1998 (11) TMI 526 - SC - VAT and Sales Tax

Whether section 59A of the Kerala General Sales Tax Act 1963 as being invalid? Held that - Appeal dismissed. We are in complete agreement with the view of the Kerala High Court that section 59A of the Act is violative of article 14 of the Constitution and the High Court was therefore right in striking down the said provision. For the aforesaid reasons these appeals are dismissed with costs.

Summary

Issues Involved:
1. Constitutional validity of Section 59A of the Kerala General Sales Tax Act, 1963.
2. Arbitrary and unguided power of the Government under Section 59A.
3. Impact of Section 59A on statutory rights of appeal and revision.
4. Comparison of Section 59A with similar provisions in other states' legislation.

Issue-wise Detailed Analysis:

1. Constitutional validity of Section 59A of the Kerala General Sales Tax Act, 1963:
The Supreme Court examined the Kerala High Court's judgment which declared Section 59A of the Kerala General Sales Tax Act, 1963, as invalid. The High Court had found the section unconstitutional, being violative of Article 14 of the Constitution due to its vagueness and potential for arbitrary application. The provision granted the Government the power to determine the rate of tax on any goods, with such decisions being final and overriding other provisions in the Act.

2. Arbitrary and unguided power of the Government under Section 59A:
The respondents argued that Section 59A conferred arbitrary and unguided power to the Government, allowing it to determine tax rates without any guidelines or obligation to hear the dealers. The Supreme Court noted that the section did not specify who could make a reference to the Government or require the Government to hear the dealers before making a decision. This lack of procedural safeguards and guidelines led to the conclusion that the power granted was indeed arbitrary and unguided.

3. Impact of Section 59A on statutory rights of appeal and revision:
The Supreme Court highlighted that the Kerala General Sales Tax Act contained elaborate provisions for assessment, appeal, and revision, ensuring quasi-judicial and judicial resolution of tax-related disputes. Section 59A, however, allowed the Government to make administrative decisions on tax rates, which could negate the statutory provisions of appeal and revision. This administrative power could override decisions made by appellate or revisional authorities, undermining the legal framework designed for fair adjudication of tax disputes.

4. Comparison of Section 59A with similar provisions in other states' legislation:
The Court compared Section 59A with Section 49 of the Delhi Sales Tax Act, 1975, which also granted the Commissioner power to determine certain disputed questions. However, the Delhi provision included safeguards, such as limiting the Commissioner's power to situations where no court proceedings had commenced and allowing the Commissioner to direct that determinations would not affect prior sales. The absence of such safeguards in Section 59A of the Kerala Act further supported the conclusion that it was unconstitutional.

Conclusion:
The Supreme Court upheld the Kerala High Court's decision, affirming that Section 59A of the Kerala General Sales Tax Act, 1963, was violative of Article 14 of the Constitution due to its arbitrary nature and lack of procedural safeguards. The appeals were dismissed with costs, and the provision was struck down as unconstitutional.