Taxing power and Consolidated Fund control limit a social security cess; prior sales tax exemption did not bar the levy.

A State cess described as social security was examined for legislative competence and for compliance with the constitutional scheme for State revenues. The text states that welfare entries may support legislation on social welfare or pensions, but they do not by themselves confer taxing power; taxation must rest on a proper legislative source. It also notes that a levy cannot divert revenue away from the Consolidated Fund into an executive-controlled fund outside legislative appropriation, as this conflicts with the constitutional provisions governing State finances. The document further records that sales tax exemption did not, by itself, prevent a separate cess, so the estoppel plea failed.

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Issues: (i) Whether the levy of social security cess and creation of the Social Security Fund were ultra vires the Constitution for want of legislative competence and for bypassing the constitutional scheme governing State revenues; (ii) Whether the State was estopped from imposing the cess merely because sales tax exemption had earlier been granted.

Issue (i): Whether the levy of social security cess and creation of the Social Security Fund were ultra vires the Constitution for want of legislative competence and for bypassing the constitutional scheme governing State revenues?

Analysis: The Act imposed a cess described as being for social security, but its incidence was tied to sales tax payable on sales and purchases of goods and the proceeds were earmarked for a separate fund controlled by the Government. Entries relating to social welfare and pensions may authorise legislation on those subjects, but they do not by themselves confer taxing power. Taxation is a distinct field and cannot be inferred as an ancillary power from welfare entries. Even if the levy were assumed to fall within the sales tax entry, the statutory design diverted State revenue away from the Consolidated Fund and placed it in a fund outside the constitutional appropriation process. Articles 266, 202, 203, 204 and 283(2) require State revenues to be credited to the Consolidated Fund and spent only through legislative appropriation. The impugned scheme gave the executive complete control over collection, custody, investment and utilisation of the proceeds, thereby excluding legislative control.

Conclusion: The levy of cess and the creation of the fund were held to be ultra vires the Constitution and invalid.

Issue (ii): Whether the State was estopped from imposing the cess merely because sales tax exemption had earlier been granted?

Analysis: The exemption granted to the petitioners was from sales tax. The cess was treated as a separate impost and the grant of exemption from one levy did not, by itself, bar the State from imposing another lawful levy. The plea of equitable estoppel could not succeed because the earlier promise was not shown to extend to a different tax measure, and exemption given to some dealers could not curtail legislative power generally.

Conclusion: The plea of estoppel was rejected.

Final Conclusion: The challenge to the cess succeeded on constitutional grounds, but the estoppel plea failed; the writ petitions were therefore allowed on the main issue.

Ratio Decidendi: A State taxing measure is invalid where it lacks a proper legislative source and diverts revenues away from the Consolidated Fund into an executive-controlled fund outside the constitutional appropriation process; welfare objectives cannot, by themselves, supply taxing power.

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