2001 (3) TMI 993 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the first proviso to section 37(6) of the Haryana General Sales Tax Act, 1973 is ultra vires to the legislative powers of the State.
2. Whether the first proviso to section 37(6) is violative of the petitioner's fundamental right to carry on trade or business under Article 19(1)(g) of the Constitution of India.
3. Whether the first proviso to section 37(6) contravenes the provisions of Part XIII of the Constitution of India.
4. Whether the authorities under the Act are treating the imposition of penalty as mandatory under the new proviso.
5. Whether the petitioner has failed to avail the statutory alternative remedy of appeal.

Detailed Analysis:

1. Ultra Vires to Legislative Powers:
The petitioner argued that the first proviso to section 37(6) is ultra vires to the legislative powers of the State as it falls under entry 92 of List I of the Seventh Schedule to the Constitution of India and not under entry 54 of List II. The court referred to various judicial precedents, including *United Provinces v. Mst. Atiqa Begum* and *Navinchandra Mafatlal v. Commissioner of Income-tax*, which established that legislative entries should be given the widest possible construction. The court held that the impugned proviso falls within the scope of entry 54 of List II, which pertains to taxes on the sale or purchase of goods, including ancillary and incidental matters necessary to prevent tax evasion.

2. Violation of Fundamental Right to Trade:
The petitioner contended that the impugned proviso violates Article 19(1)(g) of the Constitution as it affects the right to carry on trade and business without hindrance. The court examined the provisions of section 37 and judicial precedents, including *Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver* and *R.S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited*. It concluded that the power to legislate on sales tax includes the power to enact provisions to prevent tax evasion, which is incidental and ancillary to the levy of sales tax. The court held that the impugned proviso does not violate the petitioner's fundamental right to trade and business.

3. Contravention of Part XIII of the Constitution:
The petitioner argued that the impugned proviso contravenes the provisions of Part XIII of the Constitution, which guarantees freedom of trade and commerce. The court referred to the decision in *Sodhi Transport Co. v. State of U.P.*, where a similar provision was upheld. It held that a statutory provision creating a rebuttable presumption to prevent tax evasion does not confer the power to levy a tax that the Legislature cannot otherwise levy. Therefore, the impugned proviso does not impede the freedom of trade and commerce guaranteed under Part XIII of the Constitution.

4. Mandatory Imposition of Penalty:
The petitioner claimed that the authorities under the Act are treating the imposition of penalty as mandatory under the new proviso. The court noted that the petitioner failed to produce any evidence to substantiate this claim. It emphasized that the proviso merely introduces a rebuttable presumption that can be contested by producing evidence to prove that no attempt was made to evade tax. The court rejected the argument that the impugned proviso violates the petitioner's rights.

5. Failure to Avail Alternative Remedy:
The court highlighted that the petitioner did not avail the statutory alternative remedy of appeal against the order dated January 15, 2001. Citing precedents such as *Titaghur Paper Mills Co. Ltd. v. State of Orissa* and *Assistant Collector of Central Excise, Chandan Nagar, West Bengal v. Dunlop India Ltd.*, the court reiterated that the High Court should not entertain a petition under Article 226 if an effective alternative remedy is available. Consequently, the petitioner's challenge was rejected on this ground as well.

Conclusion:
The writ petition was dismissed, and the petitioner was advised to avail the remedy of appeal against the order dated January 15, 2001. The court upheld the constitutional validity of the first proviso to section 37(6) of the Haryana General Sales Tax Act, 1973, and found no violation of the petitioner's fundamental rights or the provisions of Part XIII of the Constitution.

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