1969 (11) TMI 83 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of Sections 8 and 9 of the Central Sales Tax Act, 1956.
2. Whether the Central Sales Tax Act must be deemed to have adopted the sales tax laws as in force when the Act came into force on 21st December, 1956.

Detailed Analysis:

Constitutionality of Sections 8 and 9 of the Central Sales Tax Act, 1956:
The petitioner challenged the levy of tax under Sections 8 and 9 of the Central Sales Tax Act, 1956, arguing that these sections are unconstitutional. The primary contention was that the Act adopts not only the sales tax laws of various States as they stood when the Act was passed but also future amendments, which amounts to the Parliament abdicating its essential legislative function. The petitioner relied on the Supreme Court decision in B. Shama Rao v. The Union Territory of Pondicherry, where it was held that adopting future laws enacted by another Legislature is unconstitutional.

The court examined whether the Parliament had abdicated its legislative functions by adopting future State laws. It referred to various Supreme Court rulings, including Pandit Banarsi Das Bhanot v. The State of Madhya Pradesh, which held that it is not unconstitutional for the Legislature to leave details of taxation laws to the executive, and Corporation of Calcutta v. Liberty Cinema, which supported delegating the power to fix tax rates to a non-legislative authority.

The court concluded that the adoption of State tax rates and procedural laws for assessment and collection by the Central Sales Tax Act does not amount to abdication of legislative function. The policy of the law was clearly laid down, and the linkage of tax rates with State laws was essential to prevent tax evasion and ensure uniformity. Thus, the first ground of challenge was rejected as untenable.

Adoption of Sales Tax Laws as in Force on 21st December, 1956:
The petitioner alternatively argued that the Act should be deemed to have adopted the sales tax laws as they existed when the Act came into force on 21st December, 1956. The court noted that Section 2(i) of the Act defines "sales tax law" and "general sales tax law" as the law for the time being in force in any State, indicating the Legislature's intention to include future amendments.

The court disagreed with the decision in Shah & Co. v. State of Madras, which held that only the law as it stood when the Act was enacted was adopted. It opined that the Parliament was competent to adopt State laws as they may exist in the future, including any amendments. The adoption of procedural laws for assessment and collection of tax from State laws does not constitute abdication of legislative functions.

Thus, the second ground of challenge was also rejected as untenable.

Conclusion:
The court dismissed the writ petition, holding that both grounds of challenge to the constitutionality of Sections 8 and 9 of the Central Sales Tax Act, 1956, failed. The Parliament had not abdicated its legislative functions, and the adoption of State tax laws, including future amendments, was within its competence. The petitioner was ordered to pay costs, with an advocate's fee of Rs. 100.

Petition dismissed.