1979 (3) TMI 185 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of the third proviso to section 27(1)(a)(ii) of the Haryana General Sales Tax Act, 1973.
2. Retrospectivity of the third proviso to section 27(1)(a)(ii) of the Haryana General Sales Tax Act, 1973.

Issue-Wise Detailed Analysis:

1. Constitutional validity of the third proviso to section 27(1)(a)(ii) of the Haryana General Sales Tax Act, 1973:
The petitioners challenged the third proviso to section 27(1)(a)(ii) of the Haryana General Sales Tax Act, 1973, claiming it violated their fundamental rights under Article 19(1)(f) and (g) of the Constitution of India. They argued that the proviso imposed an unreasonable restriction on their right to hold property and conduct business, making it impossible to comply with. The petitioners contended that the selling dealer could not control the sold goods or prove the financial and business capacity of the purchaser. They cited Commissioner of Income-tax v. Walchand and Co. (Pvt.) Ltd. [1967] 65 I.T.R. 381 (S.C.) to argue that the reasonableness of a provision should be viewed from the trader's perspective.

The court, however, found that the third proviso was neither unreasonable nor irrational. It merely empowered the Assessing Authority to examine the genuineness of transactions in the tax return. The court emphasized that it is essential for the Assessing Authority to verify the authenticity of the transactions to prevent tax evasion. The court also noted that prior to the enactment of the third proviso, the Assessing Authority already had the power to examine the genuineness of transactions under the Punjab General Sales Tax Act, 1948. This was affirmed by precedents such as Ram Pal Madan Gopal v. Punjab State [1968] 22 S.T.C. 79 and Devinder Kumar Kewal Kumar v. State [1972] 30 S.T.C. 352.

The court concluded that the third proviso was constitutionally valid and did not impose any unreasonable restrictions on the petitioners' fundamental rights.

2. Retrospectivity of the third proviso to section 27(1)(a)(ii) of the Haryana General Sales Tax Act, 1973:
The petitioners also challenged the retrospectivity of the third proviso, which was given effect from 1st May, 1949, by section 1(3) of the Act. They argued that the third proviso could not operate retrospectively because section 27 itself did not have retrospective effect. They contended that a proviso, being a part of the main clause, could not stand independently and operate in a vacuum before the enactment of the primary clause.

The court rejected this argument, stating that the third proviso was in essence a substantive clause that laid down a rule of action by itself. It empowered the Assessing Authority to examine the genuineness of transactions and provided guidelines for determining the authenticity of a sale transaction. The court cited Commissioner of Income-tax, Madras v. Ajax Products Ltd. [1965] 55 I.T.R. 741 (S.C.) to support the view that a proviso could be construed as a substantive clause and could have independent statutory force.

The court further noted that the third proviso could operate on the corresponding provisions of the Punjab General Sales Tax Act, 1948, which was the predecessor statute of the Haryana General Sales Tax Act, 1973. The court found that section 5(2) of the Punjab General Sales Tax Act was virtually in pari materia with section 27 of the Haryana Act. Therefore, the third proviso could have identical operative force with regard to the provisions of the predecessor statute.

The court concluded that the retrospectivity of the third proviso was valid and did not violate any legal principles.

Conclusion:
The court dismissed all the writ petitions, upholding the constitutional validity and retrospectivity of the third proviso to section 27(1)(a)(ii) of the Haryana General Sales Tax Act, 1973. The parties were left to bear their own costs.

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