1978 (6) TMI 164 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the vires of rule 6 under the General Sales Tax Act, 1125 on grounds of violation of article 14 of the Constitution and excess of delegated authority under section 3(2) of the Act.

Analysis:
The writ petitions contested the validity of rule 6 framed under the General Sales Tax Act, 1125, specifically focusing on its compliance with article 14 of the Constitution and the extent of authority delegated under section 3(2) of the Act. The rule in question pertained to the taxation of certain goods at the stage of sale by the first dealer in the State, not exempt from taxation under section 3(3). The primary argument against the rule was that it violated the constitutional principle of equality under article 14 and exceeded the permissible delegation of authority outlined in the parent section of the Act.

Regarding the challenge based on article 14, the Court considered established precedents emphasizing the broad discretion granted to the legislature in classifying subjects for taxation purposes. Despite the lack of substantial evidence presented to support the contention, the Court found no merit in the claim that the rule contravened article 14, thereby upholding its validity.

Moving on to the argument concerning the delegation of power, the Court delved into the provisions of section 3(2) of the Act, which permitted the imposition of tax at a prescribed point in the series of sales by successive dealers. The Court interpreted that the rule effectively fulfilled its function by specifying the point of taxation as the first dealer in the State not exempt under section 3(3). Referring to a previous Division Bench ruling, the Court highlighted that the rule's scope was to determine the taxable person at a specific stage of the sales process, aligning with the legislative intent behind the provision.

Furthermore, the Court referenced a Supreme Court decision that upheld the interpretation of the rule provided by the Division Bench, reinforcing the validity and consistency of the rule's application. Ultimately, the Court concluded that rule 6 did not overstep the delegated authority granted by section 3(2) of the Act, dismissing the writ petitions challenging its validity. The petitions were consequently dismissed, with no costs imposed on either party.

In summary, the Court upheld the validity of rule 6 under the General Sales Tax Act, 1125, rejecting the challenges raised against it on the grounds of violating article 14 of the Constitution and exceeding the delegated authority outlined in section 3(2) of the Act.