1986 (10) TMI 307 - SC - VAT and Sales Tax

Supreme Court affirms constitutionality of U.P. Sales Tax Act provision on coal dealers.

Kasturi Lal Harlal Versus State of UP. and Others

The Supreme Court upheld the constitutional validity of section 29-A of the U.P. Sales Tax Act, 1948, in a case involving coal dealers who collected sales ... Whether the section 29-A, as it stood at the material time in the form in which it was introduced by section 17 of the U.P. Taxation Laws Amendment Act, 1969, was within the legislative competence of the State Legislature? Held that:- Appeal dismissed. The decision in R.S. Joshi's case [1977 (8) TMI 140 - SUPREME COURT OF INDIA]must, therefore, be regarded as laying down the correct law on the subject and if that be so, it is obvious that section 29-A must be held to fall within the legislative competence of the State Legislature and its constitutional validity must be upheld. Issues:Constitutional validity of section 29-A of the U.P. Sales Tax Act, 1948.Analysis:The judgment by the Supreme Court addressed the constitutional validity of section 29-A of the U.P. Sales Tax Act, 1948. The appellants, who were dealers in coal, collected sales tax from purchasers following the imposition of sales tax on coal from October 1, 1965. However, upon assessment, it was found that no sales tax was payable by the appellants. The Sales Tax Officer rejected the appellants' refund claim citing section 29-A, which allowed refunds only to the persons from whom the tax was collected. The High Court upheld the constitutional validity of section 29-A, leading to the appeal to the Supreme Court.The relevant provisions of the U.P. Sales Tax Act, 1948, including section 8-A(4) and (5), were examined. Section 29-A was inserted by the Taxation Laws Amendment Act, 1969. The central question was whether section 29-A fell within the legislative competence of the State Legislature under entry 54 of List II of the Seventh Schedule to the Constitution, which pertains to taxes on the sale or purchase of goods. The Court considered precedents like R.S. Joshi v. Ajit Mills and Ashoka Marketing Ltd. v. State of Bihar to determine the legislative scope regarding ancillary or incidental powers.The Court highlighted the conflicting decisions in Ashoka Marketing Ltd.'s case and Orient Paper Mills Ltd.'s case but ultimately relied on R.S. Joshi's case to establish that section 29-A was a valid exercise of legislative competence. The Court emphasized that section 29-A served as a consumer-protection measure by ensuring the return of unjust gains collected by dealers to the buyers. The decision in R.S. Joshi's case was deemed authoritative, confirming the constitutional validity of section 29-A under the State Legislature's competence.In conclusion, the Supreme Court dismissed the appeal, recognizing the evolving legal landscape at the time of filing the appeal. The Court directed that no costs be awarded due to the unsettled legal position preceding the clarification provided by the judgment in R.S. Joshi's case.