2010 (12) TMI 1075 - HC - VAT / Sales Tax

Validity of Trade Tax Rules (2001) upheld, rejecting reading down; form validity limited to two preceding financial years

HC upheld validity of challenged Trade Tax Rules as amended in 2001, rejecting the petitioner's plea to read down provisions limiting form validity to ... Validity of Rules 12A(5), 12B(4), 12C(3) and 25B(3) of the U.P. Trade Tax Rules as amended by the U.P. Trade Tax (Amendment) Rules, 2001 challenged and further seeking a direction in the nature of mandamus reading down the aforesaid Rules insofar as it provides that the forms issued in particular financial year shall be valid for the transactions of purchase and sale made during two financial years immediately preceding to that year, as not applicable to the transactions of sale or purchase which are not disputed by the Department Held that:- Following the reasoning given in the cases of M/s. K.B. Hides (2003 (12) TMI 585 - ALLAHABAD HIGH COURT) the validity of Rules 12-A, 12-B, 12-C and 25-B of the Rules are upheld. Now coming to the question of submissions of learned counsel for the petitioner that the Rule may be read down in the manner suggested by him. We do not find any substance. The question of reading down any provision arises only in a situation to save the provision. Once the provision is held to be valid, there is no question of reading down the provision in the manner suggested by him. It has to be read as such and nothing can be added and nothing can be substracted from it. Appeal dismissed. Issues: (i) Whether Rules 12-A(5), 12-B(4), 12-C(3) and 25-B(3) of the U.P. Trade Tax Rules (as amended) are valid; (ii) Whether, if valid, those Rules ought to be read down to admit declaration forms issued beyond the periods specified where delay was attributable to the Department or where forms are otherwise genuine.Issue (i): Validity of Rules 12-A(5), 12-B(4), 12-C(3) and 25-B(3) of the U.P. Trade Tax Rules as amended by the U.P. Trade Tax (Amendment) Rules, 2001.Analysis: The amended provisions fix temporal validity for forms issued in a financial year to that year and the two preceding financial years and restrict single-form coverage by value and assessment year. Prior decisions addressing similar amendments and the rule-making power under the Act, including provisions enabling rules for carrying out the purposes of the statute, were considered. The amendments were evaluated against principles applicable to fiscal regulation, including the allowance for reasonable legislative or executive restrictions to prevent misuse of forms and tax evasion, and established precedents that courts should exercise restraint in reviewing economic and fiscal measures.Conclusion: The amended Rules 12-A(5), 12-B(4), 12-C(3) and 25-B(3) are valid and are not ultra vires the U.P. Trade Tax Act or the Constitution.Issue (ii): Whether the valid Rules must be read down so that declaration forms issued beyond the prescribed period are admissible where delay is attributable to the Department or the forms are otherwise genuine.Analysis: Reading down is a remedial device applied only to save a provision that would otherwise be invalid. Where the provisions are held valid, the scope for judicial modification to admit forms outside the temporal validity is limited. Precedents rejecting similar requests to alter or enlarge the statutory scheme for issuance and acceptance of declaration forms were applied. The balance between individual hardship and the legislative objective of preventing revenue leakage and misuse of forms was examined in light of established fiscal jurisprudence that disfavors equitable exceptions to taxing rules.Conclusion: The Rules will not be read down to permit admissibility of forms issued beyond the periods specified; no judicial enlargement of the valid provisions is warranted in the circumstances.Final Conclusion: The challenge to the amended Rules fails and the petitions are dismissed, leaving the statutory temporal limits and related restrictions intact and enforceable.Ratio Decidendi: Delegated fiscal regulations that impose temporal and value limits on the validity of statutory declaration forms to prevent misuse and tax evasion are within rule-making authority and reasonable restraints on trade; where such provisions are validly enacted, courts will not read them down to create exceptions for administrative delay or equitable hardship.