1973 (3) TMI 130 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of Section 10 of the Central Sales Tax Act under Article 14 of the Constitution.
2. Validity of the classification of dealers based on the collection of tax before and after 10th November 1964.
3. Severability of the invalid portion of Section 10 if found unconstitutional.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 10 of the Central Sales Tax Act under Article 14 of the Constitution:

The primary issue was whether a part of Section 10 of the Central Sales Tax Act is ultra vires of Article 14 of the Constitution, which guarantees equality before the law. The petitioners, dealers in paddy, challenged the order of the Deputy Commissioner rejecting their exemption claim under Section 10. They argued that the exemption granted by Section 10 for a specified period is discriminatory. The court examined whether the classification made by Section 10 was rational and had a reasonable nexus with the object of the Act.

2. Validity of the classification of dealers based on the collection of tax before and after 10th November 1964:

The court noted that the classification must be rational and based on an intelligible differentia, distinguishing those grouped together from others left out. The classification should have a rational nexus with the Act's policy and object. The court observed that the Central Sales Tax Act was amended in 1969 to address difficulties created by previous Supreme Court decisions. Section 10 granted exemption from tax liability for inter-State sales during a specified period if the dealer had not collected tax. This classification divided dealers into three categories: those who collected tax before 10th November 1964, those who did not collect tax during the specified period, and those who collected tax during the same period.

The court found that the classification based on whether dealers collected tax during the specified period was reasonable and not violative of Article 14. The classification was based on the fact that the law was unsettled before the Supreme Court's decision on 10th November 1964. The Legislature's intention was to levy tax, and the assessments were validated regardless of tax collection. However, after the Supreme Court decision, dealers who did not collect tax based on the decision could not be compelled to pay taxes. The court held that the classification had a valid policy and a reasonable nexus with the object of Section 10.

3. Severability of the invalid portion of Section 10 if found unconstitutional:

The petitioners argued that if the invalid portion of Section 10 granting exemption for a specified period was struck down, the rest of Section 10 should remain valid as the invalid portion is severable. However, since the court concluded that the classification was valid and not ultra vires of Article 14, it was unnecessary to consider the severability of the impugned portion.

Conclusion:

The court dismissed the writ petition, holding that the impugned portion of Section 10 of the Central Sales Tax Act is not ultra vires of Article 14 of the Constitution. The classification of dealers based on the collection of tax before and after 10th November 1964 was found to be reasonable and justified. The court also noted that the other contentions raised in the writ petition could be urged before the appellate authority where the appeal was still pending. The petition was dismissed with costs.