1978 (7) TMI 236 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of the Madras General Sales Tax (Revival and Special Provisions) Act, 1971.
2. Legislative competence of the Kerala State Legislature to enact the Revival Act.
3. Validity of assessments and demand for tax for the period from 1st April, 1957, to 30th September, 1957.
4. Alleged discrimination under the Revival Act.
5. Status of the petitioner as a "dealer" liable to pay sales tax.

Detailed Analysis:

1. Constitutional Validity of the Madras General Sales Tax (Revival and Special Provisions) Act, 1971:
The petitioners challenged the constitutional validity of the Revival Act, arguing it was ultra vires and unconstitutional. The court examined the legislative intent behind the Revival Act, which aimed to address the void in sales tax legislation for transactions deemed "outside sales" under Article 286 of the Constitution. The court concluded that the Revival Act was a legitimate legislative response to ensure that such turnover did not escape assessment.

2. Legislative Competence of the Kerala State Legislature:
The petitioners contended that the Kerala State Legislature lacked the competence to enact the Revival Act, especially for transactions prior to 1st November, 1956. The court cited multiple Supreme Court decisions, including A. Hajee Abdul Shukoor and Company v. State of Madras and Chandarana & Co. v. State of Mysore, to affirm that legislative competence must be judged at the time of passing the legislation, not its effective date. The court concluded that the Kerala State Legislature was competent to legislate retrospectively in respect of its territory.

3. Validity of Assessments and Demand for Tax:
The petitioners argued that the assessment and demand for tax for the period from 1st April, 1957, to 30th September, 1957, were invalid. The court referenced Section 3 of the Revival Act, which allowed for the levy, assessment, reassessment, and collection of tax for sales made from 1st April, 1951, to 30th September, 1957. The court upheld the validity of these assessments, citing precedents like M.P.V. Sundararamier and Co. v. State of Andhra Pradesh, which recognized the legitimacy of retrospective legislation.

4. Alleged Discrimination Under the Revival Act:
The petitioners claimed that the Act was discriminatory, as it created two categories of dealers based on where the tea was sold. The court examined the argument and found that the difference in treatment was based on the constitutional provision in Article 286 and its practical application. The court referenced State of Madhya Pradesh v. Bhopal Sugar Industries Ltd. to conclude that the initial geographical classification justified the unequal laws, and thus, the claim of discrimination was unfounded.

5. Status of the Petitioner as a "Dealer":
In O.P. No. 2391 of 1973, the petitioner argued that they were not a "dealer" and thus not liable for sales tax. The court clarified that under the charging section of the Madras General Sales Tax Act, the tax was levied on "every dealer," and registration was relevant only for tax collection purposes. The court dismissed the petitioner's claim, noting the absence of requisite pleading and the fact that transporting and selling tea in Cochin could not be considered part of agricultural operations.

Conclusion:
All the objections raised in the writ petitions were dismissed. The court upheld the constitutional validity of the Madras General Sales Tax (Revival and Special Provisions) Act, 1971, affirmed the legislative competence of the Kerala State Legislature, validated the retrospective assessments, and rejected the claims of discrimination and the petitioner's non-liability as a dealer. The petitions were dismissed with no order as to costs.

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