1995 (3) TMI 442 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutionality of Section 38(3)(c) of the M.P. General Sales Tax Act, 1958.
2. Constitutionality of Section 18(9) of the M.P. General Sales Tax Act, 1958.
3. Validity of Notification dated December 26, 1988, extending the period for completion of assessment.

Detailed Analysis:

Issue 1: Constitutionality of Section 38(3)(c) of the M.P. General Sales Tax Act, 1958
Section 38(3)(c) of the State Act mandates that no first or second appeal against an order of assessment or penalty shall be admitted unless 50% of the balance amount is paid. The petitioners argued that this provision is arbitrary and unconstitutional, as it imposes an oppressive condition that makes the right of appeal illusory. They contended that the statute confers wide discretion on the statutory authority to impose penalties, which can be abused, thus making the mandatory deposit oppressive.

The court referred to several precedents, including:
- Babubhai & Co. v. State of Gujarat: The Supreme Court upheld a provision in the Bombay Town Planning Act, emphasizing the importance of corrective machinery and the need for the exercise of power to be quasi-judicial and subject to judicial review.
- Monoranjan Chakraborty v. State of Tripura: The Gauhati High Court found a similar provision in the Tripura Sales Tax Act to be ultra vires Article 14 of the Constitution due to the enormous discretion vested in the taxing authority and the serious consequences of arbitrary orders.
- D.K. Trivedi and Sons v. State of Gujarat and Anant Mills Co. Ltd. v. State of Gujarat: The Supreme Court held that the possibility of abuse of power does not invalidate the statute conferring the power. The court emphasized that the right of appeal is statutory and can be regulated by imposing conditions.
- Nand Lal v. State of Haryana and Shyam Kishore v. Municipal Corporation of Delhi: The Supreme Court upheld similar provisions, emphasizing that conditions for appeals are valid as long as they are not unreasonably onerous.

The court concluded that Section 38(3)(c) is regulatory and not oppressive or arbitrary. The requirement to deposit 50% of the balance amount is a valid condition for the exercise of the right of appeal and does not render the right illusory.

Issue 2: Constitutionality of Section 18(9) of the M.P. General Sales Tax Act, 1958
Section 18(9) allows the State Government to extend the period for completion of assessment beyond the statutory period of two calendar years for reasons to be recorded in writing. The petitioners argued that this provision is arbitrary and confers unguided power on the State Government, undermining the protection afforded by the statutory period.

The court noted that the scheme of Section 18(8) and (9) contains implicit guidelines. The State Government must consider the mandate of expeditious completion of assessment and record reasons for the extension. The reasons must be relevant and connected to the inability to complete the assessment within the prescribed period.

The court rejected the contention that Section 18(9) confers arbitrary and unguided power, holding that the provision is reasonable and contains implicit guidelines for its exercise.

Issue 3: Validity of Notification dated December 26, 1988
The impugned notification extended the period for completion of assessment from December 31, 1988, to February 28, 1989, citing reasons such as an increase in the number of dealers and the need to afford reasonable opportunity to dealers. The petitioners argued that the reasons must be specific to individual dealers or proceedings and not general.

The court held that the expression "any dealer" in Section 18(9) comprehends all dealers, and the reasons for the extension can be general. The reasons stated in the notification were relevant and germane to the guidelines implicit in Section 18(9). The extension for a period of two months was deemed reasonable.

The court dismissed the writ petitions, upholding the validity of Section 38(3)(c) and Section 18(9) of the State Act and the notification dated December 26, 1988.

Conclusion
The court upheld the constitutionality of Section 38(3)(c) and Section 18(9) of the M.P. General Sales Tax Act, 1958, and validated the notification extending the period for completion of assessment. The writ petitions were dismissed, and the court awarded an advocate's fee of Rs. 500 in each case.

← Previous Next →