1972 (8) TMI 111 - HC - VAT and Sales Tax

Court upholds validity of tax security requirement, emphasizing regulatory measures and penal consequences.

The court upheld the validity of section 14(4) read with section 46(2)(e) of the Kerala General Sales Tax Act, 1963, stating that demanding security for ... - Issues:Validity of section 14(4) read with section 46(2)(e) of the Kerala General Sales Tax Act, 1963.Analysis:The judgment of the court dealt with the appeal concerning the validity of section 14(4) read with section 46(2)(e) of the Kerala General Sales Tax Act, 1963. The appellant, a registered dealer, was asked to furnish security by the Sales Tax Officer under section 14(4) but failed to comply, leading to a notice of prosecution under section 46(2)(e). The appellant challenged the validity of these sections on constitutional grounds under articles 14, 19(1)(g), and 301. The court examined the provisions of the Act, rules, and relevant case laws to determine the constitutionality of the sections.The court analyzed the provisions of section 14(4) which allowed the authority to demand security from dealers for the proper payment of taxes. The court referred to the Supreme Court's decision in Nand Lal Raj Kishan v. Commissioner of Sales Tax, stating that demanding security for tax payment is a reasonable restriction and does not violate article 19(1)(g) of the Constitution. The court also cited the decision in Durga Prosad Khaitan v. Commercial Tax Officer, emphasizing that imposing reasonable safeguards for tax collection is within the legislative power.Regarding the violation of article 301 of the Constitution, the court referred to interpretations by the Supreme Court in various cases. The court held that the provision for security under section 14(4) is a regulatory measure to ensure tax payment and does not directly impede trade. The court rejected the argument that the penalty under section 46(2)(e) violates article 301, stating that penal consequences are necessary to enforce the security provision effectively.The court dismissed the argument of violation of article 14, noting that orders under section 14(4) can only be passed for valid reasons outlined in the rules and are subject to revision by higher authorities. The court concluded that the appeal lacked substance and dismissed it, with no order as to costs. The judgment upheld the validity of section 14(4) read with section 46(2)(e) of the Kerala General Sales Tax Act, 1963.In summary, the court's decision affirmed the constitutionality of the provisions in question, emphasizing the importance of regulatory measures for tax collection and the necessity of penal consequences to enforce compliance. The judgment provided a detailed analysis of the legal framework, relevant precedents, and constitutional principles to support its conclusion.