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PETITIONER: SHIV DUTT RAI FATEH CHAND ETC. ETC.

       Vs.

RESPONDENT: UNION OF INDIA & ANR. ETC.

DATE OF JUDGMENT06/05/1983

BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) SEN, A.P. (J)

CITATION:  1984 AIR 1195            1983 SCR  (3) 198  1983 SCC  (3) 529        1983 SCALE  (1)590

ACT:      Central Sales Tax Act 1956-Sub-section (2-A) of section 9 introdaced  by Central  Sales Tax  (Amendment)  Act  1976- Applicability of  provisions relating  to penalties leviable under  general   sales  tax   laws  of  the  States  to  the proceedings under the Act-And section 9 of the Central Sales Tax (Amendment)  Act 1976-  Retrospective  operation-Whether sub-section (2-A)  of section 9 of the Act suffers from vice of  excessive   delegation-Whether  sub-section   (2-A)  and section 9  of the Amending Act violative of Article 19(1)(f) and (g) and Article 20 (1) of the Constitution.      Haryana General Sales Tax Act 1973- Section 48- Whether confers uncanalised  unguided and  arbitrary  power-Validity of.      Constitution of  India-Article 20  gives constitutional protection to  persons charged  with crime  before  criminal court.      Wards and  phrases-Penalty-Meaning of-A  word  of  wide significance- Used  in Article 20 (1) of the Constitution in a narrow sense.

HEADNOTE:      Section 9 of the Central Sales Tax Act, 1956 as amended retrospectively by  the Central  Sales Tax  (Amendment) Act, 1969 provided  for levy  and collection of tax and penalties on sale  of goods  effected by  a dealer  in the  course  of inter-State trade  or commerce. lt further provided that the authorties for  the time  being  empowered  to  assess,  re- assess, collect  and enforce  payment of  any tax  under the general sales  tax law  of the  appropriate State  shall, on behalf of  Government of  India, assess,  re-assess, collect and enforce payment of tax including any penalty, payable by a dealer  under this Act as if the tax or penalty payable by such a  dealer under  this Act is a tax or penalty under the general sales  tax law  of the  State; and  for this purpose they may  exercise all  or any of the powers they have under the general  sales tax law of the State. Consequent upon the decision  of  this  Court  in  Khemka  &  Co.  v.  State  of Maharashtra [1975]  3 S.C.R.  753 holding by a majority that it was  not open  to the  authorities under the State law to levy and  recover penalty for delay or default in payment of tax under  the Central Sales Tax Act, 1956, section 9 of the

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Act came  to be amended by the Central sales Tax (Amendment) Act, 1976  introducing sub-section  (2-A) in it. Sub-section (2-A) of section 9 provided that all the provisions relating to offences  and penalties  (with certain exceptions) of the general sales  tax law  of each  State shall  with necessary modification, apply  in  relation  to  the  assessment,  re- assessment, collection and the enforcement of payment of any tax required to be collected under this Act in such State as if the  tax under  this Act  were a tax under such sales tax law. 199      Section 9  of the  Amending Act, 1976 declared that the provisions; of  section 9  of the 1956 Act would have effect and should  be deemed  always to have had effect in relation to the  period commencing  from January 5, 1957 (the date of coming into  force of  1956 Act)  and ending  with the  date immediately proceeding  the  date  of  commencement  of  the Amending Act.      The petitioners in these two batches of petitions filed under Article  32 of  the Constitution are dealers under the Central Sales  Tax Act,  1956 (herein-after  referred to  as ’the Act’)  having their  places of business at Maharashtra, Haryana  etc.   They  have   questioned  the  constitutional validity of  sub-section (2-A)  of section  9 of  the Act as introduced by  the Central  Sales Tax  (Amendment) Act, 1976 (herein-after referred  to as ’the Amending Act’ and section 9 of the Amending Act validating the levy of penalties under the Act with retrospective effect on the following grounds:      (1) That  the  introduction  of  sub-section  (2-A)  in section 9 of the Act by the Amending Act, 1976 does not have the effect  of making  the provisions  relating to penalties leviable under  the general  sales tax  laws of  the  States applicable to  the assessees  under  the  Act  25  the  word ’penalties’ is  not Found  along with the words ’assessment, re-assessment, collection  and the enforcement of payment of any tax’  in sub-section (2-A); the lacuna in the Act, which was pointed  out by  this Court in Kehmka’s case namely that there is  no specific provision levying penalties in the Act remains unfilled  up even  now and hence no penalties can be recovered by  utilising the  provisions of the general sales tax laws of the respective States.      (2) Sub-section  (2-A) of  section 9  suffers from  the vice of  excessive  delegation  of  legislative  power;  the Parliament by  adopting the  provisions relating to offences and penalties  referred to  in the various general sales tax laws of  the States  has abdicated its essential legislative function.      (3) That  sub section (2-A) of section 9 of the Act and section 9 of the Amending Act are violative of Article 20(1) of the  Constitution; that  any act  or  omission  which  is considered to  be a  default under the Act for which penalty is leviable is an offence, that such act or omission was not an offence,  and no  penalty was  payable under  the law  in force at  the time  when it  was committed  and  hence  they cannot be  punished by the levy of penalty under a law which is given retrospective effect.      (4)  The   levy  and   collection  of   penalties  with retrospective  effect   amounts  to   an  imposition  of  an unreasonable restriction  on the  fundamental right  of  the petitioners  to  own  property  and  to  carry  on  business guaranteed  under   Article  19  (1)  (f)  and  (g)  of  the Constitution.      (5) That  in the  case of  assessees of  the  State  of Haryana, section  48 of  the Haryana  General Sales Tax Act, 1973 which  authorises the  levy of penalty of ’a sum of not

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less than  twice and  more than ten times the amount of tax’ on proof  of the  defaults mentioned therein is violative of Article 14 of the 200 Constitution as  there is no guidance given to the authority levying the penalty about the quantum of penalty.      Dismissing the petitions, ^      HELD 1.  Sub-section (2-A)  of section 9 of the Act and section 9  of the  Amending Act  are  adequately  enough  to assess and  realise penalties  w.e.f.  January  5,  1957  as contemplated therein. The principal object of the Act is not the levying  of the penalties. Its object is assessment, re- assessment collection  and the  enforcement  of  payment  of central sales  tax. The assessees incur the liability to pay penalties on  account of certain acts or omissions committed by them  at the  various  stages  specified  above,  namely, assessment, re-assessment, collection and the enforcement of payment of  tax. The inclusion of the word ’penalties’ along with these  four stages would have, therefore been redundant apart from being inappropriate. Sub-section (2-A) of section 9 of  the Act expressly makes all the provisions relating to offences and  penalties which  are committed  or incurred as the case  may be,  under the  general sales  tax laws of the respective  States   applicable  to   persons   who   commit corresponding acts  and omissions  at  the  above  mentioned stages under  the Act. There is no lacuna in the language of sub-section (2-A)  of section  9 of  the Act which makes the provisions relating to penalties under the general sales tax laws of  the respective  States inapplicable even now to the proceedings  under  the  Act.  While  sub-section  (2-A)  of section 9  of the  Act makes the provisions relating to both offences and  penalties in the general Sales tax laws of the States  applicable   to  the   proceedings  under   the  Act prospectively, section  9 of  the Amending Act makes all the provisions relating  to penalties  only in the general sales tax laws  of the  States applicable  to the proceeding under the  Act  retrospectively  by  adopting  the  same  language appearing in sub-section (2-A) of section 9 of the Act. This pattern of  legislation had  to be  adopted perhaps  because Parliament wished  rightly not  to give retrospective effect to the  provisions  relating  to  offences  also  which  are referred to  in sub-section  (2-A) of section 9. Having thus given retrospective  effect to section (2-A) of section 9 w. e. f.  January 5, 1957 in so far as penalties were concerned by enacting  sub-section (1)  of section  9 of  the Amending Act,  Parliament  removed  the  deficiency  pointed  out  in Khemka’s case. [217 E-F, 216 E-G, 217 A-D]      Khemka &  Co. v.  State of  Maharashtra [1975] 3 S.C.R. 1973, referred to.      2.  The  question  whether  there  has  been  excessive delegation or  abdication of  legislative power  has  to  be decided on  the meaning  of the words in the Statute and the policy behind it, Legislation by incorporation of provisions of  another  statute  even  though  passed  by  a  different legislature is a well known method of legislation which does not effect the validity of the legislation particularly when the  scheme  of  the  other  statute  is  similar  and  such incorporation is  relevant and  necessary for the purpose of advancing the  objects and purposes of the legislation. [217 H, 218 A-B] 201      In the  instant case  sub-section (2-A) of section 9 of the  Act   does  not  suffer  from  the  vice  of  excessive delegation merely because the provisions relating to penalty

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in the  general sales tax laws of the States are adopted for purposes of  the Act.  The assessees  under the  Act who are spread over  various States  are accustomed  to the  general pattern of  sales tax law in their respective States and the various duties  and responsibilities  of an  assessee who is liable to pay sales tax. The officers who assess and collect the tax under the Act are the officers who discharge similar functions  under  the  State  laws.  In  this  situation  if Parliament has, with the knowledge of the various provisions relating to  offences and penalties in the general sales tax laws of  the various  States adopted  them for  purposes  of assessment, re-assessment, collection and enforcement of the provisions of  the  Act  it  cannot  be  said  that  it  has abdicated its legislative functions. [222 B-C, 218 C-E]      The circumstances  leading to  imposition of  penalties and the  rates of  penalties very from on State to the other but the  power to  make a  legislative provision  on matters relating to  penalties is  circumscribed by various economic factors and  it cannot be said that Parliament had virtually surrendered  its   legislative   judgment   to   the   State legislatures. There is a clear legislative policy adopted by Parliament in the case of levy of penalties and that is that the penalties  payable under  the Act  should be the same as the penalties  payable under  the general  sales tax  law of each State  if the  rates  of  penalties  exceed  reasonable limits  the  States  which  are  beneficiaries  of  the  tax collected  under   the  Act   themselves  suffer   as   such unreasonable levy  is bound  to lead  to the  killing of the goose which lays the golden egg. The trade would immediately shift to  areas outside  the State  which resorts  to higher taxes and  penalties. The  political  and  economic  factors which operate  in  this  field  are  so  powerful  that  the provisions with  regard to penalties to be made by the State Legislature cannot  but be  reasonable as  they would affect the levy  of tax  under the State Act also. The penal nature of the  penalties itself  is a sufficient guidance regarding maximum limits upto which penalties can be levied. A penalty cannot  be   wholly  disproportionate   to  the   extent  of infringement of  law. Moreover  Parliament  always  has  the power to amend its own law i. e the Act if it finds that the provisions realting  to penalties in any State law cross the limits of public interest. [222 C-G]      State of  Madras v.  N.K. Nataraja  Mudaliar, [1968]  3 S.C.R. 829;  Gwalior Rayon  Silk Mfg. (Wvg.) Co. Ltd. v. The Asstt. Cvmmissioner of Sales Tax & Ors. [1974]   2.   S.C,R. 879; M,K  Papiah &  Sons v.  The Excise  Commissioner &  Anr [1975] 3 S.C.R. 607, referred to.      3. The  marginal note  of our Article 20 is ’protection in respect  of conviction  for offences  . The  presence  of words ’conviction’  and ’offences’,  in  the  marginal  note ’convicted of  an offence’,  ’the act charged as an offence’ and ’commission  of an  offence’, ’in  clause (1) of Article 20, ’prosecuted  and punished’  in clause  (2) of Article 20 aud ’accused  of an  offence’ and ’compelled to be a witness against  himself’  in  clause  (3)  of  Article  20  clearly suggests that  Article  20  relates  to  the  constitutional protection given  to persons  who are  charged with  a crime before a criminal Court. [226 A-B] 202      The word  ’penalty’ is  a word  of a wide significance. Sometimes it  means recovery of an amount as a penal measure even in  a civil  proceeding. An  exaction which is not of a compensatory character  is also  termed as  a  penalty  even though it  is not  being  recovered  pursuant  to  an  order finding the  person concerned  guilty of a crime. In Article

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20(1) the  expression ’penalty’  is used in the narrow sense as meaning  a payment  which has to be made or a deprivation of liberty  which has  to be  suffered as a consequence of a finding that  the person accused of a crime is guilty of the charge. The word ’penalty’ unsed in Article 20 (1) cannot be construed as  including a  ’penalty’ levied  under the sales tax laws  by the  departmental authorities  for violation of statutory  provisions.   A  penalty  imposed  by  sales  tax authorities is  only a  civil  liability,  though  penal  in character. It may be relevant to notice that sub-section (2- A) of  section 9  of the  Act specifically refers to certain acts and  omissions which  are offences for which a criminal prosecution  would   lie  and  the  provisions  relating  to offences have  not been retrospective effect by section 9 of the Amending Act.                                           [226 B-D, 230 C-D]      Constitutional Law  of India  by H.M.  Seervai; 3rd Ed. vol. 1.  p. 759;  Maqbool Hussain  v. The  state of  Bombay, [1953] S.C.R.  730; Jawala  Ram v.  State of Pepsu, [1962] 2 S.C.R. 503;  State of  West Bengal  v. S.K  Ghosh  [1963]  2 S.C.R. 111;  M/s. Hati Singh Mfg Co. Ltd. & Anr. v. Union of India &  Ors., [1960]  3 S.C.R.  528: Pai Bahadur Hurdut Roy Mati Lal  Jute Mills  v The  State of Bihar & Anr., [1956] 7 S.T.C. 609;  The State  of Bihar  v. Rai  Bahadur Hurdut Ray Moti Lall  Jute Mills  & Anr.,  A.I.R. 1960  S.C. 378;  Shew Bhagwan Goenka  v. Commercial  Tax Officer  & Ors. [1973] 32 S.T.C. 368;  Commissioner of  Wealth Tax, Amritsar v. Suersh Seth, [1981]  3 S.C.R.  419; Raghunathan Prasad Mohan Lal v. Income Tax Appellate Tribunal, Delhi Bench & Ors., [1970] 75 I.T.R. 741;  Central India  Motors v. C.L. Sharma, Assistant Commissioner of  Sales Tax,  Indore Region,  Indore &  Anr., [1980] 46 S.T.C. 379, referred to.      4. If  in its  essential features  a taxing  statute is within the competence of the legislature, it would not cease to be  so if  retrospective  effect  is  given  to  it.  The provision for  levying of  interest and  to  levy  penalties retrospectively and  to validate  earlier proceedings  under laws which had been declared unconstitutional after removing the element  of unconstitutionality  is included  within the scope of legislative power. [231 E]      Under the  Constitution the grounds on which infraction of the  rights to  property is  to  be  tested  have  to  be considered on  the precise  criteria set  out in  Article 19 (5). Mere  retrospectivity in  the  imposition  of  the  tax cannot per  se render the law unconstitutional on the ground of it  infringing the  rights to hold property under Article 19 (1)  (f). The  test of  the length of time covered by the retrospective operation  cannot by  itself be  treated as  a decisive test.                                               [231 E, 233 D]      In the  instant case,  there is  no dispute  about  the validity of  the tax payable under the Act during the period between January  1, 1957 and the date of commencement of the Amending Act.  It has  to be  presumed that  all the tax has been collected by the dealers from their customers. There is also no dispute that the law required the dealers to pay the tax within the specified time. The 203 dealers had also the knowledge of the provisions relating to penalties in  the general sales tax laws of their respective States. It  was only  owing to  the deficiency  in  the  Act pointed out  by this  Court in  Khemaka’s case the penalties became not payable. In this situation where the dealers have untilised the  money which  should have  been  paid  to  the Government and  have committed  default in  performing their

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duty, if  Parliament calls  upon them  to pay  penalties  in accordance with the law as amended with retrospective effect it cannot  be said  that there  has  been  any  unreasonable restriction imposed  on the  rights guaranteed under Article 19 (1)  (f) and  (g) of  the Constitution,  even though  the period of  retrospectivity is nearly nineteen years. [233 H, 234 A-C]      Chhotabhai Jethabhai  Patel & Co, v. The Union of India JUDGMENT: The State of Bihar, [1964] 1 S.C.R. 897, referred to.      5. Section  48 of  the Haryana  General Sales  tax Act, 1973 provides  both the  minimum and  the maximum  amount of penalties leviable and it is correlated to the amount of tax which would  have been  avoided if  the turnover returned by such dealer  had been  accepted as  correct. The  degree  of remissness involved  in the  default is a factor to be taken into  account  while  levying  penalty.  The  order  levying penalty is quasi judicial in character and involves exercise of judicial  discretion.  An  order  levying  penalty  under section 48  is also  subject to  the provision  relating  to appeal. In  the circumstances,  it is  not possible  to hold that  section   48  confers  an  uncanalised,  unguided  and arbitrary power on the authority levying penalty. [235 E-G]      Hindustan Steel  Ltd. v.  State  of  Orissa,  [1970]  1 S.C.R. 753, referred to.

&      ORIGINAL JURISDICTION:  Writ  Petitions  Nos.  9057  of 1982, 318-319 of 1980, 1406-07 of 1981, 782 of 1980, 1264 of 1979, 450,  5798, 5799 of 1980, 2254-60, 4715-17, 7636, 8190 of 1981,  2250, 3478,  5455, 3479,  5518, 7220 of 1982, 608, 609 of  1983, 55-57 of 1977, 362, 401, 670-71, 672-75, 1191- 96, 1534-36,  1539 of 1977, 3768-69, 4196 of 1978, 280, 789- 92, 1981-82,  1083-84 of  1979, 233-241, 2201 of 1981, 3300, 3316, 3317,  3318, 3325,  3326, 3327  of 1982,  4389-90  and 4562-72 of 1978.      Under Article 32 of the Constitution of India.      M.N. Phadke,  U.R. Lalit,  S.B.  Bhasmi,  Smt,  Santosh Gupta, H.  G. Gupta,  Snrwa Mitter,  K.C. Dua, M.P. Jha, Dr. N.M.  Ghatate  S  Y.  Deshpaade,  S.B.  Saharya,  Vishnu  B. Saharya, G. S. Jetely and Ram Lal for the Petitioners.      L N,  Sihna, Attorney  General,  P.P.  Singh,  Miss  A. Subhashini, R.N.  Poddar, Gopal  Subramanium, D.P.  Mohanti, S.A. Shroff, D.D. Sharma, V.B. Joshi and M.N. Shroff for the Respondents. 204      The Judgment of the Court was delivered by      VENKATARAMIAH, J.  The petitioners in these two batches of petitions filed under Article 32 of the Constitution have questioned the  Constitutional validity of sub-section (2-A) of section  9 of the Central Sales Tax Act, 1956 (Act No. 74 of 1956)  (hereinafter referred  to as ’the Act’) as amended by the  Central Sales Tax (Amendment) Act, 1976 (Act No. 103 of 1976)  hereinafter referred to as ’the Amending Act’) and section 9  of  the  Amending  Act  Validating  the  levy  of penalties under the Act with retrospective effect.      The petitioners  are dealers under the Act having their places of  business in  the States  of Maharashtra, Haryana, etc.      For the  purpose of understanding the points of dispute raised in  these cases,  it is  necessary to  deal with  the history of  the legislation relating to taxes on inter-State Sales and  purchases of  goods during  the post-Constitution

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period. Under Entry 54 of List II of the Seventh Schedule to the Constitution,  the power to levy tax on sale or purchase of good  other than  newspapers was  assigned to  the  State Legislature. The power to levy taxes on the sale or purchase of newspapers  and on  advertisements published therein was, however, assigned  to Parliament under Entry 92 of List I of the Seventh Schedule to the Constitution. Article 286 (as it was originally  enacted) of  the Constitution  which imposed certain restrictions on a State in the matter of levy of tax on the sale or purchase of goods read as follows:-           "286. (1)  No law of a State shall impose, or      authorise the  imposition of, a tax on the sale or      purchase of  goods where  such  sale  or  purchase      takes place-           (a)  outside the State; or           (b)   in the  course of  the import  of the  goods                into, or  export of  the goods  out  of,  the                territory of India.           Explanation.- For  the purposes of sub-clause      (a), a  sale or  purchase shall  be deemed to have      taken place  in the  State in which the goods have      actually been delivered 205      as a  direct result  of such  sale or purchase for      the  purpose   of  consumption   in  that   State,      notwithstanding the  fact that  under the  general      law relating  to sale of goods the property in the      goods has  by reason  of  such  sale  or  purchase      passed in another State.           (2) Except in so far as Parliament may by law      otherwise provide, no law of a State shall impose,      or authorise  the imposition of, a tax on the sale      or purchase  of  any  goods  where  such  sale  or      purchase takes  place in the course of inter-State      trade or commerce:           Provided that  the  President  may  by  order      direct that  any tax  on the  sale or  purchase of      goods which  was  being  lawfully  levied  by  the      Government of  any State  immediately  before  the      commencement   of    this   Constitution    shall,      notwithstanding that the imposition of such tax is      contrary  to   the  provisions   of  this  clause,      continue to  be levied  until the thirty first day      of March, 1951.           (3) No law made by the Legislature of a State      imposing, or  authorising the imposition of, a tax      on the  sale or purchase of any such goods as have      been declared by Parliament by law to be essential      for the  life of  the community  shall have effect      unless it  has been reserved for the consideration      of the President and has received his assent."      The true  effect of  the above  Article on  inter-State sales and purchases of goods was considered by this Court in the State of Bombay & Anr. v. The United Motors (India) Ltd. & Ors(1).  In that case this Court held that Article 286 (1) (a) of  the Constitution  read with  the Explanation thereto and construed in the light of Article 301 and Article 304 of the  Constitution   prohibited  the  taxation  of  sales  or purchases  involving  inter-State  elements  by  all  States except the  State in  which the goods were delivered for the purpose of  consumption therein.  In other words it was held that in  the case  of inter-State sales, the importing State alone was  competent to  levy tax  on transactions  of  sale under its sales tax law on persons who were, 206

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resident outside  its  territory  provided  the  goods  were delivered  in   the  importing  State  for  the  purpose  of consumption therein.  The result of this decision was that a dealer carrying  on business  in the  exporting State became amenable to  the sales  tax law  of the  importing State  in which the  goods were  consumed.  This  question  was  again reconsidered in  The Bengal  Immunity Company  Ltd.  v.  The State of  Bihar & Ors.(1) In that case, this Court held that a reading  of clause  (1) (a)  read  with  the  Explanation, clause.(1) (b),  clause (2)  and clause  (3) of  Article 286 showed  that  those  clauses  were  intended  to  deal  with different topics and one could not be projected or read into the other  and, therefore,  the Explanation  to  clause  (!) could not  be legitimately  extended to clause (2) either as an exception  or as  proviso to  it or read as curtailing or limiting clause (2). Consequently it was held that the State of Bihar  could not  levy sales  tax under  its law on goods which were  subject matt  r of inter-State sales even though they had been consumed in that State in the absence of a law made by Parliament as provided in clause (2) of Article 286. This judgment  Was delivered  on September  6, 1955  and the view expressed  in this  case was  further reiterated in M/s Ram Narain  Sons Ltd.  v, Asst.  Commissioner of Sales Tax & Ors.(3) which  was decided on September 20, 1955. The result was that  no State could levy sales tax on inter-State sales as there  was no  central legislation  authorising  it  This judgment caused  a serious  financial disequilibrium  on the budgets of  the several States which had collected sales tax in accordance with the decision in the case of United Motors (supra) as  they had  to refund  all the  taxes so collected from the non-resident traders. This situation was met by the President promulgating  ordinance No.  III of 1956 which was later on replaced by the Sales Tax Laws Validation Act, 1956 (Act VII  of 1956),  whereby all collections of sales tax on inter-State sales  by the States upto September 6, 1955 were validated and  proceedings in  respect of the levy on inter- State sale.  for assessment were also protected. Later on in the light  of the report of the Taxation Enquiry Commission, the Constitution  itself was  amended  by  the  Constitution (Sixth Amendment) Act, 1956 by introducing Entry 92-A in the Union List, substituting Entry 54 in the State List by a new Entry and by amending Article 269 and Article 286. Entry 92- A in the Union List reads: 207           "92-A. Taxes on the sale or purchase of goods      other than newspapers, where such sale or purchase      takes place  in the course of inter-State trade or      commerce".      Entry 54 in the State List now reads:           "54. Taxes  on the  sale or purchase of goods      other than  newspapers, subject  to the provisions      of Entry 92-A of List I."      The taxes levied on the inter-State sales and purchases by the  Central Government  under a law made pursuant to the new Entry  92-A came  to be  assigned to  the States  in the manner  provided  in  clause  (2)  of  Article  269  by  the inclusion of sub-clause (g) in clause (1) of Article 269 and under the  new clause  i.e. clause (3) added to Article 269, Parliament  was   empowered  to   formulate   principles-for determining when  a sale  or purchase of goods took place in the course of inter-State trade or commerce. After amendment the relevant part of Article 269 of the Constitution reads:           "269. (1)  The  following  duties  and  taxes      shall be levied and collected by the Government of      India but  shall be  assigned to the States in the

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    manner provided in clause (2), namely- 13      ...        ...           ....           ...           (g) taxes  on the  sale or  purchase of goods      other than newspapers, where such sale or purchase      takes place  in the course of inter-State trade or      commerce.      ...       ...            ...            ...           (3)   Parliament   may   by   law   formulate      principles for determining when a sale or purchase      of goods  takes place in the course of inter-State      trade or commerce."      In Article  286 of the Constitution, the Explanation to clause  (1)  was  omitted  and  clauses  (2)  and  (3)  were substituted by new clauses (2) and (3) Article 286 now reads as follows:           "286. (1)  No law of a State shall impose, or      authorise the  imposition of, a tax on the sale or      purchase of  goods where  such  sale  or  purchase      takes place- 208      (a)  outside the State; or      (b)   in the  course of  the import  of the  goods           into,  or   export  of   goods  out  of,  the           territory of India.      (2)   Parliament may  by law  formulate principles           for determining  when a  sale or  purchase of           goods take place in any of the ways mentioned           in clause (1).      (3)   Any law  of a  State shall,  in so far as it           imposes, or  authorises the  imposition of, a           tax on the sale or purchase of goods declared           by  Parliament   by  law  to  be  of  special           importance in  inter-State trade  or commerce           be   subject   to   such   restrictions   and           conditions in  regard to  the system of levy,           rates and  other  incidents  of  the  tax  as           Parliament may by law specify."      Accordingly the  Act was  passed in.  1956. It has been amended a  number of  times since  then. The Preamble to the Act states  that the  object of  the  Act  is  to  formulate principles for deter mining when a sale or purchase of goods takes place  in the  course of inter-State trade or commerce or outside  a State  or in  the course  . Of  import into or export from  India, to  provide for the levy, collection and distribution of  taxes on  sales of  goods in  the course of inter-State trade  or commerce  and to declare certain goods to be of special importance in inter-State trade or commerce and specify  the restrictions  and conditions to which State laws imposing  taxes on  the sales or purchase of such goods of special  importance  shall  be  subject.  The  expression ’dealer’ is  defined in  section 2(b)  of the  Act  and  the expression  ’sale’  is  defined  in  section  2(g)  thereof. Section 3 of the Act lays down the principles with reference to which  the question  whether a  sale or purchase of goods has taken  place in  the  course  of  inter-State  trade  or commerce or not can be determined. Section  4   of  the  Act provides for determining when a sale or purchase of goods is deemed to  take place  outside a  State and section 5 of the Act lays  down the principles governing the determination of the question  whether a  sale or purchase has taken place in the course  of export or import. Section 6 of the Act is the charging section.  Sub-section (1) and (l-A) of section 6 of the Act which are material for purposes of this case read as follows:      "6. Liability to tax on inter-State sales.

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209           (1) Subject to the other provisions contained      in this  Act every  dealer shall, with effect from      such date  as the  A Central  Government  may,  by      notification in the official Gazette, appoint, not      being earlier  than thirty  days from  the date of      such notification, be liable to pay tax under this      Act on  all sales  of goods  other than electrical      energy effected  by him  in the  course of  inter-      State trade  or commerce  during any  year on  and      from the date so notified.           Provided that a dealer shall not be liable to      pay tax  under this Act on any sale of goods which      in accordance  with the  provisions of sub-section      (3) of  section 5,  is a  sale in  the  course  of      export of  those goods  out of  the  territory  of      India.           (1-A) A  dealer shall  be liable  to pay  tax      under this  Act on a sale of any goods effected by      him in the course of inter-State trade or commerce      notwithstanding  that   no  tax  would  have  been      leviable (whether  on the seller or the purchaser)      under the  sales tax  law of the appropriate State      if that sale had taken place inside that State."      Sub-section (2)  of section 6 of the Act deals with the circumstances when  certain inter-State  sales or  purchases will be exempt from the liability imposed under sub-sections (1) and  (1-A) of  section 6.  Section 6-A  of the Act deals with the  burden of  proof in the proceedings under the Act. Section 7  of the  Act provides for registration of dealers, section 8  specifies the rates of tax on sales in the course of inter-State  trade or  commerce and section 8-A lays down the rules  relating to  determination of turnover. Section 9 of the  Act which has undergone a number of changes provides for assessment,  collection etc.  Of the levy made under the Act. By  reason of  the retrospective  amendment made by the Central Sales  Tax Amendment Act 28 of 1969, section 9 (with effect from the commencement of the Act) read as follows:           "9. Levy and collection of tax and penalties-           (1) The  tax payable by any dealer under this      Act on  sales of  goods effected  by  him  in  the      course of  inter-State trade  or commerce, whether      such sales fall within clause (a) or clause (b) of      section 3, shall be levied by the 210      Government of India and the tax so levied shall be      collected by  that Government  in accordance  with      the t  provisions of sub-section (2), in the State      from which the movement of the goods commenced:           Provided that, in the case of a sale of goods      during their  movement from  one State to another,      being a  sale subsequent  to  the  first  sale  in      respect of  the same  goods, the  tax shall, where      such sale  does not fall within sub section (2) of      section 6,  be levied  and collected  in the State      from which  the registered  dealer  effecting  the      subsequent sale  obtained or,  as the case may be,      could have  obtained the  form prescribed  for the      purposes of  clause  (a)  of  sub-section  (4)  of      section 8  in connection with the purchase of such      goods.           (2) Subject  to the  other provisions of this      Act and the rules made thereunder, the authorities      for the  time .  being empowered  to  assess,  re-      assess, collect  and enforce  payment of  any  tax

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    under the general sales tax law of the appropriate      State shall,  on behalf  of Government  of  India,      assess, reassess,  collect and enforce. payment of      tax, including  any penalty,  payable by  a dealer      under this Act as if the tax or penalty payable by      such a  dealer under  this Act is a tax or penalty      payable under  the general  sales tax  law of  the      State; and  for this purpose they may exercise all      or any  of the  powers they have under the general      sales tax  law of the State; and the provisions of      such  law,   including  provisions   relating   to      returns, pro  visional assessment, advance payment      of tax,  registration 1’  of the transferee of any      business, imposition  of the  tax liability  of  a      person carrying  on business on the transferee of,      or  successor   to,  such  business,  transfer  of      liability of any firm or Hindu undivided family to      pay tax  in the  event of  the dissolution of such      firm or  partition of such family, recovery of tax      from third  parties, appeals,  reviews, revisions,      references,  refunds,  penalties,  compounding  of      offences and treatment of documents furnished by a      dealer as confidential, shall apply accordingly.           Provided that if in any State or part thereof      there is  no general  sales tax  law in force, the      Central Govern- 211      ment  may  by  rules  made  in  this  behalf  make      necessary provision  for all or any of the matters      specified in this sub-section.      (3) The proceeds in any financial year of any tax,      including any  penalty, levied and collected under      this  Act   in  any  State  (other  than  a  union      territory) on  behalf of  the Government  of India      shall be  assigned to  that  State  and  shall  be      retained by  it and  the proceeds  attributable to      Union territories  form part  of the  Consolidated      Fund of India."                                     (Underlining by us)      It is  seen from  sub-section (2)  of section  9 quoted above that  the authorities  empowered to  assess, reassess, collect and  enforce payment  of any  tax under  the general sales tax  law of  the appropriate  State are  authorized to assess,’ reassess  and enforce  payment of tax including any penalty payable  by a  dealer under the Act. The authorities under the  General sales tax law of the State have thus been made the  agents of  the Union Government in discharging the duties of assessment etc. referred to in section 9(2) of the Act, and empowered to exercise all Dr any of the powers they have under  the general  sales tax  law of the State for the aforesaid purposes.  Section 9(2)  further provides that the provisions of  the  general  sales  tax  law  of  the  State concerned  including   provisions   relating   to   returns, provisional assessment, advance payment of tax, registration of the  transferee of  any business,  imposition of  the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm  or Hindu  undivided family to pay tax in the event of dissolution  of any  firm or  partition of  such  family, recovery  of  tax  from  third  parties,  appeals,  reviews, revisions, references,  refunds, penalties,  compounding  of offences and treatment of documents furnished by a dealer as confidential shall  apply  accordingly  to  the  proceedings under the  Act. The proviso to sub- section (2) of section 9 of the  Act provides  that if  in any  State or part thereof

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there is  no general  sales tax  law in  force, the  Central Government may  by rules  made in this behalf make necessary provision for  all or  any of  the matters specified in that sub-section.  Sub-section  (3)  of  section  9  of  the  Act virtually carries  out the  intention of  Article 269 of the Constitution  by  providing  that  the  proceedings  in  any financial year  of any tax, including any penalty levied and collected under the Act in any State (other than a Union 212 Territory) on  behalf of  the Government  of India  shall be retained by  it. It  may be mentioned here that there was no express provision  in the Act itself authorizing the levy of any penalty  for delay  or default in payment of the tax due under the Act or for other breaches of the general sales tax laws of the States in so far as they were adopted by section 9(2) of  the Act as part of the machinery under the Act. But it was  understood by  all the  sales tax authorities in the States who  were authorized  to exercise power under section 9(2) that  penalty  could  also  be  collected  by  them  in accordance with  the provisions  of the general sales tax of the appropriate  State in order to enforce the provisions of the Act  including collection of tax thereunder. In Khemka & Co. v.  State of  Maharashtra(1) which was a case heard by a Bench of  five learned  Judges of  this Court,  an  assessee under the Act who was a resident of the State of Maharashtra contended that  the levy  of penalty  under section 16(4) of the Bombay  Sales Tax Act for delay or default in payment of tax due under the Act was not warranted by the provisions of section 9(2) of the Act. There were three opinions expressed in that case. A. N. Ray, J. with whom Khanna, J. agreed held that a  penalty not being merely a sanction or an adjunct to or consequential  to an  assessment and  not  being  just  a machinery to  enforce payment  of a tax but in reality was a statutory liability  in the absence of any express provision of levy  of penalty  for delay  or default in payment of the tax under  the Act, it was not open to the authorities under the State  law to  levy and  recover penalty  for  delay  or default in  payment of  tax under  the Act.  Mathew, J. with whom Chandrachud, J. (as he then was) agreed took a contrary view holding  that if for enforcing payment of tax due under the general  sales tax  law of  the  appropriate  State  the authorities thereunder had power to impose penalty, they had the same power of imposing penalty for enforcing. payment of tax payable  under the  Act in  accordance with  the general sales tax  law of the State. While the existence of specific provision for  levy of  penalty under  section 10  read with section 10-A  of the Act was relied on by A. N. Ray, C.J. in support of  his view,  the said provisions were explained by Mathew, J.  by observing  that the penalties provided for in section 10  read with  section 10-A  of the Act were not for the  purpose   of  or   in   connection   with   assessment, reassessment, collection  and enforcement  of payment of tax payable by  a dealer under the Act. Beg, J. (as he then was) by his  separate judgment  concurred with  the view  of A. N Ray, C.J.. The result was that 213 the penalty  levied against  the appellant  was held  to  be unsustainable  in   accordance  with   the  opinion  of  the majority. Consequently  section 9  came to be amended by the Amending Act  which was published in the Gazette of India on September 9,  1976 introducing  sub-section (2-A)  in it. We are not  concerned with  the other  amendments made  by  the Amending Act  in this  case. Sub-section  2-A of  section  9 which was introduced by the Amending Act reads:           "(2-A).  All   the  provisions   relating  to

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    offences  and   penalties  (including   provisions      relating to  penalties in  lieu of prosecution for      an offence  or in  addition to  the  penalties  or      punishment  for   an  offence  but  excluding  the      provisions relating  to matters  provided  for  in      sections 10  and 10A) of the general sales tax law      of each  State shall with necessary modifications,      apply in relation to the assessment, reassessment,      collection and  the enforcement  of payment of any      tax required  to be  collected under  this Act  in      such State or in relation to any process connected      with such assessment, reassess-ment, collection or      enforcement of  payment as  if the  tax under this      Act were a tax under such sales tax law."      Sub-section (1)  of  section  9  of  the  Amending  Act contains a  validating provision.  Section 9 of the Amending Act declared  that the  provisions of  section 9  of the Act would have  effect and  should be  deemed always to have had effect in  relation to the period commencing from January S, 1957 and ending with the date immediately preceding the date of commencement  of the  Amending Act as if section 9 of the Act also provided-      (a) that  all  the  provisions  relating  to  penalties (including provisions  relating  to  penalties  in  lieu  of prosecution for  an offence  or in addition to the penalties or punishment on conviction for an offence but excluding the provisions relating  to matters  provided for in sections 10 and 10A  of the principal Act and the provisions relating to offences) of  the general sales tax law of each State shall, with necessary modifications, apply in relation to-      (i)  the assessment, re-assessment, collection and           enforcement of payment of any tax required to           be collected  under the principal Act in such           State; and 214      (ii) any  process connected  with such assessment,           reassessment, collection  or  enforcement  of           payment; and      (b)   that for  the purposes  of the application of the prosisions of  such law,  the tax  under the  principal  Act shall be deemed to be tax under such law,      Sub-section (2)  of  section  9  of  the  Amending  Act validated all  actions taken  in connection with the levy of penalties  by   declaring  that   notwithstanding   anything contained in  any judgment,  decree or order of any court or tribunal or other authority, all penalties under the general sales tax  law of  any State  imposed or  purporting to have been imposed  in pursuance of the provisions of section 9 of the Act and all proceedings acts or things taken or done for the  purpose  of,  or  in  relation  to  the  imposition  or collection of  such penalties before the commencement of the Amending Act  should for all purposes be deemed to be and to have always  been imposed.  taken or  done  as  validly  and effectively as if the provisions of sub-section (1) had been in force  when such penalties were imposed or proceedings or acts or things were taken or done and accordingly-      (a) no suit or other proceedings shall be maintained or continued in  or before  any court  or any tribunal or other authority for  the refund of any amount received or realised by way of such penalty;      (b) no court, tribunal or other authority shall enforce any decree  or order  directing the  refund  of  any  amount received or realised by way of such penalty;      (c)  where  any  amount  which  had  been  received  or realised by way of such penalty had been refunded before the

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commencement of this Act and such refund would not have been allowed if  the provisions  of sub-section  (1) had  been in force on  the date  on which  the order  for such refund was passed, the amount so refunded may be recovered as an arrear of tax under the Act;      (d) any  proceeding, act or thing which could have been validly taken,  continued or done for the imposition of such penalty at  any time  before the commencement of this Act if the provisions of sub section (1) had then been in force but which had not been taken, 215 continued or  done, may  after such  commencement be  taken, continued or done.      Sub-section (3)  of  section  9  of  the  Amending  Act provided that  nothing in  section 9  (2) there of should be construed as  preventing any  person  from  questioning  the imposition or  collection of  any penalty or any proceeding, act or  thing in  connection therewith  or from claiming any refund  in  accordance  with  section  9  of  the  Act.  The Explanation to  this sub-section  provided for the exclusion of the  period between February 27, 1975 and the date of the commencement  of   the  Act   in  computing  the  period  of limitation for questioning the penalty.      Sub-section (4)  of  section  9  of  the  Amending  Act validated the levy of interest on arrears of sales tax also.      These petitions  are filed  after the Amending Act came into force.      In support  of these  petitions  the  petitioners  have urged the following contentions:-      1.   that the introduction of sub-section (2-A) in           section 9 of the Act does not have the effect           of making  the provisions relating to penalt-           ies leviable under the general sales tax laws           of the  States applicable  to the proceedings           under the Act,      2.    that  the Parliament cannot adopt the provi-           sions relating  to penalties  in the  general           sales tax  laws, of  the States for enforcing           the charge  under the  Act, as  such a course           would  amount   to  an   abdication  of   its           essential legislative function by Parliament;      3      that  the  provision  giving  retrospective           effect to  sub- section (2-A) of section 9 of           the Act  and the provision validating all the           penalties levied  prior to  the  coming  into           force of  the Amending  Act are  violative of           clause (1) of Article 20 of the Constitution;      4.    The  levy of  penalties  with  retrospective           effect is  also violative  of Article  19 (1)           (f) and (g) of the Constitution; and 216      5.   that in the case of assessees of the State of           Haryana it  is urged  that section  48 of the           Haryana General  Sales  Tax  is  void  as  it           confers arbitrary  and unguided  power on the           authorities to levy penalties.      We shall consider these contentions seriatim.      The first contention urged on behalf of the petitioners is that  the lacuna in the Act which was pointed out by this Court in  Khemaka’s case  (supra) namely  that there  was no specific provision  levying penalties in the Act as it stood before its  amendment in  1976 remains  unfilled up even now and hence  no penalties  can be  recovered by  utilising the provisions of  the general  sales tax laws of the respective States.  This   argument  is  based  upon  the  language  of

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subsection (2.A)  of section 9 of the Act which is extracted above. lt is contended that the words "(A) 11 the provisions relating to  offences and  penalties.. of  the general sales tax law  of each  State shall  with necessary  modifications apply  in   relation  to   the  assessment,   re-assessment, collection  and  the  enforcement  of  payment  of  any  tax required  to   be  collected  under  this  Act  .  ..."  are insufficient to make the provisions relating to penalties in the State  laws applicable to the assessees under the Act as the word  ’penalties’  is  not  found  alongwith  the  words assessment, reassessment,  collection and the enforcement of payment of  any tax’.  The  argument  is  misconceived.  The principal object of the Act is not the levying of penalties. Its object  is assessment,  reassessment, collection and the enforcement of  payment of central sales tax. The assessment incur the  liability to  pay penalties on account of certain acts or  omissions committed  by them  at the various stages specified   above,    namely,   assessment,    reassessment, collection and  the  enforcement  of  payment  of  tax.  The inclusion of  the  word  ’penalties’  alongwith  these  four stages would  have, therefore,  been  redundant  apart  from being inappropriate.  Sub-section (2-A)  of section 9 of the Act expressly  makes all the provisions relating to offences and penalties  which are  committed or incurred, as the case may be,  under the  general sales tax laws of the respective States, applicable  to persons who commit corresponding acts and omissions  at the  above mentioned stages under the Act. To illustrate,  if a person is liable to pay any penalty for not filing  a return  required to  be filed by him under the general sales  tax law of a State, a person who is similarly required to  file a  return under the Act incurs the penalty for not  filing a  return and  the measure of penalty is the same as under the State law. If a person is liable to 217 pay penalty  at a particular rate in addition to the tax for not paying  any part of the tax due under a State law within the specified time, a person liable to pay tax under the Act becomes liable  to pay  the penalty  at the  same rate if he commits default  in paying  the tax due under the Act. We do not, therefore,  find any  lacuna in  the language  of  sub- section (2-A)  of section  9 of  the  Act  which  makes  the provisions relating to penalties under the general sales tax laws of  the respective  States inapplicable even now to the proceedings  under  the  Act.  While  sub-section  (2-A)  of section 9  of the  Act makes the provisions relating to both offences and  penalties in  the general  sales tax  laws  of States  applicable   to  the   proceedings  under   the  Act prospectively, section  9 of  the Amending Act makes all the provisions relating  to penalties  only in the general sales tax laws  of the  States applicable  to the proceeding under the  Act  retrospectively  by  adopting  the  same  language appearing in  subsection (2-A) of section 9 of the Act. This pattern of  legislation had  to be  adopted perhaps  because Parliament wished  rightly not  to give retrospective effect to the  provisions  relating  to  offences  also  which  are referred to  in sub-section  (2-A) of section 9. Having thus given retrospective  effect to section 2-A of section 9 with effect from  January 5,  1957 in  so far  as penalties  were concerned by  enacting sub-section  (1) of  section 9 of the Amending Act,  Parliament removed the deficiency pointed out in Kheamaka’s  case (supra)  in the  Act.  In  view  of  the retrospective  amendment,  the  basis  of  the  judgment  in Kheamka’s case  (supra) was  also removed.  Consequently the judgment delivered  in that  case could not stand in the way of  realisation   of  penalties   in  accordance   with  the

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validating provisions  of section  9 (2) of the Amending Act We are  of the  view that  sub-section (2-A) of section 9 of the Act  and section  9 of  the Amending  Act  are  adequate enough to  assess and  realise penalties  with  effect  from January 5, 1957 as contemplated therein. We, therefore, hold that there  is  no  substance  in  this  contention  of  the petitioners.      The second  point urged on behalf of the petitioners is that sub-section  (2-A) of section 9 of the Act suffers from the vice of excessive delegation of legislative power. It is argued that  Parliament by  adopting the provisions relating to offences and penalties referred to in the various general sales tax  laws of  the States  has abdicated  its essential legislative function.  The question  whether there  has been excessive delegation  or abdication of legislative power has to be decided on the meaning of the words in the statute and the policy  behind it.  In the  instant case, Parliament has not authorised  the  State  Legislatures  to  make  laws  in respect of 218 offences and  penalties that  may be leviable under the Act. What is done by Parliament by enacting sub-section (2-A) of’ section 9  is that  whatever provisions relating to offences and penalties  were there  in the  general sales tax laws of the States would be applicable with appropriate modification to assessment,  reassessment, collection  and enforcement or the provisions  of the  Act. Legislation by incorporation of provisions of  another statute  ever.  though  passed  by  a different legislature  is a well known method of legislation which does  not  affect  the  validity  of  the  legislation particularly when the scheme of the other statute is similar and such  incorporation is  relevant and  necessary for  the purpose  of  advancing  the  objects  and  purposes  of  the legislation. In  the instant case we should bear in mind the history of  the central sales tax legislation and its object and purpose.  The central  sales tax  levied on  inter-State sales is  assigned under  Article 269 of the Constitution to the States  who are  the true  beneficiaries. The  assessees under the  Act  who  are  spread  over  various  States  are accustomed to  the general  pattern of sale tax law in their respective   States    and   the    various    duties    and responsibilities of  an assessee  who is liable to pay sales tax. The  officers who  assess and collect the tax under the Act are  the officers  who discharge similar functions under the State  laws. In  this situation  if Parliament has, with the knowledge of the various provisions relating to offences and penalties  in the  general sales tax laws of the various States,   adopted   them   for   purposes   of   assessment, reassessment, collection  and enforcement  of the provisions of the  Act it  cannot be  said that  it has  abdicated  its legislative functions. In this connection it is necessary to refer to the decision of this Court in State of Madras v. N. K. Nataraja Mudaliar(1). In that case one of the contentions raised by  the assessee related to the validity of section 8 of the  Act as  amended by  Central Act  31 of 1958. By sub- section (1)  of section  8 every dealer who in the course of inter-State trade  or commerce  sold to  the Government  any goods or  to a registered dealer, other than the Government, goods of  the description  referred to in sub-section (3) of section 8 was liable to pay tax under the Act at the rate of one per  cent of  his turnover.  Under  sub-section  (2)  of section 8 the tax payable on the turnover relating to inter- State sales  not falling  under sub-section (1) of section 8 was (a) in the case of declared goods, to be computed at the rate applicable to the sale or purchase of such goods inside

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the appropriate  State and  (b) in  the case  of goods other than declared  goods at the rate of seven per cent or at the rate 219 applicable to  the sale or purchase of such goods inside the appropriate State whichever was higher. Sub-section (2-A) Of section 8  of the Act provided that notwithstanding anything contained in subsection (1) or sub-section (2), if under the sales tax law of the appropriate State the sale or purchase, as the case may be, of any goods by a dealer was exempt from tax generally  or subject  to tax  generally at a rate which was lower  than one per cent (whether called a tax, a fee or by any  other name)  the tax  payable under  the Act  on his turnover in  so far  as the  turnover or  any  part  thereof related to  the sale  of such  goods should be nil or as the case might  be, should  be calculated at the lower rate. The Explanation to  sub-section 2-A  of section  8 provided that for the  purpose of  that sub-section, a sale or purchase of goods should  not be  deemed to be exempt from tax generally under the  sales tax  law of  the appropriate State if under that it  was exempt only in specified circumstances or under specified conditions  or in  relation to  which the  tax was levied at  specified stages or otherwise than with reference to the  turnover of  goods. Justifying  the varying rates of tax under  subsection (2)  and (2-A)  of section 8 depending upon the  rates of  tax levied in different States, Shah, J. Observed at pages 844-846 thus:           "The rates  of tax  in force at the date when      the Central  Sales Tax  Act was enacted have again      not become  crystalised The  rate which  the State      Legislature determines,  subject  to  the  maximum      prescribed for  goods referred  to in  s 8 (1) and      (2)   are    the   operative   rates   for   those      transactions: in  respect of  transactions falling      within s  8 (2)  (b) the rate is determined by the      State rate  except where the State rate is between      the range  of two  and seven  per cent.  The  rate      which a  State legislature  imposes in  respect of      inter-State transactions in a particular commodity      must depend upon a variety of factors. A State may      be led to impose a high rate of tax on a commodity      either when  it is  not consumed at all within the      State, or  if it  feels that  the burden  which is      falling on consumers within the State will be more      than offset  by the  gain  in  revenue  ultimately      derived from  outside consumers. The imposition of      rates of  sales  tax  is  normally  influenced  by      factors political  and economic. If the rate is so      high as  to drive  away prospective  traders  from      purchasing a  commodity and  to  resort  to  other      sources of  supply, in  its own interest the State      will adjust 210      the rate  to attract  purchasers  ...Again,  in  a      democratic  constitution  political  forces  would      operate against the levy of an unduly high rate of      tax. The  rate of  tax on sales of a commodity may      not   ordinarily    be    based    on    arbitrary      considerations but in the light of the facility of      trade  in   a  particular  commodity,  the  market      conditions   internal    and   external-and    the      likelihood of-consumers  not being  scared away by      the price  which includes  a  high  rate  of  tax.      Attention must  also be  directed to sub-s. (S) of      s.  8   which  authorises  the  State  Government,

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    notwithstanding anything  contained in s. 8 in the      public interest  to waive  tax or  impose  tax  on      sales at  a lower  rate on  inter-State  trade  or      commerce. It  is clear  that the  legislature  has      contemplated that  elasticity of  rates consistent      with economic forces may be maintained.           Prevalence of  differential rates  of tax  on      sales of  the same commodity cannot be regarded in      isolation  as   determinative  of  the  object  to      discriminate between  one State and another. Under      the Constitution  as  originally  framed,  revenue      from sales  tax was  reserved to  the States.  But      since the  power of taxation could be exercised in      a  manner   prejudicial  to   the  larger   public      interests by  the States it was found necessary to      restrict the  power  of  taxation  in  respect  of      transactions which  had  an  inter-State  content.      Amendment of  Art. 286  and the  enactment of  the      Sales Tax  Validation Act  1956, and  the  Central      Sales Tax  Act, 1956, were all intended to serve a      dual purpose:  to maintain  the source  of revenue      from sales  tax to the States and at the same time      to prevent the States from subjecting transactions      in the  course  of  inter-State  trade  so  as  to      obstruct  the   free  flow   of  trade  by  making      commodities unduly  expensive. The  effect of  the      Constitutional provisions  achieved in  a somewhat      devious manner  is still  clear, viz.  to  reserve      sales tax  as a  source of revenue for the States.      The Central  Sales Tax  Act is  enacted under  the      authority of  the Union Parliament, but the tax is      collected through  the agency  of the State and is      levied ultimately  for the  benefit of  the States      and is statutorily assigned to the States. That ii      clear from the amendments made by the Constitution      (Sixth Amendment) Act, 1956, in Art. 269, and the 221      enactment of cls. (1) & (4) of s. 9 of the Central      Sales Tax Act. The Central sales-tax though levied      for and  collected in  the  name  of  the  Central      Government is a part of the sales-tax levy imposed      for the  benefit of  the States.  By leaving it to      the States  to levy  sales-tax  in  respect  of  a      commodity   on    intra-State   transactions    no      discrimination is  practised: and  by  authorising      the  State   from  which  the  movement  of  goods      commences to  levy on transactions of sale Central      sales-tax,  at  rates  prevailing  In  the  State,      subject to  the limitation already set out, in our      judgment, no  discrimination can  be deemed  to be      practised.      In Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. The Asst. Commissioner of  Sales Tax  &  ors.(1)  this  Court  had  to consider whether  section 8 (2) (b) of the Act suffered from the vice  of excessive  delegation.  The  material  part  of section 8(2)  (b), as  it stood  then, provided that the tax payable by  any dealer  on his  turnover in  so  far  as  it related to  the sale  of goods  in the course of inter State trade or commerce not falling within sub-section (1) thereof and In  case of  goods other  than declared  goods should be calculated at  the rate  often  per  cent  or  at  the  rate applicable to  the sale or purchase of such goods inside the appropriate State  whichever was higher. The provision meant that while  the tax due on the sale of the goods in question could not  be less  than ten  per cent  of the  turnover, it

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could be  any amount higher than that as might be determined by  a  State  Legislature  in  respect  of  the  intra-State transactions of sales or purchases of the said goods. In the above case  there were  two  judgments  both  upholding  the validity of the impugned provision.      The majority  judgment delivered by Khanna, J. saw that there was a legislative policy behind the provision, namely, that the  rate of  sales tax on the goods in question should be not less than ten per cent but in any event should be the same as  the local sales tax for the said goods. Khanna, J., however, held  that it  was not  possible to accept that the view that  the  legislature  would  not  be  abdicating  its essential  legislative  function  merely  because  it  could always  repeal  the  law  delegating  legislative  power  to another authority.  The minority  view expressed  by Mathew, J., however, differed from 222 Khanna, J on the above point, but agreed with the conclusion of the majority on the validity of the impugned provision. A reading of  the above  decision shows  that the  question of valid delegation of legislative power requires to be further examined by  this Court  in view of a subsequent decision of this Court in M. K. Papiah & Sons. v.       The       Excise Commissioner & Anr.(1) in which we do not find any reference at all to the case of Gwalior Rayon Silk Mfg. Wvg. Co. (supr a). Even  so, so  far as  the  present  case  is  concerned, judging it  in the  light of either of the two views, it has to be  held that  subsection (2-A)  of section  9 of the Act does not suffer from the vice of excessive delegation merely because the  provisions relating to penalties in the general sales tax laws of the States are adopted for purposes of the Act.      It may  be  true  that  the  circumstances  leading  to imposition of penalties and the rates of penalties vary from one State  to the  other but the power to make a legislative provision on  matters relating to penalties is circumscribed by various  economic factors  and it  cannot  be  said  that Parliament  has   virtually  surrendered   its   legislative judgment  to   the  State   legislatures.  There   is  clear legislative policy adopted by Parliament in the case of levy of penalties  and that  is that  penalties payable under the Act should  be the  same as  the penalties payable under the general sales  tax law  of  each  State.  If  the  rates  of penalties exceed  reasonable limits the States which are the beneficiaries of  the tax collected under the Act themselves suffer as  such unreasonable  levy is  bound to  lead to the killing of  the goose  which lays  the golden egg. The trade would immediately  shift to  areas outside  the State  which resorts to  higher taxes  and penalties  The  political  and economic factors which operate in this field are so powerful that the  provisions with  regard to penalties to be made by the State Legislature cannot but be reasonable as they would affect the  levy of  tax under the State Act also. The penal nature of  the penalties  itself is  a  sufficient  guidance regarding maximum limits upto which penalties can be levied. A penalty cannot be wholly disproportionate to the extent of infringement of  law. Moreover  Parliament  always  has  the power to  amend its  own i.  e. the Act if it finds that the provisions relating  to penalties in any State law cross the limits of  public interest.  It is  of interest to note here that in  the case  of M.K. Papiah & sons (Supra) it was held that the  existence of the power to repeal or modify its own law in order to bring a piece of 223 delegated legislation  in accord  with its  own  legislative

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will should  be considered  as an  effective  check  on  the misuse of  legislative power  by the  delegate. The power of Parliament to  remedy a  situation created  by the  levy  of penalties by  the general  sales tax  laws of  States not in consonance with  its own  pleasure is  also an answer to the criticism that  Parliament has  effaced itself  in  enacting sub-section (2-A)  of section  9 of the Act. As long as such power is  intact and  can be  exercised whenever  Parliament wishes to take the matter directly into its own hands, there cannot be  a total  effacement of  the legislative  power of Parliament.  The   above  view  receives  support  from  the following passage  in  "Australian  constitutional  Law"  by Fajgenbaum & Hanks (Second Edition) at page 202:      "3,009 ............................ Parliament can      delegate to  the Crown,  or to  any servant of the      Crown, the  power to  demand the payment of taxes,      including the power to fix the rate of taxation. A      clear illustration  is provided  by the provisions      of the  State Transport  Facilities Act 1947 (Qld)      and the  State Transport Act 1960 (Qld) which gave      to a  commissioner for transport very broad powers      to license services for the carriage of passengers      and goods  and to fix the amount of licence fee to      be paid  by every  licencee The  validity of these      provisions was  up held  by the  Privy Council in,      Cobb &  Co.  Ltd.  v.  Kropp  (1967)  1  AC,  141,      rejecting an  argument that  Queensland Parliament      had no  power to abrogate its taxing power in this      way:           In  their   Lordships’  view  the  Queensland      legislature were fully warranted in legislating in      the  terms   of  the   Transport  Acts  now  being      considered.  They  preserved  their  own  capacity      intact and  they retained perfect control over the      commissioner for  transport in  as  much  as  they      could at  any time  repeal  the.  legislation  and      withdraw such authority and discretion as they had      vested in  him. It  cannot be  asserted that there      was a  levying of money by pretence of prerogative      without   grant    of   Parliament    or   without      parliamentary warrant.           The legislature  were  entitled  to  use  any      agent or  any subordinate  agency or any machinery      that they  considered appropriate for carrying out      the objects and purposes that 224      they had  in mind  and which they designated. They      were  entitled   to  use   the  commissioner   for      transport as  their instrument  to fix and recover      the licence  and permit  fees (1967)  1 AC at 156,      157."      We feel  that even  applying the  rule in  the  Gwalior Rayon Silk Mfg. (Wvg.) Co.’s case (supra), it cannot be said that sub-section (2-A) of section 9 suffers from the vice of excessive delegation  of legislative  power having regard to the nature of that provision.      We shall  now proceed  to consider the question whether by reason  of retrospective effect having been given to sub- section (2-A) of section 9 of the Act in so far as penalties are concerned  by enacting  section 9  of the  Amending  Act Parliament  has   contravened  Article   20   (1)   of   the Constitution. In  order to  make good  the deficiency in the Act pointed  out by  the majority  judgment in Khemka’s case (supra) the  validating provision  contained in section 9 of The Amending  Act provided  in substance  that in  so far as

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penalties were  concerned sub-section  (2-A)  of  section  9 should be  deemed to  have had  effect in  relation  to  the period commencing  on January  5, 1957  and ending  with the date immediately  preceding the  date of commencement of the Amending Act.  That is  obvious from  the similarity  of the language between  sub-section (2-A)  of section 9 of the Act and section  9 (1) of the Amending Act. Section 9 (2) of the Amending Act  also contained  the usual provision validating the levy of penalties completed prior to the commencement of the Amending  Act and  authorising the  continuance of  the. proceedings for  levy of  penalties in respect of the period commencing from  January 5, 1957. In the instant case it may be noted  that in  all the  general sales  tax laws  of  the States, there  were provisions  requiring  every  dealer  to comply with  statutory requirements  such as  the filing  of returns, the  payment of  the tax  due within  the specified time etc.  and they were applicable to the dealers under the Act by  reason of  section 9 (2) of the Act. Notwithstanding such statutory  provisions many  dealers failed  to  perform their statutory  duties. They  would  have  been  liable  to penalties mentioned  in the relevant statutory provisions if the defaults  committed by  them were  those committed under the said  statutory provisions  on the basis of the language of sub-section  1.1 (2)  of section  9 of  the Act  in  many States proceeding  for levying  penalties in accordance with the provisions  relating to  penalties in  their  respective general  sales   tax  laws   were  commenced   against  such defaulters under  the Act  and in some cases proceeding were completed 225 and penalties  were also  recovered. Some  High Courts  also took the view that such penalties were validly leviable. But ultimately this  Court by a majority of three to two held in Khemka’s case  (supra)  that  since  there  was  no  express provision in  the Act permitting the levy of such penalties, the proceedings  relating to  the determination and recovery of  penalties   were  not   valid.  The  Amending  Act  was, therefore, passed expressly to make the levy of penalties as per the  general sales  tax laws  in  force  in  the  States permissible with  retrospective effect  and also to validate all  such   previous  proceedings.   Article   20   of   the Constitution reads thus:           "20. (1)  No person shall be convicted of any      offence except  for violation of a law in force at      the time  of the  commission of the act charged as      an offence,  nor be subjected to a penalty greater      than that  which might  have been  inflicted under      the law  in force at the time of the commission of      the offence.           (2)  No   person  shall   be  prosecuted  and      punished for the same offence more than once.           (3) No person accused of any offence shall be      compelled to be a witness against himself."      The contention  of the  petitioners is  that any act or omission which  is considered  to be a default under the Act for which  penalty is  leviable is an offence, that such act or omission  was not  an offence  and no penalty was payable under the law in force at the time when it was committed and hence they cannot be punished by the levy of penalty under a law which  is given  retrospective effect.  They principally rely on  Article 20 (1) in support of their case Art. 20 (1) is modelled  on the  basis of  section 9 (3) of Article 1 of the Constitution  of the  United  States  of  America  which reads: "No  bill of  attainder or ex post facto law shall be passed". This  clause has  been  understood  in  the  United

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States of  America as  being applicable  only to legislation concerning crimes.  (See Calder  v. Bull 3 Dall 386 (1798)). The expression ’offence’ is not defined in the Constitution. Article 367 of the Constitution says that unless the context otherwise provides  for words  which are  not defined in the Constitution, the  meaning assigned  in the  General Clauses Act, 1897  may be  given. Section  3  (38)  of  the  General Clauses Act  defines ’offence’  as any  act or omission made punishable by any law for the time being in force, 226 The marginal  note of  our  Article  20  is  ’protection  in respect of  conviction for  offences’. The  presence of  the words ’convition’  and  ’offences’,  in  the  marginal  note ’convicted of  an offence’,  ’the act charged as an offence’ and ’commission  of offence’  in clause  (1) of  Article 20, ’prosecuted and  punished’ in  clause (2)  of Article 20 and ’accused of  an offence’  and ’compelled  to  be  a  witness against  himself’  in  clause  (3)  of  Article  20  clearly suggests that  Article  20  relates  to  the  constitutional protection given  to persons  who are  charged with  a crime before a  criminal court.  (See H.M. Seervai: Constitutional Law of  India (3rd  Edition) Vol.  1, page  759).  The  word ’penalty’ is a word of wide significance. Sometimes it means recovery of  an amount  as a  penal measure  even in a civil proceeding.  An   exaction  which  is  not  of  compensatory character is  also termed as a penalty even though it is not being recovered  pursuant to  an order  finding  the  person concerned  guilty   of  a  crime.  In  Article  20  (1)  the expression ’penalty’  is used in the narrow sense as meaning a payment  which has  to be made or a deprivation of liberty which has  to be suffered as a consequence of a finding that the person accused of a crime is guilty of the charge.      In Maqbool  Hussain v.  The  State  of  Bombay.(1)  the question for  consideration was  whether  when  the  customs authorities confiscated  Certain goods under the Sea Customs Act there  was a  prosecution and  the order of confiscation constituted a punishment within the meaning of clause (2) of Article 20.  Negativing the said plea, the Court observed at pages 738-739:           "The very wording of article 20 and the words      used therein:-"  convicted "commission  of the act      charged  as   an  offence",  "be  subjected  to  a      penalty", "commission of the offence’, "prosecuted      and punished",  "accused of  any  offence",  would      indicate that the proceedings therein contemplated      are of the nature of criminal proceedings before a      court of  law or  a judicial tribunal and the pro-      secution in  this context would mean an initiation      or starting  of proceedings  of a  criminal nature      before a  court of  law or  a judicial tribunal in      accordance with  the procedure  prescribed in  the      statute which  creates the  offence and  regulates      the procedure." 227      The levy  of charges  for ’unauthorised  use’ of  water enforced with  retrospective  effect  was  held  to  be  not offending Article 20 (1) in Jawala Ram v. State of Pepsu.(1) Similarly in  State of  West Bengal  v.  S.K  Ghosh.(2)  the forfeiture provided under section 13 (3) of the Criminal Law Amendment ordinance  1944 (38  of 1944) was held to be not a penalty  within  the  meaning  of  Article  20  (1)  of  the Constitution and  in that  connection this Court observed at pages 130-131 thus:           "Article 20  (1)  deals  with  conviction  of      persons for offences and for subjection of them to

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    penalties. It  provides firstly  that  "no  person      shall be  convicted  of  any  offence  except  for      violation of  a law  in force  at the  time of the      commission of  the act  charged  as  an  offence".      Secondly, it  provides that  no  person  shall  be      "subjected to  a penalty  greater than  that which      might have  been inflicted  under the law in force      at the  time of  the commission  of the  offence".      Clearly, therefore, Art.20 is dealing with punish-      ment for  offences  and  provides  two  safeguards      namely. (1)  that no  one shall be punished for an      act which  was not  an offence  under the  law  in      force when  it was committed, and (ii) that no one      shall be  subjected to  a greater  penalty for  an      offence than  what was  provided under  the law in      force when  the offence  was committed. The provi-      sion for  forfeiture under s. 13(3) has nothing to      do with  the infliction  of  any  penalty  on  any      person for  an offence. If the forfeiture provided      ins. 13(3)  were really  a penalty  on a convicted      person for  commission of  all offence  we  should      have found  it provided  in the 1943 ordinance and      that  penalty   of  forfeiture   would  have  been      inflicted  by   the  criminal   court  trying  the      offender."      Again while  upholding section  25 FFF(1)  (which  came into force  on June 6, 1957) of the Industrial Disputes Act, 1947 which  directed compensation  to workers  who had  been retrenched earlier  on and  after November  28,  1956,  this Court observed in Hatisingh Mfg. Co. Ltd. & Anr. v. Union of India & ors.(3) at pages 536 and 545 thus: 228           "A law  which creates  a civil  liability  in      respect of  a transaction  which has  taken  place      before the  date on which the Act was enacted does      not per se impose an unreasonable restriction                                            (page 536)           If the  statute fixes  criminal liability for      contravention of  the prohibition  or the  command      which is  made applicable  to  transactions  which      have taken  place before the date of its enactment      the protection of Art. 20(1) may be attracted.. By      s. 33(c)  liability to  pay  compensation  may  be      enforced by  coercive process, but that again does      not amount  to infringement  of Art.  20(1) of the      Constitution. Undoubtedly for failure to discharge      liability to  pay compensation,  a person  may  be      imprisoned,  under   the  statute   providing  for      recovery of  the amount,  e.g.,  the  Bombay  Land      Revenue Code,  but failure  to discharge  a  civil      liability is  not unless  the statute expressly so      provides, an offence. The protection of Art. 20(1)      avails only against punishment for an act which is      treated as  an offence  which when done was not an      offence."                                              (page 545)      The petitioners  have relied  upon certain decisions in support of  their contention.  We shall  deal with  some  of them. It  is true  that in  Rai Bahadur Hurdut Roy Moti Lall Jute Mills v. The State of Bihar & Anr.(1) the High Court of Patna held  that the  amendment of  section 14A of the Bihar Sales Tax  Act, 1947 by Bihar Act IV of 1955 in so far as it authorised the  imposition of  the penalty  of forfeiture of the amounts collected earlier by dealers in contravention of the provisions  of section  14A, without  prejudice  to  any

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punishment for  an offence  under that Act, was violative of Article 20(1) of the Constitution. We have gone through that decision. We  do not  find any  tenable reason  given by the High Court in support of its view. It may be added here that in the  appeal filed against that decision before this Court in The  State of  Bihar v.  Rai Bahadur Hurdut Roy Moti Lall Jute Mills  & Anr.(2)  the judgment  of the  High Court  was confirmed on  the ground  that the penalty of forfeiture was not 229 imposable on  the facts of that case, but on the question of the applicability  of Article  20(1) to the case, this Court declined to  express any  opinion on  the ground that it was purely  an   academic  issue.  In  Shew  Bhagwan  Goenka  v. Commercial Tax  officer &  ors.(1) the  Calcutta High  Court observed that the retrospective operation of an amendment to the Bengal  Finance (Sales  Tax) Act,  1941 which imposed an unexpected liability  in  respect  of  certain  transactions which when they took place were not subject to any charge or liability under that Act was opposed to Article 20(1) of the Constitution. In  that case  the facts were that as a result of the modification of the definition of the word ’business’ with retrospective effect, the assessee became liable to pay tax on  the turnover  relating to  sales of  certain old and discarded machineries  and equipments.  The assessee had not been prosecuted  for any offence or punished by any criminal court as a consequence of such amendment. It was open to the High Court  to hold  that if  there was any such prosecution for any offence it was violative of Article 20(1). But in so far as  realisation of  tax was  concerned Article 20(1) did not  in   terms  apply.  Reference  to  Article  20(1)  was, therefore,  unnecessary   for  deciding   that   case.   The observations made  by this  Court in  Commissioner of Wealth Tax, Amritsar v. Suresh Seth(2) at page 430 to the effect:           "In the  case of acts amounting to crimes the      punishment to be imposed cannot be enhanced at all      under   our   Constitution   by   any   subsequent      legislation by  reason of  Article  20(1)  of  the      Constitution which  declares that  no person shall      be subjected  to a penalty greater than that which      might have  been inflicted  under the law in force      at the  time of  the commission of the offence. In      other cases,  however, even  though the  liability      may be  enhanced it  can only  be done  by a subs-      equent law (of course subject to the Constitution)      which either  by express  words  or  by  necessary      implication provides for such enhancement," are obviously of no assistance to the petitioners.      On the.  Other hand,  a Full Bench of the High Court of Allahabad has  held  in  Raghunandan  Prasad  Mohan  Lal  v. Income-Tax 230 Appellate Tribunol, Delhi Bench & ors.(1) that Article 20 of the Constitution  contemplates proceedings  in the nature of criminal proceedings  and  it  does  not  apply  to  penalty proceedings under  the Income-tax  Act, 1961  which  have  a civil sanction  and are revenue in nature. The High Court of Madhya Pradesh  has held  in Central  India Motors  v. C. L. Sharma, Assistant  Commissioner of Sales Tax, Indore Region, Indore Anr.(2)  that Article  20(1) is  not attracted to the case of  a levy  of penalty  made with  retrospective effect under the Madhya Pradesh General Sales Tax Act, 1958.      After giving  an anxious  consideration to  the  points urged before  us, we  feel that  the word  ’penalty’ used in Article 20(1)  cannot be  construed as including a ’penalty’

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levied  under   the  sales  tax  laws  by  the  departmental authorities for  violation of  statutory provisions  penalty imposed by  the  sales  tax  authorities  is  only  a  civil liability, though  penal in character. It may be relevant to notice that  subsection  (2-A)  of  section  9  of  the  Act specifically refers  to certain acts and omissions which are offences for  which a criminal prosecution would lie and the provisions  relating   to  offences   have  not  been  given retrospective effect  by section  9 of the Amending Act. The argument based  on Article  20(1) of  the  Constitution  is, therefore, rejected.      The  next   point  to  be  considered  is  whether  the imposition and  collection  of  penalty  with  retrospective effect  amounts   to  an   imposition  of   an  unreasonable restriction on  the fundamental  right of the petitioners to own property  and to  carry  on  business  guaranteed  under Article 19(1)  (f) and  (g) of  the  Constitution.  We  have already indicated  above the  circumstances under  which  it becomes  necessary  to  levy  penalties  with  retrospective effect and  to validate all the proceedings relating to levy of penalties and recovery thereof. The scope of the power of a legislature  to make a law validating the levy of a tax or a duty  retrospectively was  considered  by  this  Court  in Chhotabhai Jethabhai  Patel &  Co. v.  The Union  of India & Anr.(3) The  Court held  that Parliament  acting within  its legislative field  had the  power  and  could  by  law  both prospectively and retrospectively levy excise duty under the Central Excises  and  Salt  Act  .1944  even  where  it  was established that by reason of the retrospective effect 231 being given  to the  law, the  assessees were  incapable  of passing on  the excise duty to the buyers. After considering certain American  decisions, Ayyangar J. Observed at page 37 thus:           "It would  thus be  seen that  even under the      constitution of  the United  States of America the      unconstitutionality  of  a  retrospective  tax  is      rested on what has been termed "the vague contours      of the  5th Amendment.  Whereas under  the  Indian      Constitution that  grounds on  which infraction of      the rights  to property is to be tested not by the      flexible rule  of "due  process" but  on the  more      precise criteria  set  out  in  Art.  19(5).  Mere      retrospectivity  in  the  imposition  of  the  tax      cannot per  se render  the Law unconstitutional on      the ground  of its  infringing the  right to  hold      property under  Art. 19(1)(f  ) or  depriving  the      person of property under Art. 31(1). If on the one      hand, the  tax enactment  in question  were beyond      legislative competence  of the  Union or  a  State      necessarily different  considerations arise.  Such      unauthorised imposition would undoubtedly not be a      reasonable  restriction   on  the  right  to  hold      property besides  being an  unreasonable restraint      on the  carrying on  of business,  if the  tax  in      question is  one which  is laid  on  a  person  in      respect of his business activity."      The Court was more emphatic in Rai Ramkrishan & ors. v. The State  of Bihar(3) about the power of the legislature in India to  enact retrospective taxation laws. It held that if in its  essential features  a taxing  statute is  within the competence of  the legislature,  it would not cease to be so if retrospective  effect is  given to  it. A power to make a law, therefore,  includes  within  its  scope  to  make  all relevant provisions which are ancillary or incidental to it.

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The provision  for levying of interest and to levy penalties retrospectively and  to validate  earlier proceedings  under laws  which   have  been   declared  unconstitutional  after removing the  element  of  unconstitutionality  is  included within  the   scope  of  legislative  power.  In  the  above mentioned case of Rai Ramkrishna & ors. (supra), a Bihar Act levying a  tax on  passengers and  goods passed  in 1950 was declared to  be unconstitutional  by this Court in December, 1960.  An  Act  validating  the  said  levy  after  removing constitutional deficiencies in it was passed with 232 the assent  of the  President in September 23, 1961 and that Act was  given retrospective  effect from  April 1,  1950 on which date  the earlier  Act  which  had  been  declared  as unconstitutional had  come into force. The limited challenge mounted against  the validating  Act was that the provisions contained in  section 23(b)  thereof which provided that any proceeding commenced or purported to have been commenced for the assessment, collection and recovery of any amount as tax or penalty under the provisions of the earlier Act which had been  declared   as  unconstitutional   or  the  rules  made thereunder during  the period from April 1, 1950 to July 31, 1961 i.e.  till the  date on  which an  ordinance which  was replaced by  the validating Act in question came into force, should be  deemed to  have been  commenced and  conducted in accordance with  the provisions of the validating Act and if not already  completed should  be continued and completed in accordance with  the validating  Act was  opposed to Article 304(b) and  Article 19(1)(f  ) and (g). It was urged in that case on  the basis  of the observation made in Sutherland on ’Statutes and Statutory Constructions’ to the effect that:           "Tax statutes  may be  retrospective  if  the      legislature   clearly    so   intends.    If   the      retrospective feature  of a  law is  arbitrary and      burdensome the statute will not be sustained" that the  length of  retrospectivity, that  is, eleven years was an  unreasonable restriction  on the  rights  guaranteed under Article 19(1)(f ) (g). This contention was rejected by this Court at pages 915 and 916 of the Report as follows:           ’We do  not think that such a mechanical test      can be  applied in determining the validity of the      retrospective  operation   of  the   Act.  It   is      conceivable that  cases may  arise  in  which  the      retrospective  operation  of  a  taxing  or  other      statute  may   introduce  such   an   element   of      unreasonableness that  the restrictions imposed by      it  may   be  open   to   serious   challenge   as      unconstitutional; but  the test  of the  length of      time  covered   by  the   retrospective  operation      cannot, by itself, necessarily be a decisive test.      We  may   have  a   statute  whose   retrospective      operation covers  a comparatively short period and      yet  it   is  possible  that  the  nature  of  the      restriction  imposed  by  it  may  be  of  such  a      character as  to introduce  a serious infirmity in      the 233      retrospective operation. On the other hand, we may      get  cases   where  the   period  covered  by  the      retrospective operation  of  the  statute,  though      long, will  not introduce any such infirmity. Take      the case  of a Validating Act. If a statute passed      by the  legislature is  challenged in  proceedings      before a  court, and  the challenge  is ultimately      sustained and  the statute  is struck  down, it is

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    not unlikely  that the  judicial  proceedings  may      occupy a  fairly long  period and  the legislature      may well decide to await the final decision in the      said proceedings  before it  uses its  legislative      power to cure the alleged infirmity in the earlier      Act. In  such a  case, if after the final judicial      verdict  is   pronounced   in   the   matter   the      legislature passes  a validating  Act, it may well      cover  a   long  period   taken  by  the  judicial      proceedings  in   Court  and   yet  it   would  be      inappropriate   to    hold   that    because   the      retrospective  operation  covers  a  long  period,      therefore,  the   restriction  imposed  by  it  is      unreasonable. That is why we think the test of the      length  of   time  covered  by  the  retrospective      operation  cannot   by  itself  be  treated  as  a      decisive test.           Take the  present case.  The earlier  Act was      passed in  1950 and  came into  force on  April 1,      1950,  and   the  tax  imposed  by  it  was  being      collected until  an order of injunction was passed      in  the   two  suits  to  which  we  have  already      referred. The  said suits were dismissed on May 8,      1952, but  the appeals preferred by the appellants      were pending  in this  Court  until  December  12,      1960.  In  other  words,  between  1950  and  1960      proceedings were  pending in  Court in  which  the      validity of  the Act  was being  examined and if a      Validating Act  had to  be passed, the legislature      cannot be  blamed. for  having awaited  the  final      decision of  this Court  in the  said proceedings.      Thus the period covered between the institution of      the said  two suits  and their  final disposal  by      this Court  cannot be  pressed  into  service  for      challenging    the     reasonableness    of    the      retrospective operation of the Act."      In the  instant case,  the facts  are one shade better. There is  no dispute  in this case about the validity of the tax payable  under the Act during the period between January 1, 1957 and the date of commencement of the Amending Act. It has to be presumed that 234 all the  tax has  been collected  by the  dealers from their customers. There  is also  no dispute  that the law required the dealers  to pay  the tax  within the specified time. The dealers had also the knowledge of the provisions relating to penalties in  the general sales tax laws of their respective States. It  was only  owing to  the deficiency  in  the  Act pointed out  by this  Court in  Khemka’s  case  (supra)  the penalties became  not payable.  In this situation, where the dealers have  utilised the money which should have been paid to the  Government and  have committed default in performing their duty,  if Parliament  calls upon them to pay penalties in accordance  with the  law as  amended with  retrospective effect  it   cannot  be   said  that   there  has  been  any unreasonable restriction  imposed on  the rights  guaranteed under Article  19(1) (f)  and (g)  of the Constitution, even though the  period of  retrospectivity  is  nearly  nineteen years. It  is also pertinent to refer here to subsection (3) of section  9 of  the Amending  Act which  provides that the provisions contained  in sub-section  (2) thereof  would not prevent  a   person  from   questioning  the  imposition  or collection of any penalty or any proceeding, act or thing in connection  therewith   or  for   claiming  any   refund  in accordance with  the Act as amended by the Amending Act read

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with sub-section  (l) of  section 9  of  the  Amending  Act. Explanation to  sub-section (3) to section 9 of the Amending Act also  provides  for  exclusion  of  the  period  between February 27,  1975 i.e.  the date  on which  the judgment in Khemka’s case  (supra) was  delivered upto  the date  of the commencement of  the Amending Act in computing the period of limitation for  questioning ally  order levying  penalty. In those proceedings  the authorities  concerned  are  sure  to consider all  aspects of  the  case  before  passing  orders levying  penalties.   The  contention   that  the   impugned provision is  violative of  Article 19(1)(f)  and (g) of the Constitution has, therefore, to be rejected.      The next  contention relates to the validity of section 48 of the Haryana General Sales Tax Act, 1973 (Act No. 20 of 1973) It reads:           "48. Failure  to maintain  correct  accounts.      and to  furnish correct  returns. If  a dealer has      maintained false or incorrect accounts with a view      to suppressing  his sales,  purchases or stocks of      goods, or  has concealed  any particulars  of  his      sales, purchases  or has furnished to, or produced      before any  authority under  this Act or the rules      made thereunder  any account return or information      which  is  false  or  incorrect  in  any  material      particular, the 235      Commissioner or any person appointed to assist him      under sub-section  (I)  of  section  3  may  after      affording such  dealer a reasonable opportunity of      being heard  direct him to pay, by way of penalty,      in addition  to any  tax payable by him, a sum not      less than twice and more than ten times the amount      of tax  which  would  have  been  avoided  if  the      turnover returned by such dealer had been accepted      as correct  and where  no tax is payable a sum not      less than one hundred rupees but not exceeding one      thousand rupees."      The argument  urged on  behalf of  the dealers  in  the State of  Haryana is  that this section which authorises the levy of  penalty at  ’a sum  of not less than twice and more than ten  times the  amount of tax’ on proof of the defaults mentioned therein  is violative of Article 14 as there is no guidance given  to the  authority levying  the penalty about the quantum  of penalty. There is no substance in this plea. The provision  in question  itself suggests that the levy to be made  under it  is in  the  nature  of  a  penalty  which requires the  authority concerned  to apply  his mind to all relevant  aspects  of  the  default  alleged  to  have  been committed by  a dealer.  First the  default committed by the dealer should  be established at an enquiry after giving the dealer concerned  an opportunity  of being heard. The degree of remissness  involved in  the default is a relevant factor to be  taken into account while levying penalty. The section provides both  the minimum and the maximum amount of penalty leviable and  it is  correlated to  the amount  of tax which would have  been avoided  if the  turnover returned  by such dealer had  been accepted  as  correct.  The  order  levying penalty is quasi judicial in character and involves exercise of judicial  discretion.  The  considerations  which  should weigh with  the authorities  while imposing penalty are well known and  have been  settled by  many decisions.  Hindustan Steel Ltd.  v. State  of Orissa(l)  is one such decision. An order levying  penalty  under  section  48  of  the  Haryana General Sales  Tax Act  is also  subject to  the  provisions relating to  appeal, etc. set out in Chapter VII thereof. In

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the circumstances,  it is  not possible to hold that section 48 of  the Haryana  General Sales  Tax Act,  1973 confers an uncanalised, unguided  and arbitrary  power on the authority levying penalty. This contention should, therefore, fail. 236      In Writ  Petition No.  7220  of  1982  it  was  faintly suggested that  the order  of penalty  had been passed by an authority not  authorised by  law. We  find from  the record that the  said order  is passed  by the Assessing Authority- cum-Excise and  Taxation officer,  Hissar authorised  by the State Government  apparently under  section 2(a)  read  with section 3  of the  Haryana General  Sales Tax  Act, 1973 and Rule 4(1)  of the  Haryana General Sales Tax Rules, 1975. We do not find any substance in this contention too.      In  the  result  these  petitions  fail  and  they  are dismissed. In  the circumstances  of these cases, there will be no order as to costs. H.S.K.                                   Petitions dismissed 237