1966 (2) TMI 65 - HC - VAT and Sales Tax

Validity of Section 3-D & Notification Upheld | Delegation of Power Valid | Procedural Fairness Maintained

The Court upheld the validity of Section 3-D of the U.P. Sales Tax Act, along with the notification issued under it. It found that the delegation of power ... - Issues Involved:1. Validity of Section 3-D of the U.P. Sales Tax Act.2. Validity of Notification No. ST-7122/X-900(16)/64.3. Delegation of legislative power to the State Government.4. Infringement of Article 14 of the Constitution.5. Procedural fairness in assessment under Rule 41(3).Issue-wise Detailed Analysis:1. Validity of Section 3-D of the U.P. Sales Tax Act:The petitioner challenged Section 3-D on the grounds that it delegated the power to levy purchase tax to the State Government without reserving any control or check on its exercise. It was argued that the Legislature did not lay down any principle for the guidance of the State Government. The Court held that the U.P. Legislature had the exclusive power to make laws for U.P. with respect to taxes on the purchase of goods under Article 246(3) of the Constitution. The Court found that the legislative policy and principle were sufficiently enunciated in the statement of objects and reasons for the enactment of Section 3-D, providing guidance to the State Government. The Court concluded that the discretion conferred on the State Government was not unguided, thus rejecting the argument of unconstitutional delegation of legislative power.2. Validity of Notification No. ST-7122/X-900(16)/64:The petitioner argued that the notification increased the tax on pulses from 1 paisa per rupee to 1.5 paise per rupee without proper legislative authority. The Court found that the notification was issued in exercise of the powers conferred by Section 3-D(1) and was within the limits prescribed by the Legislature. The Court held that the tax was imposed by the Legislature through Section 3-D, and the notification merely specified the goods and rates, thus upholding the validity of the notification.3. Delegation of legislative power to the State Government:The petitioner contended that the Legislature had delegated its essential legislative function to the State Government, which amounted to unconstitutional delegation. The Court referred to various precedents, including Vasanlal Maganbhai v. State of Bombay and Hrishanker Bagla v. State of Madhya Pradesh, to establish that the Legislature can delegate subsidiary powers to the State Government provided it lays down the legislative policy and principle. The Court found that the legislative policy and principle were sufficiently enunciated, and the delegation of power to the State Government was valid.4. Infringement of Article 14 of the Constitution:The petitioner argued that Section 3-D and the notification infringed Article 14 by giving arbitrary power to the State Government to distinguish between dealers. The Court held that there was no discrimination between dealers in respect of the same goods; both were charged under Section 3 or Section 3-D at the same rate. The Court found that the classification of goods for taxation purposes was rational and had a nexus with the object of the law. The Court concluded that the provisions did not infringe Article 14.5. Procedural fairness in assessment under Rule 41(3):In Petition No. 3579, the petitioner contended that it was assessed without being given an opportunity to be heard as required under Rule 41(3). The Court found that the assessment order was a provisional assessment under Rule 41(3), which did not require an enquiry unless deemed necessary by the Sales Tax Officer. The Court held that the final assessment under sub-rule (5) would provide an opportunity for the petitioner to be heard. The Court concluded that there was no infringement of the principles of natural justice.Conclusion:The Court dismissed the petitions, upholding the validity of Section 3-D and the notification issued under it. The Court found that the delegation of power to the State Government was valid and did not infringe Article 14. The Court also held that the procedural fairness in assessment under Rule 41(3) was maintained.