1961 (8) TMI 29 - SC - Indian Laws

Whether a tax must be levied for the purpose of revenue and cannot be for purpose of control and that in the Mysore Act was really colourable legislation in that the impugned tax had been levied for the purpose of controlling prize competitions although it was given the form of a tax Whether the assessment was provisional which was not contemplated under the Act? Whether there should have been a fresh notification after the amendment of the Mysore Act? Whether at the time when the recovery proceedings were taken the tax had not become due as it was payable within a week which had not expired? Held that - By passing the resolution the States did not surrender their power of taxation it cannot be said that clause (2) of Article 252 of the Constitution was violated by the amendment of the Mysore Act; nor can it be said that in reality to was a piece of colourable legislation by an indirect attempt to amend the Central Act and a new method of control was devised by imposing a penalty under the name of tax. We have already held that the tax imposed under the Mysore Act was not by way of penalty but was the exercise of the power which the legislature possessed of imposing tax under entry 62.The tax imposed under the Mysore Act was not by way of penalty but was the exercise of the power which the legislature possessed of imposing tax under entry 62. As the tax was not paid the provisions of the Revenue Recovery Act were resorted to. This cannot be said to be a provisional assessment. The return submitted by the appellants as far as it went was accepted and on that the tax was demanded which was not a case of provisional assessment at all but as was held by the High Court it must be taken to be a final assessment and if and when any further assessment or a revised assessment is made the question may become relevant. Its legality depends upon the constitutionality of amended section 12(1) (b) and if that is valid, as we have held it to be, the notification is equally valid. The notification was only in regard to the rate of taxation and had no reference to the obtaining or not obtaining of the licence. The notice of demand called upon the appellants to pay the sum therein specified and to produce the challan in token of payment within a week. It is not the case of the appellants that they had paid or were in a position to produce the challan within a week. It was not an order making the tax payable within a week. Appeal dismissed.

Issues Involved:

1. Constitutionality of the Mysore Act after adopting the Central Act.
2. Alleged violation of Article 252(2) of the Constitution.
3. Competence of the Mysore Legislature to amend an Act allegedly repealed by the Central Act.
4. Repugnancy between the Mysore Act and the Central Act under Article 254(1).
5. Allegation of colorable legislation.
6. Legality of the provisional assessment and tax recovery proceedings.

Detailed Analysis:

1. Constitutionality of the Mysore Act after adopting the Central Act:

The appellants contended that by adopting the Central Act, the Mysore Legislature surrendered its legislative power regarding prize competitions, including taxation. The court examined Article 252(1) and determined that the resolutions passed by the States did not surrender the power to tax. The court emphasized that the power to tax under entry 62 of List II is separate from the power to control and regulate under entry 34 of List II. The court concluded that the Mysore Legislature retained its power to tax.

2. Alleged violation of Article 252(2) of the Constitution:

The appellants argued that the Mysore Act violated Article 252(2) by indirectly amending the Central Act through the imposition of monetary penalties. The court held that the Mysore Act did not amend the Central Act but exercised its separate power to tax under entry 62 of List II. The court found no violation of Article 252(2) and rejected the argument of colorable legislation.

3. Competence of the Mysore Legislature to amend an Act allegedly repealed by the Central Act:

The appellants claimed that the Mysore Legislature could not amend an Act that stood repealed due to the enactment of the Central Act. The court clarified that only the portions of the Mysore Act that were repugnant to the Central Act became void under Article 254(1). The rest of the Mysore Act, particularly the taxation provisions, remained valid. The court invoked the doctrine of eclipse, stating that the Mysore Legislature could amend the Act to remove repugnant portions.

4. Repugnancy between the Mysore Act and the Central Act under Article 254(1):

The appellants contended that the Mysore Act was repugnant to the Central Act and thus void under Article 254(1). The court acknowledged that certain provisions related to licensing in the Mysore Act became void due to repugnancy. However, the court held that the taxation provisions were not affected by this repugnancy. The Mysore Legislature's amendment, which omitted repugnant words retrospectively, was valid, and the remaining provisions of the Mysore Act were not repugnant to the Central Act.

5. Allegation of colorable legislation:

The appellants argued that the Mysore Act was colorable legislation, imposing a tax to control prize competitions. The court reiterated that the motives of the legislature are irrelevant if the legislation is within its competence. The court found that the Mysore Legislature had the power to impose the tax under entry 62 of List II and rejected the allegation of colorable legislation.

6. Legality of the provisional assessment and tax recovery proceedings:

The appellants raised three objections: (1) the assessment was provisional, which was not contemplated under the Act; (2) a fresh notification was required after the amendment of the Mysore Act; (3) the tax had not become due as it was payable within a week. The court found that the assessment was not provisional but a final assessment based on the appellants' return. The court held that no fresh notification was required, as the amended section 12(1)(b) was valid. The court also dismissed the objection regarding the timing of the tax payment, noting that the appellants did not pay or produce the challan within the specified week.

Conclusion:

The court concluded that:

1. The power to tax was not surrendered to Parliament by the resolutions passed under Article 252(1).
2. The Mysore Act was not colorable legislation and did not violate Article 252(2).
3. The Mysore Legislature was competent to amend the Act, and the amendment was not affected by Article 254(1).
4. The remaining provisions of the Mysore Act were not repugnant to the Central Act.
5. The objections to the legality of the assessment and tax recovery proceedings were without substance.

The appeal was dismissed with costs.

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