1985 (3) TMI 310 - HC - VAT and Sales Tax

Issues Involved:
(i) Whether section 13(2) of the Act provides for payment of penalty or interest?
(ii) Whether section 13(2) of the Act was violative of articles 14 and 19(1)(f) of the Constitution?
(iii) Whether section 13(2A) of the Act suffers from the vice of excessive delegation and was violative of article 14 of the Constitution?
(iv) If section 13(2A) of the Act was invalid, whether that invalidity by itself invalidates section 13(2) of the Act, on the grounds that it was not severable from the latter?

Detailed Analysis:

Re: Point No. I
The primary contention was whether section 13(2) of the Karnataka Sales Tax Act, 1957, provides for the payment of penalty or interest. The petitioner argued that the plain language of section 13(2) does not support the interpretation that it provides for an automatic levy of interest, as previously held by the court in Volkart's case. The respondents maintained that the ruling in Volkart's case was correct and did not require reconsideration. The court reviewed the historical context and various interpretations of section 13(2), including decisions in Sha Jayantilal Khetsi v. Additional Commercial Tax Officer, Sterling Construction & Training Company v. Commercial Tax Officer, and Volkart's case. The court concluded that the term "penalty" in section 13(2) should be construed as "interest" and rejected the petitioner's contention for reconsideration.

Re: Point No. II
The petitioner challenged section 13(2) as violative of articles 14 and 19(1)(f) of the Constitution, arguing that it levied penalties automatically without an opportunity for hearing and ignored stay orders. The court noted that article 19(1)(f) had been deleted by the 44th Constitution Amendment Act and thus could not be a basis for the challenge. The court referenced previous rulings, including Mutha Manickchand's case and Khazan Chand v. State of Jammu and Kashmir, to conclude that section 13(2) did not violate article 14. The court reasoned that the provision uniformly applied to all defaulting assessees and the rates of interest were neither disproportionate nor arbitrary. The court also stated that stay orders only postponed liabilities and did not affect the validity of section 13(2).

Re: Point No. III
The petitioner challenged section 13(2A) of the Act, arguing that it conferred arbitrary and uncontrolled power on the executive government, violating article 14. The respondents countered that the provision did not suffer from excessive delegation. The court noted that section 13(2A) conferred a benefit on assessees, allowing them to seek remission of penalties, and such a beneficial provision could not be challenged by the beneficiary. The court also held that conferring power on the government, the highest executive authority, subject to rules laid before the legislature, did not constitute excessive delegation. The court referenced the Supreme Court ruling in Chinta Lingam v. Government of India to support its conclusion.

Re: Point No. IV
The petitioner argued that if section 13(2A) was struck down for excessive delegation, section 13(2) should also be invalidated as they were inseparable. The court, having found section 13(2A) valid, stated that this point did not survive for consideration. However, the court examined the principles of severability from Harakchand Ratanchand Banthia v. Union of India and concluded that section 13(2A) was independent and separable from section 13(2). Even if section 13(2A) were invalid, section 13(2) could still stand independently.

Conclusion
The court dismissed the writ petition, upholding the validity of sections 13(2) and 13(2A) of the Karnataka Sales Tax Act, 1957. The court also suggested that the legislature amend section 13 to replace the term "penalty" with "interest" to avoid future litigation. The petitioner was ordered to pay the costs of the respondents, set at Rs. 250.

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