Legislative competence for sales tax penalties upheld, and writ courts will not reassess penalty quantum on arbitrariness grounds.

Section 28(8) of the Kerala General Sales Tax Act was upheld as within the State Legislature's competence, with the Court treating Entries 54 and 64 of List II as sufficient support for a penalty linked to unaccounted goods found in inspection or search. The levy was not dependent on prior determination of tax liability, and the constitutional challenge failed. The Court also declined to reduce the penalty in writ proceedings, holding that Article 226 jurisdiction does not ordinarily extend to factual reassessment of penalty quantum on a plea of arbitrariness. The statutory penalty provision therefore stood, and no writ relief was granted.

---

---

Issues: (i) Whether section 28(8) of the Kerala General Sales Tax Act, 1963 was beyond the legislative competence of the State Legislature and ultra vires the Constitution; (ii) whether the levy of penalty warranted reduction in writ proceedings on the ground of arbitrariness.

Issue (i): Whether section 28(8) of the Kerala General Sales Tax Act, 1963 was beyond the legislative competence of the State Legislature and ultra vires the Constitution.

Analysis: The provision authorised penalty where goods found in inspection or search were not accounted for in the dealer's records, and the quantum was fixed with reference to the value of the unaccounted goods rather than the tax liability. Entries 54 and 64 of List II of Schedule VII to the Constitution were treated as sufficient constitutional support for legislation imposing penalties in relation to offences under sales tax laws. The determination of tax was held to be neither a condition precedent nor a relevant factor for levy under the provision.

Conclusion: The provision was held to be intra vires and the challenge to its constitutional validity failed.

Issue (ii): Whether the levy of penalty warranted reduction in writ proceedings on the ground of arbitrariness.

Analysis: The Court held that in proceedings under Article 226 of the Constitution of India, it would not go into a plea seeking factual reduction of penalty on the ground of arbitrariness, having regard to the limited scope of writ jurisdiction.

Conclusion: No reduction of penalty was granted.

Final Conclusion: The statutory penalty provision was upheld, and the writ petition failed in its entirety.

Ratio Decidendi: The State Legislature has competence to provide for penalty under sales tax law for unaccounted goods, and a writ court will not ordinarily reassess the quantum of such penalty on a claim of arbitrariness within the confines of Article 226 jurisdiction.

---