Vires challenge barred in revision, but penalty failed for lack of reasons on quantum under the trade tax law.

A vires challenge to section 8-D(1) of the U.P. Trade Tax Act, 1948 was held not entertainable in revisional proceedings, as the statutory authority and the revisional court were bound to apply the provision and could not question its constitutional validity; the challenge therefore failed. On penalty under section 8-D(6), the failure to deduct tax at source justified invocation of the provision, but the penalty order was unsustainable because no reasons were recorded for fixing the quantum at an amount equal to the tax deductible. The penalty order was set aside and the matter remitted for fresh adjudication.

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Issues: (i) Whether the validity of section 8-D(1) of the U.P. Trade Tax Act, 1948 could be examined in revisional proceedings and whether penalty could be avoided on the ground that the provision was beyond legislative competence. (ii) Whether the penalty imposed under section 8-D(6) of the U.P. Trade Tax Act, 1948 could be sustained when no reasons were recorded for fixing the penalty at the amount equal to the tax deductible but not deducted.

Issue (i): Whether the validity of section 8-D(1) of the U.P. Trade Tax Act, 1948 could be examined in revisional proceedings and whether penalty could be avoided on the ground that the provision was beyond legislative competence.

Analysis: The revisional court held that a challenge to the vires of the taxing provision could not be entertained in proceedings under the Act. The authority functioning under the statute was bound to apply the provision and could not question its constitutional validity, and the same limitation governed the High Court in revision. The earlier decision upholding section 8-D(1) was treated as controlling for the purpose of the revision.

Conclusion: The vires challenge was not maintainable in the revision and the assessee could not escape the statutory obligation on that ground.

Issue (ii): Whether the penalty imposed under section 8-D(6) of the U.P. Trade Tax Act, 1948 could be sustained when no reasons were recorded for fixing the penalty at the amount equal to the tax deductible but not deducted.

Analysis: The Court found that the assessee had failed to deduct tax at source despite repeated directions and had offered no satisfactory explanation, so invocation of the penalty provision was justified. However, although section 8-D(6) permitted a penalty up to twice the deductible amount, the authorities had not recorded any reason for choosing the particular quantum equal to the deductible tax. The absence of reasons for the amount imposed rendered the order unsustainable.

Conclusion: The penalty order could not be sustained in its present form and the matter required fresh consideration.

Final Conclusion: The revisions succeeded only to the extent that the penalty order was set aside and the appeals were remitted for fresh adjudication, while the challenge to the statutory provision itself failed.

Ratio Decidendi: Constitutional validity of a taxing provision cannot be examined in revisional proceedings under the statute, and even where penalty is within the statutory ceiling, the authority must record reasons for the quantum imposed.

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