1972 (10) TMI 84 - SC - VAT and Sales Tax

Court upholds retrospective tax on split/processed foodgrains, dismisses appeals on statutory interpretation and legislative delegation.

Hira Lal Rattan Lal & Others Versus Sales Tax Officer, Section III Kanpur and Another  

The court upheld the legislative amendments allowing for the retrospective levy of tax on split or processed foodgrains. It rejected the appellants' ... Whether the Government is competent to levy sales tax on the purchases made by the appellants of split or processed foodgrains and dal under the provisions of the United Provinces Sales Tax Act, 1948, as amended by the Uttar Pradesh Sales Tax (Amendment and Validation) Act, 1970? Held that:- Appeal dismissed. Issues Involved:1. Retrospective levy of tax.2. Separation of split and unsplit pulses for taxation.3. Alleged usurpation of judicial power by the Legislature.4. Violation of Article 14 of the Constitution.5. Interpretation of Explanation II to Section 3-D.6. Requirement of a fresh notification for tax levy.7. Excessive delegation of legislative power.Detailed Analysis:1. Retrospective Levy of Tax:The appellants challenged the retrospective imposition of tax, arguing that no fresh levy can be imposed retrospectively. The court held that legislative power includes the authority to legislate both prospectively and retrospectively. It cited several precedents, including The Union of India v. Madan Gopal Kabra and J.K. Jute Mills Co. Ltd. v. The State of Uttar Pradesh, to affirm that the power to tax retrospectively is within legislative competence.2. Separation of Split and Unsplit Pulses for Taxation:The appellants argued that the Legislature cannot separate split and unsplit pulses into independent commodities and impose tax twice on the same commodity. The court rejected this contention, stating that the Legislature has the authority to define the nature of goods for taxation purposes. It cited Jagannath and Others v. Union of India to support its view that the Legislature can classify goods as it deems fit for tax purposes.3. Alleged Usurpation of Judicial Power:The appellants claimed that the Legislature unlawfully usurped judicial power by adding Explanation II to Section 3-D and Section 7. The court clarified that the Legislature did not overrule the High Court's decision but rather changed the law retrospectively to remove the basis of that decision. The court distinguished between encroachment on judicial power and nullification of a judicial decision by changing the law retrospectively, which is permissible.4. Violation of Article 14 of the Constitution:The appellants argued that Explanation II to Section 3-D violated Article 14 due to irrational classification. The court held that the Legislature has wide powers of classification in taxing statutes, provided there is a reasonable basis. It cited Khandige Sham Bhat v. The Agricultural Income-tax Officer to affirm that the classification between processed and unprocessed pulses is reasonable and not violative of Article 14.5. Interpretation of Explanation II to Section 3-D:The appellants contended that Explanation II could not extend the scope of the main section and thus did not create a new charge. The court disagreed, stating that the legislative intent was clear in treating split and unsplit foodgrains as separate items for taxation. It emphasized that the explanation, though not well-worded, effectively broadened the scope of Section 3-D to include split or processed foodgrains.6. Requirement of a Fresh Notification for Tax Levy:The appellants argued that a fresh notification was needed under Section 3-D read with Explanation II to separately show foodgrains as split or processed and unsplit or unprocessed. The court held that the existing notification, when read in conjunction with Explanation II and Section 7, was sufficient to levy tax on both categories. It emphasized that Section 7 validated all past notifications and actions taken under them.7. Excessive Delegation of Legislative Power:The appellants claimed that the power conferred on the Government under Section 3-D amounted to excessive delegation. The court rejected this, stating that it is permissible for the Legislature to delegate the selection of goods or transactions for taxation to the executive. It cited Pt. Banarsi Das Bhanot and Others v. The State of Madhya Pradesh to support the view that such delegation is constitutional and necessary for practical governance.Conclusion:The court found no merit in any of the appellants' contentions. It upheld the legislative amendments and the retrospective levy of tax on split or processed foodgrains. The appeals were dismissed with costs.