Security for tax payment upheld as a reasonable regulatory safeguard, with no breach of trade freedom or equality.

A security requirement for payment of sales tax, backed by penal consequences for default, was treated as a reasonable regulatory safeguard rather than an arbitrary restraint on business. It was held not to infringe article 19(1)(g) because tax collection may be supported by effective enforcement measures. The provision also did not offend article 301, since it did not directly or immediately impede trade and operated as a non-discriminatory regulatory device. Article 14 was not violated because the demand for security was limited by objective criteria and was subject to revisional scrutiny, which negatived arbitrariness.

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Issues: (i) whether the demand for security under section 14(4) of the Kerala General Sales Tax Act, 1963, read with the penal consequence under section 46(2)(e), violated article 19(1)(g) of the Constitution; (ii) whether the said provisions violated article 301 of the Constitution by directly or immediately restricting trade; and (iii) whether section 14(4) was hit by article 14 of the Constitution.

Issue (i): whether the demand for security under section 14(4) of the Kerala General Sales Tax Act, 1963, read with the penal consequence under section 46(2)(e), violated article 19(1)(g) of the Constitution

Analysis: The security requirement was treated as a safeguard for proper realisation of sales tax and not as an arbitrary restriction on carrying on business. The existence of penal sanction for non-compliance did not change the character of the provision, because effective enforcement of the security requirement depended upon legal consequences for default. The principle that the power to levy tax includes reasonable safeguards in collection was applied.

Conclusion: The provision did not violate article 19(1)(g) and the challenge failed.

Issue (ii): whether the said provisions violated article 301 of the Constitution by directly or immediately restricting trade

Analysis: Article 301 was read as striking only at restrictions that directly and immediately impede the free flow of trade. A non-discriminatory sales tax measure, or a regulatory device to secure payment of tax, does not offend that freedom unless it directly impedes movement of trade. The security requirement was held to be regulatory in nature, and the penal consequence for default was viewed as incidental to making the measure effective.

Conclusion: The provisions did not violate article 301 and the challenge failed.

Issue (iii): whether section 14(4) was hit by article 14 of the Constitution

Analysis: The demand for security was confined to cases where good and sufficient reasons existed, as reinforced by the criteria in the rules. The order was also subject to revisional scrutiny under the Act. These safeguards negatived the complaint of arbitrariness or unequal treatment.

Conclusion: The provision was not violative of article 14 and the challenge failed.

Final Conclusion: The constitutional challenge to the security-demand provision and its penal enforcement failed in full, and the statutory scheme was upheld as a valid regulatory measure for tax collection.

Ratio Decidendi: A statutory requirement to furnish security for proper payment of tax, backed by penal consequences for default, is constitutionally valid where it operates as a reasonable regulatory safeguard, does not directly and immediately impede trade, and is controlled by objective safeguards against arbitrariness.

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