1983 (1) TMI 226 - HC - VAT and Sales Tax

Interpretation of statute - before imposing penalty the authority has to give notice under Section 54 (1) and to record a finding either on the basis of material before it, or produced by the dealer, or any other person, or the department and which may include incomplete Form 38, (which may be a ground for seizure of the goods), that there was an intention to evade the payment of tax.

Summary

Issues Involved:

1. Constitutional validity of Section 28-A of the U.P. Sales Tax Act as substituted by U.P. Act No. 33 of 1979.
2. Validity of the notification by the State Government specifying the quantity, measure, or value of goods as contemplated by Section 28-A(1).
3. Validity of U.P. Ordinance No. 35 of 1982.

Issue-wise Detailed Analysis:

1. Constitutional Validity of Section 28-A of the U.P. Sales Tax Act:

The petitioners argued that Section 28-A was constitutionally invalid, claiming it transgressed the limits of legislative competence under Entry 54 of List II of the Seventh Schedule to the Constitution. They contended that the section imposed obligations on individuals who were not necessarily involved in the sale or purchase of goods within Uttar Pradesh, thus extending beyond the legislative field of sales tax.

The Court examined the legislative history and amendments to Section 28-A, noting that the new section was designed to prevent tax evasion related to intra-state sales. The Court highlighted that the new Section 28-A only applied to goods imported for business purposes and liable to tax under the Act. It required declarations for goods exceeding specified quantities, measures, or values, and authorized detention only if there was an attempt to evade tax.

The Court concluded that the new Section 28-A was constitutionally valid as it was ancillary and incidental to the subject matter of taxes on sales or purchases of goods, falling within the legislative competence of the State under Entry 54 of List II. The Court distinguished the new section from the old one, which had been declared ultra vires, noting that the new section did not assume that all goods carried in a vehicle were sold within the State and did not authorize detention solely based on the absence of documents.

2. Validity of the Notification Specifying Quantity, Measure, or Value of Goods:

The petitioners argued that there was no valid notification specifying the quantity, measure, or value of goods as required by Section 28-A(1), and thus the respondents could not detain their goods under Section 28-A(6).

The Court acknowledged that the notification dated March 29, 1974, issued under the old Section 28-A, had been declared invalid. The new Section 28-A, introduced by U.P. Act No. 33 of 1979, did not have a corresponding notification. The respondents relied on the old notification, but the Court held that without a valid notification under the new section, the detention of goods was unauthorized.

3. Validity of U.P. Ordinance No. 35 of 1982:

The Governor of Uttar Pradesh promulgated U.P. Ordinance No. 35 of 1982 to address the controversy regarding the validity of the new Section 28-A and the actions taken under it. The Ordinance aimed to validate the old notification by deeming it to have been issued under the new Section 28-A.

The petitioners challenged the validity of the Ordinance, arguing that it did not succeed in achieving its objective. The Court examined the Ordinance and concluded that it failed to retrospectively validate the notification. The Ordinance did not create a fiction that the new Section 28-A was in force on the date when the old notification was issued, nor did it give retrospective effect to the new section.

The Court held that the Ordinance did not infuse life into the old notification, and thus, there was no valid notification in existence at the time the goods were detained. Consequently, the detention of goods was unauthorized and without legal basis.

Conclusion:

The Court concluded that the new Section 28-A of the U.P. Sales Tax Act was constitutionally valid. However, the detention of the petitioners' goods was unauthorized due to the absence of a valid notification specifying the quantity, measure, or value of goods as required by Section 28-A(1). The U.P. Ordinance No. 35 of 1982 failed to validate the old notification, and thus, the respondents' actions were without legal authority. The petitions were allowed, and the respondents were directed to return the seized goods to the petitioners. The Court also certified the case as fit for appeal to the Supreme Court, recognizing the substantial question of law involved.