1989 (7) TMI 314 - HC - VAT and Sales Tax

Issues Involved
1. Validity of Section 26A of the Tripura Sales Tax Act, 1976.
2. Violation of Articles 14 and 19(1)(g) of the Constitution.
3. Arbitrary and discriminatory exercise of power under Section 26A.
4. Vagueness and lack of guidance in Section 26A.

Detailed Analysis

1. Validity of Section 26A of the Tripura Sales Tax Act, 1976

The petitioners challenged the constitutional validity of Section 26A of the Tripura Sales Tax Act, 1976, arguing that it violated Articles 14 and 19(1)(g) of the Constitution. Section 26A was introduced to provide a special mode of recovery of tax dues from defaulting dealers. This section allows the Commissioner to issue a notice to any person who owes money to a dealer, directing them to pay the amount to the government treasury instead of the dealer.

2. Violation of Articles 14 and 19(1)(g) of the Constitution

The petitioners argued that Section 26A violated Article 19(1)(g) of the Constitution, which guarantees the right to practice any profession or to carry on any occupation, trade, or business. They contended that the provision imposed unreasonable restrictions on their right to carry on business. The court, however, found that Section 26A did not levy any tax but only provided an additional mode of recovery of taxes from defaulting dealers. The court held that the provision was in the public interest and did not infringe upon the petitioners' rights under Article 19(1)(g).

Regarding Article 14, the petitioners argued that Section 26A was arbitrary and discriminatory as it allowed the authorities to pursue two different procedures for realizing the amounts due under the Act without any guidance on when either of the two procedures should be resorted to. The court noted that the provision applied uniformly to all dealers and was enacted to provide a speedy and easy process of making realization from defaulting dealers. The court held that the provision did not violate Article 14 of the Constitution.

3. Arbitrary and discriminatory exercise of power under Section 26A

The petitioners contended that Section 26A vested arbitrary powers in the authorities to pursue two different procedures for realizing the amounts due under the Act without any guidance on when either of the two procedures should be resorted to. The court, however, found that the provision applied uniformly to all dealers and was enacted to provide a speedy and easy process of making realization from defaulting dealers. The court held that the provision did not violate Article 14 of the Constitution.

The court also referred to previous judgments, including the Assam High Court's decision in Murlidhar Jalan v. Income-tax Officer and the Supreme Court's decision in State of Kerala v. C.M. Francis & Co., which upheld the validity of similar provisions providing multiple remedies for the recovery of tax dues.

4. Vagueness and lack of guidance in Section 26A

The petitioners argued that Section 26A was vague and did not specify at what stage the power under the section could be exercised. The court noted that the provision was enacted to provide a special mode of recovery from defaulting dealers and that the question of resorting to the same against dealers who were not defaulters did not arise. The court found that the provision was not vague and that the power under Section 26A could be exercised only when a dealer was a defaulter or deemed to be in default.

Conclusion

The court held that Section 26A of the Tripura Sales Tax Act, 1976, did not violate Articles 14 and 19 of the Constitution and was valid. The court directed the respondents to re-examine the impugned notices by giving an opportunity of hearing to the petitioners in light of the observations made and to not take any further action in pursuance of the same until such examination was made. The petitions were disposed of with parties bearing their own costs.

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