Delegated tax-rate power and anti-evasion classification upheld where legislative policy and rational nexus were shown.

SC held that section 3-D(1) of the U.P. Sales Tax Act validly delegated power to fix purchase tax rates because the Legislature had laid down policy and imposed an outer ceiling, leaving only administrative adjustment within defined limits. It also upheld the Explanation classifying purchases through licensed and unlicensed dealers, finding the distinction rationally connected to preventing tax evasion and ensuring effective tax administration, since licensed dealers were subject to record-keeping and disclosure obligations that unlicensed dealers did not share. The levy was therefore sustained, and the classification was not discriminatory under article 14.

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Issues: (i) whether section 3-D(1) of the U.P. Sales Tax Act, 1948 involved an invalid or excessive delegation of legislative power by authorising the State Government to fix the rate of purchase tax within the prescribed ceiling; (ii) whether the classification drawn in the Explanation to section 3-D between purchases through licensed dealers and purchases through unlicensed dealers offended article 14 of the Constitution of India.

Issue (i): whether section 3-D(1) of the U.P. Sales Tax Act, 1948 involved an invalid or excessive delegation of legislative power by authorising the State Government to fix the rate of purchase tax within the prescribed ceiling

Analysis: The power to fix the rate of tax is legislative in character, but delegation is permissible where the Legislature lays down the policy and provides intelligible guidelines. In fiscal legislation, the Legislature may entrust the executive with the task of adjusting details such as the choice of goods and the rate within an outer limit, since taxation must be capable of flexibility to meet administrative and economic needs. The provision fixed maximum rates and therefore did not leave the matter to unguided executive discretion. A prescribed upper ceiling on the rate was treated as a sufficient limitation on the delegated power.

Conclusion: The delegation under section 3-D(1) was valid and not excessive.

Issue (ii): whether the classification drawn in the Explanation to section 3-D between purchases through licensed dealers and purchases through unlicensed dealers offended article 14 of the Constitution of India

Analysis: A fiscal statute may adopt a wider classification to prevent evasion of tax, and equality does not forbid reasonable distinction. Licensed dealers were subject to statutory duties to maintain accounts and furnish particulars, enabling effective scrutiny of transactions. Unlicensed dealers were under no comparable obligation, creating a practical difference relevant to enforcement and collection. The distinction was therefore based on a rational nexus with the object of preventing tax evasion and securing effective administration of the levy.

Conclusion: The classification did not violate article 14.

Final Conclusion: The impugned levy was upheld and the appeals failed.

Ratio Decidendi: In fiscal legislation, the Legislature may validly delegate rate-fixing power if it prescribes a policy and an upper limit, and a classification based on differences relevant to preventing tax evasion satisfies article 14 where it bears a rational nexus to the object of the levy.

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