1998 (4) TMI 525 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutional validity of Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959.
2. Alleged violation of Articles 14 and 19(1)(g) of the Constitution of India.
3. Legislative competence and mens rea in the context of penalty provisions.

Summary:

1. Constitutional Validity of Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959:
The writ petitions challenged the constitutional validity of Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959, as substituted by Tamil Nadu Act No. 25 of 1993. This provision introduced graded penalties based on the difference between the tax paid and the tax assessed. The assessees contended that this provision was ultra vires entry 54 of List II of the Seventh Schedule to the Constitution of India. However, the court noted that the legislative competency to enact sub-section (3) of Section 12 was not pressed by the petitioners' counsel.

2. Alleged Violation of Articles 14 and 19(1)(g) of the Constitution of India:
The petitioners argued that Section 12(3) violated Articles 14 and 19(1)(g) of the Constitution of India. They contended that the penal provisions were disproportionate, equated dissimilar persons and situations, and did not allow discretion to the assessing authorities to determine the quantum of penalty based on the culpability of the assessee. The court, however, held that the provision served as a deterrent to tax evasion and was a reasonable restriction on the right to carry on business. The court also rejected the argument that the provision was discriminatory, stating that the classification of defaulters based on the degree of default was reasonable and did not violate Article 14.

3. Legislative Competence and Mens Rea in the Context of Penalty Provisions:
The petitioners contended that the element of mens rea should be considered in the imposition of penalties. The court referred to various judgments, including the decision in [1983] 53 STC 289 (Shiv Dutt Rai Fateh Chand v. Union of India), which held that a penalty imposed by the sales tax authority is a civil liability, though penal in character. The court concluded that mens rea is not an essential element for holding a delinquent liable to pay a civil penalty under a taxation statute. The court upheld the validity of the penalty provisions, stating that they were intended to curb tax evasion and were not arbitrary or unreasonable.

Conclusion:
The court dismissed the writ petitions and the writ appeal, holding that Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959, as amended by Tamil Nadu Act No. 25 of 1993, was constitutionally valid and did not violate Articles 14 and 19(1)(g) of the Constitution of India. The court also held that the element of mens rea was not required for the imposition of civil penalties under the taxation statute.