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TMI Blog1998 (6) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... CSL 97, Bangalore, dated March 31, 1998 Karnataka Gazette, dated March 31, 1998. In exercise of the powers conferred by the proviso to clause (a) of sub- section (4) of section 10-A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957), the Government of Karnataka hereby fixes with effect from first day of April, 1998, the amount of security mentioned in column (3) of the table below in respect of the category of dealers mentioned corresponding entries in column (2), who are dealing in liquor and/or beer, namely: Sl. No. Category of dealer Amount of security deposit Rs. 1. Distilleries manufacturing- (a) Rectified spirit 6,50,000 (b) Indian-made foreign liquor 7,50,000 (c) Fenny 2,00,000 (d) Wine 1,00,000 2. Breweries 6,50,000 3. (a) Wholesale dealers doing business- in the area of city Corporation having population of 20 lakhs and above. 3,00,000 (b) in other areas 2,50,000 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special commodities are defaulters in payment of tax-or are evading payment of tax. The avoidance or evasion of tax is identified by the department in the dealers dealing in special commodities like arecanut, cashew, cardamom, coconut, timber, pepper, cotton, copra, coffee, oil seeds, edible and liquor. Hence the State Legislature has amended the provisions of section 10-A with a view to ensure proper tax compliance from dealers dealing in liquor. 3A. So far as the constitutional validity or violation of article 14 of the Constitution is concerned it is sufficient to observe that the Legislature has wide range and flexibility in the matter of taxation and may pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably, as held in Khyerbari Tea Co. Ltd. v. State of Assam AIR 1964 SC 925. In the matter of security which is for enforcement of liability of tax, the object with which classification is made is reasonable and cannot be considered to be violative of the provisions of the Constitution. It cannot be considered to be unreasonable or mala fide exercise on the part of the State Government. 4.. The main contention which has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for renewal of registration should furnish security or additional security for the proper payment of tax payable by him, the said authority may direct him in writing, to furnish within such time as may be specified by such authority, security for an amount not exceeding the limits prescribed in clause (b) of sub-section (4) of section 10-A. For purposes of determining the amount of security, the assessing authority or registering authority, as the case may be, shall take into account, the taxable turnover of the dealer, if any, at the time of such determination, the nature of the goods dealt with by him and such other factors as may in the opinion of the said authority assist it in making a proper determination. (2) Such security may be furnished by the dealer in any of the following ways, namely: (a) by depositing as security in the Government treasury the amount fixed by the said authority; or (b) by depositing with the said authority Government securities for the amount fixed by the said authority; or (c) by depositing security amount in the Post Office Savings Bank and pledging the pass book to and depositing it with the said authority; or (d) by furnishing to the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statutorily prescribed mode of observing natural justice may have the effect of invalidating the subordinate legislation......... But, where the Legislature has not chosen to provide for any notice or hearing, no one can insist upon it and it will not be permissible to read natural justice into such legislative activity." The apex Court has held that the Legislature has plenary jurisdiction to exclude the rules of natural justice. That exclusion may be by express provision or by necessary implication. In the said case the principles of natural justice have been expressly provided by the statute itself. 7.. In the case of C.B. Gautam v. Union of India [1993] 199 ITR 530 (SC) question had arisen with regard to the application of principles of natural justice and the apex Court observed thus: "It must, however, be borne in mind that courts have generally read into the provisions of the relevant sections a requirement of giving a reasonable Opportunity of being heard before an order is made which would have adverse civil consequences for the parties affected. This would be particularly so in a case where the validity of the section would be open to a serious challenge for wan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken. The hearing may be given individually or collectively, depending upon the facts of each situation. A departure from this fundamental rule of natural justice may be presumed to have been intended by the Legislature only in circumstances which warrant it. Such circumstances must be shown to exist, when so required, the burden being upon those who affirm their existence." Since there is statutory exclusion of hearing for fixing the quantum of security for liquor/beer dealers, principles of natural justice cannot be said to be violated, State Government was not required to give the opportunity before fixing the quantum of security to each of the dealers. 8.. The question which has been now raised is that the proviso is contrary to the main section itself. In this regard the observation in the case of Hindustan Ideal Insurance Co. Ltd. v. Life Insurance Corporation of India AIR 1963 SC 1083 are relevant where it is observed that where the main provision is clear its effect cannot be cut down by the proviso. But where it is not clear the proviso, which cannot be presumed to be surplusage, can properly be looked into to ascertain the meaning and scope of the main provision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject- matter of the enacting clause". 10.. In the case of Aphali Pharmaceuticals Ltd. v. State of Maharashtra [1991] 81 STC 113 (SC); AIR 1989 SC 2227 it was observed "An explanation is different in nature from a proviso for a proviso excepts, excludes or restricts while an explanation explains or clarifies". 11.. The principles have been laid down by the apex Court in the case of S. Sundaram Pillai v. V.R. Pattabiraman AIR 1985 SC 582 which are as under: (para-42) "42. We need not multiply authorities after authorities on this point because the legal position seems to be clearly and manifestly well established. To sum up, a proviso may serve four different purposes: (1) qualifying or excepting certain provisions from the main enactment; (2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable; (3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and (4) it may be used merely to act as an optional addenda to the enactment with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-A(4)(a) of the Act is contrary to section 10-A(8). There may be refusal for grant of licence or renewal on the ground that the assessee has not furnished sec That is only a consequence and it does not affect the validity of the proviso to section 10-A(4)(a) of the Act. 14.. Question was also raised that the demand of security or additional security while fixing the amount is arbitrary exercise of power on the part of the State Government and the amount so fixed are excessive. So far as fixation of the amount under the notification dated March 31, 1998 is concerned it may be observed that the notification is based on 50 per cent of the amount of anticipated tax, In a particular circumstance the notification may sometimes cause hardship. -As observed by the apex Court in Khoday Distilleries Ltd. v. State of Karnataka (1995) 1 SCC 574, there is no fundamental right in carrying on business in liquor. 15.. The validity of demand of security was examined in Nand Lal Raj Kishan v. Commissioner of Sales Tax, Delhi [1961] 12 STC 324 (SC). Therein it was held that the power to levy a tax includes the power to impose reasonable safeguards in collecting it, and demanding security for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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