1971 (2) TMI 104 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Section 21(6) of the Andhra Pradesh General Sales Tax Act.
2. Legislative competence of the State Legislature to enact Section 21(6).
3. Whether Section 21(6) violates Articles 14 and 19(1)(f) and (g) of the Constitution of India.

Issue-wise Detailed Analysis:

1. Validity of Section 21(6) of the Andhra Pradesh General Sales Tax Act:
The petitioner challenged the validity of Section 21(6) of the Andhra Pradesh General Sales Tax Act, which mandates that no appeal shall be entertained by the Sales Tax Appellate Tribunal unless it is accompanied by satisfactory proof of payment of tax, except in cases where a stay of collection of tax is in force.

2. Legislative Competence of the State Legislature to Enact Section 21(6):
The petitioner argued that the State Legislature lacks the power to regulate the jurisdiction and powers of Tribunals, asserting that only the Parliament holds such authority under entry 97 of List I of the Seventh Schedule to the Constitution. The court, however, concluded that the State Legislature has the competence to enact Section 21(6) under entry 54 of List II, which authorizes the State to legislate on taxes on the sale or purchase of goods. The court emphasized that this entry includes ancillary and incidental matters, such as provisions for appeals and revisions, thereby validating the legislative competence of the State Legislature.

3. Violation of Articles 14 and 19(1)(f) and (g) of the Constitution of India:
The petitioner contended that Section 21(6) is discriminatory and violates the principle of equality before the law and equal protection of the laws enshrined in Article 14. The court examined whether the classification made by Section 21(6) is reasonable and whether it has a nexus with the object sought to be achieved by the Act.

The court found that the classification of appeals under Section 21(6) is neither reasonable nor founded on an intelligible differentia. The provision discriminates between dealers who obtain a stay of collection of tax and those who do not, without any rational basis for such differentiation. The court also noted that the provision could render the right of appeal illusive for dealers unable to pay the tax, thereby violating Article 14.

Furthermore, the court observed that the restraint imposed by Section 21(6) does not facilitate tax collection or discourage frivolous appeals, as claimed by the respondents. Instead, it places undue power in the hands of the Deputy Commissioner, who may arbitrarily grant or refuse stay orders, thereby affecting the right of appeal. The court concluded that Section 21(6) is more likely to deprive dealers of their right of appeal rather than achieving its purported objectives.

Given these findings, the court struck down Section 21(6) as violative of Article 14 of the Constitution. Consequently, the court did not find it necessary to examine the contention regarding the violation of Article 19(1)(f) and (g).

Conclusion:
The petition was allowed, and the court directed the Sales Tax Appellate Tribunal to entertain the petitioner's appeal without insisting on proof of payment of tax. The court awarded costs to the petitioner, including an advocate's fee of Rs. 100.