2009 (10) TMI 878 - HC - VAT and Sales Tax

Constitutional validity of sub-section (5A) of section 14 of the Act 15 of 1963 as amended by the Kerala Finance Bill, 2004 questioned Held that - The Division Bench of this court, while sustaining section 14(1) of the Kerala General Sales Tax Act prescribing fees for registration at different levels, on the basis of the turnover (the maximum of which was ₹ 10,000 in 1993 and ₹ 20,000 in 1996), had only observed that there was no rationale in demanding the very same extent of fees for the purpose of renewal also, to be done on yearwise basis and it was accordingly, that sub-section (5) as it existed earlier for collecting such amount was set aside as unreasonable and unconstitutional. Unlike this, the position as it stands now, it only such that the fees payable for renewal, under sub-section (5A) in respect of Kerala general sales tax registration is ₹ 500; whereas in the case of dealers having Kerala general sales tax and Central sales tax registration, it is ₹ 1,500. This court does not find it as exorbitant, arbitrary or shockingly disproportionate to the extent of service being provided in connection with the steps for renewal of registration and as such, no interference is called for. With regard to the maintainability of the writ petition, even though it has been stated in the opening paragraph of the writ petition that the same has been preferred in a representative capacity (for and on behalf of more than 800 dealers enlisted in exhibit P2), absolutely no document has been produced before this court to show that the petitioners have been authorised by all such persons to file the proceedings on their behalf as well. Merits having already been answered against the petitioners, the writ petition fails

Issues Involved:
1. Constitutional validity of sub-section (5A) of section 14 of the Kerala General Sales Tax Act, 1963.
2. Legislative competence of the State to impose renewal fees.
3. Whether the renewal fee is a tax in disguise.
4. Quid pro quo principle in relation to renewal fees.
5. Maintainability of the writ petition in a representative capacity.

Issue-wise Detailed Analysis:

1. Constitutional Validity of Sub-section (5A) of Section 14 of the Kerala General Sales Tax Act, 1963:
The petitioners challenged the constitutional validity of sub-section (5A) of section 14, which mandates a renewal fee for dealers registered under the Kerala General Sales Tax Act and the Central Sales Tax Act. They argued that this provision was beyond the legislative competence of the State, referencing the Division Bench's judgment in Kerala Electric Trades Association v. State of Kerala (Exhibit P3), which had previously set aside similar provisions as ultra vires the Constitution.

2. Legislative Competence of the State to Impose Renewal Fees:
The court examined the legislative competence of the State to impose renewal fees. It was noted that the Kerala General Sales Tax Act was enacted within the powers of the State as per Article 246(3) of the Constitution of India and Item 66 of List II of the Seventh Schedule, which allows the State to levy fees in respect of any matters in this List. The court held that there was legislative competence for the State to impose fees under the Act.

3. Whether the Renewal Fee is a Tax in Disguise:
The petitioners contended that the renewal fee, though labeled as a "fee," was actually a "tax" in disguise. However, the court referred to the Government's stance and previous judgments, indicating that what is collected is a fee and not a tax. The court did not find it necessary to delve into whether the levy was a tax or fee, as the legislative competence to impose fees was established.

4. Quid Pro Quo Principle in Relation to Renewal Fees:
The petitioners argued that the renewal fee violated the principle of quid pro quo, as no service was being rendered by the State in connection with the registration or renewal of registration. The court, however, noted that the principle of quid pro quo has been watered down by the apex court, and there is no requirement for mathematical exactitude between the fees collected and the services rendered. The court found that the renewal fee was justified by the general services provided by the State, including the verification of records and issuance of electronic identity cards.

5. Maintainability of the Writ Petition in a Representative Capacity:
The court addressed the maintainability of the writ petition, noting that the petitioners had not produced any document authorizing them to file the proceedings in a representative capacity for the members listed in Exhibit P2. Additionally, the requisite court fee for all the members was not paid. The court cited previous judgments, emphasizing the need for proper authorization and payment of court fees. Consequently, the writ petition was deemed not maintainable in respect of all other members listed in Exhibit P2 and was confined to the petitioners alone.

Conclusion:
The court dismissed the writ petition, holding that the legislative competence of the State to impose renewal fees was established, the renewal fee was not a tax in disguise, and the principle of quid pro quo was not violated. The petition was also found not maintainable in a representative capacity due to lack of proper authorization and payment of requisite court fees.

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