1972 (8) TMI 118 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Vires of section 8(2)(b) of the Central Sales Tax Act.
2. Vires of section 9 of the Central Sales Tax Act.

Issue-wise Detailed Analysis:

1. Vires of Section 8(2)(b) of the Central Sales Tax Act:

The petitioners challenged the authority of the assessing officer to determine whether transactions claimed as outside sales were indeed inter-State sales and taxable under section 8(2)(b) of the Central Sales Tax Act. The primary contention was that the Constitution vested the Parliament with exclusive power to impose sales tax on inter-State trade and commerce, and thus, Parliament could not delegate this power to the State Legislature to fix the rate of sales tax on such transactions. The petitioners argued that section 8(2)(b) allowed State Legislatures to fix a higher rate than 10 percent for intra-State sales, which would then apply to inter-State sales, amounting to an abdication of Parliament's legislative power.

The court distinguished between delegated legislation and legislation by reference. It held that section 8(2)(b) was not a case of delegation but legislation by reference, where Parliament adopted the rates of sales tax applicable in individual States without physically incorporating all details. This was deemed valid as it did not involve the delegation of legislative power but rather the adoption of existing State laws.

The court cited several cases, including Devi Dass Gopal Krishnan v. State of Punjab, to illustrate that the principles of delegation requiring guidance do not apply to laws passed by Legislatures with plenary powers. It also referenced the Supreme Court's decision in State of Madras v. N.K. Nataraja Mudaliar, which upheld the constitutionality of section 8(2), asserting that this court could not declare the section invalid on other grounds not considered in that ruling.

2. Vires of Section 9 of the Central Sales Tax Act:

The petitioners argued that section 9, before its amendment in 1969, provided for the levy of sales tax by adopting the machinery of different State Acts, amounting to excessive delegation and effacement of parliamentary powers. They contended that even after the amendment, the provision remained invalid because the original section was invalid and could not be resuscitated by a subsequent amendment.

The court held that section 9, like section 8(2)(b), was not invalid. It reasoned that the Act as a whole was not still-born, and the charging section (section 6) was valid. Thus, even if one section was invalid, it could be amended, and the amended section would take effect because the Act itself was alive. The court referenced State of Punjab v. Sansari Mal Puran Chand to support this view.

Conclusion:

The court dismissed the petitions, upholding the validity of sections 8(2)(b) and 9 of the Central Sales Tax Act. It concluded that section 8(2)(b) constituted valid legislation by reference and not delegation, and section 9, even if previously invalid, was rectified by subsequent amendment. The petitions were dismissed with costs, and the outstanding security deposit was ordered to be refunded to the petitioners after deducting costs.