Unconstitutional sales tax penalty provision invalidated, and the penalty order quashed because it exceeded legislative competence.

Section 28(4) of the Kerala General Sales Tax Act, 1963 was found beyond the State Legislature's competence and therefore unconstitutional, applying the principle that a sales tax provision cannot impose penal consequences if it falls outside legislative power. As the provision was materially similar in effect to a sales tax provision earlier invalidated by the Supreme Court, the High Court held that the defect attached equally here. The penalty order made under that unconstitutional provision could not be sustained and was quashed in favour of the assessee; the cash security recovered was directed to be refunded.

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Issues: Whether section 28(4) of the Kerala General Sales Tax Act, 1963 was unconstitutional and whether the penalty order passed thereunder was liable to be quashed.

Analysis: The validity of section 28(4) was tested against the principle that a State Legislature cannot enact a provision beyond its legislative powers. The provision was treated as materially similar in effect to the sales tax provision previously held invalid by the Supreme Court. On that reasoning, the High Court held that section 28(4) suffered from the same constitutional infirmity. The penalty order, having been made under an unconstitutional provision, could not stand.

Conclusion: Section 28(4) of the Kerala General Sales Tax Act, 1963 was held unconstitutional, and the penalty order was quashed in favour of the assessee.

Final Conclusion: The assessee succeeded in challenging the statutory penalty, and the amount recovered as cash security was directed to be refunded.

Ratio Decidendi: A sales tax provision imposing penal consequences, if beyond the legislative competence of the State, is unconstitutional and any order made under it is unenforceable.

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