1969 (11) TMI 83 - HC - VAT and Sales Tax

Court upholds constitutionality of Central Sales Tax Act provisions, dismisses writ petition

The court dismissed the writ petition challenging the constitutionality of Sections 8 and 9 of the Central Sales Tax Act, 1956. It held that the adoption ... Adoption of State law by Central legislation - Delegation of legislative power / abdication of essential legislative function - Validity of provisions adopting rates and procedural law of States - Provisional assessment and assessment procedure under adopted State lawDelegation of legislative power / abdication of essential legislative function - Adoption of State law by Central legislation - Whether sections 8 and 9 of the Central Sales Tax Act effected an unconstitutional abdication of Parliament's legislative function by adopting State sales tax laws (including future amendments). - HELD THAT: - The Court rejected the contention that the Central Act abdicated essential legislative functions. Having regard to precedents permitting delegation in matters of tax detail, the Court held that adoption of the rates and procedural machinery of the appropriate State sales tax law for the purposes of inter-State taxation does not amount to impermissible delegation. The legislative scheme and policy of the Act - to canalise inter-State trade through registered dealers, to avoid multiple taxation, and to link central rates and exemptions with State rates where necessary - justify adoption of State rates and procedures. Consequently, incorporation of State law for fixation of rates and for assessment, reassessment, collection and enforcement, as contemplated by sections 8 and 9, is a permissible legislative technique and is not an abdication of Parliament's essential function.Sections 8 and 9 are not unconstitutional on the ground of abdication of legislative power; the challenge on this ground is dismissed.Validity of provisions adopting rates and procedural law of States - Adoption of State law by Central legislation - Whether the Central Act adopted State sales tax law only as it stood on commencement of the Central Act (21st December 1956) or whether it adopted the State law 'for the time being in force' (including subsequent amendments), and whether provisional assessment under the adopted procedural law is valid. - HELD THAT: - The Court construed the definitions in the Act which refer to the sales tax law 'for the time being in force in any State' as manifesting Parliament's intention to adopt the State law as it exists from time to time, not merely as it stood on the date the Central Act was enacted. In that context the Court found no merit in the alternative argument that only the State law contemporaneous with the Central Act could be adopted. The Court further observed that section 9(2) adopts the assessment and collection procedures of the appropriate State law and that such adoption does not offend constitutional or legislative limits. As a consequence, procedural devices such as provisional assessment, if authorised under the State law in force for the time being, may be applied under the Central Act.The Central Act adopts the State sales tax law as 'for the time being in force,' including subsequent amendments; provisional assessment under the adopted State procedural law is valid.Final Conclusion: Writ petition dismissed. The Court upheld the validity of sections 8 and 9 of the Central Sales Tax Act as amended: Parliament did not abdicate its legislative function by adopting State rates and procedural law, and the Act lawfully adopts the State sales tax law as it stands from time to time, permitting application of State-authorised assessment procedures including provisional assessment. Issues Involved:1. Constitutionality of Sections 8 and 9 of the Central Sales Tax Act, 1956.2. Whether the Central Sales Tax Act must be deemed to have adopted the sales tax laws as in force when the Act came into force on 21st December, 1956.Detailed Analysis:Constitutionality of Sections 8 and 9 of the Central Sales Tax Act, 1956:The petitioner challenged the levy of tax under Sections 8 and 9 of the Central Sales Tax Act, 1956, arguing that these sections are unconstitutional. The primary contention was that the Act adopts not only the sales tax laws of various States as they stood when the Act was passed but also future amendments, which amounts to the Parliament abdicating its essential legislative function. The petitioner relied on the Supreme Court decision in B. Shama Rao v. The Union Territory of Pondicherry, where it was held that adopting future laws enacted by another Legislature is unconstitutional.The court examined whether the Parliament had abdicated its legislative functions by adopting future State laws. It referred to various Supreme Court rulings, including Pandit Banarsi Das Bhanot v. The State of Madhya Pradesh, which held that it is not unconstitutional for the Legislature to leave details of taxation laws to the executive, and Corporation of Calcutta v. Liberty Cinema, which supported delegating the power to fix tax rates to a non-legislative authority.The court concluded that the adoption of State tax rates and procedural laws for assessment and collection by the Central Sales Tax Act does not amount to abdication of legislative function. The policy of the law was clearly laid down, and the linkage of tax rates with State laws was essential to prevent tax evasion and ensure uniformity. Thus, the first ground of challenge was rejected as untenable.Adoption of Sales Tax Laws as in Force on 21st December, 1956:The petitioner alternatively argued that the Act should be deemed to have adopted the sales tax laws as they existed when the Act came into force on 21st December, 1956. The court noted that Section 2(i) of the Act defines 'sales tax law' and 'general sales tax law' as the law for the time being in force in any State, indicating the Legislature's intention to include future amendments.The court disagreed with the decision in Shah & Co. v. State of Madras, which held that only the law as it stood when the Act was enacted was adopted. It opined that the Parliament was competent to adopt State laws as they may exist in the future, including any amendments. The adoption of procedural laws for assessment and collection of tax from State laws does not constitute abdication of legislative functions.Thus, the second ground of challenge was also rejected as untenable.Conclusion:The court dismissed the writ petition, holding that both grounds of challenge to the constitutionality of Sections 8 and 9 of the Central Sales Tax Act, 1956, failed. The Parliament had not abdicated its legislative functions, and the adoption of State tax laws, including future amendments, was within its competence. The petitioner was ordered to pay costs, with an advocate's fee of Rs. 100.Petition dismissed.