1971 (12) TMI 100 - HC - VAT and Sales Tax

Issues Involved:
1. Legislative Trespass on Judicial Power
2. Efficacy of Section 3-AB
3. Applicability of Section 3-AB to Pending Proceedings
4. Violation of Article 14
5. Violation of Article 19(1)(f) and (g)
6. Repugnancy of Section 3-AB to Old Section 3-A

Issue-wise Detailed Analysis:

1. Legislative Trespass on Judicial Power:
The petitioners argued that Section 3-AB of the U.P. Sales Tax (Amendment and Validation) Act, 1971, constituted a legislative trespass on judicial power by attempting to validate notifications that had already been declared invalid by the court. The court, however, found that Section 3-AB was modeled on the precedent set by Jaora Sugar Mills v. State of M.P., where the Supreme Court upheld similar legislative actions. The court held that the Legislature had not merely validated the notifications but had incorporated them into the statute, thereby exercising its legislative power rather than encroaching on judicial functions.

2. Efficacy of Section 3-AB:
The petitioners contended that Section 3-AB made no sense and was inefficacious because it incorporated notifications that had been declared invalid. The court rejected this argument, noting that only the substantive parts of the notifications imposing tax were incorporated into Section 3-AB, excluding any redundant or irrelevant language. The court cited precedents such as Jaora Sugar Mills and Sadasib Prakash v. State of Orissa to support its interpretation.

3. Applicability of Section 3-AB to Pending Proceedings:
The petitioners argued that Section 3-AB should not apply to assessment proceedings for years prior to the commencement of the Amending Act, 1971, which were still pending. The court disagreed, stating that Section 3-AB was retrospective and intended to save all steps taken or proceedings initiated for assessing tax on the turnover of the sale of bricks before the commencement of the Amending Act. The court emphasized the significance of the term "levy" in Section 3-AB, which includes any step taken or proceeding initiated for determining tax liability.

4. Violation of Article 14:
The petitioners claimed that Section 3-AB violated Article 14 of the Constitution by creating two different methods of taxation and thereby causing discrimination. The court found no merit in this argument, explaining that the old Section 3-A and Section 3-AB did not overlap concerning bricks. The court also noted that higher rates of tax on building materials, including bricks, were justified due to administrative convenience, cost of collection, and the ability of consumers in higher income groups to bear the tax burden. The court cited multiple Supreme Court decisions to support the Legislature's discretion in tax matters.

5. Violation of Article 19(1)(f) and (g):
The petitioners argued that the retrospective operation of Section 3-AB infringed on their rights under Article 19(1)(f) and (g) of the Constitution. The court rejected this argument, noting that the retrospective validation was necessary to address the financial predicament of the State Government, which had already assessed and collected a significant amount of tax. The court referred to Supreme Court decisions in Tata Iron and Steel Co. Ltd. v. State of Bihar and Rai Ramkrishna v. State of Bihar to uphold the validity of retrospective tax laws.

6. Repugnancy of Section 3-AB to Old Section 3-A:
The petitioners argued that Section 3-AB was repugnant to the old Section 3-A. The court found no repugnancy, explaining that Section 3-AB incorporated all notifications issued under the old Section 3-A until the commencement of the Amending Act, 1971. The court emphasized that Section 3-AB was intended to operate retrospectively, thereby validating the previously issued notifications and ensuring continuity in tax imposition.

Conclusion:
The court dismissed all the petitions with costs, upholding the validity of Section 3-AB and its retrospective application. The court found that the Legislature had acted within its powers and had not encroached on judicial functions. The court also held that the higher tax rates on bricks were justified and did not violate constitutional provisions.

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