Important point
Power under Section 59A of the Kerala General Sales Tax Act is so wide and unbridled that it does not contain any guidelines as to at what stage the power can be exercised, nor does the exercise of such a power make it amenable to the appellate or revisional provisions provided by the Act and as such Section 59A has to be struck down as violative of Article 14 of the Constitution.

Headnote:Kerala General Sales Tax Act, 1963 - Section 59A - Power of Government to determine rate of tax - Constitutional validity - Section 59A does not furnish a limitation subject which power can be exercised-Does not contain any guidelines as to at what stage power can be exercised-Nor does the exercise of such a power make it amenable to appellate or revisional provisions provided by the Act-Power is so wide and unbridled-Provisions violative of Article 14 of Constitution-Struck down.
       Held : Plain reading of Section 59A shows that if any question relating to the rate of tax leviable under the Act on any goods is referred to the Government then its decision thereon, notwithstanding any other provision in this Act is final”. This section does not indicate as to who can make a reference to the Government. There is no obligation on the Government to hear any dealer before it decides as to the rate of tax leviable on the sales or purchase of any type of goods. Lastly Section 59A clearly states that the decision so given by the Government shall be final and would have an over-riding effect. (Para 10)
       There is no warrant in our opinion in trying to read down the provisions of Section 59A. The words of the said provision are clear and unambiguous. The said section gives absolute power to the Government to decide any question regarding the rate of tax leviable on the sale or purchase of goods in any manner it deems proper and finality is given to such a decision. Section 59A enables the Government to pass an administrative order which has the effect of negating the statutory provisions of appeal, revision etc. contained in Chapter VII of the Act which would have enabled the appellate or revisional authority to decide upon questions in relation to which an order under Section 59A is passed. Quasi - judicial or judicial determination stands replaced by the power to take an administrative decision. There is nothing in Section 59A which debars the Government from exercising the power even after a dealer has succeeded on a question relating to the rate of tax before an appellate authority. The power under Section 59A is so wide and unbridled that it can be exercised at any time and the decision so rendered shall be final. It may well be that the effect of this would be that such a decision may even attempt to over-ride the appellate or the revisional power exercised by the High Court under Section 40 of the Act as the case may be. The section enables passing of an executive order which has the effect of subverting the scheme of a quasi-judicial and judicial resolution of the lis between the State and the dealer. (Paras 11 & 12)
       The section does not furnish a limitation subject to which the power can be exercised. The section does not contain any guidelines as to at what stage the power can be exercised and nor does the exercise of such a power make it amenable to the appellate or revisional provisions provided by the Act. It is no doubt true that in certain enactments of other States the Government has the power but such power is not unbridled. Section 59A of the Act is violative of Article 14 of the Constitution and the High Court was, therefore, right in striking down the said provision. (Paras 13 & 14)

Judgment

Kirpal, J.-Leave granted. Delay condoned.

In these appeals the appellants are aggrieved by the common judgment of the Kerala High Court which has held Section 59A of the Kerala General Sales Tax Act, 1963 (for short ‘the Act’) as being invalid.

2. Respondents in these appeals, manufacture and sell various commodities like copper sulphate, batteries, battery plates, electrical goods, laboratory apparatus, battery spare parts etc. If during the course of their assessment proceedings under the Act any question used to arise relating to the rate of tax leviable on the goods sold by various dealers or the entry under which a particular item sold by a dealer would fall the same used to be decided by the assessing and the appellate authorities under the Act. By an amendment Section 59A was inserted in the Act with effect from 1st April, 1978. This section sought to give power to the Government to determine the rate of tax and it reads as follows :

“59A. Power of Government to determine rate of tax.-If any question arises as to the rate of tax leviable under this Act on the sale or purchase of any goods, such question shall be referred to the Government for decision and the decision of the Government thereon shall, notwithstanding any other provision in this Act, be final.”

3. In exercise of the powers given by the said Section 59A the State Government issued orders, from time to time, purporting to clarify the rate of sales tax. On 23rd April, 1984, an order was issued by the State Government purporting to clarify the rate of sales tax on various items. One of the items contained in this order was tinned foods like Horlicks, Viva, Boost, Bournvita, Ovumalt etc. By this order the Government stated that the said items of tinned food were covered by Entery-6 of the First Schedule of the Act.

4. M/s. Parry and Company, one of the respondents in these appeals, wrote a letter dated 11th December, 1984 to the Secretary, Board of Revenue, with regard to the classification of aforesaid item - Horlicks. It was stated in this letter that they were registered dealers since 30th June, 1957 and all along successive officers had accepted their classification of Horlicks as a milk product falling under Sl. No. 3 of the First Schedule and, therefore, they were liable to pay tax at a lesser rate and not at the rate of ten per cent which was payable under Sl. No. 6 of the First Schedule. To this letter the reply which was received was to the following effect :

“No. OS 2661/85/TX/Ldis.

Office of the Board of Revenue

(Taxes) Trivandrum - 1

Dated 31.1.1985

From

The Secretary,

Board of Revenue (Taxes),

Trivandrum

M/s. Parry & Company Ltd.,

“DARE HOUSE” Post Box No. 12,

Madras-600001

Gentleman,

Sub. : Taxes - Sales tax rate of tax on Horlicks etc.

Ref. : Your letter dated 11.12.1984

The case at issue has already been examined previously and Government in GO Rt.314/84/TD dated 23.4.1984 have clarified that Horlicks would come under Entry 4 of the First Schedule to the K.G.S.T. Act, 1963.

Yours faithfully

Sd/-

(Secretary [Taxes])”

5. It is in view of such decisions taken by the State Government in determining the entries under which different items would fall, in exercise of its power under Section 59A of the Act, that the respondents in these appeals filed different writ petitions in the Kerala High Court challenging the constitutional validity of Section 59A. The main contention of the dealers was that Section 59A gave the Government arbitrary and unguided power in determining the rate of tax applicable to different items and, furthermore, the said power had in fact been exercised in an arbitrary manner.

6. The High Court in the impugned judgment referred to an earlier bench decision of that Court in Dadha Pharma Pvt. Ltd. v. State of Kerala1. That was a case by way of revision before the High Court under Section 41 of the Act. The High Court had to deal with the applicability of Section 59A in that case. As it was exercising limite

Click Here to Read the rest of this document

1998 Supreme(SC) 1128

Cases Referred (1)