1980 (2) TMI 242 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Ultra vires of Section 5C under Article 301 of the Constitution of India.
2. Applicability of penalty under Section 16(1)(k) versus Section 5C.
3. Nature of penalty under Section 5C(2) as a tax without authority of law.

Detailed Analysis:

1. Ultra vires of Section 5C under Article 301 of the Constitution of India:

The petitioner challenged the vires of Section 5C of the Rajasthan Sales Tax Act, claiming it violates Article 301 of the Constitution, which ensures freedom of trade, commerce, and intercourse throughout India. The court examined whether the penalty under Section 5C(2) directly impedes the free movement or transport of goods. Referring to Supreme Court judgments in Andhra Sugars Ltd. v. State of Andhra Pradesh and State of Madras v. Nataraja Mudaliar, the court concluded that a tax on the sale of goods does not directly impede the free movement or transport of goods and is not violative of Article 301. The court found no evidence that the penalty directly restricts the movement of goods. The court also noted that the concessional rate of tax under Section 5C(1) is a lawful incentive to encourage manufacturing and sale within the state or in the course of inter-State trade and commerce. Hence, Section 5C is not ultra vires Article 301.

2. Applicability of penalty under Section 16(1)(k) versus Section 5C:

The petitioner argued that the penalty should have been levied under Section 16(1)(k) of the Act, which deals with wrong declarations, rather than under Section 5C. The court clarified that Section 16(1)(k) requires a guilty intention (mens rea) at the time of making the declaration, whereas Section 5C(2) applies when the conditions for the concessional rate are not met, regardless of intent. Section 5C(2) is a special provision designed to address specific situations where the concessional rate conditions are violated. Therefore, the penalty under Section 5C(2) was deemed appropriate and valid.

3. Nature of penalty under Section 5C(2) as a tax without authority of law:

The petitioner contended that the penalty under Section 5C(2) is essentially a tax imposed without authority of law, violating the principle that the state cannot indirectly do what it cannot do directly. The court rejected this argument, stating that the penalty is not a tax but a measure to prevent the misuse of the concessional rate of tax. The court emphasized that the power to impose tax includes the incidental power to prevent tax evasion. The penalty under Section 5C(2) is a lawful consequence of violating the conditions for the concessional rate and is not a second instance of tax imposition. Hence, the penalty is not without authority of law.

Conclusion:

The court dismissed the writ petitions, holding that:
- Section 5C is not ultra vires Article 301 of the Constitution.
- The penalty under Section 5C(2) is appropriate and valid, not requiring the application of Section 16(1)(k).
- The penalty under Section 5C(2) is lawful and not a tax imposed without authority.

The petitioner was ordered to pay Rs. 300 as costs to the respondents, and the request for a certificate for appeal to the Supreme Court was refused.