1988 (3) TMI 413 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to notices under section 17(3) and 19B of Kerala General Sales Tax Act, constitutionality of section 19B, arbitrary powers of assessing authority under section 19B.

Analysis:
The petitioners, who are commission agents for the sale of cured arecanuts, challenged notices issued by the assessing authority under section 17(3) and 19B of the Kerala General Sales Tax Act. The notices (exhibits P7, P8, P9) proposed final assessments and invited objections from the petitioners. The petitioners also sought a declaration that section 19B is unconstitutional. The High Court, through Fathima Beevi, J., held that section 19B is constitutionally valid and the notices were served in accordance with statutory provisions. The petitioners' original petition was dismissed, leading to the writ appeal by the petitioners.

The main argument presented in the appeal was that section 19B of the Act is unconstitutional and confers arbitrary powers on officers to estimate the value of goods based on prevailing market prices, unrelated to dealers' accounts. Section 19B empowers the assessing authority to estimate the value of goods if a dealer has shown prices lower than prevailing market rates to evade tax. The State Legislature has the authority to enact laws imposing taxes on goods, including provisions to prevent tax evasion. The Court, after referencing relevant Supreme Court decisions, agreed with the single judge's reasoning that section 19B does not preclude the principles of natural justice and provides safeguards against arbitrary exercise of power by the assessing authority.

The Court emphasized that the assessing authority can estimate goods' value based on prevailing market prices only if satisfied that the dealer manipulated prices to evade tax. The authority must conduct an enquiry, provide an opportunity for the dealer to be heard, and make assessments objectively. Section 19B aims to prevent tax evasion and should be interpreted liberally to fulfill its purpose. The discretion vested in assessing officers is not discriminatory, as there are safeguards in place to prevent misuse of power.

Ultimately, the Court upheld the single judge's decision, affirming the constitutionality of section 19B and dismissing the writ appeal. The judgment highlights the importance of adhering to statutory procedures, ensuring fairness in assessments, and preventing tax evasion through legislative provisions like section 19B of the Act.