1975 (11) TMI 101 - SC - VAT and Sales Tax

Whether the Notification No. SRO-3908 dated December 7 1957 issued by the Central Government in purported exercise of its powers under section 2 of the Union Territories (Laws) Act 1950 is ultra vires? Held that - Appeal allowed. Set aside the judgment of the Appellate Bench of the High Court and declare the notification dated December 7 1957 and the subsequent notifications in so far as they withdrew the exemptions from tax mentioned above to be unconstitutional.

Summary

Issues Involved:

1. Whether the Notification No. SRO-3908 dated December 7, 1957, issued by the Central Government is ultra vires.
2. Whether the power given by section 2 of the Laws Act to the Central Government to extend enactments can be exercised only to make modifications necessary due to local conditions.
3. Whether the modification could be made only once when the Act was extended.
4. Whether the modification could change the policy of the legislature.
5. Whether the withdrawal of exemptions without giving the statutory notice of not less than three months was valid.

Detailed Analysis:

1. Ultra Vires Notification No. SRO-3908:

The principal question in these appeals was whether the Notification No. SRO-3908 dated December 7, 1957, issued by the Central Government, was ultra vires. The court found that the notification transgressed the limits circumscribing the power conferred by section 2 of the Laws Act. The power had been exhausted when the Bengal Act was extended to Delhi by Notification No. SRO 615 dated April 28, 1951. The impugned notification issued more than 6 1/2 years later was beyond the permissible scope of the power.

2. Power of Modification for Local Conditions:

The validity of the withdrawal of exemptions was challenged on the grounds that the power given by section 2 of the Laws Act could only be exercised to make modifications necessary due to local conditions. The court held that the modifications permissible under section 2 are those necessary to adapt the enactment to local conditions without altering its essential features or legislative policy.

3. Single Exercise of Power of Modification:

The court held that the power of modification is an integral part of the power of extension and cannot be exercised repeatedly or subsequently. It exhausts itself on the first exercise when the Act is extended. Therefore, any modification after the initial extension was not permissible.

4. Change in Legislative Policy:

The court emphasized that the power of modification cannot be used to change the essential features or legislative policy of the enactment. The impugned notification attempted to change the requirement of section 6(2) as to "not less than three months' notice," which was an essential feature of the legislative policy, and thus, it was beyond the scope of permissible modifications.

5. Validity of Withdrawal of Exemptions Without Notice:

The court found that the statutory requirement of giving "not less than three months' notice" was mandatory. The impugned notification and subsequent notifications withdrawing exemptions without complying with this requirement were invalid. The court held that the legislative intent behind the notice period was to ensure that the imposition or exemption from tax causes the least dislocation and inconvenience to dealers and the public.

Conclusion:

The court declared the Notification No. SRO-3908 dated December 7, 1957, and subsequent notifications withdrawing exemptions from tax, to be unconstitutional. The appeals were allowed, and the judgment of the Appellate Bench of the High Court was set aside. The parties were left to bear their own costs.