1983 (5) TMI 31 - SC - VAT and Sales Tax

Constitutional validity of sub-s. (2-A) of s. 9 of the Central Sales Tax Act, 1956 as amended by the Central Sales Tax (Amendment) Act, 1976 and S. 9 of the Amending Act validating the levy of penalties under the Act with retrospective effect questioned Held that - There is no dispute in this case about the validity of the tax payable under the Act, during the period between January 1, 1957, and the date of commencement of the Amending Act. It has to be presumed that all the tax has been collected by the dealers from their customers. There is also no dispute that the law required the dealers to pay the tax within the specified time. The dealers had also the knowledge of the provisions relating to penalties in the general sales tax laws of their respective States. In this situation, where the dealers have utilised the money which should have been paid to the Government and have committed default in performing their duty, if Parliament calls upon them to pay penalties in accordance with the law as amended with retrospective effect it cannot be said that there has been any unreasonable restriction imposed on the rights guaranteed under art. 19(1)(f) and (g) of the Constitution, even though the period of retrospectivity is nearly nineteen years. It is also pertinent to refer here to sub-s. (3) of S. 9 of the Amending Act, which provides that the provisions contained in sub-s. (2) thereof would not prevent a person from questioning the imposition or collection of any penalty or any proceeding, act or thing in connection therewith or for claiming any refund in accordance with the Act as amended by the Amending Act read with sub-s. (1) of 9. of the Amending Act. Explanation to sub-s. (3) of S. 9 of the Amending Act also provides for exclusion of the period between February 27, 1975, i.e., the date on which the judgment in Khemka s case 1975 (2) TMI 91 - SUPREME COURT OF INDIA was delivered upto the date of the commencement of the Amending Act, in computing the period of limitation for questioning any order levying penalty. In those proceedings, the authorities concerned are sure to consider all aspects of the case before passing orders levying penalties. The contention that the impugned provision is violative of art. 19(1)(f) and (g) of the Constitution has, therefore, to be rejected. Also not possible to hold that S. 48 of the Haryana General Sales Tax Act, 1973, confers an uncanalised, unguided and arbitrary power on the authority levying penalty. Appeal dismissed.

Issues Involved:
1. Constitutional validity of sub-section (2-A) of section 9 of the Central Sales Tax Act, 1956 (as amended by the Central Sales Tax (Amendment) Act, 1976).
2. Validity of retrospective effect and validation of penalties under the Act.
3. Alleged excessive delegation of legislative power by Parliament.
4. Violation of Article 20(1) of the Constitution.
5. Violation of Articles 19(1)(f) and (g) of the Constitution.
6. Validity of section 48 of the Haryana General Sales Tax Act, 1973.

Detailed Analysis:

1. Constitutional Validity of Sub-section (2-A) of Section 9:
The petitioners challenged the constitutional validity of sub-section (2-A) of section 9 of the Central Sales Tax Act, 1956, as amended, arguing that the amendment did not effectively fill the lacuna pointed out in the Khemka case. The court held that the language of sub-section (2-A) was adequate to make the provisions relating to penalties under the general sales tax laws of the respective States applicable to the proceedings under the Act. The court clarified that the principal object of the Act is the assessment, reassessment, collection, and enforcement of payment of Central sales tax and that the inclusion of penalties is implicit in these processes.

2. Validity of Retrospective Effect and Validation of Penalties:
The petitioners contended that the retrospective effect given to sub-section (2-A) of section 9 and the validation of penalties levied prior to the amendment were unconstitutional. The court noted that the retrospective amendment was necessary to address the deficiency pointed out in the Khemka case and to validate the penalties levied under the general sales tax laws of the States. The court upheld the retrospective amendment, stating that it effectively removed the basis of the Khemka judgment and allowed for the assessment and realization of penalties from January 5, 1957.

3. Alleged Excessive Delegation of Legislative Power:
The petitioners argued that sub-section (2-A) of section 9 constituted an excessive delegation of legislative power, as it adopted the provisions relating to penalties from the general sales tax laws of the States. The court rejected this argument, stating that Parliament had not abdicated its legislative function but had merely incorporated relevant provisions from the State laws to ensure uniformity and efficiency in the enforcement of the Central Sales Tax Act. The court emphasized that such incorporation is a well-known legislative method and does not affect the validity of the legislation.

4. Violation of Article 20(1) of the Constitution:
The petitioners claimed that the retrospective imposition of penalties violated Article 20(1) of the Constitution, which protects against ex post facto laws. The court held that Article 20(1) applies to criminal proceedings and not to civil penalties imposed under tax laws. The court distinguished between penalties for criminal offenses and civil penalties for statutory violations, stating that the latter do not fall within the scope of Article 20(1).

5. Violation of Articles 19(1)(f) and (g) of the Constitution:
The petitioners argued that the retrospective imposition of penalties constituted an unreasonable restriction on their fundamental rights to own property and carry on business under Articles 19(1)(f) and (g). The court rejected this argument, stating that the retrospective amendment was a necessary legislative measure to address the deficiencies in the Act and ensure compliance with tax obligations. The court emphasized that the imposition of penalties was a reasonable restriction in the public interest and did not violate the petitioners' fundamental rights.

6. Validity of Section 48 of the Haryana General Sales Tax Act, 1973:
The petitioners contended that section 48 of the Haryana General Sales Tax Act, 1973, which authorizes the levy of penalties, was arbitrary and conferred unguided power on the authorities. The court rejected this contention, stating that the provision itself provided sufficient guidance for the exercise of discretion by the authorities. The court noted that the imposition of penalties under section 48 involved a quasi-judicial process and was subject to appeal and review, ensuring that the power was not exercised arbitrarily.

Conclusion:
The court dismissed the petitions, upholding the constitutional validity of sub-section (2-A) of section 9 of the Central Sales Tax Act, 1956, as amended, and the retrospective validation of penalties. The court also upheld the validity of section 48 of the Haryana General Sales Tax Act, 1973, and rejected the arguments based on Articles 20(1) and 19(1)(f) and (g) of the Constitution.

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