1979 (2) TMI 181 - HC - VAT and Sales Tax

Summary

Issues Involved
1. Constitutional validity of Section 29A of the Kerala General Sales Tax Act.
2. Legislative competence of the State Legislature under Entry 54, List II, of the Seventh Schedule to the Constitution.
3. Reasonableness of restrictions under Article 301 and Article 19(1)(f) and (g) of the Constitution.
4. Procedural fairness and potential for abuse of power by subordinate officials.

Issue-Wise Detailed Analysis

1. Constitutional Validity of Section 29A of the Kerala General Sales Tax Act
The petitioner challenged the constitutional validity of Section 29A, arguing that it is not comprehended by legislative entry 54, List II, of the Seventh Schedule to the Constitution, and constitutes an unreasonable restriction on the freedom to carry on trade or business, violating Article 301 of the Constitution. The State contended that Section 29A is constitutionally valid and does not contain the vices identified in the Full Bench decision in Yogesh Trading Co. v. Intelligence Officer of Sales Tax.

2. Legislative Competence of the State Legislature under Entry 54, List II, of the Seventh Schedule to the Constitution
The court emphasized that legislative entries should be considered in their widest amplitude, and the power to impose a tax includes the power to prevent tax evasion. The court distinguished the present case from the Supreme Court decision in Check Post Officer v. K.P. Abdulla and Bros., noting that Section 29A is intended only for the prevention of tax evasion and does not assume that goods were transported after sale within the State. The provision for demanding security and seizing goods in default is deemed an effective measure to prevent tax evasion and falls within the incidental or ancillary powers of taxation.

3. Reasonableness of Restrictions under Article 301 and Article 19(1)(f) and (g) of the Constitution
The court acknowledged that intercepting the movement of goods constitutes a restriction under Article 301. However, Article 304(b) permits reasonable restrictions in the public interest with the previous sanction of the President, which was obtained for Section 29A. The court found the restrictions reasonable, as they are aimed at preventing tax evasion and include procedural safeguards such as recording reasons for suspicion, providing an opportunity to furnish security, and conducting an enquiry before imposing penalties. The ownership of goods remains with the owner, and the process is consistent with natural justice principles.

4. Procedural Fairness and Potential for Abuse of Power by Subordinate Officials
The court addressed concerns about the potential for abuse of power by subordinate officials, stating that the mere possibility of abuse is not a ground to strike down a statutory provision. The court emphasized that the powers should be exercised bona fide and for their intended purpose, and any transgressions can be addressed through the court's extraordinary powers. The court also noted that petitioners could challenge the application of Section 29A during the enquiry and appeal processes.

Conclusion
The court upheld the constitutional validity of Section 29A of the Kerala General Sales Tax Act, finding it within the legislative competence of the State Legislature and a reasonable restriction under Article 304(b). The court dismissed the petitions, allowing the petitioners to challenge the application of Section 29A in the appropriate forums.