various Supreme Court judgments that emphasized the necessity for the Legislature to lay down guiding principles and provide adequate safeguards against arbitrary exercise of delegated power. The court found that section 3-A(1) and (2) of the Act do not provide any adequate guidance or safeguards, thereby resulting in excessive delegation of legislative power. The court held that the clause added to section 3-A(1) by U.P. Act 2 of 1970, which allows the State Government to impose higher taxes on goods not ordinarily sold at more than one point, is invalid due to excessive delegation and arbitrary discrimination.

Conclusion:
The court allowed the petitions filed by the brick manufacturers, holding that the clause added to section 3-A(1) by U.P. Act 2 of 1970 is invalid and ineffective. The impugned notifications dated April 5, 1961, and December 1, 1962, were also held to be invalid. The turnovers of the petitioners shall be taxed in accordance with the provisions of section 3 of the Act. The court did not find it necessary to decide on the validity of sub-section (2) of section 3-A for the retail vendors of country liquor, as the impugned notification dated April 2, 1969, was unenforceable against them on other grounds.