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Sha Ghelabhai Devji and Co. Vs. Assistant Commissioner of Commercial Taxes (Assessment), Dharwad and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberWrit Petition No. 2127 of 1979
Judge
Reported inILR1985KAR1330; [1986]62STC418(Kar)
ActsKarnataka Sales Tax Act, 1957 - Sections 13(2), 13(2A), 13(3), 13(4) and 14; Constitution of India - Articles 14, 19(1), 226 and 246(3); States Reorganisation Act, 1956 - Sections 7 and 119; Travancore-Cochin Land Tax Act; Mysore Sales Tax Act - Sections 13; Mysore Buildings Tax Act, 1962 - Sections 3(2)
AppellantSha Ghelabhai Devji and Co.
RespondentAssistant Commissioner of Commercial Taxes (Assessment), Dharwad and anr.
Excerpt:
- workmens compensation act, 1923 [c.a. no. 8/1923]. section 19; [k. ramanna, j] employment injury death of driver due to heart attack while on duty - liability of the insurer - fastening the liability on the insurer/appellant to indemnify the owner of the vehicle nexus between the death of the deceased and the nature of work carried out by him held, considering the nature of work carried out by the deceased who was a driver of heavy vehicle and further as there is no previous history of chest pain or hear attack, the same be related to his nature of work and out of stress and strain for continuously driving the heavy vehicle, he suffered heart attack. as such, the nexus betweens the death of the deceased and the nature of work carried out by him has been clearly established. further,.....orderputtaswamy, j.1. on a reference made by one of us (puttaswamy, j.), this case was posted before us for disposal. 2. m/s. sha ghelabhai devji and company of dharwad is a dealer and an assessee under the karnataka sales tax act of 1957 (karnataka act 25 of 1957) ('the act') on the file of the assistant commissioner of commercial taxes (assessment), dharwad ('acct'). for the period from 25th october, 1965, to 12th november, 1966, the acct by his rectification order made under section 25a of the act on 1st march, 1969, held that the purchase turnover of rs. 21,47,000 of the petitioner on cotton and groundnuts was exigible to a sum of rs. 42,940 as purchase tax under the act, the validity of which was challenged by him in writ petition no. 352 of 1975. on 30th july, 1975, vrnkataramiah,.....
Judgment:
ORDER

Puttaswamy, J.

1. On a reference made by one of us (Puttaswamy, J.), this case was posted before us for disposal.

2. M/s. Sha Ghelabhai Devji and Company of Dharwad is a dealer and an assessee under the Karnataka Sales Tax Act of 1957 (Karnataka Act 25 of 1957) ('the Act') on the file of the Assistant Commissioner of Commercial Taxes (Assessment), Dharwad ('ACCT'). For the period from 25th October, 1965, to 12th November, 1966, the ACCT by his rectification order made under section 25A of the Act on 1st March, 1969, held that the purchase turnover of Rs. 21,47,000 of the petitioner on cotton and groundnuts was exigible to a sum of Rs. 42,940 as purchase tax under the Act, the validity of which was challenged by him in Writ Petition No. 352 of 1975. On 30th July, 1975, Vrnkataramiah, J. (as His Lordship then was), rejected the same, which was challenged by it in Writ Appeal No. 555 of 1975. On 29th September, 1975, a Division Bench of this Court admitted the said writ appeal and thereafter on 10th November, 1975, stayed the recovery on terms. On 9th June, 1978, a Division Bench of this Court dismissed the said writ appeal during which period the petitioner had the benefit of the said stay order.

3. On the termination of the proceedings before this Court, the ACCT to show cause as to why proceedings should not be instituted against it for recovery of taxes outstanding and a penalty of Rs. 36,713.70 thereon that had accrued thereto on the same under the Act. On its failure to show cause or pay the amounts specified in the said notice, the ACCT on 23rd January, 1979 issued a garnishee notice (exhibit B), to Branch Manager of Vijaya Bank, Dharwad, under section 14 of the Act calling upon it to make payment of the amounts standing to the credit of the petitioner towards the taxes and penalty due by it to the State. In this petition under article 226 of the Constitution presented on 15th February, 1979, the petitioner has challenged the validity of section 13(2) of the Act, the show cause notice and the garnishee notice issued by the ACCT (exhibits A and B).

4. The petitioner has challenged section 13(2) of the Act which provides for automatic levy of penalty ignoring the effect of the stay order made by this Court and without providing an opportunity of hearing, as violative of articles 14 and 19(1)(f) of the Constitution. At the hearing, the petitioner also urged that section 13(2A) of the Act confers arbitrary, unguided, uncanalised and uncontrolled power on the executive Government and was violative of article 14 of the Constitution.

5. In their return the respondents have urged that section 13(2) of the Act which only provides for payment of automatic levy of interest on the outstanding amounts was not violative of articles 14 and 19 of the Constitution.

6. Sri K. Srinivasan, learned Advocate, appeared for the petitioner. Sri S. Rajendra Babu, learned Government Advocate, has appeared for the respondents.

7. Both sides have relied on a large number of rulings in support of their respective cases. We will refer to them at the appropriate stages.

8. On the pleadings and the contentions urged before us, the following points arise for determination and they are :

(i) Whether section 13(2) of the Act provides for payment of penalty or interest

(ii) Whether section 13(2) of the Act was violative of articles 14 and 19(1)(f) of the Constitution

(iii) Whether section 13(2A) of the Act suffers from the vice of excessive delegation and was violative of article 14 of the Constitution

(iv) If section 13(2A) of the Act was invalid, whether that invalidity by itself invalidates section 13(2) of the Act, on the grounds that it was not severable from the latter

We will examine these points in their order.

Re : Point No. I

Sri Srinivasan has urged that the plain language of section 13(2) of the Act does not permit this Court to construe the same as providing for automatic levy of interest as held by a Division Bench of this Court in Patel Volkart (P.) Limited v. Commissioner of Commercial Taxes in Karnataka (S.T.R.P. No. 64 of 1981 decided on 29th January, 1982) hereafter referred to as Volkart's case) (printed at page 411 supra) and the same requires reconsideration by a larger Bench.

9. Sri Babu has urged that there were no grounds to doubt the correctness of the ruling rendered by this Court in Volkart's case (printed at page 411 supra) and refer it to a larger Bench.

10. In order to appreciate this and the other points also, we consider it useful to briefly notice the scheme of the Act and its material provisions at the threshold.

11. As on 1st November, 1956, on which day the new State of Mysore now called as Karnataka comprising of the areas specified in section 7 of the States Reorganisation Act of 1956 (SR Act) came into being, there were various sales tax enactments referred to in section 40 of the Act regulating the levy and collection of sales tax in the several integrating areas of the State which continued to be in force in the retrospective areas by operation of section 119 of the SR Act. The new State by virtue of the powers derived from article 246(3) of the Constitution and entry No. 57 of List II, State List, of the Seventh Schedule to the Constitution enacted the uniform Act repealing the various enactments that were in force in the several integrating areas of the State. The Act came into force from 1st October, 1957.

12. The Act provides for levy of sales tax which necessarily includes purchase tax and their recoveries. Chapter V of the Act regulates the returns to be filed, assessments to be made, payment of taxes assessed, their recovery, composition and collection of taxes on the pattern of other sales tax and other tax laws in the country.

13. Section 13 of the Act, omitting sub-section (3) of the same section that is not material, as originally enacted, reads thus :

'13. Payment and recovery of tax. - (1) The tax assessed under this Act shall be paid in such manner and in such instalments, if any, and within such time, as may be specified in the notice of assessment.

(2) If default is made in paying according to the notice of assessment, -

(i) the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax under this Act; and

(ii) the person or persons liable to pay the tax under this Act shall pay a penalty equal to -

(a) one per cent of the amount of tax remaining unpaid for each month for the first months, after the expiry of the period specified in the notice of assessment, and

(b) two and one-half per cent of such amount for each month subsequent to the first three months as aforesaid.'

But, this section as in the case of many other provisions of the Act, has not remained in the same form from 1st October, 1957.

14. Section 13 as amended by the later amending Acts omitting sub-sections (3) and (4) of that section that is not material, as it stands at present and as on 29th January, 1982, on which day this Court rendered its decision in Volkart's case (printed at page 411 supra), reads thus :

'13. Payment and recovery of tax. - (1) The tax or any other amount due under this Act shall be paid in such manner and in such instalments, subject to such conditions, on payment of such interest and within such time, as may be prescribed.

(2) If default is made in making payment in accordance with sub-section (1),

(i) the whole of the amount outstanding on the date of default shall become immediately due and shall be charge on the properties of the person or persons liable to pay the tax under this Act; and

(ii) the person or persons liable to pay the tax under this Act shall pay a penalty equal to -

(a) one per cent of the amount of tax remaining unpaid for each month for the first three months, after the expiry of the time prescribed under sub-section (1), and

(b) two and one-half per cent of such amount for each month subsequent to the first three months as aforesaid.

Explanation. - For purposes of clause (ii), the penalty payable for a part of a month shall be proportionately determined.

(2A) Notwithstanding anything contained in sub-section (2), the State Government, may, subject to such conditions as may be prescribed, remit the whole or any part of the penalty payable in respect of any period of any person or class of persons.'

The scope and ambit of section 13 of the Act has been examined by this Court on more than one occasion. Even otherwise, it is necessary to notice and ascertain the same for a proper appreciation of the challenge made against the same by the petitioner.

15. In Sha Jayantilal Khetsi v. Additional Commercial Tax Officer (1966) 2 Mys LJ 614, a Division Bench of this Court consisting of Hegde and Bhimiah, JJ. (as their Lordships were then), speaking through Hegde, J., interpreting section 13(2) of the Act, as it stood then, expressed thus :

'As seen earlier, the assessing authority had made a demand for the payment of the tax assessed by its notice dated 13th May, 1964. That demand had to be complied with on or before 3rd June, 1964. The same not having been complied with within that date, it is clear that the assessee had become a defaulter. Once he becomes a defaulter, in view of sub-section (2) of section 13 of the Act, his liability to pay the penalty at the prescribed rate begins. Sub-section (2) of section 13 does not contemplate any separate order levying penalty. The liability under that provision is statutory liability. It is more or less in the nature of payment of interest, though at an exorbitant rate, on the amount due as tax. We are unable to agree with Mr. Bhat that section 13(2) contemplates any separate assessment order or any order levying penalty. The liability to pay the penalty accruing under that provision is ancillary to the assessee's liability to pay the tax. The penalty payable becomes a part and parcel of the tax itself. That being so, the fact that no separate provision is made either in the Act or in the Rules for assessing the penalty due or levying penalty is no ground for paying that the liability to pay the penalty has not accrued. For the same reason, we are unable to agree with Mr. Bhat that in the absence of any provision empowering the assessing authority to collect the penalty due, the liability in question is incapable of being enforced. As mentioned earlier, the liability arising under that provision becomes a part and parcel of the tax levied and therefore the power to collect the tax include also the power to realise the penalty ........

What section 13(2) of the Act provides is that whenever an assessee makes default in making payment in accordance with sub-section (1), he is statutorily liable to pay the penalty prescribed therein. In a case like the one before us, the question whether the assessee had defaulted wilfully or not does not arise for consideration. What is relevant is the factum of the default and not the reason for the same.'

In Mutha Manickchand v. Commercial Tax Officer, Gangavathi [Writ Petitions Nos. 504 and 505 of 1966 decided on 13th March, 1967 (Mys)] to which we will make a detailed reference at a later stage, a Division Bench of this Court consisting of Narayana Pai, J. (as His Lordship then was), and Venkataswamy, J., upholding the validity of section 13(2) of the Act as it stood then, without reference to the ruling in Sha Jayantilal Khetsi's case (1966) 2 May LJ 614 on the scope of that provision expressed thus :

'It is clear from the section that the penalty is a consequence which flows directly from the statute itself without the necessity of any authority making a specific order imposing or directing payment of penalty. But, all the penalty that accrues is penalty for default in making payment in accordance with sub-section (1) of the section - the payment required under sub-section (1) is of 'the tax under this Act' - the mandate of the section being that the said tax shall be paid in such manner and in such instalments, if any, and within such time, as may be prescribed.'

In Sterling Construction & Training Company v. Commercial Tax Officer, X Circle, Seshadripuram, Bangalore [1973] 32 STC 235 (hereinafter referred to as Sterling's case) a Division Bench of this Court consisting of Govinda Bhat, C.J., and Jagannatha Shetty, J., following Sha Jayantilal Khetsi's case (1966) 2 Mys LJ 614 reiterated and reaffirmed the same principle in these words :

'The Act gives no discretion to authorities under the Act to waive or reduce the penalty. Obligation is case on the defaulting assessee to make payment of the penalty computed in the manner provided by sub-section (2) of section 13. When no discretion has been left to the respondent to waive or reduce the penalty, no purpose will be served by affording to the petitioners the opportunity of being heard. According to the argument of Sri Srinivasan, opportunity ought to be afforded to show that there was reasonable excuse for non-payment of the tax assessed and that penalty under section 13(2) is incurred only in cases where non-payment of tax is without reasonable excuse. This argument has been met by Judge Cooley in this Treatise on Taxation, Volume 3, page 2532, thus :

'Excuses for non-payment. - It is no excuse for non-payment that the owner is under personal disability. Thus, insanity is no excuse for non-payment. So it is no excuse for failure to pay a tax in full that the collector, without authority, and on his motion, has remitted a part of the tax, or that the person taxed is financially embarrassed, or that the proceeds of the tax are to be devoted to an unlawful purpose.' The same learned author has stated at page 2535 that 'in tax laws penalties are imposed for mere delinquencies, in order to hasten payment, and they are also imposed as a punishment for frauds, evasions, and neglect of duty'.

If financial embarrassment or personal disability affords no excuse for non-payment where payment of penalty is fixed by the statute, it cannot be contended that the penalty is not incurred when reasonable excuse for non-payment is shown by the defaulter. To afford relief in hard cases like insanity, disability or financial embarrassment, etc., the statute has made express provision by sub-section (2A) empowering the State Government to waive or reduce the amount of penalty, but that power is not vested in any authority constituted under the Act.

Our view is also supported by the decision of this Court in Sha Jayantilal v. Additional Commercial Tax Officer (1966) 2 Mys LJ 614. There the contention on behalf of the assessee was that the default, if any, was not a wilful default and, therefore, the assessee had not incurred any liability to pay penalty. Hegde, J., (as he then was), who delivered the judgment of this Court stated : 'What section 13(2) of the Act provides is that whenever an assessee makes default in making payment in accordance with sub-section (1), he is statutorily liable to pay the penalty prescribed therein. In a case like the one before us, the question whether the assessee had defaulted wilfully or not does not arise for consideration. What is relevant is the factum of the default and not the reason for the same.''

In Volkart's case (printed at page 411 supra), a Division Bench of this Court consisting of Venkatachaliah and Rama Jois, JJ., following the earlier cases of this Court in particular in Sterling's case [1973] 32 STC 235 and the ruling of the Supreme Court in Haji Lal Mohd. Biri Works v. State of U.P. : [1974]1SCR25 which interpreted section 8(1) and (1A) of the U.P. Sales Tax Act providing for automatic levy of interest in cases of defaults as in section 13 of the Act expressed thus :

'Thus the amount payable by a defaulter is really the interest payable on the amount of tax withheld by the defaulter and the rate of interest is fixed by the section itself, there being no power in any of the authorities to diminish or extinguish the liability, no order is required to be made and, therefore, no question of preferring an appeal against an order made under section 13(2) of the Act arises.'

In this case the Division Bench examining the very provision in the present form has ruled in clear and definite terms that the term 'penalty' occurring in section 13(2) of the Act with due regard to the context in which it occurs should be construed as 'interest' and not as penalty as used in that section.

16. When this Court rendered its decision in Sterling's [1973] 32 STC 235 and Volkart's (printed at page 411 supra) cases, section 13(2A) was part of section 13 of the Act. In both these cases, this Court had reached its conclusion with due regard to section 13(2A) of the Act. In both the cases the very point has been decided though not on the very arguments advanced by Sri Srinivasan. The binding nature of a decision does not depend on the fact that an argument addressed in a later case was neither addressed nor considered in the earlier case provided the permit therein has been considered and decided (vide Smt. Somawanti v. State of Punjab : [1963]2SCR774 . We are, therefore, of the view that Volkart's case (printed at page 411 supra) is a direct authority on the point. We are bound by this decision. We will now examine whether the same requires reconsideration as seriously pressed by Sri Srinivasan.

17. Section 13 of the Act employs the term 'penalty' and not 'interest' as payable on taxes withheld or defaulted by an assessee under the Act. But, that by itself cannot be decisive in holding one way or the other. Every word takes its colour from the context in which it occurs. A word is not a crystal with a definite and unalterable meaning to be applied mechanically to all and every situations in one and the only way. The rationale for providing for payment of interest has also been explained by this Court referring to the principles expounded by Cooley in his classic treatise on 'Taxation' in Sterling's case [1973] 32 STC 235. The income tax laws in India and United States of America also provide for the same [vide World Tax Series - Taxation in India by Harvard Law School, Chapter 13, para 13/7.1 and 7.2 at pages 391 and 392 and Taxation in the United States published by Harvard Law School, Chapter 13, para 13/7.1 at page 1262]. The object is to deter a dilatory assessee, as the very petitioner, to make prompt payment of taxes found due to the State to meet the ever growing and almost insatiable demands and in default to make compensation for delayed payments. When one examines the same in that context, as that should be, applying the progressive rule of construction of statutes that has now come to stay, which has been very felicitously expressed by Lord Denning in Seaford Court Estates Limited v. Asher [1949] 2 All ER 155 at page 164 approved by our Supreme Court in State of Karnataka v. Hansa Corporation : [1981]1SCR823 and K. P. Varghese v. Income-tax Officer, Ernakulam : [1981]131ITR597(SC) and a Full Bench of this Court in C. Arunachalam v. Commissioner of Income-tax ILR (1984) 2 Kar 1387, we are of the view that what is provided in section 13(2) of the Act is only interest and not penalty.

18. Sri Srinivasan has urged that section 13(2) of the Act that does not provide for refund of interest in conformity with the appellate or revisional order made, can only be construed as providing for penalty and not of interest.

19. On this very contention urged in Mutha Manickchand's case [W.P. Nos. 504 and 505 of 1966 decided on 13th March, 1967 (Mys)] the Division Bench expressed thus :

'15. We, therefore, reject the argument and hold that even before they amendment, the section would not and did not authorise retention of penalty when it becomes unlawful to retain it by reason of an order made in appeal or revision reducing or cancelling the tax as originally imposed.'

We are of the view that this is a complete answer to this contention of Sri Srinivasan. Even otherwise we are of the view that the mere absence of an express provision for refund cannot be construed as disabling refund in whole or in part of interest or penalty paid, if that becomes necessary in pursuance of an appellate or revisional order made in favour of an assessee. We are of the view that this contention of Sri Srinivasan does not justify us to doubt the correctness of the decision in Volkrat's case (printed at page 411 supra).

20. On the above discussion, we are of the view that there are no grounds for us to doubt the correctness of the ruling in Volkart's case (printed at page 411 supra). We, therefore, reject this contention of Sri Srinivasan.

Re : Point No. II

21. Sri Srinivasan has urged that section 13(2) of the Act that automatically levies penalty without affording an opportunity of hearing, ignoring orders of stay issued by the authorities and courts and fact situations was violative of article 14 of the Constitution.

22. Sri Babu has urged that section 13(2) of the Act was not violative of article 14 and its validity was concluded by the Supreme Court in Khazan Chand v. State of Jammu and Kashmir : [1984]2SCR858 and this Court directly in Mutha Manickchand's case (W.P. Nos. 504 and 505 of 1966 decided on 13th March, 1967).

23. In its petition, the petitioner has also urged that section 13(2) of the Act was violative of article 19(1)(f) of the Constitution. Sri Srinivasan in our opinion rightly did not pursue this challenge of the petitioner, which is without even a discussion calls for rejection.

24. Article 19(1)(f) of the Constitution that guaranteed citizens the right to acquire, hold and dispose of property has been deleted by the 44th Constitution Amendment Act with effect from 1st August, 1979. With the deletion of that article the petitioner cannot sustain his challenge to section 13(2) with reference to this article. Even assuming that that article should be treated as part of our Constitution, for purposes of this case, then also that article did not guarantee immunity from taxes, levy of penalties or interests for non-payment of taxes. We are, therefore, of the view that the challenge of the petitioner based on article 19(1)(f) of the Constitution has no merit. We, therefore, reject this challenge of the petitioner.

25. In Mutha Manickchand's case [W.P. Nos. 504 and 505 of 1966 decided on 13th March, 1967 (Mys)] the Division Bench dealing with the very challenge noticing the ruling of the Supreme Court in Kunnathat Thathunni Moopil Nair v. State of Kerala : [1961]3SCR77 on which Sri Srinivasan has again placed strong reliance, has rejected the same, in these words :

'6. The challenge to the constitutionality of section 13(2) is based solely upon the principles stated by their Lordships of the Supreme Court in the case of Moopil Nair reported in : [1961]3SCR77 . The exact principle stated by their Lordships of the Supreme Court in the said case is that a tax or an impost purporting to be a tax directed to be paid in the exercise of the legislative power of taxation would lose the character of a tax, if it actually amounts to expropriation of the very property in respect of which the tax is intended to be or purports to be levied. The uniform rate of land tax proposed to be levied under the Travancore-Cochin Land Tax Act impugned in the said case was shown to have clear possibilities of its operating in such a way as to make owners of land liable to pay tax several times the capital value of the land itself.

7. It is not possible to apply that principle to the operation of section 13 of the Mysore Sales Tax Act. Although penalty in the circumstances mentioned in the section may be in the nature of tax itself and not punishment for an offence the penalty arises not by virtue of assessment to tax or as a direct consequence of the original liability to taxation under the statute but by virtue of a default committed by the assessee in the payment of tax lawfully exigible. To the extent default contributes to the liability the said liability itself is capable of being totally avoided by prompt payment on the part of the assessee. It is also a small percentage of the tax due - one per cent of the amount of tax remaining unpaid for each month for the first three months and two and one-half per cent in the subsequent months - and is related to so much of the tax as remains unpaid. The sales tax itself is a percentage of the turnover and nothing short of continued default on the part of the assessee for a period as long as six years is sufficient to double the tax liability itself. Therefore, in the ordinary course it would require a default of over a decade or decades before the assessee can successfully say that the tax plus penalty would amount the price of the goods sold or purchased by him and subjected to tax.

8. For these reasons, we are unable to accept the argument that there is anything expropriatory in the penalty imposed by section 13 of the Mysore Sales Tax Act of the same type as could be and was actually postulated in the Travancore-Cochin Land Tax Act dealt with by the Supreme Court in Moopil Nair's case : [1961]3SCR77 mentioned above.'

We are of the view that on these very principles the challenge to section 13(2) of the Act based on article 14 of the Constitution is liable to be rejected.

26. An assessee that does not make payment of taxes due by him under the Act on or before the date specified in the notice of demand indisputably becomes a defaulter of the moneys legitimately due to the State. In order to deter him not to commit such default and compensate the State for the deprivation of such moneys by such defaulter, the Act can undoubtedly make a suitable provision to meet both the situations. Section 13(2) uniformly provides for a lower rate of interest for the first period of three months and for a higher rate of interest thereafter till payment is made by the defaulting assessee. Section 13(2) that treats the defaulting assessee uniformly cannot, therefore, be condemned as violative of article 14 of the Constitution.

27. What should be the rates of interest to be paid during the first period of three months and thereafter is essentially for the legislature to decide. At any rate, the rates of interest stipulated in section 13(2) of the Act when one has regard to the rates of interest prevailing in the country cannot be characterised as disproportionate, excessive or arbitrary to justify its condemnation under article 14 of the Constitution.

28. For the period from 10th November, 1975, to 9th June, 1978, the petitioner had the benefit of an order to stay in Writ Appeal No. 555 of 1975 subject to his furnishing security. In the present case also, the petitioner has the benefit of a similar order made on 5th April, 1979, which has continued ever since then without any further modification. We are of the view that those stay orders only postponing the liabilities or preventing the recoveries, cannot be read as destroying the liability created by section 13(2) of the Act, which operates notwithstanding the interim orders made by this Court. In any event, those orders obtained by the petitioner at his own risk, do not touch on the validity of section 13(2) of the Act. We are of the view that these factors neither touch on the construction of section 13(2) nor its validity at all.

29. In Khazan Chand's case : [1984]2SCR858 the Supreme Court examining the validity of an analogous provision found in the Jammu and Kashmir General Sales Tax Act of 1962 has rejected a similar contention in these words :

'Thus, payment of interest in case of default in payment of tax is a means of compelling an assessee to pay the tax due by the prescribed date. It is a mode of recovery of tax and well within the legislative power of the State.

13. The challenge to sub-section (2) of section 8 on the ground that the provisions of that sub-section infringe article 14 of the Constitution a twofold one, namely :

(1) that the said sub-section is discriminatory, and

(2) that it is arbitrary and unreasonable.

14. Sub-clause (4) of clause 2 of the Constitution (Application to Jammu and Kashmir) Order, 1954, makes article 14 of the Constitution of India applicable to the State of Jammu and Kashmir. With respect to the charge of discrimination, it was submitted that such high rates of interest for non-payment of tax are not to be found in the sales tax law of any other State and therefore, by enacting the said sub-section (2) of section 8 and providing for payment of interest at the rate of two per cent per month when the period of default exceeded three months but did not exceed six months and for interest at the rate of three per cent per month if the default was for a period exceeding six months, dealers in the State of Jammu and Kashmir were hostilely discriminated against as compared with dealers in other States. This argument wholly overlooks the very basis of the scheme of distribution of legislative power contained in our Constitution. Our Constitution. Our Constitution is federal in its structure and a salient feature of a federal policy is distribution of legislative and administrative powers between the federated unit and the federating units, that is, between the Federal Government and the State Governments. Thus, matters in respect of which our Constitution-makers felt that there should be uniformity of law throughout the country have been placed by them in the Union List (List I in the Seventh Schedule to the Constitution) conferring exclusive power upon Parliament to make laws with respect thereto, while matters which they felt were of local concern and may require laws to be made having regard to the particular needs and peculiar problems of each State have been assigned to the State Legislatures by placing them in List II of the Seventh Schedule, that is, the State List. Inter-State trade and commerce is a matter which affects all the States in India and thus the whole country. It is for this reason that in the Seventh Schedule to the Constitution the subject of taxes on the sale or purchase of goods taking place in the course of inter-State trade or commerce has been put in List I and made a Union subject. Taxes on the sale or purchase of goods taking place within the State affect only those who carry on the business of buying and selling goods within the State and therefore, this subject has been put in List II of the Seventh Schedule, namely, the State List. Sales tax is the biggest source of revenue for a State and it is for the State to decide how and in what manner it will raise this revenue and to determine which particular transactions of sale or purchase of goods taking place within the State should be taxed and at what rates, and which particular transactions of sale or purchase of goods should be exempted from tax or taxed at a lower rate having regard to the subject-matter of sale, as for instance, where particular goods constitute necessities for the poorer classes of people or where the goods in question are of such a nature as are required to be exempted from tax or taxed at a lower rate in order to encourage a local industry. Consideration of these matters must, from the nature of things, differ from State to State. Similarly, it is for each State to determine the methods it will adopt to collect its revenue from this source and to decide which methods would be most efficacious for this purpose. The provisions of the sales tax law of each State must, therefore, necessarily differ in various respects from the provisions of sales tax laws of other States. If the provisions of the legislation of every State on a particular topic are to be identical in every respect, there is no purpose in including that topic in the State List and it may as well be included in the Union List. Merely because the provisions of a State law differ from the provisions of other State laws on the same subject cannot make such provisions discriminatory.

15. The second part of the challenge under article 14 was with respect to the rates at which interest is payable under sub-section (2) of section 8 on the amount of tax paid after the expiry of the prescribed date of payment. It is true that the rate of two per cent per month and particularly the rate of three per cent per month can be said to be on the high side, but we fail to see how this would render the provisions of that sub-section void or unconstitutional. Providing for payment of interest in case of delayed payment of tax is a method usually adopted in fiscal legislation to ensure that the amount of tax which is due is paid by the prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing statute. It is for the State to provide by what means payment of tax is to be enforced and a person who does not pay the amount of tax lawfully and admittedly due by him can hardly complain of the measures adopted by the State to compel him to pay such amount. It neither lies in the defaulter's mouth to protest against the rate of interest charged to him nor is it open to him to dictate to the State the methods which it should adopt for recovering the amount of tax due by him. In this connection, it is pertinent to note that under section 10-B of the Act, where as a result of an order made in appeal or revision, a refund has become due to the dealer or any other person on account of tax or penalty found to have been paid in excess, the State Government is required to pay to such dealer or person simple interest at the rate of 12 per cent per annum on the amount of such refund from the date such payment was made up to the date on which such refund was granted and in case of delay in refunding the excess amount, interest at the rate of 24 per cent per annum if the refund is granted beyond a period of three months but before the expiry of six months from the date of the appellate or revisional order and at the rate of 36 per cent per annum if it is granted thereafter. Thus, under the Act, the same rates of interest apply both to the dealer who has made default in payment of tax due by him and to the State Government in case of default made by it in making payment of the amount of tax or penalty which has become refundable as a result of an appellate or revisional order. The graduated rates of interest provided by sub-section (2) of section 8 cannot, therefore, be characterised as arbitrary or unreasonable.'

We are of the view that these principles apply in all fours to this challenge of the petitioner based on article 14 of the Constitution and calls for rejection for these very reasons.

30. In this connection it is worth recalling the observations of Lord Greene in Lord Howard De Walden v. Inland Revenue Commissioners [1942] 1 All ER 287 (CA). In that case the learned Master of the Rolls dealing with avoidances of income tax in that country and the legislative measures undertaken to plug or overcome the same, has expressed thus :

'It scarcely lies in the mouth of the tax payer who plays with fire to complain of burnt fingers.'

We are of the view that this is what the petitioner has been doing. We do not think we can assist the petitioner on the touchstone of article 14 of the Constitution.

31. On the above discussion, we hold that the challenge of the petitioner based on article 14 of the Constitution is without any merit. We, therefore, reject the same.

Re : Point No. III

32. In its petition, the petitioner had not challenged section 13(2A) of the Act. When the petitioner had not challenged this provision, normally this Court cannot examine its validity at all. But, Sri Srinivasan sought our leave to challenge the same as violative of article 14 of the Constitution which was vehemently opposed by Sri Babu. On hearing both sides on this aspect, we orally overruled the objections of Sri Babu, permitted Sri Srinivasan to challenge the same and then heard both sides on the same in full. We now proceed to examine its validity on merits.

33. Sri Srinivasan has urged that section 13(2A) of the Act conferring power on Government to remit the whole or any part of penalty/interest without any guidance and control suffers from the vice of excessive delegation and was violative of article 14 of the Constitution. In support of his contention Sri Srinivasan has strongly relied on a Division Bench ruling of this Court in P. Bhuvaneswariah v. State of Mysore (1964) 2 Mys LJ 470; AIR 1965 Mys 170.

34. Sri Babu has urged that section 13(2A) that confers discretionary power on the executive Government, the highest executive authority, under the Constitution, subject to the rules to be made and to be laid before the legislature does not suffer from the vice of excessive delegation. In support of his contention Sri Babu has strongly relied on the ruling of the Supreme Court in Chinta Lingam v. Government of India : [1971]2SCR871 .

35. In Mutha Manickchand's case (W.P. Nos. 504 and 505 of 1966 decided on 13th March, 1967) this Court in examining the validity of section 13(2) of the Act has also noticed the insertion of section 13(2A) by Karnataka Act 3 of 1966 and has upheld section 13 though its validity as such had not been expressly challenged. We have only noticed this as a fact.

36. Section 13(2A) of the Act while conferring power on Government really confers a benefit on assessees or a class of assessees to approach Government and seek for remitting the whole or part of the interest levied or collected or to be collected from them. A beneficial provision cannot be challenged by the beneficiary even if it is unconstitutional [vide Bhikaji Vihswanath Mujumdar v. State of Mysore (1966) 2 Mys LJ 524 and Massachusetts v. Mellon 262 US 447]. On this short ground the challenge of the petitioner to section 13(2A) of the Act is liable to be rejected.

37. Section 13(2A) confers power on Government, which is the highest executive authority in the State. Whenever power is conferred on a high authority like Government, it is expected that that authority would exercise the power reasonably and for purpose of the Act only. We are of the view that on the ratio of the ruling of the Supreme Court in Chinta Lingam's case : [1971]2SCR871 and other cases on the same point, we cannot hold that the provision suffers from the vice of excessive delegation.

38. Section 13(2A) of the Act confers power subject to such terms and conditions as may be stipulated in the Rules. The terms and conditions or the details subject to which the power has to be exercised has to be prescribed by the Rules. The Rules made stipulating the terms and conditions are required to be laid on the floor of the Legislature of the State which is competent to modify them also. When Rules made by Government are not modified legally they are deemed to have been approved by the legislature. This is a safeguard on the delegation made by the legislature. With all these safeguards it is difficult to hold that the provision suffers from the vice of excessive delegation and violates article 14 of the Constitution.

39. In Bhuvaneswariah's case (1964) 2 Mys LJ 470; AIR 1965 Mys 170 this Court dealing with the validity of the Mysore Buildings Tax Act of 1962 has held that section 3(2) of that Act which reads thus :

'(2) The State Government may, if in its opinion it is necessary in public interest so to do, by notification in the official gazette, exempt from payment of buildings tax any class of buildings'

suffered from the vice of excessive delegation and was violative of article 14 of the Constitution (vide para 26). We have earlier reached the conclusion that the provision does not suffer from the vice and excessive delegation in the light of the principles enunciated by the Supreme Court. When that is so, we consider it unnecessary to examine the correctness of this decision and express our opinion on the same. In any event these principles do not really bear on the validity of section 13(2A) of the Act that is not in pari materia with section 3(2) of the Mysore Buildings Tax Act, 1962.

40. On the above discussion, we hold that section 13(2A) of the Act does not suffer from the vice of excessive delegation and is not violative of Article 14 of the Constitution.

Re : Point No. IV

41. Sri Srinivasan has urged that if this Court were to strike down section 13(2A) of the Act on the ground it suffers from the vice of excessive delegation, then this Court has no choice except to strike down section 13(2) of the Act, which is inextricably woven into the same and was, therefore, not severable.

42. We have earlier found that section 13(2A) of the Act does not suffer from the vice of excessive delegation and was not violative of article 14 of the Constitution. From this it necessarily follows that point No. IV does not survive for consideration and calls for rejection as such. But, we will also assume that Sri Srinivasan is right and examine this point also.

43. The principles of severability have been explained by the Supreme Court in a large number of cases and it is not necessary to notice all of them or extract the principles stated in all of them. He Harakchand Ratanchand Banthia v. Union of India : [1970]1SCR479 the Supreme Court quoting with approval the principles set out by Cooley, in this classic treatise on Constitutional Limitations, speaking through Ramaswami, J., stated the principles of severability in these words :

'24. The only other point that remains to be decided is whether as a result of some of the sections of the impugned Act being struck down, what is left of the impugned Act should survive or whether the whole of the impugned Act should be declared invalid. We are of opinion that the provisions which are declared invalid cannot affect the validity of the Act as a whole. In a case of this description the real test is whether what remains of the statute is so inextricably bound up with the invalid part that what remains cannot independently survive or as it is sometimes put whether on a fair review of the whole matter it can be assumed that the legislature would have enacted at all that which survives without enacting the part that is ultra vires. The matter is clearly put in Cooley on Constitutional Limitations, 8th Edn., at page 360 :

'It would be inconsistent with all just principles of constitutional law to adjudge these enactments void because they are associated in the same Act, but not connection with or dependent on others which are unconstitutional. Where, therefore, a part of a statute is unconstitutional, that fact does not authorise the courts to declare the remainder void also, unless all the provisions are connected in subject-matter, depending on each other, operating together for the same purpose, or otherwise so connected together in meaning, that it cannot be presumed the legislature would have passed the one without the other. The constitutional and unconstitutional provisions may even been contained in the same section, and yet be perfectly distinct and separable, so that the first may stand though the last fall. The point is not whether they are contained in the same section; for the distribution into sections is purely artificial; but whether they are essentially and inseparably connected in substance. If, when the unconstitutional portion is stricken out, that which remains is complete in itself, and capable of being executed in accordance with the apparent legislative intent, wholly independent of that which was rejected, it must be sustained.''

Bearing these principles it is necessary to examine point No. IV.

44. We have reproduced section 13(2A) of the Act earlier in its entirety. A close examination of section 13(2A) of the Act shows that it is an independent and separate provision conferring power on Government and is not woven into or bound with section 13(2) of the Act. Section 13(2A) of the Act is not inextricably woven into section 13(2) of the Act. Even assuming that we strike down section 13(2A) of the Act, then also section 13(2) of the Act without any doubt can remain on the statute book and enforced. We are, therefore, of the view that there is no merit in this contention of Sri Srinivasan and we reject the same.

45. Before parting with this case, we deem it necessary to point out on the desirability to amend section 13 of the Act.

46. We have earlier found that the term 'penalty' had to be construed as 'interest'. In the neighboring State of Tamil Nadu, that State has suitably amended a similar provision in the Tamil Nadu General Sales Tax Act. We are of the view that a simple amendment to section 13 of the Act by substituting the term 'interest' to 'penalty' would end all this needless litigation before courts. We are of the view that sooner it is done, it would be better for the State.

47. In the light of our above discussion, we hold that this writ petition is liable to be dismissed. We, therefore, dismiss this writ petition and discharge the rule with costs of the respondents. Advocate's fee Rs. 250.

48. Let this order be communicated to the respondents within 10 days from this day. Let a copy of this order be also furnished to the learned Government Advocate within the same time.


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