1961 (3) TMI 59 - SC - VAT and Sales Tax

Court upholds constitutionality of Section 8A Bengal Finance Act, emphasizing limited power, tax liability security, and natural justice principles.

The Court dismissed the petition challenging the constitutionality of Section 8A of the Bengal Finance (Sales Tax) Act, 1941. It upheld the section, ... Whether there was violation of the principles of natural justice in the present case? Held that:- Appeal dismissed. When the petitioners were heard by the Chief Commissioner in support of their application in revision, they made no grievance on the score that the Commissioner of Sales Tax had not given them a second opportunity of a fresh oral hearing. We do not think that a second opportunity like the one suggested on behalf of the petitioners was either necessary or obligatory. The petitioners had an opportunity of saying what they had to say against the demand of security. They raised their objections which were considered by the Commissioner who, in spite of these objections, came to the conclusion that it was necessary to ask the petitioners to furnish security for the proper realisation of the tax levied or leviable under the Act. We agree with the chief Commissioner that there was no violation of the principles of natural justice in the present case. Issues:Challenge to the constitutionality of Section 8A of the Bengal Finance (Sales Tax) Act, 1941, on grounds of unlimited power to the Commissioner of Sales Tax, absence of limit on demanded security amount, and lack of provision for an enquiry or opportunity to be heard.Analysis:The case involved a writ petition under Article 32 of the Constitution challenging an order demanding security under Section 8A of the Bengal Finance (Sales Tax) Act, 1941. The petitioners, commission agents in Delhi, claimed exemption from sales tax but were asked to furnish security by the Commissioner of Sales Tax. The petitioners contended that Section 8A was constitutionally invalid due to the broad powers granted to the Commissioner. The Court rejected this argument, emphasizing that the Commissioner's power to demand security was limited to cases where it was necessary for tax realization. Reference was made to previous judgments to distinguish the present case from instances of unfettered discretion, highlighting the statutory condition guiding the Commissioner's exercise of power.The Court further addressed the argument regarding the absence of a limit on the amount of security that could be demanded under Section 8A. It clarified that the demanded security amount must be related to the tax liability of the individual, considering factors like the nature of the business and turnover. Additionally, the order of the Commissioner was subject to revision by the Chief Commissioner, ensuring scrutiny of any arbitrary or unreasonable demands. The Court held that the power of the Commissioner in determining the security amount was not unlimited or unrestricted.Regarding the lack of provision for an enquiry or opportunity to be heard, the Court emphasized the application of principles of natural justice. It noted that the person affected by the order must be given a chance to present their defense, which was provided in this case. The petitioners were issued a notice, submitted a written explanation, and made oral submissions before the Commissioner. The Court rejected the argument that a second oral hearing was necessary, as the petitioners had already availed the opportunity to present their objections. The Court agreed with the Chief Commissioner that there was no violation of natural justice principles in the proceedings.In conclusion, the Court dismissed the petition, holding that the challenges to the constitutionality of Section 8A lacked merit. The Court upheld the validity of the section, emphasizing the statutory limitations on the Commissioner's power, the necessity of security demands, and the adherence to principles of natural justice in the proceedings.