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TMI Blog1970 (8) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... all be liable to pay, in addition to any tax for which he may be liable, a penalty of an amount not exceeding two thousand rupees, or double the amount of tax which would have been payable had there been no such failure, whichever is less; and in addition, in the case of contravention referred to in clause (a), any sum so collected shall be forfeited to the State Government. (2) If the assessing authority in the course of any proceeding under this Act or otherwise has reason to believe that any person has become liable to a penalty with or without forfeiture of any sum under sub-section (1), he shall serve on such person a notice in the prescribed form requiring him on a date and at a place specified in the notice to attend and show cause why a penalty with or without forfeiture of any sum as provided in sub-section (1) should not be imposed on him. (3) The assessing authority shall thereupon hold an inquiry and shall make such order as he thinks fit. (4) No prosecution for an offence under this Act, shall be instituted in respect of the same facts on which a penalty has been imposed under this section." A close and careful analysis of this section would indicate that if an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is included within the term of turnover whether the dealer shows this amount in his turnover and therefore is taxed or where he does not show so such amount in his turnover but is nevertheless taxed on escaped turnover, in either case under section 30-B a penalty can be levied apart from the tax. And when it directs that in addition to the tax and penalty the amount so collected in contravention of section 30-A shall be forfeited to the State Government, it gives rise to the question whether the State Legislature is competent to enact such a provision. It is not in doubt that under entry 54 of List II of the Seventh Schedule to the Constitution, the State Legislature can enact a law taxing transactions of sales or purchases of goods. The entry therefore empowers the State Legislature to make laws for taxing sales and purchases of goods. It does not expressly empower the State Legislature to enact a law by which a dealer who has collected a tax without authority of any law is either required to hand over the amount to the State Government or enact for the forfeiture of such amounts to the State Government, obviously because the collection so made would not be a tax levied under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra vires of the Constitution as the Government had no right in realising the amount from the dealers. In Ashoka Marketing Limited v. State of Bihar and AnotherSince reported at [1970] 26 S.T.C. 254 (S.C.)., unreported judgment of the Supreme Court in C.A. No. 2004 of 1966 dated 30th January, 1970, the Supreme Court was called upon to consider firstly, whether section 20-A of the Bihar Sales Tax Act (19 of 1959) is within the competence of the State Legislature and secondly, whether the order made under section 20-A for depositing with the State Government the amount collected by a dealer from his constituents to recoup himself for payment of sales tax under the Act of 1947, which amount according to that Act the constituent was not liable to pay, was proper. Section 20-A, which was more reasonable than section 11 of the Hyderabad General Sales Tax Act and section 5-C of the Andhra Pradesh General Sales Tax Act, read as follows: "(1) No person who is not a registered dealer shall collect from any person any amount, by whatever name or description it may be called, towards or purporting to be tax on sale of goods. (2) No registered dealer shall collect from any person any suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compliance with an order under sub-section (3) or sub-section (4) or is deemed, under sub-section (5) to have been so deposited, such deposit shall constitute a good and complete discharge of the liability of the dealer in respect of such amount to the person from whom it was collected. (8) The person from whom the dealer has collected the amount deposited in pursuance of an order under sub-section (3) or sub-section (4) or deemed, under sub-section (5), to have been so deposited shall be entitled to apply to the prescribed authority in the prescribed manner for refund of the amount to him and the said authority shall allow the refund if it is satisfied that the claim is in order: Provided that no such refund shall be allowed unless the application is made before the expiry of the period within which the applicant could have claimed the amount from the dealer by a civil suit had his liability not been discharged in accordance with the provisions of sub-section (7): Provided further that no claim for such refund shall be rejected without giving the applicant a reasonable opportunity of being heard........" The Supreme Court did not express any opinion on the second question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or ancillary power to make law for the levy and collection of tax under entry 54, a provision like section 30-B can be made. Now it is trite to say that constitutional provisions are entitled to a liberal or generous interpretation and not to a "strict" construction as may be applicable to statutes with particular objects. The principle that a large and liberal construction must be so put on legislative powers has been laid down in numerous cases. Because of this it is said that every Legislature has certain incidental and ancillary powers to make sure that legislation with respect to its enumerated powers may be effected. It is thus a fundamental principle of constitutional law that everything necessary to the exercise of the power is included in the grant of the power. The Constitution merely marks the outlines of the powers granted to the Legislature, but does not undertake, as a code of laws would, to enumerate the sub-divisions of those powers, or to specify all the means of executing them. Laws, therefore, which are necessary and proper or incidental to the execution of the power, are alike constitutional. Thus none of the entries in the Lists should be read in a narrow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court in C.A. No. 2004 of 1966 dated 30th January, 1970. We are therefore satisfied that the impugned provision cannot be sustained on the basis that such a provision can be made under the incidental or ancillary power which entry 54 of List II confers on the State Legislature. The provision of section 30-B is then sought to be supported on the ground that the State Legislature is empowered to declare the collection of any sum by way of tax which is not exigible under the Act, as an offence under entry 64 and directs confiscation or forfeiture of the amount so collected. Now, entry 64 read with article 246 undoubtedly empowers the State Government to enact a law relating to offence against laws with respect to any of the matters in List II. The exercise of such legislative power has necessarily to be connected with entry 54. It can be seen that each of the three Legislative Lists has an entry conferring power upon the different Legislatures to make offences for the violation of the laws respectively made by them. Entry 64 of List II, is one such entry. Thus to make an act a penal offence is essentially an exercise of legislative power and if that power is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated above, it becomes plain that the prohibition imposed in section 30-A or direction to recover a penalty or forfeiture of any amount collected in contravention of section 30-A cannot be said to be a legislation on tax on sale or purchase of goods within the meaning of entry 54. We have already held that the validity of these provisions cannot be supported under entry 54 either on the basis of express grant of power to legislate or on the ground of ancillary or incidental power to enact. When once that is found, then what must follow is that any law made under entry 64 which does not satisfy the requirements of entry 54 is not a law with respect to the subject-matter enumerated in entry 54 but a law which falls outside that entry and consequently the State Legislature is not competent to impose any prohibition or make an act contravening such a provision an offence as is attempted in section 30-A or section 30-B. Nor can it direct forfeiture of such an amount which does not come within the purview of entry 54. Moreover, the Legislature under the guise, pretence or in the form of exercise of its own power cannot carry out an object which is beyond its powers. It must be borne in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g is that section 30-B(1)(a), the provision of penalty relating thereto, and the last line of the operating clause which appears after clause (b) and which reads as under: "and in addition, in the case of contravention referred to in clause (a), any sum so collected shall be forfeited to the State Government" are ultra vires of the Constitution inasmuch as the State Legislature was not competent to enact any such provisions of law under entries 54 and 64 read with article 246 of the Constitution. On parity of reasons and the reasons which we are giving below, section 30-A will also have to be found as ultra vires of the Constitution. The next question, which immediately arises for our consideration, is whether the rest of section 30-B, which has not been attacked as invalid, can be separated from the provisions of section 30-B which are found to be invalid. Now it is common experience that the validity of statutes is constantly challenged in these days. With the field of legislative activity rapidly expanding in all departments of national life and the speed with which the laws are made, many enactments must contain elements, the validity of which is at least questionable. Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question shall be treated by the court as void and not the whole statute. Such conclusion evidently can be arrived at after applying the doctrine of severability. In determining the separability of a statute, the ultimate decision, as seen above, will rest upon judicial determination of legislative intent. The problem is twofold. The Legislature must have intended that the Act be separable and that the Act must be capable of separation in fact. Thus where the Act or a section is such as to warrant the belief that the Legislature would not have passed the Act or the section without the invalid parts, the whole Act or the section must be held inoperative. If it is found that all the provisions are connected in subject-matter, dependent on each other, operating together for the same purpose or otherwise so connected in any manner that if it cannot be presumed that the Legislature would have passed the one without the other, the whole thing must go as invalid. That this is so is seen from R.M.D. Chamarbaugwalla v. Union of IndiaA.I.R. 1957 S.C. 628., where Venkatarama Ayyar, J., laid down several tests in this behalf. The real test therefore is whether or not the Legislature would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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