State sales tax penalty for unauthorised tax collection upheld as valid ancillary legislation and applied retrospectively.

Section 49 of the Haryana General Sales Tax Act, 1973 was upheld as valid ancillary legislation within the State's taxing power because it prevents unlawful collection of tax and protects the revenue. Its retrospective operation from 14 November 1967 was also held valid, as no constitutional bar was shown. The saving proviso in section 65 did not protect the petitioners, since it preserved only accrued rights and liabilities and did not create immunity from penalty for excess collection. After insertion of section 9(2A) of the Central Sales Tax Act, State penalty provisions became applicable, with necessary modifications, to Central sales tax enforcement; penalty under section 49 could therefore be imposed for excess collection under the Central Act.

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Issues: (i) Whether section 49 of the Haryana General Sales Tax Act, 1973 was beyond the legislative competence of the State Legislature; (ii) whether section 49 could validly operate retrospectively from 14 November 1967; (iii) whether the saving proviso to section 65 of the Haryana General Sales Tax Act, 1973 protected the petitioners from penalty; and (iv) whether, in the absence of a penalty provision in the Central Sales Tax Act, 1956, penalty under section 49 could be imposed for excess collection of tax under the Central Act.

Issue (i): Whether section 49 of the Haryana General Sales Tax Act, 1973 was beyond the legislative competence of the State Legislature.

Analysis: The provision prohibiting collection of tax not payable and authorising penalty for unauthorised collection was treated as analogous to provisions upheld by the Supreme Court as valid ancillary or incidental legislation connected with the State power to levy sales tax. The governing principle was that measures designed to prevent unlawful tax collection and protect the public exchequer fall within the implied powers accompanying the taxing entry.

Conclusion: Section 49 was within legislative competence and not ultra vires.

Issue (ii): Whether section 49 of the Haryana General Sales Tax Act, 1973 could validly operate retrospectively from 14 November 1967.

Analysis: Retrospective operation of a taxing or penal fiscal provision was held to be within legislative power, subject only to constitutional limitation. No constitutional bar was shown against making the provision effective from the earlier date fixed by the Legislature.

Conclusion: The retrospective operation of section 49 was valid.

Issue (iii): Whether the saving proviso to section 65 of the Haryana General Sales Tax Act, 1973 protected the petitioners from penalty.

Analysis: The saving clause preserved rights, liabilities, and actions already accrued or taken under the repealed law, but it did not create any immunity from penalty for excess collection where no such right had accrued under the repealed statute. The proviso was confined to preserving existing legal positions and could not be used to defeat the new penalty provision.

Conclusion: The proviso to section 65 did not bar the proposed penalty proceedings.

Issue (iv): Whether, in the absence of a penalty provision in the Central Sales Tax Act, 1956, penalty under section 49 could be imposed for excess collection of tax under the Central Act.

Analysis: Although earlier authority had held that, in the absence of an enabling provision, State penalty provisions could not be invoked for Central sales tax defaults, the legal position changed after insertion of section 9(2A) in the Central Sales Tax Act, 1956. That amendment made the State law relating to offences and penalties applicable, with necessary modifications, to assessment, collection, and enforcement under the Central Act, and did so retrospectively.

Conclusion: Penalty under section 49 could be invoked for excess collection of tax under the Central Act.

Final Conclusion: The challenge to the penalty notices failed on all substantive grounds, and the writ petitions were dismissed.

Ratio Decidendi: A State sales tax provision imposing penalty for unauthorised or excessive tax collection is valid as ancillary legislation within the taxing power, may operate retrospectively if constitutionally authorised, is not defeated by a repealing savings clause that preserves only accrued rights, and may be applied to Central sales tax defaults when the Central Act itself makes State penalty provisions applicable.

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