1985 (1) TMI 288 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Section 6 of the Amendment Act.
2. Whether the Amendment Act authorizes the levy and collection of sales tax without amending the definition of "sale" in the Sales Tax Act.

Summary:

(1) Validity of Section 6:
The petitioners, comprising hoteliers and licensees of bars and restaurants, challenged the Constitution (Forty-sixth Amendment) Act, 1982, particularly sections 4(f) and 6, as ultra vires of Article 368 of the Constitution and violative of their fundamental rights under Articles 14, 19(1)(g), and 21. They argued that section 6 of the Amendment Act, which sought to validate the levy and collection of sales tax on the supply of food and drinks, was not a valid exercise of the constituent power under Article 368. The Court, however, held that the Amendment Act was passed following the procedure prescribed under Article 368, including ratification by more than half of the State Legislatures and the President's assent. The Court found that the Amendment Act did not encroach upon judicial power but merely removed the basis of the earlier Supreme Court judgments that had exempted such supplies from sales tax. The Court concluded that section 6 of the Amendment Act was within the amending power of Parliament and did not affect the basic structure of the Constitution, thereby upholding its validity.

(2) Does the Amendment Authorize Levy of Tax:
The petitioners contended that the definition of "sale" in the Andhra Pradesh General Sales Tax Act, 1957, had not been amended to include the supply of food and drinks in hotels and restaurants, and thus the tax authorities lacked jurisdiction to levy sales tax on such supplies. The Court observed that section 6 of the Amendment Act aimed to validate past transactions and tax collections but did not explicitly authorize future levy and collection of sales tax without further legislative action by the State. The Court noted that other States had amended their respective Sales Tax Acts following the Amendment Act to include such supplies within the definition of "sale." Therefore, the Court held that further amendment of the State law was necessary to levy and collect tax on the supply of foodstuffs and beverages from 2nd February 1983 onwards. The provisional assessment orders for 1983-84 were quashed.

Conclusion:
The Court held that the Amendment Act:
(i) is valid and does not offend any of the basic features of the Constitution;
(ii) is not ultra vires of Article 368 of the Constitution and is not violative of Articles 14, 19(1)(g), and 21 of the Constitution; and
(iii) does not authorize the imposition and collection of tax on the supply of foodstuffs from 2nd February 1983, but confers legislative competence on the State Legislature to do so and merely validates the collection and recovery of tax by removing the invalidity in the existing law subject to the exemption granted under sub-section (2) of section 6. The writ petitions were partly allowed to this extent.