K. Balakrishnan Nair J.
1. The constitutional validity of Sub-section (16A) of Section 47 of the Kerala Value Added Tax Act, 2003 and the sustainability of two circulars issued by the Commissioner of Commercial Taxes under the said provision are the points, that arise for decision in these writ petitions. Since same points arise for decision in all these writ petitions, they are heard and disposed of by this common judgment. W.P. (C) No. 2844 of 2007 is treated as the main case.
W.P. (C) No. 2844 of 2007:
2. The petitioner, which is a firm, is a dealer in glass sheets. It is an asses-see on the files of the third respondent, Sales Tax Officer, Manjeri, under the Kerala Value Added Tax Act, 2003 (hereinafter referred to as "the KVAT Act") and the Central Sales Tax Act, 1956. The fourth respondent, Commissioner of Commercial Taxes issued Circular No. 50 of 2006, in exercise of his powers under Clause (c) of Sub-section (2) of Section 3 read with Sub-section (16A) of Section 47 of the KVAT Act, 2003, directing to collect sales tax in advance at the border check-posts, at the time of import of certain evasion-prone commodities named therein into the State. The said circular dated December 18, 2006 is marked as exhibit PI in the writ petition. The relevant portion of the said circular reads as follows:
In exercise of the powers conferred by Clause (c) of Sub-section (2) of Section 3, read with Sub-section (16A) of Section 47 of the Kerala Value Added Tax Act, 2003, the undersigned, having considered it necessary to prevent evasion of tax in respect of the following evasion-prone commodities, order that tax in respect of the estimated sales turnover shall be collected at the check-posts at the time of import into the State at the rates specified against each commodity below:
SI. No. Commodities Rate of tax
1. Marble slabs and tiles 20.00%
2. Granite slabs and tiles 20.00%
3. Ceramic floor and wall tiles
including vitrified tiles 20.00%
4. Lift, elevators and escalators 12.50%
5. Glass sheets 12.50%
6. Cuddapah stones, kotta stones,
any other similar stones
and slabs 12.50%
7. Readymix concrete 12.50%
8. Generator whether assembled or not 12.50%
9. Timber 12.50%
10. Live chicken and chicken meat 12.50%
11. Petroleum products other than LPG 12.50%
12. Bitumen 4.00%
While estimating the sale value, guidelines already circulated for valuation of items such as chicken, timber, etc., shall be followed.
The dealers who pay advance tax as detailed above can adjust the said amount against the output tax due for the month while filing return for the respective return period.
These orders shall take immediate effect.
On the representation of the dealers, further clarifications were issued regarding the collection of sales tax in advance as per Circular No. 53 of 2006 dated December 22, 2006. The relevant portion of the said circular, which is produced as exhibit P2 in the writ petition is extracted below:
As per Circular No. 50 of 2006 instructions were issued for collection of advance tax in respect of twelve evasion-prone commodities at the entry points into the State such as check-posts, ports, airports and railway stations.
Now it is brought to the notice of the Commissionerate that dealers are experiencing inconvenience for remitting tax at the entry point in respect of the consignment, especially where the entry point is far from the ordinary place of business. Suggestions have been put forth from the trade to permit them to remit the tax before the concerned assessing authority.
This issue has been examined and the following further instructions are issued. Dealers may remit the tax on the consignments in advance before the respective assessing authority if they can provide details of the consignment such as copy of the bill/invoice, vehicle number, and name of the entry point (check-post/port/airport/railway station)
While estimating the sale price for the purpose of collecting the advance tax the assessing authority shall consider the value as disclosed in the invoice/bill, transporting charges and an estimated gross profit at five per cent. In the case of stock transfer no gross profit shall be considered for the purpose of computing the sale price.
On acceptance of advance tax, the assessing authority shall issue a certificate which specifies:
details of bills/invoice,
name of goods,
their quantity and value as per accompanying documents,
the value adopted by him for purposes of advance tax,
details of the advance tax remitted,
and name of the entry point into the State.
These certificates may be delivered in original or faxed to the entry point at the option of the dealer.
The check-post authorities shall accept such certificates and permit the consignments to be transported after satisfying the genuineness of the certificate with reference to the consignment.
Assessing authorities shall maintain a register in respect of the details of certificates issued and check-post authorities will maintain a separate register containing the details of consignments allowed on the basis of such certificates.
All officers are reminded that advance tax remittances shall be credited under the same head of account as VAT. To monitor these payments a separate register shall be maintained.
4. On the strength of the above circulars, two consignments of the petitioner were detained at the check-posts and it was called upon to pay tax in advance, by issuing exhibits P3 and P4 notices dated January 19, 2007 and January 22, 2007, respectively. Feeling aggrieved by exhibits P3 and P4, this writ petition is filed, seeking the following reliefs:
(i) To call for the records leading to exhibit P3 and exhibit P4 notices and quash the same by issuing a writ of certiorari or any other appropriate writ, direction or order.
(ii) To direct the first, second and third respondents to release the goods and vehicle covered by exhibit P3 and exhibit P4 notices and future goods and vehicles of the petitioner without detention as per exhibit P1 and exhibit P2 circulars by issuing a writ of mandamus or any other appropriate writ, order or direction.
(iii) To declare that Sub-section (16A) of Section 47 of the KVAT Act and exhibit PI and exhibit P2 circulars are unconstitutional and invalid.
5. Pursuant to the interim order of this court, the goods were released, on executing simple bond without sureties.
6. The petitioner seeks the above reliefs on the following grounds : exhibits PI and P2 circulars are illegal and unconstitutional. They are not supported by any statutory provision and therefore, will be hit by Article 265 of the Constitution of India. Sub-section (16A) of Section 47 of the KVAT Act is ultra vires of the constitutional provisions concerning sales tax. Imposition, levy and collection of tax in advance before the sale is effected, is unconstitutional. The taxable event is the sale and collection of tax before the sale takes place is, therefore, unconstitutional. The provisions contained in Chapter V of the KVAT Act concerning assessment, collection or payment of tax do not authorise collection of tax in advance, by issuing a circular by the first respondent. Section 3(2)(c) authorises to issue only administrative instructions. The Commissioner of Commercial Taxes cannot exercise the statutory power of taxation, based on the said provision. This position is covered by the decision of the division Bench of this Court in
7. The respondents have filed a counter-affidavit in W.P. (C) No. 411 of 2007, which is one of the writ petitions, which are disposed of by this common judgment. The learned Special Government Pleader appearing for the respondents submitted that the said counter-affidavit is adopted in this and other connected writ petitions. The contentions in the said counter-affidavit are the following : Sub-section (16A) of Section 47 of the KVAT Act is a valid piece of legislation enacted by the State Legislature in exercise of its power under Articles 242, 245 and 246 of the Constitution of India read with entry 54 of List II of the Seventh Schedule. Entry 54 is : "Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I". Entry 54 is the field of legislation. The Legislature can make laws not only on the legislative entry, but on incidental matters. Such power flows from the words of Article 246. The contention that the attempt is to collect tax even before the incidence of tax, is not correct. The purport of the provision and the circulars is only to plug the evasion of tax. A genuine and honest dealer cannot have any grievance about the statutory provision and the circulars. No unreasonable impediment is created as per this provision. The collection of tax in advance is not arbitrary or unreasonable. The impugned provision or circulars do not infringe the right of the petitioners under Article 14 or Article 19(1)(g) of the Constitution of India. The section does not violate any of the constitutional provisions. The petitioners have failed to dislodge the presumption of constitutionality in favour of the statute. In taxing matters, the courts must normally respect the legislative judgment. The allegation that the issuance of the circulars is to get over the decision of the division Bench of this Court dated December 18, 2006 in O. P. No. 434 of 1996 and connected cases Thressiamma 1 Chirayil v. State of Kerala [2007] 7 VST 293, is absolutely baseless. Some dealers transport certain commodities, using the registration numbers of the Kerala dealers. Complaints regarding clandestine transport by bogus parties have been received from honest dealers in the State. In order to prevent clandestine transport of goods into the State, circular No. 50 of 2006 was issued. The direction to pay tax in advance cannot be termed as one amounting to collection of tax from a dealer before the incidence of tax under the KVAT Act. The investigation conducted by the department revealed that certain goods are evasion-prone and therefore, they are included in exhibit PI circular. To enable the Commissioner to take effective steps, Section 47 was amended, introducing Sub-section (16A). The circulars were issued in public interest, to safeguard the interest of the State and also the interest of honest dealers. Exhibit P2 circular was issued to minimise the inconvenience caused to the dealers in bringing goods from outside. Payment of advance tax is not a new levy. No additional liability is cast on the dealer. The incidence of tax continues to be the sale of goods. The dealers are permitted to adjust the advance tax paid in accordance with the circulars, against the tax due during the same month. The tax paid can be adjusted towards the output tax due for the month. There is no insistence that the set off shall only be against the very same items on which advance tax was paid. The dealers can pay the tax before the assessing authorities also. No honest dealer, as stated earlier, can have any grievance against the circulars. There is no lack of jurisdiction for the Commissioner to issue the circulars. What is attempted to be collected in advance on the strength of Sub-section (16A) is only the tax payable under the KVAT Act. Nothing more is levied or collected by way of advance tax. The sub-section and the circulars only envisage prevention of evasion of tax. Therefore, they cannot be described in any way as unconstitutional. So, the respondents pray for dismissal of the writ petition.
8. Heard Dr. K.B. Muhamed Kutty, learned Senior Counsel for the writ petitioner. I also heard M/s. V.P. Sukumar and A. Kumar, apart from other learned Counsel, appearing for the petitioners in the connected writ petitions. Sri V.V. Asokan, Special Government Pleader (Taxes), was heard on behalf of the respondents. Learned Senior Counsel Dr. K.B. Muhamed Kutty submitted that Sub-section (16A) of Section 47 of the KVAT Act authorises the Commissioner to direct payment of tax in respect of the sale of evasion-prone goods before the date prescribed for payment. He has no authority to direct payment of tax before the sale takes place. Rule 22 of the KVAT Rules prescribes that the payment of tax relating to the sale of a particular month shall be made before the 10th of the next month. As per Section 47(16A) the Commissioner can at the most direct that the tax shall be paid at any point of time after the sale and before the 10th of the next month. Under the KGST Rules, advance tax is confined to the month of March alone, which is to be paid before March 31. There is no provision in the KVAT Act to collect tax before the sale is effected. The taxable event is sale and nobody can demand sales tax before the sale takes place. Exhibit PI circular deals with tax on estimated turnover before the sale takes place. Tax is demanded before the goods reach the destination. The circulars are ultra vires of Sub-section (16A) itself. The charging section is Section 6 and the charge is on the turnover, which is attained only by sale. The circular is issued in violation of the parent provision. Collection of tax must be authorised by law and not by administrative instruction or executive fiat. The power u/s 3(2)(c) of the KVAT Act is administrative in character.
9. The learned Senior Counsel further submitted that Sub-section (16A) suffers various constitutional infirmities. Instead of conferring delegated power on the Government, it is delegated to a person. Evasion-prone commodity is a vague concept and therefore, the provision confers unbridled power on the Commissioner. Even an honest dealer, who is dealing in goods, which are labelled as evasion-prone goods, has to pay advance tax. Sub-section (16A) suffers from the vice of excessive delegation. The impugned provision is violative of Article 14 of the Constitution of India. Further, the circulars violate the freedom of trade under Articles 19(1)(g) and 301 of the Constitution of India. The Government have no jurisdiction to stop inter-State movement of goods. The goods purchased for own use are also held liable. If there is any doubt in interpreting a taxing statute, the doubt must go in favour of the assessee, submitted the learned Senior Counsel.
10. Learned Counsel Sri. V.P. Sukumar also adopted the contentions of learned Senior Counsel Dr. K.B. Muhamed Kutty. The learned Counsel further submitted that what is demanded under the impugned circulars is entry tax, though the nomenclature of advance tax is employed. What has been prohibited by the division Bench of this court, is sought to be implemented in another garb, it is submitted. In the absence of any concluded sale, there cannot be any levy and collection of sales tax. Persons who do export sale only, are also bound to pay advance tax. Evasion-prone goods are "notified goods" in the KVAT Act. But, circular No. 50 of 2006 takes in other items also, which are not included among the "notified goods". By virtue of Article 265 of the Constitution, tax can be levied only under the authority of law. But, the Commissioner under the impugned circulars is trying to collect tax without the authority of law. But by virtue of Section 47(16A), the Commissioner can pre-pone the date of payment of tax, to a day between the date of sale and the appointed day. He cannot go to a date before the date of sale. So, the impugned circulars are ultra vires of Section 47(16A) of the KVAT Act. Learned Counsel Sri A. Kumar and other learned Counsel supported the abovesaid contentions. The learned Special Government Pleader reiterated the contentions of the fourth respondent pleaded in his counter-affidavit and submitted that the impugned provision and the circulars are valid. He heavily relied on the presumption of constitutionality available in favour of a legislation.
11. The learned Counsel for the petitioners relied on the following decisions :In re Article 143, Constitution of India AIR 1951 SC 332,
12. Section 47(16A) reads as follows:
47. Procedure for inspection of goods in transit.-(1)....
(16A) Notwithstanding anything contained in this Act or the Rules made thereunder, the Commissioner may where he deems it necessary to prevent any evasion of tax, direct that the tax in respect of the sale of any evasion prone commodities, as may be specified by him, shall be paid before the date prescribed for its payment under this Act. (Emphasis supplied)
13. The learned Counsel for the petitioners, at the time of final hearing, did not attack the above quoted sub-section as unconstitutional, on the ground that it authorises collection of tax even before the occurrence of the taxable event. According to them, the said provision only authorises the Commissioner to issue circulars to demand tax after the taxable event, that is, the sale of goods, but before the appointed day for payment of tax by the dealer. But, I think, the said interpretation, if accepted, will make the provision meaningless. The provision is introduced to prevent evasion of tax. If the above interpretation of the petitioners that tax can be demanded only after the sale takes place, is accepted, the very purpose of the section will be defeated. If evasion of tax is to be prevented, the same can be done only by demanding tax in advance before the occurrence of the taxable event. It is true, while interpreting a taxing statute, if there is any doubt, the same should go in favour of the assessee. But, in this case, if the interpretation advanced by the petitioners is accepted, the same will render the provision ineffective to prevent evasion of tax. So, the "golden rule" of interpretation has to be followed. The "golden rule" is dealt with in Principles of Statutory Interpretation (G.P. Singh-Eighth edition), in the following words:
VISCOUNT SIMON, L.C, said : ''The golden rule is that the words of a statute must prima facie be given their ordinary meaning''. Natural and ordinary meaning of words should not be departed from ''unless it can be shown that the legal context in which the words are used requires a different meaning''. Such a meaning cannot be departed from by the judges ''in the light of their own views as to polic although they can ''adopt a purposive interpretation if they can find in the statute read as a whole or in material to which they are permitted by law to refer as aids to interpretation an expression of Parliament''s purpose or policy. For a modern statement of the rule one may refer to the speech of LORD SIMON ot GLAISDALE in a recent case where he said : ''Parliament is prima facie to be credited with meaning what is said in an Act of Parliament. The drafting of statutes, so important to a people who hope to live under the rule of law, will never be satisfactory unless courts seek whenever possible to apply ''the golden rule'' of construction, that is to read the statutory language, grammatically and terminologically, in the ordinary and primary sense which it bears in its context, without omission or addition. Of course, Parliament is to be credited with good sense; so that when such an approach produces injustice, absurdity, contradiction or stultification of statutory objective the language may be modified sufficiently to avoid such disadvantage, though no further''.
14. Maxwell on The Interpretation of Statutes deals with the golden rule in the following words:
The so-called ''golden rule'' is really a modification of the literal rule. It was stated in this way by Parke B. : ''It is a very useful rule, in the construction of a statute, to adhere to the ordinary meaning of the words used, and to the grammatical construction, unless that is at variance with the intention of the Legislature, to be collected from the statute itself, or leads to any manifest absurdity or repugnance, in which case the language may be varied or modified, so as to avoid such inconvenience, but no further.''. ''If,'' said Brett L.J., ''the inconvenience is not only great, but what I may call an absurd inconvenience, by reading an enactment in its ordinary sense, whereas if you read it in a manner, in which it is capable, though not its ordinary sense, there would not be any inconvenience at all, there would be reason why you should not read it according to its ordinary grammatical meaning''.
15. In the light of the above principles, Sub-section (16A) has to be read as authorising the Commissioner to direct payment of tax before the taxable event takes place. Otherwise, the purpose of the sub-section, namely, prevention of evasion of tax will be defeated. Therefore, the circulars have to be held intra vires of Sub-section (16A).
16. The petitioners submit, if such an interpretation is accepted, it will make Sub-section (16A) unconstitutional. They point out that the taxable event is the sale. The Constitution authorises the Legislature to impose tax on sale. So, the demand of tax even before the sale takes place is unauthorised by the constitutional provisions, it is submitted by the petitioners. Though, in support of this submission, several decisions were relied on by the petitioners, they mainly relied on the decision of the apex court in
12. Significantly, the court observed about the substance of the levy as under : Budh Prakash Case [1955] 1 SCR 248
''The substance of the matter is that the sales tax is a levy on the price of the goods, and the reason of the thing requires that such a levy should not be made, unless the stage has been reached when the seller can recover the price under the contract.''
13. The aforesaid decision makes it clear that subject ''tax on sales of goods'' in entry 48 of List II of the Seventh Schedule of the 1935 Act providing for legislative field of sale of goods ought to be confined to levy of tax on sales of goods as defined in the Sales Act and in substance, it is a levy on price of goods and the State Legislature does not have power to enlarge the definition of ''sales'' by creating a legal fiction and levy tax on a sale which has not come into existence.
...
15. After referring to the definition of the expression ''sale of goods'' from the times of Roman Law and the law in England, this Court (at SCR pp. 396-97) culled out and approved the following principle stated in Benjamin''s book ''Sale of Goods'':
''Hence it follows that, to constitute a valid sale, there must be a concurrence of the following elements, viz., (1) parties competent to contract; (2) mutual assent; (3) a thing the absolute or general property in which is transferred from the seller to the buyer; and (4) a price in money paid or promised.
...
32. It was a case in which weight of the commodity was made the basis for levy of the tax. But, price of goods was approved to be usual meaning of levy of tax on sale of goods. It does not deviate from basic principle that a tax of any nature is determined ex hypothesi on occurrence of taxing event. Its actual computation and collection takes place later on through the machinery provided. However, the determination of charge ex hypothesi instantly on occurrence of taxing event which inheres into it that measure of tax is integrally connected with occurrence of the taxing event and is not postponed to a later date.
40. However, this case did not lay down the principle that where price is the measure to which rate of tax can be applied, it can be something else other than the price component of taxing event, whether agreed by mutual consent or as regulated by statutes.
53. By devising a methodology in the matter of levy of tax on sale of goods, law prohibits taxing of a transaction which is not a completed sale and also confines sale of goods to mean sale as defined under the Act. This cannot be overridden by devising a measure of tax which relates to an event which has not come into existence when tax is ex hypothesi determined, much less which can be said a completed sale and which cannot be subject of legislation providing tax on ''sale of goods'' by transplanting a sum related to ''likely price'' to be charged for subsequent sale to be taxed by the devise of measuring tax for the completed transaction which has become subject of tax.
...
55. If the legislation can provide for a measure of tax on subject of tax by substituting any notional value, which at no point of time becomes part of or related to subject of tax, viz., sale of goods, then the fact that it is related to MRP loses its significance altogether. If this is permitted to be done, the legislation can provide for any measure for the purpose of applying the rate of tax, whether it is founded on MRP or any other fixed value which Legislature may provide will make little difference. It is not contended by the appellant that even if the measure is not relatable to MRP, it can substitute any value as a measure of tax. Subject of tax is not the goods or goods sold, but a transaction of ''sale of goods'' as defined under the Sales Act.
17. The learned Special Government Pleader on the other hand, relied on the decision of the apex court in
11. Liability to pay tax on sales by casual trader. - (1)....
(7) If the Commissioner or any person appointed under Sub-section (1) of Section 3 to assist him is satisfied that a casual trader may become liable to pay tax under Sub-section (1) in respect of any goods, he may, in order to secure payment of tax that may become due upon determination of tax under Sub-section (3) and for reasons to be recorded in writing, demand from such casual trader an amount in advance equivalent to the amount of tax that may become due from him after determination, or security for an equivalent amount, after taking into consideration the saleable value of such goods.
(8) The amount in advance equivalent to the amount of tax that may become due from a casual trader after determination after taking into consideration the saleable value of the goods as aforesaid shall, on demand under Sub-section (4), be paid by him in advance and shall be adjusted with the amount of tax due from him; and the security, if any, for the equivalent amount shall, on demand, be furnished by him, and shall be refunded to him, in such manner and on such terms and conditions as may be prescribed.
18. The tax payable in advance has to be computed based on the "saleable value" of the goods. So, the tax in advance is authorised to be collected before the actual sale takes place. The apex court upheld the above provisions, on the ground that they were enacted to prevent evasion of tax, which will come under the legislative field covered by entry 54, List II of the Seventh Schedule to the Constitution. The relevant portion of the judgment reads as follows:
16. A careful reading of Sub-section (7) makes it clear that the Commissioner or any person appointed under Sub-section (1) of Section 3 to assist him, on being satisfied that a casual trader may become liable to pay tax under Sub-section (1) thereof in respect of any goods, may with a view to secure payment of tax that may become due upon determination under Sub-section (3) and for reasons to be recorded in writing, demand from such casual trader an amount in advance equivalent to the amount of tax that may become due from him after determination, or security for an equivalent amount after taking into consideration the saleable value of such goods. It does not postulate payment of advance tax. What it aims is an amount in advance equivalent to the amount of tax that may become due from a casual trader or security for an equivalent amount depending upon the saleable value of the goods in question. There is thus a clear nexus between the amount in advance or security and the levy of impost on the casual trader. The provision is meant to ensure collection of tax. Sub-section (8) provides for payment of the amount in advance or the security, if any, referred to in Sub-section (7) by a casual trader on demand under Sub-section (4) at the time of bringing any goods, except those specified in Schedules I and IV or those notified u/s 10(2) of the Act, for being adjusted with the amount of tax due from him and for refund after due adjustment in the prescribed manner.
17. It is, thus, clear that Sub-sections (3), (4), (5), (6), (7) and (8) are part of the same scheme aimed at prevention of evasion of tax payable under the Act. Sub-sections (10) and (12) are consequential provisions. Sub-section (10) empowers the Commissioner or the authorised officer to seize the goods with containers or other packing materials, if any, when he has reason to believe contravention of the restrictions and conditions provided in Sub-sections (4) and (5) or non-compliance of Sub-sections (6) and (8). In the case of seizure of goods under Sub-section (10), imposition of penalty is authorised under Sub-section (11). Sale of the seized goods in open auction on failure to pay the penalty is dealt with in Sub-section (12). It is a common ground that these sub-sections stand or fall along with Sub-sections (5), (7) and (8). We have indicated above that the impugned Sub-sections of Section 11 are enacted to prevent evasion of tax payable under the Act. The main challenge against those provisions is on the ground of legislative competence.
18. On the issue of legislative competence, we shall refer to entry 54 of List II of the Seventh Schedule to the Constitution which is the field of State legislation for imposing taxes on the sale or purchases of goods, other than newspaper. This entry is subject to the provisions of entry 92-A of List I of the Seventh Schedule to the Constitution. It is well-settled that the State Legislature, while providing for levy of impost, has power to provide for incidental matters, including measures for prevention of evasion of tax.
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24. From the above discussion it follows that the aforementioned impugned provisions which are intended to prevent the evasion of tax payable under the Act are within the legislative competence of the State and are intra vires entry 54 of List II of the Seventh Schedule to the Constitution.
19. Going by the above decision, I feel that the challenge against the provision to collect tax in advance has to be repelled. Though the amount demanded in this case is loosely described as advance tax, it is in effect a payment in advance towards the tax that may become payable in future. The apex court in the above decision upheld the provisions enabling demand of tax in advance while bringing the goods to West Bengal by casual traders. The learned Counsel for the petitioners tried to distinguish this decision by contending that the decision relates to the liability of casual traders. The significance of the decision is that it upholds the power to demand advance payment towards tax when the goods are brought to the State, that is, before the taxable event, namely, the sale. The decision in
20. The petitioners attack the impugned provision as vitiated by excessive delegation. According to them, it does not lay down any legislative policy properly. The legislative policy has also been delegated to the Commissioner, it is submitted. Every one familiar with collection of sales tax knows that certain goods are evasion-prone. The "notified" goods are admittedly evasion-prone. Experience may show that some other goods are also evasion-prone. The contention of the petitioners that the identification of the goods is left to the Commissioner without any guidelines, cannot be accepted. Going by the scheme of the Act and the Rules, goods which can be subjected to tax under the KVAT Act alone can be notified under Sub-section (16A). The words "evasion-prone goods" cannot be said to convey a very vague concept without providing any guidelines. As stated earlier, all those associated with collection of tax know what are evasion-prone goods. If any particular type of goods which are not evasion-prone is also included in the notification, the affected persons can challenge the same. So, the contention that unfettered and unbridled power is conferred on the Commissioner, cannot be accepted. He can only include evasion-prone goods, which are well known in trade circles. The contention that the Legislature has not laid down any norms to guide the Commissioner and therefore, there is excessive delegation, also cannot be accepted. The words "evasion-prone goods" give sufficient guidelines to the Commissioner, while selecting the goods. The apex court had occasion to consider the challenge against a provision in the Madras Co-operative Societies Act, based on excessive delegation, in
3... The Parliament and the State Legislature are not bodies of experts or specialists. They are skilled in the art of discovering the aspirations, the expectations and the needs, the limits to the patience and the acquiescence and the articulation of the views of the people whom they represent. They function best when they concern themselves with general principles, broad objectives and fundamental issues instead of technical and situational intricacies which are better left to better equipped full time expert executive bodies and specialist public servants. Parliament and the State Legislatures have neither the time nor the expertise to be involved in detail and circumstances. Nor can Parliament and the State Legislatures visualise and provide for new, strange, unforeseen and unpredictable situations arising from the complexity of modern life and the ingenuity of modern man. That is the raison detre for delegated legislation. That is what makes delegated legislation inevitable and indispensable. The Indian Parliament and the State Legislatures are endowed with plenary power to legislate upon any of the subjects entrusted to them by the Constitution, subject to the limitations imposed by the Constitution itself. The power to legislate carries with it the power to delegate. But excessive delegation may amount to abdication. Delegation unlimited may invite despotism uninhibited. So, the theory has been evolved that the Legislature cannot delegate its essential legislative function. Legislate it must by laying down policy and principle and delegate it may to fill in detail and carry out policy. The Legislature may guide the delegate by speaking through the express provision empowering delegation or the other provision of the statute, the preamble, the scheme or even the very subject-matter of the statute. If guidance there is, wherever it may be found, the delegation is valid. A good deal of latitude has been held to be permissible in the case of taxing statutes and on the same principle a generous degree of latitude must be permissible in the case of welfare legislation, particularly those statutes which are designed to further the Directive Principles of State Policy.
4. In
... the Legislature cannot delegate its function of laying down legislative policy in respect of a measure and its formulation as a rule of conduct. The Legislature must declare the policy of the law and the legal principles which are to control any given cases and must provide a standard to guide the officials or the body in power to execute the law. The essential legislative function consists in the determination or choice of the legislative policy and of formally enacting that policy into a binding rule of conduct. In the present case the Legislature has laid down such a principle and that principle is the maintenance or increase in supply of essential commodities and of securing equitable distribution and availability at fair prices. The principle is clear and offers sufficient guidance to the Central Government in exercising its powers u/s 3.
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In regard to this matter we desire to make two observations. In the context of modern conditions and the variety and complexity of the situations which present themselves for solution, it is not possible for the Legislature to envisage in detail every possibility and make provisions for them. The Legislature, therefore, is forced to leave the authorities created by it an ample discretion limited, however, by the guidance afforded by the Act. This is the ratio of delegated legislation, and is a process which has come to stay, and which one may be permitted to observe is not without its advantages. So long therefore as the Legislature indicates, in the operative provision of the statute with certainty, the policy and purpose of the enactment, the mere fact that the legislation is skeletal, or the fact that a discretion is left to those entrusted with administering the law, affords no basis, either for the contention that there has been an excessive delegation of legislative power as to amount to an abdication of its functions, or that the discretion vested is uncanalised and unguided as to amount to a carte blanche to discriminate. The second is that if the power or discretion has been conferred in a manner which is legal and constitutional, the fact that Parliament could possibly have made more detailed provisions, could obviously not be a ground for invalidating the law.
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11. Let us now turn to Section 60 of the Madras Co-operative Societies Act, 1932 whose vires is in question and which is as follows:
''60. The State Government may, by general or special order, exempt any registered society from any of the provisions of this Act or may direct that such provisions shall apply to such society with such modifications as may be specified in the order.''
The provision is a near Henry VIII clause. But to give it a name is not to hang it. We must examine the preamble, the scheme and other available material to see if there are any discernible guidelines. Sure the Co-operative Societies Act is a welfare legislation. Its preamble proclaims:
''Whereas it is expedient further to facilitate the formation and working of co-operative societies for the promotion of thrift, self-help and mutual aid among agriculturists and other persons with common economic needs so as to bring about better living, better business and better methods of production and for that purpose to consolidate and amend the law relating to co-operative societies in the State of Madras.''
12. The policy of the Act is there and so are the guidelines. Why the legislation? ''To facilitate the formation and working of co-operative societies''. Co-operative societies, for what purpose? ''For the promotion of thrift, self-help and mutual aid''. Amongst whom? ''Amongst agriculturists and other persons with common economic needs''. To what end? ''To bring about better living, better business and better methods of production''. The objectives are clear; the guidelines are there. There are numerous provisions of the Act dealing with registration of societies, rights and liabilities of members, duties of registered societies, privileges of registered societies, property and funds of registered societies, inquiry and inspection, supersession of committees of societies, dissolution of societies, surcharge and attachment, arbitration, etc. We refrain from referring to the details of the provisions except to say that they are generally designed to further the objectives set out in the preamble. But, numerous as the provisions are, they are not capable of meeting the extensive demands of the complex situations which may arise in the course of the working of the Act and the formation and the functioning of the societies. In fact, the too rigorous applications of some of the provisions of the Act may itself occasionally result in frustrating the very objects of the Act instead of advancing them. It is to provide for such situations that the Government is invested by Section 60 with a power to relax the occasional rigour of the provisions of the Act and to advance the objects of the Act. Section 60 empowers the State Government to exempt a registered society from any of the provisions of the Act or to direct that such provision shall apply to such society with specified modifications. The power given to the Government u/s 60 of the Act is to be exercised so as to advance the policy and objects of the Act, according to the guidelines as may be gleaned from the preamble and other provisions which we have already pointed out, are clear.
13. We are, therefore, of the view that Section 60 is not void on the ground of excessive delegation of legislative power.
21. In the light of the above principles laid down by the apex court, it has to be held that the impugned provision is valid. The Legislature cannot be blamed for not naming the evasion-prone goods. Their list may change from time to time. So, the Commissioner has been rightly authorised to specify them. The words "evasion-prone goods" give sufficient guidelines to him. So, the challenge of excessive delegation is repelled.
22. Now what remains to be examined are the contentions of the petitioners with reference to other provisions of the Constitution. They submit, the impugned provision violates Articles 14 and 19(1)(g) of the Constitution. The classification, to demand tax in advance, of evasion-prone goods, on the ground that they come from outside the State, is made on a rational basis. Unless tax in advance is demanded, there is likelihood of evasion of tax. So, the classification is made on a sound basis, to achieve the object of safeguarding the interest of Revenue by preventing evasion of tax. It is unnecessary to impose advance tax on goods moving inside the State. So, the contentions made relying on Article 14 of the Constitution cannot be accepted. Further, it is well-settled that the Legislature enjoys a greater latitude for classification in the field of taxation (See the decision of the apex court in
23. Further, in the matter of taxation statutes, the courts should respect the legislative judgment and should not lightly interfere with them. See the decision of the apex court in
7... the Legislature understands and correctly appreciates the needs of Us own people, its laws are directed to problems made manifest by experience and its discrimination are based on adequate grounds. The presumption of constitutionality is indeed so strong that in order to sustain it, the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation.
8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. It has been said by no less a person than Holmes, J. that the Legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the Legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud [1957] 354 US 457 where Frankfurter, J. said in his inimitable style:
In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The Legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability.
The court must always remember that ''legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetr that exact wisdom and nice adaption of remedy are not always possible and that ''judgment is largely a prophecy based on meagre and uninterpreted experience''. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Reig Refining Company [1950] 94 LEd. 381 : [1950] 338 US 604 be converted into Tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any Legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the Legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the Legislature in dealing with complex economic issues.
...
19....The court must always bear in mind the constitutional proposition enunciated by the Supreme Court of the United States in Munn v. Illinois 94 US 13, namely, ''that courts do not substitute their social and economic beliefs for the judgment of the legislative bodies''. The court must defer to legislative judgment in matters relating to social and economic policies and must not interfere, unless the exercise of legislative judgment appears to be palpably arbitrary. The court should constantly remind itself of what the Supreme Court of the United States said in Metropolis Theater Company v. City of Chicago [1912] 57 LEd 730 : [1912] 228 US 61:
The problems of Government are practical ones and may justify, if they do not require, rough accommodations, illogical it may be, and unscientific. But even such criticism should not be hastily expressed. What is best is not always discernible, the wisdom of any choice may be disputed or condemned. Mere errors of Government are not subject to our judicial review''." (Emphasis supplied)
24. In view of the above legal position and for other reasons set out here in above, the challenge against the constitutional validity of Section 47(16A) of the KVAT Act is repelled. The validity of the impugned circulars are upheld. The timing of the issuance of the circulars, that is immediately after the rendering of the judgment by this court, in the "Entry Tax Cases" cannot be a ground to condemn the circulars, if they are otherwise valid. The individual grievance caused to certain dealers cannot be a ground for declaring the provision or the circulars unconstitutional. A dealer, whose entire sales are in the course of export may not be liable to pay tax. If advance tax is collected from him and he does not make any local sale and therefore, not liable to pay tax, he can claim refund of the same. In that event, the State shall refund the amount paid by him. Such individual inconveniences or grievances can never be pressed into service, to attack a legislation. I have not dealt with in this judgment, some of the decisions cited by both sides, as they were not strictly relevant. In the result, the writ petition fails and it is dismissed.
25. W.P. (C) Nos. 34390 and 34662 of 2006, 80, 134, 293, 411, 511, 606, 680, 851, 952, 991, 1189, 1191, 1361, 1372, 1431, 1442, 1449, 1454, 1456, 1464, 1465, 1478, 1482, 1492, 1493, 1494, 1503, 1529, 1532, 1539, 1609, 1639, 1685, 1692, 1698, 1715, 1716, 1717, 1718, 1945, 1949, 1970, 1976, 2095, 2146, 2148, 2194, 2278, 2281, 2288, 2292, 2318, 2336, 2377, 2381, 2382, 2396, 2512, 2531, 2536, 2537, 2538, 2539, 2606, 2667, 2689, 2768, 2772, 2773, 2789, 2796, 2828, 2840, 2878, 2903, 2904, 2907, 2911, 2922, 2923, 2924, 2980, 2983, 3009, 3036, 3062, 3069, 3076, 3079, 3081, 3082, 3087, 3090, 3092, 3093, 3094, 3095, 3099, 3188, 3199, 3203, 3204, 3220, 3221, 3227, 3281, 3345, 3461, 3465, 3471, 3472, 3473, 3474, 3500, 3543, 3566, 3619, 3620, 3621, 3622, 3623, 3632, 3645, 3738, 3777, 3795, 3797, 3798, 3800, 3803, 3804, 3805, 3807, 3813, 3828, 3937, 3946, 3949, 3950, 3959, 3962, 4098, 4189, 4206, 4236, 4246, 4277, 4287, 4315, 4343, 4355, 4455, 4459, 4480, 4582, 4587, 4613, 4616, 4699, 4766, 4767, 5305, 5306, 5307, 5315, 5318, 5319, 5475, 5476, 5485, 5493, 5494, 5495, 5496, 5508, 5550, 5744, 5748, 5758, 5798, 5829, 5861, 5950, 5951, 6078, 6092, 6104, 6113, 6114, 6115, 6126, 6127, 6128, 6129, 6136, 6250, 6262, 6268, 6269, 6276, 6297, 6409, 6424, 6437, 6622, 6646, 6651, 6752, 6816, 6823, 6824, 6852, 6855, 6982, 6985, 6992, 6997, 7005, 7173, 7174, 7175, 7329, 7334, 7346, 7545, 7550, 7661, 7733 and 7738 of 2007.
26. In the light of the judgment in W.P. (C) No. 2844 of 2007, these writ petitions are also dismissed.
