1987 (8) TMI 431 - HC - VAT and Sales Tax

Issues Involved:

1. Legislative Competence of the State Legislature under Entry 54, List II of Schedule VII.
2. Impracticability and Retrospective Application of Section 43(11)(i).
3. Violation of Article 19(1)(g) - Freedom of Trade.
4. Violation of Article 25 - Freedom of Religion.

Issue-wise Detailed Analysis:

1. Legislative Competence of the State Legislature under Entry 54, List II of Schedule VII:

The petitioners argued that the amendment to the definition of "year" under the Karnataka Sales Tax Act was ultra vires and beyond the legislative competence of the State Legislature under Entry 54, List II of Schedule VII to the Constitution. They contended that the amendment was not necessary for administering the Act and had no nexus to the object of the Act, which is to levy tax on the turnover of sale or purchase for a year. The court held that prescribing a uniform financial year for all dealers under the Act for purposes of assessment falls within the ancillary and incidental powers of the State Legislature. The amendment was upheld as falling within the purview of the legislative competence conferred under Entry 54.

2. Impracticability and Retrospective Application of Section 43(11)(i):

The petitioners contended that the provisions of Section 43(11)(i) were impossible to comply with, as it required dealers to close their accounts on 31st March 1987, while the amendment itself was enforced from 1st April 1987. The court found that the amendment lacked legislative sanction to be enforced from 31st March 1987 and declared Section 43(11)(i) as ultra vires. The court held that the retrospective operation of the amendment from 31st March 1987 was not permissible, as it imposed a new obligation on dealers to close their accounts on a date different from their chosen accounting year under the old provisions.

3. Violation of Article 19(1)(g) - Freedom of Trade:

The petitioners argued that the amendment interfered with their freedom of trade guaranteed under Article 19(1)(g) and imposed unreasonable restrictions. They contended that the amendment forced them to adopt a particular accounting year, which was impractical and caused hardship. The court rejected this contention, holding that the amendment did not impose unreasonable restrictions on the freedom of trade. The amendment was justified as an ancillary and incidental power of the State Legislature for the effective administration of the Act.

4. Violation of Article 25 - Freedom of Religion:

The petitioners argued that the amendment violated their right to freedom of religion under Article 25, as they had adopted particular accounting years based on religious beliefs and customs. The court rejected this contention, holding that the amendment did not encroach upon or infringe on the right to practice any religion or faith. The court found that the amendment did not affect any religious sentiment or belief of any citizen.

Conclusion:

The writ petitions were allowed in part. The court struck down Section 43(11)(i) of the Karnataka Sales Tax (Amendment) Act, 1987, as ultra vires and restrained the State from enforcing the amended definition of "year" for the current year commencing from 1st April 1987 and ending on 31st March 1988. The other contentions of the petitioners regarding legislative competence, violation of Article 19(1)(g), and Article 25 were rejected.

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