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TMI Blog1983 (5) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... . Nos. 3768, W.P. Nos. 3769, W.P. Nos. 4196 of 1978, W.P. Nos. 280, W.P. Nos. 789, W.P. Nos. 790, W.P. Nos. 791, W.P. Nos. 792, W.P. Nos. 1081, W.P. Nos. 1082, W.P. Nos. 1083, W.P. Nos. 1084 of 1979, W.P. Nos. 233, W.P. Nos. 234, W.P. Nos. 235, W.P. Nos. 236, W.P. Nos. 237, W.P. Nos. 238, W.P. Nos. 239, W.P. Nos. 240, W.P. Nos. 241, W.P. Nos. 2201 of 1981, W.P. Nos. 3300, W.P. Nos. 3316, W.P. Nos. 3317, W.P. Nos. 3318, W.P. Nos. 3325, W.P. Nos. 3326, W.P. Nos. 3327 of 1982, W.P. Nos. 4389, W.P. Nos. 4390, W.P. Nos. 4562, W.P. Nos. 4563, W.P. Nos. 4564, W.P. Nos. 4565, W.P. Nos. 4566, W.P. Nos. 4567, W.P. Nos. 4568, W.P. Nos. 4569, W.P. Nos. 4570, W.P. Nos. 4571, W.P. Nos. 4572 of 1978 L.N. Sinha, Attorney-General (P.P. Singh Miss A, Subhasini R.N. Poddar, Gopal Subramaniam D.P. Mohanty, S.A. Shroff, D.D. Sharma V.B. Joshi and M.N. Shroff, Advocates, with him), for the appearing respondents. M.N. Phadhe U.R. Lalit and S.B. Bhasme, Senior Advocates (Smt, Santosh Gupta, H.G. Gupta, Sarwa Mitter, K.C. Dua, M.P. Jha, Dr N.M. Ghatate, S.V. Deshpande, S.P. Saharya, Vishnu B. Saharya, G.S. Jetly and Ram Lal. Advocates, with them), for the appearing parties, JUDGMENT The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s place in the course of inter-State trade or commerce: Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty-first day of March, 1951. (3) No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent. " The true effect of the above article on inter-State sales and purchases of goods was considered by this court in State of Bombay v. United Motors (India) Ltd. [1953] SCR 1069 ; [1953] 4 STC 133 (SC). In that case this court held that art. 286(1)(a) of the Constitution read with the Explanation thereto and construed in the light of art. 301 and art. 304 of the Constitution prohibited the taxation of sales or purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptember 6, 1955, were validated and proceedings in respect of the levy on inter-State sales for assessment were also protected. Later on, in the light of the report of the Taxation Enquiry Commission, the Constitution itself was amended by the Constitution (Sixth Amendment) Act, 1956, by introducing entry 92A in the Union List, substituting entry 54 in the State List by a new entry and by amending art. 269 and art. 286. Entry 92A in the Union List reads: " 92A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce." Entry 54 in the State List now reads: "54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I." The taxes levied on the inter-State sales and purchases by the Central Government under a law made pursuant to the new entry 92A came to be assigned to the States in the manner provided in cl. (2) of art. 269 by the inclusion of sub-cl. (g) in cl. (1) of art. 269 and under the new clause, i.e., cl. (3), added to art. 269, Parliament was empowered to formulate principles for determining when a sale or purchase of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and the expression " sale " is defined in s. 2(g) thereof. Section 3 of the Act lays down the principles with reference to which the question whether a sale or purchase of goods has taken place in the course of inter-State trade or commerce or not can be determined. Section 4 of the Act provides for determining when a sale or purchase of goods is deemed to take place outside a State and s. 5 of the Act lays down the principles governing the determination of the question whether a sale or purchase has taken place in the course of export or import. Section 6 of the Act is the charging section. Sub-sections (1) and (I-A) of s. 6 of the Act which are material for purposes of this case read as follows : "6. Liability to tax on inter-State sales.-(1) Subject to the other provisions contained in this Act, every dealer shall, with effect from such date as the Central Government may, by notification in the Official Gazette, appoint, not being earlier than thirty days from the date of such notification, be liable to pay tax under this Act on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce during any year on and from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such goods. (2) Subject to the other provisions of this Act and the Rules made thereunder, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, reassess, collect and enforce payment of tax, including any Penalty, payable by a dealer under this Act as if the tax or Penalty payable by such a dealer under this Act is a tax or Penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, penalties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct virtually carries out the intention of art. 269 of the Constitution by providing that the proceedings in any financial year of any tax, including any penalty levied and collected under the Act in any State (other than a Union Territory) on behalf of the Government of India shall be retained by it. It may be mentioned here that there was no express provision in the Act itself authorising the levy of any penalty for delay or default in payment of the tax due under the Act or for other breaches of the general sales tax laws of the States in so far as they were adopted by S. 9(2) of the Act as part of the machinery under the Act. But it was understood by all the sales tax authorities in the States who were authorised to exercise powers under s. 9(2) that penalty could also be collected by them in accordance with the provisions of the general sales tax of the appropriate State in order to enforce the provisions of the Act, including collection of tax thereunder. In Khemka & Co. v. State of Maharashtra [1975] 3 SCR 753; [1975] 35 STC 571 (SC), which was a case heard by a Bench of five learned judges of this court, an assessee under the Act, who was a resident of the State of Maharasht ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided for in sections 10 and 10-A of the general sales tax law of each State shall, with necessary modifications, apply in relation to the assessment, reassessment, collection and the enforcement of payment of any tax required to be collected under this Act, in such State or in relation to any process connected with such assessment, reassessment, collection or enforcement of payment as if the tax under this Act, were a tax under such sales tax law. " Sub-section (1) of s. 9 of the Amending Act contains a validating provision. Section 9 of the Amending Act declared that the provisions of s. 9 of the Act would have effect and should be deemed always to have had effect in relation to the period commencing from January 5, 1957, and ending with the date immediately preceding the date of commencement of the Amending Act, as if s. 9 of the Act also provided (a) that all the provisions relating to penalties (including provisions relating to penalties in lieu of prosecution for an offence or in addition to the penalties or punishment on conviction for an offence but excluding the provisions relating to matters provided for in ss. 10 and 10-A of the principal Act, and the provisions relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continued or done. Sub-section (3) of s. 9 of the Amending Act, provided that nothing in s. 9(2) thereof should be construed as preventing any person from questioning the imposition or collection of any penalty or any proceeding, act or thing in connection therewith or from claiming any refund in accordance with s. 9 of the Act. The Explanation to this sub-section provided for the exclusion of the period between February 27, 1975, and the date of the commencement of the Act, in computing the period of limitation for questioning the penalty. Sub-section (4) of s. 9 of the Amending Act, validated the levy of interest on arrears of sales tax also. These petitions were filed after the Amending Act came into force. In support of these petitions the petitioners have urged the following contentions: 1. that the introduction of sub-s. (2A) in s. 9 of the Act, does not have the effect of making the provisions relating to penalties leviable under the general sales tax laws of the States applicable to the proceedings under the Act; 2. that the Parliament cannot adopt the provisions relating to penalties in the general sales tax laws of the States for 'enforcing the charge under the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been redundant apart from being inappropriate Sub-section (2A) of s. 9 of the Act expressly makes all the provisions relating to offences and penalties which are committed or incurred, as the case may be, under the general sales tax laws of the respective States, to persons who commit corresponding acts and omissions at the above-mentioned stages under the Act. To illustrate, if a person is liable to pay any penalty for not filing a return required to be filed by him under the general sales tax law of a State, a person who is similarly required to file a return under the Act, incurs the penalty for not filing return and the measure of penalty is the same as under the State law. If a person is liable to pay penalty at a particular rate in addition to the tax for not paying any part of the tax due under a State law within the specified time, a person liable to pay tax under the Act, becomes liable to pay the penalty at the same rate if he commits default in paying the tax due under the Act. We do not, therefore, find any lacuna in the language of sub-s. (2A) of s. 9 of the Act, which makes the provisions relating to penalties under the general sales tax laws of the respective States ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces and penalties were there in the general sales tax laws of the States would be applicable with appropriate modifications to assessment, reassessment, collection and enforcement of the provisions of the Act. Legislation by incorporation of provisions of another statute even though passed by a different legislature is a well-known method of legislation which does not affect the validity of the legislation particularly when the scheme of the other statute is similar and such incorporation is relevant and necessary for the purpose of advancing the objects and purposes of the legislation. In the instant case we should bear in mind the history of the Central sales tax legislation and its object and purpose. The Central sales tax levied on inter-State sales is assigned under art. 269 of the Constitution to the States who are the true beneficiaries. The assessees under the Act who are spread over various States are accustomed to the general pattern of sales tax law in their respective States and the various duties and responsibilities of an assessee who is liable to pay sales tax. The officers who assess and collect the tax under the Act are the officers who discharge similar functions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evied at specified stages or otherwise than with reference to the turnover of goods. justifying the varying rates of tax under sub-ss. (2) and (2-A) of S. 8 depending upon the rates of tax levied in different States, Shah J., observed at pp. 389-391 of 22 STC thus: "The rates of tax in force at the date when the Central Sales Tax Act was enacted have again not become crystallised. The rate which the State Legislature determines, subject to the maximum prescribed for goods referred to in s. 8(1) and (2) are the operative rates for those transactions: in respect of transactions falling within S. 8(2)(b) the rate is determined by the State rate except where the State rate is between the range of two 'and seven per cent. The rate which a State Legislature imposes in respect of inter-State transactions in a particular commodity must depend upon variety of factors. A State may be led to impose a high rate of tax on commodity either when it is not consumed at all within the State, or if it feels that the burden which is falling on consumers within the State will be more than offset by the gain in revenue ultimately derived from outside consumers. The imposition of rates of sales tax is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... States. That is clear from the amendments made by the Constitution (Sixth Amendment) Act, 1956, in art. 269, and the enactment of cls. (1) and (4) of s. 9 of the Central Sales Tax Act. The Central sales-tax though levied for and collected in the name of the Central Government is a part of the sales tax levy imposed for the benefit of the States. By leaving it to the States to levy sales tax in respect of a commodity on intra State transactions, no discrimination is practised and by authorising the State from which the movement of goods commences to levy on transactions of sale Central sales tax, at rates prevailing in the State, subject to the limitation already set out, in our judgment, no discrimination can be deemed to be practised. " In Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. Asst. Commissioner of Sales Tax [1974] 2 SCR 879; 33 STC 219; 94 ITR 204 (SC), this court had to consider whether s. 8(2)(b) of the Act suffered from the vice of excessive delegation. The material part of s. 8(2)(b), as it stood then, provided that the tax payable by any dealer on his turnover in so far as it related to the sale of goods in the course of inter-State trade or commerce not falling withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has virtually surrendered its legislative judgment to the State Legislatures. There is a clear legislative policy adopted by Parliament in the case of levy of penalties and that is that the penalties payable under the Act should be the same as the penalties payable under the general sales tax law of each State. If the rates of penalties exceed reasonable limits, the States, which are the beneficiaries of the tax collected under the Act, themselves suffer as such unreasonable levy is bound to lead to the killing of the goose which lays the golden egg. The trade would immediately shift to areas outside the State which resorts to higher taxes and penalties. The political and economic factors which operate in this field are so powerful that the provisions with regard to penalties to be made by the State Legislature cannot but be reasonable as they would affect the 'levy of tax under the State Act also. The penal nature of the penalties itself is a sufficient guidance regarding maximum limits up to which penalties can be levied. A penalty cannot be wholly disproportionate to the extent of infringement of law. Moreover, Parliament always has the power to amend its own law, i.e., the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or any subordinate agency or any machinery that they considered appropriate for carrying out the objects and purposes that they bad in mind and which they designated. They were entitled to use the commissioner for transport as their instrument to fix and recover the licence and permit fees Cobb & Co. "Ltd. v. Norman Eggert Kropp [1967] 1 AC 141 at pp. 156, 157. " We feel that even applying the rule in the Gwalior Rayon Silk Mfg. (Wvg.) Co.'s case [1974] 2 SCR 879 ; 33 STC 219 ; 94 ITR 204 (SC), it cannot be said that sub-s. (2-A) of s. 9 suffers from the vice of excessive delegation of legislative power having regard to the nature of that provision. We shall now proceed to consider the question whether by reason of retrospective effect having been given to sub-s. (2-A) of S. 9 of the Act, in so far as penalties are concerned by enacting s. 9 of the Amending Act, Parliament has contravened art. 20(1) of the Constitution. In order to make good the deficiency in the Act pointed out by the majority judgment in Khemka's case [1975] 3 SCR 753; [1975] 35 STC 574 (SC), the validating provision contained in S. 9 of the Amending Act, provided in substance that in so far as penalties we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. (2) No person shall be prosecuted and punished for the same offence more than once. (3) No person accused of any offence shall be compelled to be a witness against himself. " The contention of the petitioners is that any act or omission which is considered to be a default under the Act, for which penalty is leviable is an offence, that such act or omission was not an offence and no penalty was payable under the law in force at the time when it was committed and hence they cannot be punished by the levy of penalty under a law which is given retrospective effect. They principally rely on art. 20(1) in support of their case. Article 20(1) is modelled on the basis of s. 9(3) of art. 1 of the Constitution of the United States of America which reads : " No bill of attainder or ex post facto law shall be passed. " This clause has been understood in the United States of America as being applicable only to legislation concerning crimes. (See Calder v. Bull [1798] 3 Dall 386). The expression It offence" is not defined in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext would mean an initiation or starting of proceedings of a criminal nature before a court of law or a judicial Tribunal in accordance with the procedure prescribed in the statute which creates the offence and regulates the procedure." The levy of charges for " unauthorised use " of water enforced with retrospective effect was held to be not offending art. 20(1) in Jawala Ram v. State of Pepsu [1962] 2 SCR 503 AIR 1962 SC 1246. Similarly, in State of West Bengal v. S. K. Ghosh [1963] 2 SCR 111; AIR 1963 SC 255, the forfeiture provided under s. 13(3) of the Criminal Law (Amendment) Ordinance, 1944 (38 of 1944), was held to be not a penalty within the meaning of art. 20(1) of the Constitution and in that connection this court observed at pp. 263 of AIR 1963 SC, thus: " Article 20(1) deals with conviction of persons for offences and for subjection of them to penalties. It provides firstly that 'no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence'. Secondly, it provides that no person shall be 'subjected to a penalty greater than that which might have been inflicted under the law in force a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll Jute Mills v. State of Bihar [1 956] 7 STC 609 (Pat), the High Court of Patna held that the amendment of s. 14A of the Bihar Sales Tax Act, 1947, by Bihar Act IV of 1955, in so far as it authorised the imposition of the penalty of forfeiture of the amounts collected earlier by dealers in contravention of the provisions of s. 14A, without prejudice to any punishment for an offence under that Act, was violative of art. 20(1) of the Constitution. We have gone through that decision. We do not find any tenable reason given by the High Court in support of its view. It may be added here that in the appeal filed against that decision before this court in State of Bihar v. Rai Bahadur Hurdut Roy Moti Lall Jute Mills [1960] 11 STC 17; AIR 1960 SC 378, the judgment of the High Court was confirmed on the ground that the penalty of forfeiture was not imposable on the facts of that case, but on the question of the applicability of art. 20(1) to the case, this court declined to express any opinion on the ground that it was purely an academic issue. In Shew Bhagwan Goenka v. CTO [1973] 32 STC 368, the Calcutta High Court observed that the retrospective operation of an amendment to the Bengal Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g an anxious consideration to the points urged before us, we feel that the word " penalty " used in art. 20(1) cannot be construed as including a " penalty " levied under the sales tax laws by the departmental authorities for violation of statutory provisions. A penalty imposed by the sales tax authorities is only a civil liability, though penal in character. It may be relevant to notice that sub-s. (2A) of s. 9 of the Act specifically refers to certain acts and omissions which are offences for which a criminal prosecution would lie and the provisions relating to offences have not been given retrospective effect by s. 9 of the Amending Act. The argument based on art. 20(1) of the Constitution is, therefore, rejected. The next point to be considered is whether the imposition and collection of penalty with retrospective effect amounts to an imposition of an unreasonable restriction on the fundamental right of the petitioners to own property and to carry on business guaranteed under arts. 19(1)(f) and (g) of the Constitution. We have already indicated above the circumstances under which it became necessary to levy penalties with retrospective effect and to validate all the proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalties retrospectively and to validate earlier proceedings under laws which have been declared unconstitutional after removing the element of unconstitutionality is included within the scope of legislative power. In the above mentioned case of Rai Ramkrishna, a Bihar Act levying a tax on passengers and goods passed in 1950, was declared to be unconstitutional by this court in December, 1960. An Act validating the said levy after removing constitutional deficiencies in it was passed with the assent of the President in September 23, 1961, and that Act was given retrospective effect from April 1, 1950, on which date the earlier Act which had been declared as unconstitutional had come into force. The limited challenge mounted against the Validating Act was that the provisions contained in S. 23(b) thereof which provided that any proceeding commenced or purported to have been commenced for the assessment, collection and recovery of any amount as tax or Penalty under the provisions of the earlier Act, which had been declared as unconstitutional or the Rules made thereunder during the period from April 1, 1950, to July 31, 1961, i.e., till the date on which an Ordinance which was repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial proceedings in court and yet it would be inappropriate to hold that because the retrospective operation covers a long period, therefore, the restriction imposed by it is unreasonable. That is why we think the test of the length of time covered by a retrospective operation cannot by itself be treated as decisive test. Take the present case. The earlier Act was passed in 1950 and came into force on April 1, 1950, and the tax imposed by it was being collected until an order of injunction was passed in the two suits to which we have already referred. The said suits were dismissed on May 8, 1952, but the appeals preferred by the appellants were pending in this court until December 12,1960. In other words, between 1950 and 1960 proceedings were pending in court in which this validity of the Act was being examined and if a Validating Act had to be passed, the legislature cannot be blamed for having awaited the final decision of this court in the said proceedings. Thus, the period covered between the institution of the said two suits and their final disposal by this court cannot be pressed into service for challenging the reasonableness of the retrospective operation of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads : "48. Failure to maintain correct accounts and to furnish correct returns. If a dealer has maintained false or incorrect accounts with a view to suppressing his sales, purchases or stocks of goods, or has concealed any particulars of his sales, purchases or has furnished to, or produced before any authority under this Act or the Rules made thereunder any account, return or information which is false or incorrect in any material particular, the Commissioner or any person appointed to assist him under subsection (1) of section 3 may after affording such dealer a reasonable opportunity of being heard direct him to pay, by way of penalty, in addition to any tax payable by him, a sum not less than twice and not more than ten times the amount of tax which would have been avoided if the turnover as returned by such dealer had been accepted as correct and where no tax is payable a sum not less than one hundred rupees but not exceeding one thousand rupees. " The argument urged on behalf of the dealers in the State of Haryana is that this section which authorises the levy of penalty at " a sum not less than twice and not more than ten times the amount of tax " on proof of the defau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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