TMI Blog2002 (6) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was ordered by the court on September 2, 1996. 2.. The facts leading to the filing of the writ petitions be noted briefly and they are as follows: M/s. ITC Limited (IBD Division), Secunderabad and Guntur, the petitioner herein, registered dealers on the rolls of the concerned Commercial Tax Officer. The dealers were assessed by the concerned Commercial Tax Officer for the assessment years 1991-92 and 1992-93. The concerned Commercial Tax Officer exempted the purchase turnover of cashew as per section 38 of the Act on the ground that the resultant cashew kernel was exported to other countries and treating cashew (raw) and cashew kernel are one and the same commodity in the light of the judgment of this Court in Singh Trading Company v. Commercial Tax Officer [1979] 44 STC 1 and Malabar Cashew Nuts Allied Products v. State of Andhra Pradesh [1988] 68 STC 269. Subsequently, the Supreme Court in Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer [1996] 100 STC 571; (1996) 22 APSTJ 126, held that cashewnut and cashew kernel are not the same goods and, therefore, the benefit of section 5(3) of the CST Act is not available. Placing reliance on the said judgment of the apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other. The practice certainly needs to be strongly discouraged." (Emphasis* supplied by court). But, since the authorities including the Tribunal cannot decide the constitutional validity of the provisions of the Act, it seems, the petitioner has filed these writ petitions directly in this Court. Therefore, it may not be appropriate to refuse these writ petitions particularly at this distance of time without deciding the constitutionality question raised in the writ petitions. Giving a quietus to the controversy early is also in the interest of the assessee as well as the Revenue. 5.. Therefore, it is apt that we should deal with the challenge to the constitutional validity of section 14(4-C) and section 20 of the Act in the first instance. 6.. While assailing the constitutional validity of section 20 of the Act, it is the contention of the petitioner that in the Statement of Objects and Reasons of the Amendment Act 18 of 1985 by which the words "for the purpose of satisfying itself as to the legality or propriety of such order or as to the regularity of such proceeding" are deleted and those words were substituted by the words "and if such order or proceeding recorded is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Vijayalaxmi Cashew Company's case [1996] 100 STC 571; (1996) 22 APSTJ 126 is only prospective and that judgment should not affect the assessments already concluded and, therefore, the very initiation of the proceedings by issuing the impugned notices are one without jurisdiction and unjustified. 7.. The petitioner has sought mandamus to declare the provisions of sections 14(4-C) and 20 of the Act as unconstitutional and invalid. It is true that mandamus is the proper relief to be asked for where the petitioner seeks a declaration that an "Act" or "Ordinance" is unconstitutional and a consequential direction restraining the State and its officers or the concerned authority or authorities, as the case may be, from interfering or giving effect to the provisions of such unconstitutional law. It is trite law that the presumption is always in favour of the constitutionality of an enactment, and the burden is upon him who attacks it to show that there has been a clear transgression of constitutional principles and limits, whether it is a pre-Constitution or post-Constitution law. The courts generally lean towards the constitutionality of a statute upon the premise that a Legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "On questions of economic legislations and related matters, the court must defer to the legislative judgment. When the power to tax exists, the extent of the burden is a matter for the discretion of the law-makers. It is not the function of the court to consider the propriety or justness of the tax, or enter upon the realm of legislative policy....." 8.. The Supreme Court in Bharat Singh v. State of Haryana AIR 1988 SC 2181 has declared that a party raising a point in a writ petition must plead not only relevant facts but also state facts by way of evidence in proof of facts so pleaded in support of such point. The Supreme Court in Sanjeev Coke Manufacturing Company v. Bharat Coking Coal Ltd. AIR 1983 SC 239 and in Municipal Board Maunath Bhanjan v. Swadeshi Cotton Mills Co. Ltd. AIR 1977 SC 1055 has handed down the opinion that the constitutional courts will not pronounce upon a constitutional issue unless it has been raised in a proper lis between two or more contending parties. The Supreme Court in Third Income-tax Officer, Mangalore v. M. Damodar [1969] 71 ITR 806; AIR 1969 SC 408 held that a writ application should contain in a concise form of the matters on which the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature of a State can be struck down by the courts only on two grounds, viz., (i) lack of legislative competence and (ii) violation of any of the fundamental rights guaranteed in Part-III of the Constitution or any other substantive constitutional provisions. In State of Andhra Pradesh v. McDowell and Co. AIR 1996 SC 1627; (1996) 3 SCC 709 the Supreme Court has opined that except the above two grounds there is no third ground on the basis of which the law made by the competent Legislature can be invalidated and that the ground of invalidation must necessarily fall within the four corners of aforementioned two grounds. It is true that it will become the duty of the constitutional courts under our Constitution to declare a law enacted by the Parliament or the State Legislature as unconstitutional when the Parliament or the State Legislature has assumed to enact a law which is void, either from want of constitutional power to enact it, or because the constitutional forms or conditions have not been observed, or where the law infringes the fundamental rights enshrined and guaranteed in Part III of the Constitution or any other substantive constitutional provisions. It is needless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitutional Limitations" by Thomas M. Cooley, it is aptly stated that the law-making power of the State recognises no restraints, and is bound by none except such as or imposed by the Constitution itself placing reliance on the opinion handed down in Sill v. Village of Corning 15 NY 303. 10.. In the premise of the above well-recognized principles governing the challenge to the constitutionality of a statute, let us proceed to consider the contentions raised in these writ petitions. 11.. Sub-sections (4) and (4-C) of section 14 read as follows: "14. Assessment of tax.-(1)....... (4) In any of the following events, namely, where the whole or any part of the turnover of a business of a dealer has escaped assessment to tax, or has been under-assessed or assessed at a rate lower than the correct rate, or where the licence fee or registration fee has escaped levy or has been levied at a rate lower than the correct rate, the assessing authority may, after issuing a notice to the dealer, and after making such enquiry as he may consider necessary, by order, setting out the grounds therefor- ................ (4-C) The powers conferred by sub-section (4) on the assessing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -matter is arbitrary. The basic scheme of the Act is to secure the administration of the statute through officers who are to perform their functions within the areas respectively assigned to them. (see section 4 of the APGST Act). Neither section 4 nor section 2(b) contemplates the authorisation of more than one officer to exercise the same power within the same area. The investiture of identical powers with respect to the same territory on different officials is fraught with evil consequences. It causes great hardship and inconveniences to assessees. The power is capable of being exercised in a discriminatory manner. There is also a possibility of contradictory orders being passed by different officials in respect of the same subject-matter. The whole scheme of section 14(4-C) is arbitrary." 15.. One who invokes the power of constitutional court to declare an enactment enacted by the competent Legislature to be unconstitutional must be able to show not only that the statute is invalid on certain constitutional grounds but that he had sustained or is in immediate danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers in some ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es like declaration, injunction and for damages. Similarly, no enactment can be struck down by the constitutional courts just saying that in the opinion of the court it is arbitrary or unreasonable. Although non-arbitrariness, reasonableness and fairness are postulates of article 14 of the Constitution, when an enactment is sought to be struck down on the ground of arbitrariness and unreasonableness, the reviewing court should find some or other constitutional infirmity in addition to those grounds before invalidating the enactment. An enactment cannot be struck down merely on the ground that the court thinks it is unjustified and unwise. This position is fairly well-settled by the decision of the Supreme Court in McDowell and Company case AIR 1996 SC 1627; (1996) 3 SCC 709. It is not open to a court to declare an enactment unconstitutional and void solely on the ground of unwise and harsh provisions or that it is supposed to violate some of the perceived natural, social, economic or political rights of the citizen, unless it can be shown with satisfactory proof that such injustice is in fact prohibited or such rights guaranteed or protected by the Constitution. 17.. We do not ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State wants to generate more tax is totally misconceived, uncharitable and requires to be noticed only to be ignored. Even assuming that in a given case, the revising authority initiates proceedings under subsection (1) of section 20 where there is no prejudice to the interest of the revenue, such authority cannot pass final order without hearing the dealer and without giving a fair opportunity of being heard to the dealer and, therefore, it was open for the dealer, in such a situation, to show that the initiation of the proceeding is unwarranted and illegal. Despite such a plea, if the revising authority wrongly revises the assessment, a very comprehensive appeal remedy is provided to the High Court if the revising authority is the Commissioner, and to the Appellate Tribunal if the revising authorities are the other authorities specified in sub-section (2) of section 20 of the Act. Therefore, it cannot be said that sub-section (1) of section 20 of the Act confers a totally uncontrolled, unbridled and uncanalised discretionary power on the Commissioner and the other authorities specified under sub-section (2) of section 20 of the Act. Similarly it cannot be said that the power con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 560; (1989) Supp 1 SCC 430 and a large number of other decisions to follow that even though there is no specific bar in our Constitution against the delegation of legislative power by the Legislature to the executive, it is now well-settled that when the law-maker delegates the power to the executive, it should not commit excesses and it must lay down essential policy and norms for the exercise of such delegated power. In other words, by entrusting the power to the executive by way of delegation, the Legislature cannot create a parallel Legislature. The provisions delegating the power in favour of the authorities prescribed under sub-section (4) of section 14 and sub-section (1) of section 20 of the Act to revise the assessment orders are machinery provisions and they are not charging provisions. In India United Mills Ltd. v. Commissioner of Excess Profits Tax [1955] 27 ITR 20; [1955] 1 SCR 810; AIR 1955 SC 79, Gurusahai v. Commissioner of Income-tax [1963] 48 ITR 1 (SC); [1963] 3 SCR 893; AIR 1963 SC 1062. Associated Cement Co. Ltd. v. Commercial Tax Officer [1981] 48 STC 466 (SC); AIR 1981 SC 1887; (1981) 4 SCC 578, Commissioner of Income-tax v. National Taj Traders AIR 1980 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding anything inconsistent therewith contained in any enactment other than the Act". Both the sections were challenged on the ground of excessive delegation of legislative power. The Supreme Court held that the objection of section 6 was not to repeal or abrogate any existing law, but to bypass the same where the provisions thereof were inconsistent with the provisions of the Essential Supplies (Temporary Powers) Act. The court also held that the legislative policy was laid down in the Act and, therefore, there was no excessive delegation. The court opined that it was only an attempt to bypass the difficulty. In Edward Mills Co. Ltd. v. State of Ajmir [1955] 1 SCR 735; AIR 1955 SC 25, the Schedule to the Minimum Wages Act, 1948, contained a list of industries to which the Act was made applicable by the Parliament, but the appropriate Government was authorised to include any other industry to the said Schedule. The matter of application of the provisions of the Act to any industry was left to the "opinion of the Government" but no norms were laid down for the exercise of such discretion and yet, the Supreme Court upheld the validity of the Act. According to the Supreme Court th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld come into force as soon as they were framed and that the power of the Legislature to repeal rules subsequently could not be regarded as sufficient control over delegated legislation. Rejecting this argument, Mathew, J., observed that considering the compulsions and complexities of modern life such control must be regarded as sufficient. 22. In Brij Sunder Kapoor case AIR 1989 SC 572; (1989) 1 SCC 561, the validity of section 3 of Cantonments (Extensions of Rent Control Laws) Act, 1957 fell for consideration. Section 3 read thus: "The Central Government may, by notification in the official Gazette, extend to any cantonment with such restrictions and modifications as it thinks fit, any enactment relating to the control of rent and regulation of house accommodation which is in force on the date of the notification in the State in which the cantonment is situated." It was contended that the above provision suffered from the vice of excessive delegation of legislative power, mainly for three reasons (i) firstly, on the date of the enactment, Parliament could not predicate what type of provisions would be in operation in other areas of the States on some future date on which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt authorities on the question that how power should be exercised is different and separate from the question whether the power is valid or not." 23.. The above discussed cases are the authorities to state that skeletal legislation has come to stay and whenever a delegate under the statute exercises the power granted to him or it, the validity of the exercise of such power has to be decided not only with reference to the limitations and conditions imposed on the exercise of that power, but also applying the postulates of article 14 of the Constitution, such as reasonableness, fairness and non-arbitrariness. If this settled position in law is kept in mind, we find absolutely no ground to invalidate the provisions of sub-sections (4) and (4-C) of section 14 or section 20(1) of the Act. 24.. This takes us to the contention raised by the petitioner that since the power conferred upon the authorities under sections 14(4) and 20(1) of the Act is the same and since that power conferred on several authorities can be exercised simultaneously by those authorities, the impugned provisions of sections 14 and 20 of the Act are arbitrary and violative of article 14 of the Constitution. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial Taxes and other authorities specified in sub-section (2) of section 20 to call for and examine the record of any order passed or proceeding recorded by any other authority or officer or person subordinate to them, under the provisions of the Act. But this power of revision conferred upon the Commissioner of Commercial Taxes and other authorities is subjected to a rider, the rider being that the order or proceeding sought to be revised under sub-section (1) of section 20 of the Act should be one which is prejudicial to the interest of the revenue. In other words, if the order of proceeding which is sought to be revised under sub-section (1) of section 20 of the Act by the competent authority is not prejudicial to the interest of the Revenue, it should be held that the authority lacks the jurisdiction and competence to revise such order or proceeding. It is well-settled that the power of revision under section 20 of the Act can be exercised by looking into the record of assessment only, whereas under subsection (4) of section 14 of the Act, the power of reopening has to be exercised on the basis of material de hors the record. 25.. The decision in Sri Balaji Rice Company's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited area and it cannot mean the whole of the State of Andhra Pradesh. In section 1(2), it is stated that the Act extends to the whole of the State of Andhra Pradesh. Thus, the Legislature has itself drawn a distinction between the whole of the State of Andhra Pradesh and the local limits in the State of Andhra Pradesh. Necessarily, therefore, it follows that the local limits mentioned in the latter part of section 4 can only comprise an area or territory which is part of, but something less than the whole of the area or territory of, the State of Andhra Pradesh. While fixing the territorial jurisdiction of the officers mentioned in section 4 for the purpose of assessing dealers covered by the second proviso to G.O. No. 1091 as amended by G.O. No. 434, the State Government or any authority or officer empowered in that behalf can only fix a territorial jurisdiction which is less than the whole of the State of Andhra Pradesh. Moreover, according to the definitions of 'Assistant Commissioner', 'Commercial Tax Officer', 'Deputy Commercial Tax Officer', 'Deputy Commissioner', 'Joint Commissioner', they are all persons appointed under section 4 and their powers are exercisable only wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to all sales and purchases, as the case may be, covered by sub-section (3) of section 5 of the Central Sales Tax Act, 1956 whether such sales or purchases were effected before or after the judgment, because, the Supreme Court in the above case did not direct implementation of the judgment prospectively only. Dealing with similar contention, a division Bench of this Court in Al-Kabeer Exports Ltd. v. Commissioner of Commercial Taxes [2000] 120 STC 543, speaking through one of us (S.R. Nayak, J), held: "The contention that the judgment of the Supreme Court in the case of K.A.K. Anwar's case [1998] 108 STC 258 would have only prospective effect and does not apply to the earlier assessment years is not acceptable to us. The declaration of law in K.A.K. Anwar's case [1998] 108 STC 258 applies to all sales and purchases, as the case may be, covered by sub-section (3) of section 5 of the CST Act, whether such sales or purchases were effected before or after the judgment. However, it is open for the court, in a given case, to direct the implementation of the judgment prospectively only and not retrospectively. Wherever the courts felt such a course of action was necessary to avoid pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 120 STC 543, was rejected and this Court, dealing with the said contention, held: "The contention of the appellant that in view of the provisions of sections 30B and 30C of the APGST Act, it was prohibited from collecting tax in respect of transactions on which it sought exemption, is misconceived and not acceptable to the court. In the instant case, it cannot be said that non-collection of tax on the part of the appellant on sales effected by it to the purchaser was an act to perform an obligation imposed on the appellant under the provisions of the APGST Act or any statutory order made thereunder. The appellant has stated that it did not collect sales tax from the exporter because it sought exemption which was granted, and that it was seeking exemption under section 5(3) of the CST Act fortified by the decision of this Court in the case of Mohd. Basheer Company [1989] 72 STC 185. That circumstance itself would not be a legal justification to avoid the liability to pay sales tax in respect of the goods sold to the exporter during the concerned period. If the petitioner by force of law is liable to pay sales tax in respect of the transactions effectuated, whether before or a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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