1984 (2) TMI 305 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the vires of certain provisions of the Delhi Sales Tax Act, 1975 regarding interest imposition on registered dealers under section 27(1) - Classification between registered and unregistered dealers - Reasonable nexus between the classification and the object of the Act.

Analysis:
The petitioner challenged the vires of certain provisions of the Delhi Sales Tax Act, 1975, specifically the imposition of interest under section 27(1) on registered dealers. The petitioner, a registered dealer, was directed to pay interest for failing to make the required payment under section 21(3) of the Act. The key issue was whether the classification between registered and unregistered dealers, regarding the imposition of interest, was reasonable and had a nexus with the object of the Act.

The Act mandates that registered dealers pay tax according to their return and imposes interest on defaults, while there is no such provision for non-registered dealers. The court noted the distinct advantages and obligations of registered dealers, who act as tax collectors, compared to unregistered dealers. The classification between the two categories was deemed reasonable, given the different roles and obligations they have under the Act.

The petitioner argued that failure to impose interest on non-registered dealers made the Act ultra vires as the objective is tax collection. However, the court held that the legislature has the authority to determine who should pay interest, and the clear classification between registered and unregistered dealers did not amount to discrimination. Various provisions in the Act differentiate treatment between the two categories based on their roles and obligations.

The court distinguished a previous Supreme Court judgment where a provision was struck down due to discriminatory application to registered and unregistered dealers. In the present case, there was no dual application of provisions to the same party, making the previous judgment inapplicable. The court also referenced another case discussing the distinction between registered and unregistered dealers, emphasizing that the two are dealt with differently under the Act due to their distinct functions and obligations.

Ultimately, the court found no infringement of article 14 of the Constitution or discrimination in the classification between registered and unregistered dealers. The petition challenging the vires of the Act was dismissed, upholding the differentiation in treatment between the two categories.