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TMI Blog1990 (11) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... 81 STC 330 infra; [1990] 2 KLT 511; in some others, the declaration was found to be totally unsustainable, and accordingly invalidated. 2.. A residue of cases in a grey area, in a twilight zone as it were, still remains. The question has to be discussed and decided upon. Judicial atrophy is counter-productive. 3.. A challenge to the very section was raised before a Bench consisting of Paripoornan and Jagannadha Raju, JJ., which examined threadbare the section in its analytical highlight and operational potency. The Division Bench could not, however, pronounce on its constitutional validity. The cases had come under section 41 providing for a limited jurisdiction of tax revision. The revision is provided against the final fact finding Tribunal. The Tribunal is an authority created under the statute. That authority could not question the validity of the statute under which it was so created. That limitation pursues the proceedings even in the revisional jurisdiction. What the Tribunal could not do, the High Court functioning under the very same statute, could not attempt. You need not bark when you cannot bite. The Division Bench, therefore, did the next best thing. It read dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irements of reasonableness and rationality, could be initially scrutinised by the hierarchy of the taxing officials and finally overviewed by the Tribunal and High Court. The final filtration is by the court. An assessment, by its very nature, does not depend upon the whim or fancy of the functionaries. A disciplined judicial mind and an acquired habit of objectivity in viewing things are the hall-marks of the essential functioning of assessment process. If the adjudicatory agencies at various levels are manned properly, (we need not enquire whether there has not been a serious dilution in the quality of the officers as revealed from disturbing experiences in the scrutiny of tax determinations), and decisions rendered by discussions across the table, (as distinguished from hand movements under it) it should give a reasonable measure of satisfaction to an ordinary citizen. Arbitrariness would not go unchecked, so long as the courts of the land do the duty as the Sentinel Quit Vive of the Constitution and the laws. 7.. If this vitality of quasi-judicial and judicial functioning is seriously sapped or attacked unnecessarily or unjustifiably, the court has the power, and in a sense a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dinance was initially issued on March 31, 1978 to translate into action, the decision of the Government. The Ordinance was replaced by the amendment Bill. Paragraph 18 of the Notes on Clauses dealt with clause 21 of the Bill, which was to be enacted as section 59A of the Act. It reads: "Clause 21.-This clause seeks to insert a new section as section 59A in the Act empowering the Government to determine the rate of tax, if a question arises as to the rate of tax leviable under the Act on the date of purchase of any goods." To carry out the suggestions of the Report, a Bill was introduced. The Objects and Reasons stated: "The Committee on Commodity Taxation headed by Prof. J.S. Gulati appointed by the Government has in its report made various recommendations for restructuring the rates of sales tax on goods, for modifying exemption from sales tax, for plugging the loopholes for evasion of sales tax and also for streamlining the administration of the sales tax law. The Minister (Finance and Law) in his statement made in the Legislative Assembly on the 4th July, 1977, indicated, among other things, that a restructuring of the rates of sales tax in the light of the Gulati Commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59A. T.M. Jacob presented the opposite view. He did not see any mala fide intention in that provision. He gave an illustration from his own personal experience: "A pipe is brought for electrification of the house. Pipe is useful alike for electrification and for agricultural purposes. There could be dispute about the payment of tax for them. If there is a dispute, among the traders or for the consumer, the Government must be empowered to settle it." He admitted that there was a provision in the Act for adjudication of the issue in case a higher rate is imposed. That was in answer to the query he faced from Mr. Devassykutty and Dr. K.G. Adiyodi. The defence Mr. Jacob attempted was an absence, according to him, of a malicious motive in the enactment of that section. Shri P.K. Sankarankutty emphasised the quasi-judicial aspect of the taxation administration. In particular, he referred to the machinery for resolving the dispute up to the Tribunal and thereafter by the High Court. He reminded Shri Jacob about his earlier views about the impropriety of the executive dabbling with the judicial power. Shri. T.M. Jacob intervened to say that a Governmental decision is easier and more expedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the judgment: "It is interesting to see that the sub-title to the section reads as 'Power of Government to determine rate of tax'. The section nowhere states that the Government is entitled, or authorised, to issue clarifications." (emphasis supplied) Another feature focussed by the court is the decision of the Government being final. The conspicuous absence of an indication as to the person who shall refer the question to the Government or about the procedure the Government should follow before it arrives at a decision, or again of an indication about the persons bound by the decision, were also stressed in the judgment. That the section may give a prima facie impression that the decision of the Government may even bind the Tribunal, was also indicated therein. The judgment summed up the position: "It cannot be doubted that the language used in section 59A is of very wide import." and proceeded to observe: "If literal meaning is given to the words used therein, then such a literal interpretation would render the section vulnerable to attack as vague and uncertain, and as one taking away guaranteed rights." (emphasis* supplied) The Division Bench stressed the areas of u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opportunity to each of them to represent their respective cases. (3) The decision already rendered under section 59A can be altered by invoking sections 57 and 58, if the Government feels that any decision taken by it while exercising powers under section 59A requires a change in the Rules or an amendment of the Act or Schedule thereto, subject to the limitations indicated. The Government can amend the law, if so advised. (4) The Government cannot take unilateral decisions which are to be deemed as applicable universally or operative notwithstanding the provisions to the contrary in the Act. (5) The decision under section 59A is confined as to the rate of tax leviable and cannot be utilised for circulars or clarifications. (6) The decision rendered under section 59A will not bind the Sales Tax Appellate Tribunal; and a fortiori, it will not bind the High Court. (7) A decision will not have retrospective operation so as to adversely affect the rights of the assessees. 20.. One of the earliest notifications issued under this newly got power was one dated March 8, 1986. This was immediately challenged by the aggrieved assessee by O.P. No. 540 of 1987. The challenge had been uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the legal system-it was held. Other decisions where statutory provisions invading areas of quasi-judicial and judicial process had been struck down are: P. Sambamurthy v. State of A.P. AIR 1987 SC 663 and B.B. Rajwanshi v. State of U.P. AIR 1988 SC 1089. 26.. This Court too had to consider an analogous provision contained in a State enactment. The court declared that the responsibility for resolution of difficulty of that nature rests with the court and not with the executive. That decision was rendered in the context of the General Sales Tax Act but in relation to the exercise of the power referable to section 60 therein. Purporting to remove the difficulties in the working of the provisions in the enactment, the Government issued an order which. virtually set at naught the decision of this Court in relation to the interpretation of two entries. The crucial observation of the court is: "Even in cases where there is any difficulty in the matter of intepretation of an entry, such difficulty will have to be resolved by the court and any notification issued by the State Government concerning the matter will not bind the Tribunal or the court in the matter of determining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the Government to preserve that trust and confidence. There had been many cases in which alien considerations and unjustified aberrations had resulted in strange decisions even by the peak of the executive power, the Government itself. It is unnecessary to chronicle the very many cases noticed by the courts in this country and the very many others, which remain unexposed and unnoticed. The same Supreme Court which rested its trust in the proper utilisation of a discretionary power, cautioned later that no such assumption could be drawn in the light of the past experience. Chandrachud, J. speaking for the court, expressed it in clear enough terms. 30.. The Division Bench in Dadha Pharma Pvt. Ltd. v. State of Kerala [1991] 81 STC 254 (Ker); [1990] 2 KLT 307, posed that problem pointedly. We have occasion to peruse the files produced before us in relation to the actual exercise of powers under section 59A. The manner in which the power had been exercised, does not measure up to the required level of a fair, reasonable and rational decision making process. The court had expressed itself fairly emphatically in one of the cases (vide Tharangini case [1990] 81 STC 284; [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks obstructing the exercise of trade. That being the position, it is the court's duty to remove the obstacles, when it is called upon to do so. In certain situations, an attempt to squeeze through may be suggested. That will not effectively serve the removal of stumbling-blocks of massive montrosity. If the blocks are grossly objectionable and the passage sought for is for legitimate purposes, the court need not have a halting stand or a doubting mind. All features of deleterious vagueness of the obnoxious type are present in the section. We have, therefore, no hesitation in declaring it as unconstitutional and violative of article 14 of the Constitution. Some samples of the working of section 59A will make matters clear. 33.. The file relating to shampoo, dealt with in G.O. (P) 59/86/TD dated April 19, 1986, which is subject-matter of O.P. Nos. 4896 of 1986, 1334, 1505 and 2414 of 1987, clearly demonstrates the casualness with which the matter is dealt with invoking section 59A. The Board of Revenue in its communication noted the decision of the Supreme Court of India in State of Gujarat v. Prakash Trading Co. [1972] 30 STC 348, holding that shampoo is liquid soap. Strange to sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched in a language reading: "It may not be proper to include imitation jewellery in item 119 without any analysis of that entry or any helpful judicial precedents, would not be a proper discharge of the onerous functions of the law department. 37.. Yet another file scrutinised by us relates to the rate of tax on microscope. By the clarification, it was brought under entry 150 reading "binoculars, telescopes and opera glasses". It does not require a microscopic examination of the entry or the legal precedents to be convinced that a microscope is not a binocular, telescope or opera glass. The Board by its letter dated August 4, 1983, proposed for amending the entry 150 so as to rope in the microscope also. It also requested that till such amendment is made, a clarification under section 59A may also be issued. The former was sensible and legal. The latter was impermissible and illegal. Yet the law department gave a blanket approval to the proposal of the Board. G.O. Rt. 241/84/TD dated April 2, 1984, declaring a shocking clarification about the microscope coming within the binoculars, telescopes and opera glasses was accordingly made. The arbitrariness actually involved in the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titative terms, at least, judicial review has indeed been 'peripheral and sporadic'. It appears to have played a minimal role in the redress of grievance and has provided the community with a very partial and limited check against governmental illegality. " Phil Harris, in the third edition of the book, "An Introduction to Law", published in the series "Law in context", comments after noting the above view of Sunkin, thus: "Sunkin's study suggests that the courts are not particularly effective in imposing limits on administrative action through the procedure of judicial review..................." 42.. Perhaps, Griffith was more caustic in his comment on judicial forces at work behind the scenes. Adverting to an attitude that "everything was at the discretion of the administrator", he made what is described as "acerbic remarks": "This nonsense, screaming its absurdities to heaven, was received with respectful, even smug, acceptance by His Majesty's judges. Respectful because they agreed with it. Smug because they were largely responsible for it............" The criticism and caution should not go unnoticed by a constitutional court. When arbitrariness is writ large, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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