SITA RAM BISHAMBHER DAYAL & ORS. versus STATE OF U.P. & ORS.

SITA RAM BISHAMBHER DAYAL & ORS.

STATE OF U.P. & ORS. October 21, 1971

[K. S. HEGDE AND H. R. KHANNA, JJ.]

U.P. Sales Tax Act, 1948, s. 3D(l)-Its validity-Whether delegation of authority under the section excessive and bad in law-ls the section violative of Art. 14 of the Canstitution.

The appellants are dealers in Rab. The St,ate Government under s. 30(1) of the U.P. Sales Tax Act, 1948, levied purchase tax in respect of their dealings in Rab. Section 30(1) of the Act, inter a/ia, provides that for each assessment year, there shall be levied and. paid tax on the turn-c over of first purchases made by dealer or through dealer in respect of such goods, at such rates not exceeding 2, paise per rupee in the case of foodgrains .and 5 paise in respect of other goods and in the explanation it is provided that "in the case of purchase made by registered dealer through licensed dealer, the registered dealer shall be the first purchaser and in every other case of fresh purchase, the dealer through whom the first purchase is made shall oe deemed to be the first purchaser. The appellants challenged the vires of s. 3(d) (1) of the Act before the High Court but the High Court held against the appellants.

In appeal this Court, it was contended by the appellants that in em-powering the Government to levy tax on goods other than foodgrains at rate not exceeding 5 paisa in rupee, the legislature had given an unduly wide power to the executive. Such delegated power was, therefore,. excessive anc! bad in law and secondly, s. 30( 1) in'fringed Art. 14 of the Constitution because it discriminated between registered dealers who pur· chased through licensed dealers and the registered dealers who purchased through other dealers.

Dismissing the appeals,

HELD : ( i) The power to fix the rate of tax is legislative power, but if the legislature Jays down the legislative policy and provides the necessary guidelines that power can be delegated to the executive, Though tax is levied primarily for the purpose of gathering revenue, in selecting the objects to be taxed and in determining the rate of tax, various social and economic factors are to_ be considered and since the Jegislatures have very little time to go. into details, they have to delegate certain powers to the Executive. This Court has ruled that if reasonable upper limit ts prescribed, the leg1slature can always delegate the power of fixing the rate of purchase tax or sales tax. [143 EJ

Devi Dass Gopal Krishnan v. State of Punjab, 20 S.T.C. 430, followed.

. In the present case, taking into ~onsiderat~on the legislative practice in this coun_try and the rate of tax levied 0F- lev1able under the various sales tax laws tn force. in this c_ountry, it cannot be said that the power delegated to th~ executtve is e~cess1ve and in the absence of any material, it cannot be said that the maximum rate fixed under s. 30( 1) is unreasonably high [144 E-FJ .

(ii) Section 3IJ: is not_ violative of Art. 14 of the Constitution. In the ~resent case, t~ere IS nothmg wrong for the legislature to make classifica-lton between bce~sed. dealers and dealers who are not licensed. licemed dealer has to mamtam true and correct accounts and other particulars o'i

purchasers whereas dealers who are not registered are not required to maintain any accounts. Hence, if registered dealers are permitted to make purchases through dealers who are not licensed and those dealers are themselves not liai>le to be taxed, then opportunity for evasion of tax be-comes larger. Under the circumstances, the classification is not unjustified. [145 G]

Ltd., [1959]

State of Madras v. Gan/llOn Dunker/ay & Co. (Madras) Ltd., [1959] S.C.R. 379 and Devi Deo Gopa/ Krishna v. State of Punjab, 20 S.T.C. 430, referred to.

CIVIL APPELLATE JURISDICTION ; Civil Appeals Nos. 362 and

1672 of 1969.

Appeals from the judgments and orders dated May 17, 1968 of the Allahabad High Court in Writ Petitions Nos. 310 and 627 of 1968.

J. P. Goyal and Sob hag Mal Jain, for tbe appellants (in both the appeals) .

L. M. Singhvi and 0. P. Rana, for the respondents (in both the appeals) .

The Judgment of the Court was delivered by

. · Hegde, J. These are appeals by certificate. They raise common question of law for decision. The only contention aris-ing for decision in these appeals is as to the vires of s. 3-D (I) of the U.P. Sales Tax Act, 1948 (to be hereinafter referred to as the Act). The validity of that section has been assailed on two diffen~nt grounds viz. (I) that the power delegated to the execu -tive under s. 3-D(l) is excessive and as such bad in law and (2) Section 3-D infringes Art. 14 of the Constitution in as much as it discriminates between the registered dealers who purchase through the agency of licensed dealers and the registered dealers who purchase through other dealers.

The appellants are dealers in Rab. In respect of their deal-ings in Rab, they have been .. levied purchase tax as per the noti-fication issued by the Government under s. 3(D)(l) of the Act. They are challenging the validity of the levy on the grounds mentioned above.

The High Court has repelled both the above contentions. The High Court has come to the conclusion that the power con-ferred on the State Government under s. 3-D is valid power. It opined that the conferment of power on the executive to fix tl;Je rate of tax within the limits laid down in the section is not impermissible. Further it held that the section is not hit by Art. 14 of the Constitution.

Before proceeding to consider the correctness of the conten-tions advanced on behalf of the appellant, it is necessary to read s. 3-D(l). It says: -

"Except as provided in sub-section ( 2), there shall be levied and paid, for each assessment year or part there-B of, tax on the turnover, to be determined in such man-ner as may be prescribed, of first purchases made by dealer or through dealer, acting as purchasing agent in respect of such goods or class of gocds; and at such rates, not exceeding two paisa per rupee in the case of foodgrains, including cereals and pulses, and five paisa per rupee in the case of other goods and with effect from such date, as may, from time to time, be notified by the State Government in this behalf.

Explanation.-In the case of purchase made by registered dealer through the agency of licensed dealer, the registered dealer shall be deemed to be the first purchaser, and in every other case of first pur-chase, made through the agency of dealer, the dealer who is the agent shall be deemed to be the first pur-chaser."

It is ·true that the power to fix the rate of tax is legislative power but if the legislature Jays down the legislative policy and proTides the necessary guidelines, that power can be delegated to the executive. Though tax is levied primarily for the purpose of gathering revenue, in selecting the objects to be taxed and in determining the rate of tax, various economic and social aspects, such as the availability of the goods, administrative convenience, the extent of evasion, the impact of tax levied on the various sections of the society etc. have to be considered. In modern society taxation is an instrument of planning. It can be used to achieve the economic and social goals of the State. For that reason the power to tax must be flexible power. It must be capable of being modulated to meet the exigencies of the situation. In Cabinet form of Government, the executive is expected to reflect the views of the legislatures. In fact in most matters it gives the lead to the legislature. However, much one might deplore the "New Despotism" of the executive, the very comple-xity of the modern society and the demand it makes on its Gov-ernment have set in motion forces which have made it absolutely necessary for the legislatures to entrust more and more powers to the executive. Text book doctrines evolved in the 19th Cen-tury have become out of date. Present position as regards dele-gation of legislative power may not be ideal, but in the absence of any better alternative, there is no escape from it. The legisla-

[1972] 2 S.C.R.

tures have neither the time, nor the required detailed information nor even the mobility to deal in detail with the innumerable pro-blems arising time and again. In certain matters they can only lay down the policy and guidelines in as clear manner as possible. " Iii State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. (1) this Court observed :

"Now, the authorities are clear that it is not uncon-stitutional for the legislature to leave it to the .executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be levied, the rate at which it is to be charged in respect of different classes of goods and the like".

It was not contended before us that the power delegated to 1=be executive to select the goods on which the purchase tax is to pe levied was an excessive delegation nor was it contended· that the ·power granted to the executive to determine the rate of tax by itself amounts to an excessive delegation. All that was said was that in empowering the Government to levy tax on goods other than foodgrains at rate not exceeding 5 paise in rupee, the legislature parted with one of its essential legislative functions as the power given to the executive is an unduly wide one. We are unable to accede to this conteation. Whether power. dele-E gated by the legislature to the executive has exceeded the per-missible limits in given case depends on its facts and circums-tances. That question does not admit of any general rule. It depends upon the nature of the ·power delegated and the purposes intended to be achieved. Taking into consideration the legisla-tive practice in. this country and the rate of tax levied or leviable under the various sales tax laws in force in this country, it cannot be said that the power delegated to the executive is excessive. 'In Devi Dass Gopal Krishnan and or1>. v. The State of Punjab and ors([2 ]) this Court ruled that it is open to the legislature to delegate the power of fixing the rate of purchase tax or sales tax if the legislature prescribes reasonable upper limit.

We are unable to accept the contention of Mr. Goyal, learned Counsel for the appellant that the maximum rate fixed under s. 3-D is unreasonably high. At any rate there is no material be-fore us on the basis of which, we can come to that conclusion.

This takes us to the contention that s. 3-D is ultra vires Art. 14 of the Constitution. The argument on this question proeee4s thus : The explanal!ion to s. 3-D provides that in the case of (1) [19S9] S.C.R. 379. (2) 20 S.T.C. 430.

(2) 20 S.T.C. 430.

purchase made by registered dealer through the agency of licensed dealer, the registered dealer would be deemed to be the first purchaser whereas in every other case of first purchase made through the agency of dealer, the dealer who is the agent would be deem.ed to be the first purchaser. This difference ac-cording to Mr. Goyal is discriminatory in character. He urged that there was no justification for making an agent liable to pay sa~es tax merely because he is an unlicensed agent. According to him there is no rational distinction between the purchases made through licensed dealers and those made through unlicensed dealers.

The power to levy tax includes within itself the power to provide against evasion of tax. licensed dealer has to function according to the conditions of his licence. He is bound to main-tain true and correct accounts of his day to day transactions of sales and purchase of goods notified in sub-s. ( l) of s. 3-D in an intelligible form and in sucb manner, if any, as may be prescribed and further he must furnish to the assessing authority the details oi the aforesaid transactions together with the name and parti-culars of the purchaser and the number and date of the registra-tion certificate filed by the purchaser under s. 8A and such other information regarding the transactions as may, subject to rule, if any, in this behalf be required.

Hen~e whenever purchase is made through licensed agent, the authorities have the opportunity to know what purchases have been made and from whom those purchases were made but that would not be the case when purchases are made through dealers ·who are not licensed. They are not required by law to maintain any accounts or submit any returns. Hence if registered dealers are pem1itted to make purchases through dealers who are not licensed and those dealers themselves are not liable to be taxed then opportunity for evasion becomes larger. The rule of discrimina-tion does not ruTe out elassification. The power of classification under fiscal law is larger than in the case of other laws. Hence there was nothing wrong in the legislature making classifica-tion between licensed dealers and dealers who are not licensed. Even when dealer who is not licensed is liable to pay purchase tax, the ultimate burden falls on his principal. For these reasons. we do not see any basis for the contention that s. 3-D is violative of Art. 14.

For the reasons mentioned above these appeals fail and they are dismissed with costs--one set.