1972 (9) TMI 138 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of the Central Sales Tax Act, 1956.
2. Interpretation of sections 8(2) and 9(1) of the Central Sales Tax Act.
3. Retrospective amendments by the Central Sales Tax (Amendment) Act, 1969.
4. Alleged abdication of legislative function by Parliament.
5. Impact of amendments on Article 19(1)(f) of the Constitution.

Detailed Analysis:

1. Constitutional Validity of the Central Sales Tax Act, 1956:
The petitioner challenged the constitutional validity of the Central Sales Tax Act, 1956, as amended by the Central Sales Tax (Amendment) Act, 1969. The petition argued that the amendments, particularly the retrospective introduction of sub-section (1-A) in section 6 and the amendment of section 2, clause (j), were unconstitutional. The court examined the legislative history and purpose of the Central Act, concluding that the amendments were enacted to address the mischief of multiple taxation and to preserve the free flow of inter-State trade. The court upheld the constitutional validity, noting that the amendments were a product of deep legislative analysis and aimed at achieving a definite legislative end.

2. Interpretation of Sections 8(2) and 9(1) of the Central Sales Tax Act:
The petitioner contended that sections 8(2) and 9(1) of the Central Act, as they stood prior to the amendment, should exempt inter-State sales from tax if they were exempt under the local sales tax law. This argument was supported by the Supreme Court's decision in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons, which held that the procedural and substantive provisions of local sales tax laws were incorporated into the Central Act. However, the Central Sales Tax (Amendment) Act, 1969, introduced amendments with retrospective effect, superseding the Supreme Court's view. The court noted that the amendments clarified that the turnover for assessment under the Central Act must be determined according to its provisions and that inter-State sales were taxable regardless of exemptions under local laws.

3. Retrospective Amendments by the Central Sales Tax (Amendment) Act, 1969:
The amendments introduced by the Central Sales Tax (Amendment) Act, 1969, were given retrospective effect, which the petitioner argued was unconstitutional. The court examined the amendments and their impact, noting that they were intended to supersede the Supreme Court's interpretation in Yaddalam's case and similar decisions. The amendments clarified that inter-State sales were taxable under the Central Act, even if exempt under local laws. The court upheld the retrospective amendments, emphasizing that they were necessary to maintain the legislative intent and to prevent substantial refunds of taxes already collected.

4. Alleged Abdication of Legislative Function by Parliament:
The petitioner argued that sections 6, 8, and 9 of the Central Act represented an abdication of Parliament's legislative function in favor of State Legislatures and State Governments. The court distinguished between abdication and delegation, noting that while essential legislative functions must be performed by the legislature itself, subsidiary or ancillary powers can be delegated. The court found that section 6 imposed a clear charge of tax on inter-State sales, and sections 8 and 9 provided a detailed rate structure and procedural machinery for assessment and collection. The court concluded that there was no abdication of legislative function, as Parliament had laid down clear legislative policies and principles to guide the implementation of the Central Act.

5. Impact of Amendments on Article 19(1)(f) of the Constitution:
The petitioner contended that the retrospective amendments violated Article 19(1)(f) of the Constitution, as they imposed tax liabilities on past transactions, potentially causing financial loss to dealers who had not collected tax from purchasers. The court noted that section 10 of the Central Sales Tax (Amendment) Act, 1969, provided protection to dealers who had not collected tax on inter-State sales between 10th November 1964 and 9th June 1969. The court also emphasized that the petitioner, being a limited company and hence a non-citizen, could not challenge the constitutionality of the amendments on the ground of infraction of Article 19(1)(f).

Conclusion:
The court dismissed the petition, upholding the constitutional validity of the Central Sales Tax Act, 1956, as amended by the Central Sales Tax (Amendment) Act, 1969. The court found no merit in the petitioner's arguments regarding the interpretation of sections 8(2) and 9(1), the retrospective amendments, the alleged abdication of legislative function, and the impact on Article 19(1)(f). The rule was discharged with costs.

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