Report No. 61
Section 9(2) and The Equality Clause
4.22. Question of equality.-
Another point of great importance was raised in the same1-2 Calcutta case. Counsel for the petitioner argued that if section 9(2) was to have the effect of attacking the substantive provisions of State laws as to penalties, a situation would be created whereunder the law would differ from State to State, because the substantive provisions of each State sales tax law vary. This, he argued, would introduce inequality, and violate Article 14.
The High Court, in its judgment, referred to this argument, but did not decide it because the matter was settled by the construction placed on section 9(3)-namely, that it did not attract the penalty provisions of the law of the State. Nevertheless, the judgment did discuss the matter at some length. In the course of the discussion, the Court referred to the Supreme Court judgment1 upholding the validity of the procedure under the Income-tax Act, 1922 for the recovery of tax, and treating it as not hit by Article 14. Having mentioned this judgment, the High Court also quoted the observations in the judgment made by one of the Judges-
"We must be in a position to postulate some reasonable basis for the differentiation and we cannot get away from this necessity by vague references to the wisdom of the Legislature or by indulging in pure speculation as to what might have been at the back of its mind. Speaking broadly, for the enforcement of the levy of a Central tax like the income-tax, there should be uniformity of procedure and identity of consequences from non-payment. The machinery for recovery might be different between the several States, but the defaulting assessee must be put on the same footing as regards the penalties."
The High Court after quoting the above passage observed:
"These observations are very relevant for the point under decision in this appeal before us. Mr. Mukherjee, the learned Advocate for the appellant, has argued that, if the Central Sales Tax Act by reason of section 9(2) of its provision is construed to authorise the State Government to impose a penalty for delay or non-submission or returns of turnover, then it will lead to a chaotic situation, because different penalties are provided under different State sales tax statutes in different States.
A few illustrations were given by Mr. Mukherjee on this point. According to him, Andhra Pradesh provides only for best judgment assessment and so also the Central Sales Tax (Madras) Rule 5(4). But here, under section 11(1), a full scale assessment is contemplated in West Bengal. The State of Bihar introduces a penalty for such failure a sum not exceeding five rupees per day, whereas Orissa introduces a penalty for the same ground but for which penalty cannot exceed 1/10th per cent. of the tax due or rupees five for every day thereafter."2
1. Mohan Lid Chokhani v. C.T.O., (1971) 28 STC 363 (Cal).
2. Para. 4.19, supra.
3. Purshottam v. Addl. Collector, AIR 1956 SC 20: 28 ITR 891.
4. The judgement gives other examples of disparity.