1993 (7) TMI 330 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of Section 16A of the Orissa Sales Tax Act, 1947.
2. Validity of Rules 94 and 94A of the Orissa Sales Tax Rules, 1947.
3. Whether the establishment of check-posts violates Article 301 of the Constitution.
4. Whether the provisions are a colourable exercise of legislative power.
5. Whether the provisions violate Article 19(1)(g) of the Constitution.
6. Legality of the order passed by the Sales Tax Officer on October 21, 1989.

Detailed Analysis:

1. Validity of Section 16A of the Orissa Sales Tax Act, 1947:

The petitioners contend that Section 16A, which allows for the establishment of check-posts to prevent tax evasion, is a colourable exercise of legislative power and impedes the free flow of trade, thus violating Article 301 of the Constitution. The court, however, finds that the provision is within the legislative competence of the State Legislature under Entry 54 of List II of the Seventh Schedule. The court references the case of K.C. Gajapati Narayan Deo v. State of Orissa AIR 1953 SC 375 to explain "colourable legislation" and concludes that Section 16A is not a colourable piece of legislation as its true import and effect are to check evasion of sales tax.

2. Validity of Rules 94 and 94A of the Orissa Sales Tax Rules, 1947:

The petitioners argue that these rules, which support the implementation of Section 16A, also impede the free flow of trade and are thus invalid. The court, however, upholds these rules as regulatory measures designed to check tax evasion, citing that they do not constitute an unreasonable restriction on trade.

3. Whether the Establishment of Check-Posts Violates Article 301 of the Constitution:

The petitioners argue that the establishment of check-posts constitutes a restriction on the free flow of trade under Article 301. The court examines several precedents, including Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232 and Khyerbari Tea Co. v. State of Assam AIR 1964 SC 925, and concludes that regulatory measures that incidentally affect trade do not violate Article 301. The court finds that the check-posts are regulatory measures intended to prevent tax evasion and do not directly impede the free flow of trade.

4. Whether the Provisions are a Colourable Exercise of Legislative Power:

The court references the definition of "colourable legislation" from K.C. Gajapati Narayan Deo v. State of Orissa AIR 1953 SC 375 and concludes that Section 16A is not a colourable exercise of legislative power. The provision is found to be within the legislative competence of the State Legislature and is aimed at preventing tax evasion, not restricting trade.

5. Whether the Provisions Violate Article 19(1)(g) of the Constitution:

The petitioners argue that the provisions amount to a restraint on the freedom of trade guaranteed under Article 19(1)(g). The court, however, finds that the provisions are reasonable regulatory measures and do not constitute an unreasonable restriction on the right to trade.

6. Legality of the Order Passed by the Sales Tax Officer on October 21, 1989:

The court notes that the order in question is against "The Apptech Engineers Pvt. Ltd., Calcutta, Site at Choudwar, I.C.C. Ltd. Campus" and not against the present petitioner. Therefore, the court declines to examine the legality of the order at the instance of the present petitioner, who is not the dealer.

Conclusion:

The court dismisses the writ application, upholding the validity of Section 16A of the Orissa Sales Tax Act, 1947, and Rules 94 and 94A of the Orissa Sales Tax Rules, 1947. The court finds that these provisions are regulatory measures aimed at preventing tax evasion and do not violate Articles 301 or 19(1)(g) of the Constitution. The court also applies the doctrine of "stare decisis" to uphold the provisions, noting that they have stood the test of time for over three decades. The legality of the order passed by the Sales Tax Officer is not examined as the petitioner is not the affected dealer.

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