1990 (11) TMI 374 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of Section 59A of the Kerala General Sales Tax Act, 1963.
2. Judicial and quasi-judicial functions of the executive.
3. Procedural fairness and reasonableness in tax assessment.
4. Impact of Section 59A on the rights of assessees.
5. Arbitrary and unguided power of the executive under Section 59A.
6. Judicial review and the role of the courts in checking governmental illegality.

Issue-wise Detailed Analysis:

1. Constitutional Validity of Section 59A of the Kerala General Sales Tax Act, 1963:
Dealers in diverse goods challenged the constitutional validity of Section 59A of the Kerala General Sales Tax Act, 1963. The High Court examined the wide jurisdiction under Article 226 of the Constitution to subject the statutory provision to rigorous tests for ascertaining its constitutional purity. The court found that Section 59A contains arbitrary and unguided power on the executive, subverting the scheme of a quasi-judicial and judicial resolution of disputes between the State and the assessees, and consequently, it is violative of Article 14 of the Constitution and ultra vires the provisions of the Constitution.

2. Judicial and Quasi-Judicial Functions of the Executive:
The judgment emphasized that judicial functions should not be handled by the executive, as it violates the separation of powers among the three organs of the State. The court noted that Section 59A allowed the executive to perform judicial functions, which is against the basic principles of modern law. The court highlighted that the executive is often eager to grab powers of the judiciary, leading to potential abuse of power.

3. Procedural Fairness and Reasonableness in Tax Assessment:
The statutory scheme of the Kerala General Sales Tax Act includes assessment by an officer, appeals to departmental functionaries, further appeals to the Tribunal, and limited revision to the High Court. The court emphasized the importance of procedural fairness, reasonableness, and rationality in the assessment process. It noted that if the adjudicatory agencies are properly manned, arbitrariness would not go unchecked, as the courts act as the Sentinel Quit Vive of the Constitution and the laws.

4. Impact of Section 59A on the Rights of Assessees:
The court observed that Section 59A had a disturbing potency of having a binding effect even on the Tribunal or the High Court while functioning as a revisional court under Section 41 of the Act. The section was found to be fraught with the potentialities of the abuse of power, leading to excessive corruption and allegations. The court stressed that a trader's fundamental right to carry on a trade or business should not be drowned in a sea of rolling risks due to the arbitrary exercise of power under Section 59A.

5. Arbitrary and Unguided Power of the Executive under Section 59A:
The court scrutinized various files and found that the power under Section 59A had been exercised arbitrarily and without application of mind. Instances of casualness and lack of due consideration were evident in the issuance of clarificatory orders. The court declared that Section 59A is not merely arbitrary and unguided in its wording and content but also had been invoked with patent arbitrariness in actual reality.

6. Judicial Review and the Role of the Courts in Checking Governmental Illegality:
The court highlighted the importance of judicial review in providing a check against governmental illegality. It noted that the courts have a duty to step in and repulse any unnecessary or unjustifiable attack on the vitality of quasi-judicial and judicial functioning. The court declared Section 59A as unconstitutional and violative of Article 14 of the Constitution, emphasizing that the courts must act when arbitrariness is writ large.

Conclusion:
The High Court declared Section 59A of the Kerala General Sales Tax Act, 1963, as unconstitutional and violative of Article 14 of the Constitution. The court quashed all orders passed in exercise of the invalid and unconstitutional provision and allowed the writ petitions. The judgment emphasized the importance of maintaining the separation of powers, procedural fairness, and the role of the courts in checking governmental illegality.

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