1974 (4) TMI 89 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction of the State Legislature to legislate on purchase tax under item No. 54 of List II of the Seventh Schedule of the Constitution.
2. Inconsistency of the U.P. Sugarcane Purchase Tax Act, 1961 with the U.P. Sales Tax Act and contravention of Article 14 of the Constitution.
3. Contravention of Article 14 of the Constitution by the U.P. Sugarcane Purchase Tax Act, 1961.
4. Validity of provisions regarding penalty and interest under the U.P. Sugarcane Purchase Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Jurisdiction of the State Legislature:
The petitioner challenged the validity of the U.P. Sugarcane Purchase Tax Act, 1961, claiming that the State Legislature had no jurisdiction to legislate on purchase tax under item No. 54 of List II of the Seventh Schedule of the Constitution of India. The court referred to a previous judgment in *Basti Sugar Mills v. State of U.P.*, which relied on the Supreme Court decision in *Andhra Sugars Ltd. v. State of Andhra Pradesh*. It was held that the subject-matter of the U.P. Sugarcane Purchase Tax Act, 1961, is covered by item No. 54 of List II, thus affirming the State Legislature's jurisdiction to enact the law. Consequently, the Act could not be struck down on the grounds of lack of legislative competence.

2. Inconsistency with the U.P. Sales Tax Act and Article 14:
The petitioner argued that the U.P. Sugarcane Purchase Tax Act, 1961, is inconsistent with the U.P. Sales Tax Act, 1948, and contravenes Article 14 of the Constitution due to differing procedures for the levy and collection of tax. The court noted that Section 13 of the U.P. Sugarcane Purchase Tax Act, 1961, explicitly states that no sales or purchase tax under any other U.P. Act shall be payable for transactions covered by the Sugarcane Purchase Tax Act. Hence, the U.P. Sales Tax Act has no applicability to sugarcane transactions covered under the Sugarcane Purchase Tax Act, negating any inconsistency or contravention of Article 14.

3. Contravention of Article 14:
The petitioner contended that the U.P. Sugarcane Purchase Tax Act, 1961, violates Article 14 by imposing tax on sugarcane purchases by factories and units in reserved areas but not on other purchasers in the same areas. The court found this classification rational, based on administrative convenience and cost of tax collection. It was justified since bulk purchases by factories and units significantly impact sugarcane production, unlike smaller, insignificant purchases by others. The court also dismissed the argument that the Act should classify sugarcane by quality to avoid discrimination, as the petitioner failed to provide facts or figures showing any disadvantage due to non-classification.

4. Provisions on Penalty and Interest:
The petitioner argued that Section 3 of the U.P. Sugarcane Purchase Tax Act, 1961, which mandates interest and penalty for unpaid tax, amounts to double penalty and violates fundamental taxation principles. The court rejected this argument, stating that the provision for interest is not a penalty but a compensatory measure for delayed payment. The imposition of a penalty for further delay does not constitute double penalty. The court also upheld the automatic calculation of interest as reasonable and not requiring prior adjudication. However, the court did not address the validity of penalty procedures since no penalty was being recovered under the impugned notice.

Conclusion:
The court dismissed the petition, finding no merit in the challenges against the U.P. Sugarcane Purchase Tax Act, 1961. The factual dispute regarding the assessment and notice was left to be resolved in the pending appeal before the Assistant Sugar Commissioner. The petition was dismissed with costs.

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