2003 (12) TMI 585 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the U.P. Trade Tax (Amendment) Rules, 2001.
2. Alleged short supply and delay in issuance of forms III-A and III-B.
3. Whether the amended rules are ultra vires the U.P. Trade Tax Act, 1948 and Articles 14 and 19(1)(g) of the Constitution.
4. Whether the amended rules are mandatory or directory.
5. The impact of the amended rules on the right to do business under Article 19(1)(g).

Issue-wise Detailed Analysis:

1. Validity of the U.P. Trade Tax (Amendment) Rules, 2001:
The petitioner challenged the validity of the U.P. Trade Tax (Amendment) Rules, 2001, which limited the validity of forms III-A and III-B to transactions made during the financial year and the two preceding financial years. The court upheld the amendments, stating that they were made to prevent tax evasion and misuse of forms. The amendments were made after due consideration by the concerned authorities, including the Commissioner, Trade Tax, Finance Secretary, Finance Minister, and the Cabinet. The court found no illegality in the amendments as they were aimed at safeguarding revenue interests and ensuring the provisions of sections 3-AAA and 4-B were not misused for tax evasion.

2. Alleged Short Supply and Delay in Issuance of Forms III-A and III-B:
The petitioner alleged a short supply and delay in the issuance of forms III-A and III-B by the Trade Tax Officer, leading to difficulties in conducting transactions. The respondents countered this by stating that there was no short supply and forms were issued within a reasonable time, usually on the same day or the next working day. A circular from the Commissioner, Trade Tax, directed that forms should be supplied promptly to avoid any inconvenience to traders. The court found no evidence to support the petitioner's claim of delay and short supply and dismissed this allegation.

3. Whether the Amended Rules are Ultra Vires the U.P. Trade Tax Act, 1948 and Articles 14 and 19(1)(g) of the Constitution:
The petitioner argued that the amended rules were ultra vires the Act and violated Articles 14 and 19(1)(g) of the Constitution. The court held that the amendments did not take away or whittle down the effect of sections 3-AAA and 4-B of the Act. Instead, they imposed reasonable restrictions to prevent tax evasion. The court emphasized that the right to do business under Article 19(1)(g) is subject to reasonable restrictions, and the amended rules were reasonable as they aimed at preventing tax evasion. The court also noted that there was no specific allegation that the petitioner applied for the forms and they were not issued, making the petitioner's grievance hypothetical.

4. Whether the Amended Rules are Mandatory or Directory:
The petitioner contended that the amended rules should be considered directory and not mandatory. The court referred to the decision in Govind Ram Tansukh Rai & Co. v. Commissioner of Sales Tax, which was approved by the Supreme Court in Commissioner of Sales Tax v. Prabhudayal Prem Narain. The court held that filing the form for claiming exemption is mandatory and the amended rules were made to prevent misuse of forms and tax evasion. The court rejected the petitioner's argument that the rules should be held directory, stating that the rules imposed necessary restrictions to ensure compliance and prevent misuse.

5. The Impact of the Amended Rules on the Right to Do Business under Article 19(1)(g):
The petitioner argued that the amended rules violated the right to do business under Article 19(1)(g) of the Constitution. The court held that the right to do business is subject to reasonable restrictions, and the amended rules were reasonable as they aimed at preventing tax evasion. The court emphasized that fiscal measures and economic regulations should be viewed with greater latitude and judicial restraint. The court cited several judgments, including R.K. Garg v. Union of India, to support the view that economic regulations should be left to the discretion of the Legislature and the Government, and courts should not interfere unless the measures are clearly illegal or unconstitutional.

Conclusion:
The court dismissed the writ petition, upholding the validity of the U.P. Trade Tax (Amendment) Rules, 2001, and rejecting the petitioner's claims of short supply and delay in issuance of forms III-A and III-B. The court found the amended rules to be reasonable and necessary to prevent tax evasion, and not in violation of the U.P. Trade Tax Act, 1948, or the Constitution. The court emphasized the need for judicial restraint in economic policy matters and deferred to the expertise of the Government in devising fiscal measures.