Holding

Sub‑section (2‑A) of section 9 and the retrospective validation of penalties are constitutionally valid, do not constitute excessive delegation, and Article 20(1) does not apply to civil tax penalties; section 48 of the Haryana Act is also valid.

Summary

The petitioners, dealers under the Central Sales Tax Act, challenged the constitutional validity of sub‑section (2‑A) of section 9 of the Act (as amended in 1976) and the retrospective validation of penalties, alleging excessive delegation of legislative power and violations of Articles 19(1)(f), 19(1)(g) and 20(1) of the Constitution. They also contested section 48 of the Haryana General Sales Tax Act, 1973 as arbitrary and violative of Article 14. The Court held that sub‑section (2‑A) and the retrospective validation are valid, that Article 20(1) does not cover civil penalties imposed under tax law, and that there is no excessive delegation. The Haryana provision was found to provide sufficient guidance and not to confer unguided power. Consequently, the petitions were dismissed.

Issues considered

Whether sub‑section (2‑A) of section 9 of the Central Sales Tax Act, 1956, as amended by the Central Sales Tax (Amendment) Act, 1976, is unconstitutional on the ground of excessive delegation of legislative power.
Whether the retrospective validation of penalties under section 9 of the Amending Act violates Article 20(1) of the Constitution.
Whether the levy of civil penalties under the incorporated state sales‑tax provisions falls within the protection of Article 20(1).
Whether the retrospective imposition of penalties amounts to an unreasonable restriction on the right to property and to carry on business under Articles 19(1)(f) and 19(1)(g).
Whether section 48 of the Haryana General Sales Tax Act, 1973, is arbitrary, unguided and violative of Article 14.

Legislation cited

Central Sales Tax Act, 1956s. 2‑A, s. 9
Central Sales Tax (Amendment) Act, 1976s. 1, s. 2, s. 3, s. 4, s. 9
Constitution of Indias. Article 14, s. Article 19(1)(f), s. Article 19(1)(g), s. Article 20(1), s. Article 20(2), s. Article 20(3)
Haryana General Sales Tax Act, 1973s. 48

Subjects

Central Sales TaxPenaltyRetrospective legislationExcessive delegationArticle 19Article 20Article 14Constitutional validitySales tax lawHaryana General Sales Tax Act

Judgment

SHIV DUTT RAI FATEH CHAND ETC. ETC.

v.
UNION OF INDIA & ANR. ETC.

May 6,1983
B
(A.P. SEN AND E.S. VENKATARAMIAH, JJ.]
Central Sales Tax Act, 1956-Sub-section (2-AJ of section 9 introd."Jced by
Ceritral Sales Tax (A1nendment) Act, 1976-Applicability of provisions relating to
penalties leviab/e under general sales tax laws of the States to the proceedings

c under the Act-And seltion 9 of the Central Sales Tax (An1end111ent) Act, 1976-
RelroSpective opera/ion-Whether sub_-section (2'-A) of section 9 of the Act suffers
from vice of excessive delcgation-iVhether sub-section (2-A) and section 9 of tfie
Amending Act· violative of Article 19 (I) (f) and (g) and Article 20 (I) of the
ConStitution. ·

....Haryana General Sales Tax Act, 1973-Section 48-Whether confers
D. 1111canalised, unguided and arbitrary power-Validity of~

Constitution of lndia-Arifr!e 20 gives const(tutional prot~ctio11 lo pe,-sot1s
charged with crin1e before crin1in,al court.

Words and phrases-Penalty-Meaning of-A Word of wide sfgnificailce-·
Used in Article 20 (J) of the Constitution in a narrow sense.
E
Section 9 of the Central Sales Tax Act, 1956 as ariiended retrospe·::tively
by the Central Sales Tax (Amendment) Act, 1969 provided for levy aiid collec-
tion of tax.and penalties on sale of goods effected by a dealer in the course of
inter-State trade or commerce. It further provided tt~at the authorties for the
tin\c being empowered to assess, re-assess, collect and enforce payment of. any
tax under the gener8.I sales tax law of the· apprOpriate State shall, on behalf of
F Govern1nent of India, assess, re-assess, collect and enforce payment of tax in-
cluding any penalty, payable by a dealer under Lhis ACt as if the tax or penalty
payable by such a-dealer umil.cr this Act is a tax or penalty undef the general
sates tax Jaw of the State; and for this purpose they 1nay exercise all or any of
the powers they have under the general sales tax 13:W of the State. Consequent .
, ..
- upon the decision of this Court in Khe111ka & Co. v. State of Maharashtra;
G [1975) 3 S.C.R. 753 l1olding 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 Tnx Act, 195_6, section 9, of the Act
came -to be amended by the Central sales Tax (Amendn1ent) Act, 1976 intro-
ducing 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
H. the g,~TI.eral sales tax Jaw of each State shatt with necessa,ry modification, apply
in rela1ion to the assessment, re-assessment, colk ct ion and the enforcement or 'I.
payment of any ta~ required to be collected under thjs Act in such State as if
the tax under this Act were a tax ·under such sales tax law.
SillV DUTT v. UNION 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 A
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 imrrtedia-
tely proceeding the date of com1nencement of the Amending Act.

The petitloners in these two batcl1es of petitions filed under Article 32 of
the Coflstitution 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 const.itutional 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 thC
Act with retrospective effect on the following grounds : •

(1) That th'e introductioO of sub-section (2-A) in secticin 9 of the Act
b)' the Arr.ending .Act, 1976 does. not have the effect of- making the provisiolls
relating to p.::nalties leviab!e under the general sales tax laws of the States
applicable to the assessees under the Act as The word 'penalties' is not found
along with the words 'assessment, re-assessment, collection and the enforce-
m·ent of payment of any tax' in sub-section (2-A.); the lacuna in the Act, which D
was pointed out by this Court in Kehmka's case nainely.that there is no specific
proviSion lev·ying penalties in the Act remaias unfilled up even now and hence
no penalties can be recovered by utilising the provisions o( the ge_neral sales tax
laws of the respec!ive States.

(2) Sub-section (1-A) of section 9 suffers from the vice Of excessive E
delegation of legislative power; the Parliament by ado"'ting the proyisions
relatiDg to offences· and penalti~s referred to in. the various general sales tax
laws of !he States has abdicated its essentjal 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 (I) of the Constitiution; 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 ofrence, "'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 o~ penalty under a law which is
given retrsopective effect.

(4) The levy and collection of penalties with retrorpectiVe effect G
itmo-Unts to an imposition of an unreasonable restriction on t}le funda~Cntal
right of the petitioners to own property: and to ·carry on business guamteed
under Article 19 (I) (f) and (g) of the Constitution.

r ( 5) That in the case of assessees of the State of itaryana, section 48 or
the Haryana General Sales Tax Act, 1973 which authorises the levy of penalty
of 'a sum of not less than twice arid mor~ than ten times t.he amount ·of tax'
on proof of the defaults mentioned therein is violative of Article 14 of th~
\
~oil sti~REME cbtil<T REPORTS [J 98~j ~ s.c.ii..

Constitution as there is no guidance given to the authority levying the penalty
A about the quantum of penalty.

Dis:_missing the petitions,

. HELD J. Sub-section (2-A) of section 9 of the Act and section 9 or the
Amending' Act are adequately enough to assess and realise penalties w. e. f.
B January .5, 1957 as contemplated therein. The principal , object of the Act is·
nOt i:he levying of the penalties. Its object is assessment, re-assessrnent,
collection and the enforcement of payment of central sales tax. The assessees
incur the liability to pay penalties on account of certain acts or omis:iions
committed by them at the various stages specified above, namely, assessn1ent,
fe-asscssment, collection and the enforcement of payment of tax. The inclt1sion
c of the word 'penalties' along with these four stages would have, therefore been
redundant apart from teing 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 applica@.e to persons who comn1it corresponding
acts and on1issions at tl1:e above 111entioned stages under the Act. Tliere is no
lacuna in the language of .sub-section (2-A) of section 9 of thC Act which
D 1nakes the provisions relating to penalties under the general sales tax laws of
the respective States inapplicable even now to the proceedings under the ·1\.ct.
While sub:section (2-A) of section 9 of the Act makes the provisions realting
to both offenceS and pCnalties in the general sales tax laws 9f the States appli-
cable to the proceedings under the Act prospectively, section 9 of the Amending
Act n1akes all the provisions relating to Penalties only in the ·general sales r.ax
E laws of the States applicable to the proceeding under _the Act retrospectiv,ely
by adopting the same language appearing in suC-section (2-A) of section 9 of
the Act. This pattern of legislation had to be adopted perhaps because Parlia-
ment wished rightly .not to g"ive retrosp'ective effect to the provisions relating to
offences also which are referred to in sllb-section (2-A) of section 9. Having thus
given retrospective effect to section (2-A) of section 9 w. e. f. January 5, 19:57
in so far as penalties were concerned by enacting sub-section (I) of section 9
F of the Amending Act, Parliament removed the deficiency pointed out :'1n
Khemka's case. [217 E-F, 216 E-G, 217 AcD]

Khemka & Co. v. State of Maltarashtra, [1975] 3 S.C.R. 1973, referred
to.

G
• ·2. · The questirin whether there has been excessive delegation or
abdication of legislative power has to be decided on the meaning of the word.i
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 legislalion which does not effect the validity of thf~
H legislation particularly when the scheme of the other statute is sin1ilar and
such incorporation is relevant and nece~sary for the purpose of advancing
the objects and purposes· of the legislatjon. (217 F:-I, 218 A-B]
SHIV oti'rt v. UNION 2oi
Jn 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 relat- A
ing to penalty 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 B
.relating to offences and penalties in the general sales tax laws of the various
States adopted theril. for pur~oses 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, 2~8 C-E]

The circuinstances leading to imposition of penalties and the rates of c
I
penalties very from on State to the other but the power to make a legislative
·. Ifrovision on matters relating to penalties is circumscribed by various economic
~ factors and it cannot be said that Parliament had virtualJy surrendered its
legislative judgment to the State legislatures. There is a clear legislative policy
adopted by Parliament in the case of levy of p~nalties and that is that the penal-
ties payble under the Act should ·be the same as the penalties payable under
the-generarsales tax law of each State. If the rates of penalties exceed reasonable
D
limits the States which are beneficiaries of the tax collected under the Act them-
selves 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 high.er taxes arid 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 E
reasonable as they would affect the levy of tax under the State Act also. The
- penai nature of the penalties itself is a sufficient guidance regarding maximum
limits upto which penalties can be levied. A penalty cannot be wholly dispro-
portionate.to the extent of infringement of law. Moreover Parliament always bas
the power to amend its own law i. e the Act if it finds that the provisions re·
aJting to penalties in any.State law cros! the limits of public interest. [222 CG]
' F
; State of Modras v. N K. Nataraja Muda/iar, [1968] 3 S.C.R. 829; Gwalior
~ Rayon Silk Mfg. ( Wvg.) Co. Ltd. v. The Asst/. Commissioner of Sales Tax & Or&.,
[1974] 2. S.C,R. 879; M,K Papiah & Sons v. The. Excise Commissioner & Anr •

.I [1975] 3 S.C.R. 607, referred to.

3~. The marginal note of our Article 20 is 'protection in respe~i of
conviction for offences'. The presence of words 'conviction' and''offence-s' in
G

the nla:r:ginal note 'convicted of an offence', 'the act charged as an offence' ~nd
'con1rnission of an offence', 'in clause (1) of Article 20, 'prosecuted and punis-
hed' in clause (2) of Article 20 aud 'acc~sed of an offence' and 'comwlled to be
a witness against hhnself' in clause (3) of Article 20 clearly suggests that Article H
20 relates to the constitutional protection given to persons who are charged with
a crime before a· criminal Court. [226 A-BJ
202 SUPREME COURT REPORTS it9SJj 3 S.C.R.
The word 'penalty' is a word of a wide 5ignificance. Sometimes it me"ans
recovery of an amount as a penal nlcasure even in a civil proce:eding. An
A exaction which is not of~ compensatory character is also termed as a p~nalty
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 narr_ow sense as m~aning 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 'penatly' unsed in Article
B 20 (1) cannot be construed as including a 'penalty' levied u·nder the sales tax
Jaws by the departmental authorities for violation ~f statutory prO~lsions. A~
penalty imposed by sales tax authorities is only· a Civil liabilty, though penal in
character. It may be relevant to notice that sub-section (2-A) of section 9 of the
Act specifically refers 1o certain acts and omissions which are offences for
which a critninal prosecu~ion would lie and the provisions relating to offences
have not been retrospective effect by section 9 ·of the Amending.Act.
c ' . . . .[226 B-D, 230 C-D]

Constitutional law of India by H.M. S~ervai; 3rd Ed. vol. I.. p. 759;
Maqbool Hussain v. The State of Bon1bay, [1953] S.C.R. 730; Jawala Rani v. State
of Pepsu, [1962] 2 S.C.R. 503; State of West .Bengal v. S.K Ghosh: [1963]
2 S.C.R. 111; Mfs. Hati,Singh Mfg. Co. Ltd. & Anr. v. Union of India· & Ors., 1
D [1960] 3 S.C.R. 528: Pai Bahad11r Hurdut Roy fl,faJi Lal Jute Mills v.- The State
of Bihar & Anr., [1956] 7 S. T.C. 609; The State of Bihar v. Rai iJahadur Hurdut
.Fay Moti Lall Jute Mills & Anr., A.LR .. 19(,0 S.C. 378; Shew Bhagwan (}oenka v.
Commercial Tax Officer. & Ors. [1973] 32 S.T.C. 368; Conimissloner o[ Wealth
Tax, Amritsar v. Suersh Seth, [1981] 3 S.C.R. 419; Raghunandan Prasad Mohan
Lal v. Income ·Tax Appellate Tribunal, Delhi Bench & Ors., [1970] 75 l.T . R. 741;
Central India Motors Vo C.L. Sharma, Assistant Conimissioner of Sales Tax,
E Indore Region, Indore & ,Anr.! [1980]"46 S.T.-:=. 379, referred to.

4. If in its essential features a taxing statute is within the con1petence 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 dleclarCd
F unconstitutional after removing the element of unconstitutionality is included
within the scope of legisiative power. [231 E~G]

Under the Constitution.the grounds on which infraction of the rights to
property is io be tested hav~ to, be considered on the precise criteria set out in
Article 19 (5). Mere retro~pectivity in the imposition of the tax cannot per s~
G render the law unconstitutional on the ground of it infringing ~he'rights to hold
properly under Article J9 (1) (f). The test of the length of ttine covered by the
retrospective operation cannot by itself be treated as a decisi\'e test. ·
[231 E, 233 DJ

·in the instant case, there is no djspute about the validity of the tax
H payble under the Act during the period between January 1, 1957 and the date
of commencement of the An1ending Act. It has to be presumeq 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~. Th~
SHIV PUTT v. UNION

dealers had also d1e knowledge of the provisions relating to penalties in the
general sales ta:x laws of. their respective States. It wa.s only owing to the A
deficiency in the Act pointed out by. this Court in Khemaka's case the penalties
beCame not payable. Jn .thi$ situation where the dealers have untilised the money
which should have been paid to the Government and have committed default
in performing their duty, if Parli_ament calls upon them to pay P.enalties 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
auaranteed under Article 19 (1) (f) and (g) of the Constitution, even thou&h the B
period of retrospectiv:ty is nearly nineteen years. [233 H, ~34 A-C]

Chhotab!1ai Je1habhai Patel & Co, v. The Union· of In_fia & Anr., [1962]
Suppl. 2 S.C.R. 1; Rai Ra1nkrishna & Ors., v. The State of Bihar, [1964]
1 S.C.R. 897, referred to.
c
5. ·Section 48 of the Haryana General Sales tax Act, 1973 provides both
th~ nlinimurri and the maximum amount of renalties 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 venally is quasi~iucticial in character and involves exercise of D
judicial discretion. An order levying penalty under section 48 is also subject to
-the provision relating to appeal. Jn the circumstances, it is not possible to hold
that section 48 confers an uncanalised, unguidf'd and arbitrary power on the
authority levying pen<ilty. [235 ·E-G]

Hindustan Steel ~td. v. State ofOrissa, [1970] 1 S.C.R. 753, referred to.
E
. Writ Petitions Nos. 9057 of 1982 '
ORIGINAL JuR1so1cno'I :
318-319 of 1980, 1406-07 of 1981, 782 of 1980, 1264 of 1979, 450, ,
.

5798, 5799 of 1980, 2254-60, 4715-17, 7636, 8~90of1981, 2250, 3478,
5455, 3479, 5518, 7220of1982, 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 F
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.
G
M.N. Phadke, U.R. Lalit, S.B. Bhasmi, Smt. Santosh Gupta,
H. G. Gupta, Sarwa Mitter, K.C. Dua, M.P. Jha, Dr. N.M. Ghatate,
S. V. Deshpande, S.B. Saharya, Vishnu B. Saharya, G. S. Jete/y and
Ram Lal for the Petitioners.

L N. Sihna, Attorney General, P.P. Singh, Miss A. Subhashini,
H
R.N. Poddar, Gopal Subramanium, D.P. Mohanti, S.A. Shroff,
D.D. Sharma, V.B. Joshi and M.N. Shroff for the Respondents.
2o4 SUPREME coukT REPoRTS !1983} 3 S.C.R,
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-secticin (2-A) of section 9 ·of the
Central Sales Tax Act, 1956 (Act No. 74 of 1956) (hereinafter
B referred to as 'the Act') as amended by the Central Sal.es 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.
c 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 the3e cases, it is necessary to deal with the history of the fogislation
D relating to taxes on inter-State Sales and purchases of goods during
the post-Constitution 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,
E 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:-
F
. "286. (l l 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
G
• (b) in the course of the import of the goods into,
or export of the goods out of, the territorY, of
·India.
H 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
SHIV DUTI v. UNION (Venkataramiah, J.) 205

as a direct result of such sale or purchase for the purpose
of consumption in that State, notwithstanding ihe fact A
that under the general law relating to sale of goods the
property in the goods has by reason of such sale or pur-
chase passed in another State.

(2) Except i.n so far as Parliament may by law other- B
wise 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 c
any tax on the sale or purcha€e of goods which was
being lawfully levied by the Government of any State
immediately before the. commencement , of this Cons-
titution shall, notwithstanding that the imposition of
such tax is contrary to the provisions of this clause, D
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 declare<) E
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."
F
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('). In that
case this Court held that Article 286 (I) (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 G
or purchases involving inter-State elements by all States except the
State in which the goods were ,delivered for the purpose of con- ·
sumption 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 !aw on .persons who wer~
H

(I) [1953] S.C.IL 1069.
206 SUPREME COURT REPORTS [1983] 3 s.c.R.

resident outsaide its territory provided the goods were delivered in
A 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 im-
porting State in which the goods were consumed. This question
was again reconsidered in The Bengal Immunity Company Ltd'. v. The
State of Bihar & Ors.(') In that case, this Court held that a reading
B 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 ~ould not be projected or read
into the other and, therefore, the Explanation to clause (I) co_uid
'not be legitimately extended ·to clause (2) either as an exception or
c as proviso to it or read as curtailing o·r 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 matter 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
D the view expressed in this case wa' further reiterated in M/s Ram
Narain Sons Ltd. v, Asst. Commissioner of Sales Tax & Ors.\ 2J·which
wits 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
E disequilibrium on the budgets of the several Sta.tcs 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 co;Iected
from the non-resident traders. This situation was met by the Presi-
dent promulgating Ordinauce 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-~tate sale' · for assessment were also
protected. Later on in the light of the report of the Taxation
.Enqi,iiry Commission, the Constitution itself was amended by the
G Constitution (Sixth Amendment) Act, 1956 by introducing Entry
92-A iu 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 Lis(reads : ·

H
(1) (1955] 2 S.C.R. 603.
(2) (1955] 2 S.C.R. 483.
SHIV DUTT v. UNION (Venkataramiah, J.) 207

"92-A. Taxes on the sale or purchase of goods other
than newspapers, where such sale or purchase takei place A
in the course of inter-State trade or commerce".

Entery 54 in the State List now reads : •
"54. Taxes on the sale !lr purchase of goods other
tl).an newspapers, subject to the provisions of Entry 92-A
B
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 c
clause (2) of Article 269 by the inclusion of sub-clause (g) in clause
(I) 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 :
D

''269. (I) The following duties and taxes .shall be
~,- levied and cciUected by the Government of India but
shall be assigned to the States in the manner provided in
clause (2), namely- E
...
_

(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.
F

(3) Parliament may by law formulate principles for
d_etermining when a sale or purchase of goods takes place
in the course of inter-State trade or commerce."
G
In Article 286 of the Constitution, the Explanation to clause
(!)was omitted and clauses (2) and (3) were substituted by new
clauses (2) and (3). Article 286 now reads as follows :
H
"286. (I) No law of a State shall impose, or autho-
rise the imposition of, a tax OI) the sale or purchase of
goods where such sale or purchase takes place-
208 . SUPREME ·COURT REPORTS [1983) 3 S.C.R •

(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
B determining when a sale or purchase of goods take place
in any of the ways mentioned in clause (I):

(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 oflevy, rates and other incidents of the tax
.
as Parliament may by law specify."

D Accordingly the Act was passed m 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 com·s~
of import into or export from India, to provide for the levy, collec-
E. tion 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
F 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 9r commerce or not can be determined.
G Section 4 of the Act provides ·for determining when a sale or pur-
chase of goods is deemed to take place outside a State and section 5
of th<i 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 (I) and (I-A) of section 6 of the Act which are material
for purposes of this case read as follows :

"6. Liability to tal< on inter-State sales,
SHIV DUTT v. UNION '(Venkataramiah, J.) 209

(!) 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 com·
B
merce 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 gMds out of the c
territory of India. ·

(!·Al A dealer shµll 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
D
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 circum·
stances when certain inter-State sale.s or purchases will be exempt E
from the liability imposed under sub-sections (I) and (I-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 regis-
tration of dealers, section 8 specifies the rates of tax on iales in the
course of inter-State trade or commerce and section 8-A lays down F
the rules relating to determination of turnover. Section 9 of the
· Act which has undergone a number of changes provides for asless-
ment, collection etc. of the levy made under the Act. By reason of
the retrospective amendme11t made by the Central Sales Tax Amend-
ment Act 28 of 1969, section 9 (with effect .from the commencement
of the Act) read as follows : G

"9. Levy and collection of tax and penalties-

(I) The tax payable by any dealer under this Act on H
sales of goods effected by him in the course of inter-State
trade or commerce, whether such sales fall within clause
(~)or clause (b) of section ~. shall be levied br th~
210 SUPREME COURT. REPORTS [1983) 3 S.C.R.

Government of India and the tax so levied shall be
A collected by that Government in accordance with the
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
B
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
c 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
D being empowered to assess, re-assess, collect and enforce
payment of any tax under the general sales tax Jaw 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 ~he tax or peita/ty payable by such a dealer
E 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 ret~rns, pro-
F visional 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 trans-.
feree of, or successor to, such business, tra·nsfer of lia-
bility of any firm or Hindu undivided family to pay tax in
the event of the dissolution of such firm or partition of
G such family, recovery of tax from third parties, appeals,
reviews, revisions, references, refunds, penalties, com-
pounding of offences and treatment of documents fur-
nished· by a dealer as· confidential, shall apply accor-
dingly :
H
Provided that if in any State or part thereof there
js no ~eneral sales tax law in· force 1 the Central Govern-
SHIV DUTT v. UNION ( Venkataramiah, J.) '211

ment may by rules made in this behalf make necessary
provision for all or any of the matters· specified· in this· A
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
B
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
oflndia." ·

(Underlining by us) c
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 authorised to assess, reassess and enforce payment of tax
including any penalty payable· by a dealer under the Act. The D
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 or any of the powers they have under the
general sales tax law<of the State for the aforesaid purposes. Section E
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 F
to pay tax in the event of dissolution of any firm or partition of such
family, recovery of tax from third patties, appeals, reviews, revisions.
references, refunds, penalties; compounding of offences and treatment
of documents ·fornis hed by a dealer as confidential shall apply
accordingly to the proceedings under the Act. The proviso to sub-
G
section (2) of section 9 of the Act provides that. if in any State or
part thereof 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-seciion.
Sub-section (3) of section. 9 of the Act virtually carries out the H
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 SUPREME COURT REPORTS [1983] 3 s.c.R.

Territory) on behalf of the Government of India shall be retained
A by it. It may be mentioned here that there was no express provision
in .the Act itself authorising 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
B the Act. · But it was understood by all the sales tax authorities in
the States who were authorised to exercise power under section 9(2)
th~t 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. Stall' of Maharashtra(') which was
c a case heard by a Bench of five learned Judges of this Comt, 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 defalt 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, CJ.
D
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 r"ality
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
E 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
F the authorities thereunder bad 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 tn law
of the State. While the existence of specific provision for le\•y 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 provisiom ·
G were explained by Mathew, J. by observing that the penalties pro·
vided 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
H concurred with the view of A. N. Ray,.C.J.. The result was that

•
SiiI'v DUTT v. UNION (Venkataramiah, J.) 2i3

the penalty levied against the appellant was held to be unsustainable
in accordance with the .opinion of the. majority. Consequently A
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 amend-
ments made by the Amending Act in this case. Sub•section 2-A of
section 9 which was introduced by the Amending Act reads : · B

"(2-A). All the provisions relating to 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 IO c
and JOA) of the general sales tax law of each State shall
with necessary modifications, apply in relaJion to the
assessment, re-assessment, 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 D
with such assessment, re-assessment, collection or enforce-
ment of payment as if the tax under this Act were a tax
under such sales tax law."

Sub-section (I) of section 9 of the Amending Act contains a E
validating provision. Section 9 or' the Amending Act declared that
the provisions of section 9 of the Act would have effect ana should
be deemed always to have had effect in relation to the period
commencing from January 5, 1957 and ending with the date imme-
diately preceding the date of commencement ·of the Amending Act
as if section 9 of the Act also provided- F

(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 IO and JOA 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-

H
(i) the assessment, re-assessment, collection · and
enforcement of payment of any tax required to be
collected under the princ;pal Act in such State; and
SUPREME COURT REPORTS . t1983J 3 s.c.R.'
(ii) any process connected with such assessment,
A re-assessment, collection or enforcement · of pay·
ment; 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 tai
B 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 tri.bunal or other authority, all penalties under
c the general sales tax law· of any State imposed or purporting to have
been imposed in vursuance 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 arid to have al ways been imposed, . taken or done as
D validly and effectively as if the provisions of sub-section (I) had.been
in force when such penalties'wero 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
F
way of such penalty;

(c) where any amount which had been received or realised by
way of such penalty had been refunded before the commencement of
this Act and such refund would not have been allowed if the
G provisions of sub-section (I) had been in force on the date or, 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
H taken, continued o·r done for the imposition of such penalty at any
time before the commencement of this Act if the provisions of sub-
section(!) had then been in force b.ut which had not been taken,
SHIV DUTT v. UNION ( Venkataramiah, J.)
• 215
continued or done, may after .such commencement be taken, continued
or done. A
Sub-section (3) of section 9 of the Amending Act provided that
I
nothing in sec1ion 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 conneGtion therewith or
from claiming any refund in accordance with section 9 of the Act.
B
The Explanation to this sub-section provided for the exclusion of
the period between February 27, 1975 and the date of the commence-
ment of the Act in computing the period of limitation for ques-
tioning the penalty.
c
Sub-section (4) of section 9 of the Amend mg A~t validated the
levy of interest on arrears of sales tax also.

These petitions are filed after the Amending Act came into
force.
D
In support of these petitions ·the petitioners have urged the
following contentions :-

!. that the introduction of.sub-section (2-A) in section 9
of the Act does not have the effect of making the E
provisions relating to penalties leviable under the
general sales tax laws of the States applicable to the
proceedings under the Act;

2. that the Parliament cannot adopt the provlS!ons
relating to penalties in 'the general sales tax Iaw.s, of F
the States for enforcing the charge under the Act, as
such a course would amount to an abdication of its
·essential legislative funct1on by Parliament;

3. that the provision giving retrospective effect to sub-
section (2-A) of section 9 of the Act and ·the G
provision validating all the ·penalties levied prior to
the corning, into force of the Amending Act are viola··
tive of clause (I) of Article 20 of the Constituion;

4. The levy of penalties with retrospective effect is also H
violative of Article 19 ( 1) (f) and (g) of the
Constitution; and
•
SUPREME COURT REPORTS (1983! 3s.c.lt.
5. that in the case of assessees· of the State of Haryana it
A is urged that section 48 of the Haryana General Sales .
Tax is void as it confers arbitarary and unguided
power on the authorities to levy penalties.

We shall consider these.contentions seriatim.
B
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
c remains unfilled np even now and hence no penalties can be recove-
red by utilising tl!e provisions of the general sales tax laws of the
respective States. This argument is based upon the language of sub- £·
section (2:A) of section 9 of the Act which is extracted above. It is
contended that the words "(A) 11 the provisions relating to offences
and penalties ......... of the general sales tax law of each State shall
D 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 insuffic:ient 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
E -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
F them at the various stages specified above, namely, assessment,
reassessment, collection and the enforcement of payment of tax .. The
indusion 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
G incurred, as the case may be, under the general sales tax laws of the
respective States, applicable to persons who commit corresponding
l!CtS 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
H 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 unc.er the
Act incurs the penalty for .not filing a return and the measure of
penalty is the same as under the State law. · .Jf a person is liable to
SHIV DUTT V. UNION (Venkataramiah, l.) . 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 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
B
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 A111ending
Act makes all the provisions relating to penalties only in the general c
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 D
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 ( 1l of section 9 of the Amending Act, Parliament removed
the deficiency pointed out in Khemaka's case (supra) in the Act.
In view of the retrospective amendment, the basis of the judgment in E
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 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, F
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
G
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 H
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 SUPREME COtiRT REPORTS (1983j 3 S.C.R.

offences and penalties that may be leviable under the Act. What is
A 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 th' States would be applicable with
appropriate modification to assessm·ent, reassessment, collection and
enforcement of the provisions of the Act. Legislation' by incorporation
B of provisions of another statute even 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 f~r the purpose of advancing the objects and purposes 'of
the legislation. In the instant case we should bear in mind the history
c 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
D 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
E 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
Muda/iar( 1). In that case one of the contentions raised by the
F assessee related to the validity of section 8 of the Act as amended by
Central Act 31 of i'958. By sub-section (I) 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
G 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 (!) 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 the appropriate State and (b) in the case of goods other
H than declared goods at the rate of seven per cent or a.t the rate 1
•.
(I) [1968] 3 S.C.R. 829 •.
SHIV DUTT V. UNION (Venkataramiah, J.) 219

applicable to the sale or purchase of such goods inside the appro-
. priate State whichever was higher. Sub-section (2-A) of section 8 A
of the Act provided that notwithstanding anything contained in sub-
section (I) 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
B
· 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-.s'ection 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 c
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 sub-
section (2) and (2-A) of section 8 depending upon the rates of tax
D
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
E
crystallised. The rate which the State Legislature
determines, subject to the maximum prescribed for goods
referred to in s. 8 (I) 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 F
two and seven per cent. The rate which a State Legis- .
lature imposes in respect of foter·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
G
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. H
If the rate is so high as to drive away prospective tradern
from purchasing a commodity and io resort to other
sources of supply, in its own interest the State will adjust
220 SUPREME COURT l!.EPORTs (1983] 3 s.c.ii..

the r~te t.o attract purchasers ...... Again, in a democratic
A 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
B not being scared away by the price which includes a high
rate of tax.. Attention must also be directed to sub•s. (SJ
of s. 8 which authorises the State Government, notwith-
standing anything contained in s. 8 in the public interest
to waive tax or impose tax on sales at a lower rate on '
c inter-State trad.e or commerce. It is clear that the legis-
lature has contemplated that elasticity of rates coDsistent
with economic forces may be maintained.

Prevalence of differential rates of tax on sales of the
D 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 exer-
E cised 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
F 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 transaetions in the course of
'
inter-State trade so as to obstruct the free flow of trade
by making commodities unduly expensive. The effect
G 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 Saks
Tax Act is ~nacted under the authority of the Union
Parliament, but the tax is collected through the agency
H of the State and is levied ultimately for the benefit of
the States and is statutorily assigned to the States. That
is clear from the amendments made by the Constitution
(Sixth Amendment) Act,· 1956, in Art. 269, and th<:
•
SHlV DUTT v. UNION (Venkataram1ah, J.) 221

enactment of els. (1) & (4) of s. 9 of the Central Sales
Tax Act. The Central sales-tax though levied for and A
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-lax 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 B
on transactions of sale Central sales-tax, at rates prevail-
ing in the State, subject to the limitation already set out,
in our judgment, no discrimination can be deemed to be
practised.
c
In Gwalior.· Rayon Silk Mfg. (Wvg.) Co. Ltd. v. The Asstt.
Commissioner of Sales Tax & Ors.(') this Court had to consider
whether section 8 (2) (b) of the Act suffered from the vice of excess-
ive delegation. The material part of section 8 (2) (b), as it stood
then, provided that the tax payable by any dealer on his turnover
D
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 (!) thereof
and in case of goods other than declared goods should be calculated
at the· rate of ten 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 E
the goods in question could not )le less than ten per cent of the
turnover, it could be any amount higher than that as might be
determined by a State Legislature in respect of the intra-State trans-
. actions of sales or purchases of the said· goods. In the above case
there were two judgments both upholding the validity of the impugned
provision. F

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 G
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., nowever, differed from H

(I) [1974] 2 8.C.R. 879,
222 SUPREME COURT REPORTS [1983j 3 s.c.R.

Khanna, J on the above point, but.agreed with the conclusion of
A 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
B reference at all to the case of Gwalior Rayon Silk Mfg. Wvg. ·co.
(supra). 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 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
penalties in the general sales tax Jaws of the States are adopted for
c 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
D penalties is circumscribed by various economic factors and it <;annot
be said that Parliament has virtually surrendered its legisla.tivc judg-
ment to the State legislatures. There is a 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 ~s the
penalties payble under the general sales tax law of each State. If
E 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 l.evy is bound to lead to the killing of the goose
which fays the golden egg. The trade would immediately shift to
areas outside the State whi~h resorts to higher taxes and penalties.
The political and economic factors v. hich operate in this field are so
F
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
G 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 ihat the existence of
H the power to repeal or modify its own law in order to bring a piece of

(I) [1975] 3 S.C.R. 607.
SHIV DUTI' v. UNION (Venkataramlah, J.) 223
delegated legislation in accord with its own legislative wiJI should be
considered as an effective check on the misuse of legislative power by A
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
B
be exercised whenever Parliament wishes to take the matter directly .
into its own hands, there cannot be a total effacement of the legis-
lative 'power of Parliament. The above view receives support from the
following passage in "Australian Constitutional Law" by Fajgenbaum
& Hanks (Second Edition) at page 202
c
"'3,009. .. . .. .. . .. . .. . . . .. . . .............. Parliament can
delegate to the Crown, or to any servant of the Crown,
the power to demanil 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 D
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 eve.ry licencee The validity of these
.·~ provisions was up held. by the Privy Council in, Cobb & Co • E
Lrd. v. Kropp (1967) I AC, 141, rejecting an argument
that Queensland Parliament had no power to abrogate its
taxing power in this way :

1n their Lordships' view the Queensland legislature F
were fully warranted in legislating in the terms ~f
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 G
vested in him. It cannot be asserted that there was a
levying of money by pretence of pr_erogative without grant
of Parliament or without parliamentary warrant.

The legislature were entitled to u_se any agent or any H
subordinate agency or any machinery that they considered
appropriate for carrying out the objects and purposes that
224 SUPREME COURT REPORTS [1983) 3 s.c.R.

they had in mind and whicy they designated. They were
A entitled to use the commissioner for transport as their
instrument to fix and recover the licence and permit fees
(1967) I AC at 156, 157."

We feel that even applying the rule in the Gwalior Rayon Silk
B 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
J_--
legislative power havfog regard to the nature of that provisio!l..

We sha!Lnow proceed to consider the question whether by
reason of retrospective effect having been given to sub-section (2·A)
c 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 (!) 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
D section 9 of the Amending Act provided in substance that in so far
as penalties were concerned 'Ub·section (2-A) of section 9 should )>e
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
E
of the Act and section 9 (I) of the Amending Act. Section 9 (2J of
the Amending Act also contained the usual provision validating the
levy of penalties completed prior to the commencement of the Amen-
ding Act and authorising the continuance of the proceedings for
levy of penalties in respect of the period commencing from January
F 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 e'tc. and
they were applicable to the dealers under the Act by reason of section
9 (2) of the Act. Notwithstanding such statutory provisions many
G dealers failed to perform their statutory duties. They would have
been liable to penalties mentioned in the relevent 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
(2) of section 9 of the Act in many States proceeding for levying
H
penalties in accordance with the provisions relating .to penal!ies in
their respective general sales tax laws were commenced against such
<Jefaulters under the Act and in some cases proceedin~ were completed
SHIV DUTT v. UNION (Venkataramiah, J.) 225

and- penalties were also recovered. Some High Courts also took
the view that such penalties were validly leviable. ·But ultimately this A
Court by a majority of three to two held in Khemka's case (supra)
that since there was no expreS! 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 B
"·general sales tax laws in force in the Siates permissible with
retrospective effect and also to validate all such previous proceedings.
Article 20 ofthe Constitution reads thus :

"20. (I) No person shalt' be convicted of any offence
except for violation of a law in force at the time of the c
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.
D
(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."
E
The contention of the petitioners is that any act or om1ss1on
which is con side.red 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 F.
penalty under a law which.is given retrospective effect. They princi-
pally rely on Article 20 (!)in suppor! of their case. Art. 20·(1) is
modelled on the basis of.seetion 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
G
in the United 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 afe not defined in the Constitution, the meaning H
assigned in the General Clauses Act, 1897 may be given. Section
3 (38) of the General Clauses Act defines 'offence' as any act or
9rnissjon Jllade punishable by any law for the time \>ein~ in for~~.
226 SUPREME COURT REPORTS [1983:1 3 s.c.R.

The marginal note of our Article 20 is 'protection in respect of convic·
A lion 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 (I) of A1ticle 20,
'prosecuted aud punished' in clause (2) of Article 20 and 'accused of
an offence' and 'compelled to be a Witness against himself' in clause ·
B (3) of Article 20 clearly suggests that Article 20 rcla.tes 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 Editiqn) Vol. I, 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
c 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 (I) the
expression 'penalty' is used iu the narrow sense as meaning a payment
which has to be made or a deprivation of liberty which has to be
~uffered 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.(!) the question for
consideration was whether when the customs authorities confiscated
certain goods under the Sea Cµstoms Act there was a prosecutson
E 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 weirds used
F therein :-" convicted "commission of the act charged a.s
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
G prosecution in this context won.Id 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 thi:
offence and regulates the procedure."
H
SHIV DUTI v. UNION (Venkataramiah, J.) 221

The levy of charges for 'unauthorised use' of water enforced
with retrospective effect was held to be not offending Article io .(I) in A
1Jawala Ram v. State of Pepsu.( 1 ) Similarly in State of West Bengal

v. S.K. Ghosh,(') the forfeiture provided under sectiO'n 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 ( l) of the
Constitution and in that connection this Court observed at pages B
130-131 thus:-

"Article 20(1) deals with conviction of persons for
offences and for subjection of them to 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".
c
Secondly, it provides that no person shall b,e "subjected
to a penalty greater than that ,which might have been
inflicted under the law in force at the time of the com-
mission of the offence". Clearly, therefo!'e, Art. 20 is
dealing with punishment for offences and provides two D
safeguards namely, (!) that no one shall be punished for
an act which was not an offence under the law in foq;e
when it was committed. and (ii) that no one shall be
subjected to a greater penalty for an off~nce than what
was provided under the law in force when the offence
E
was committed. The provision 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) we're really a penalty on a convicted person
for commission of an offence we should have found it
provided in the 1943 Ordinance and that penalty of F
forfeiture would have been inflicted by ihe criminal court
trying the offender.~·

Again while upholding section 25 FFF(l) (which came into
force on June 6, 1957) of the Industrial Disputes Act, 1947 which
G
directed compensation to workers who had been retrenched earlier
ori and after November 28, 1956, this Conrt observed in Hatisingh
Mfg. Co. Ltd. & Anr. v. Union ~f India & Ors.(') at pages 536 and
545 thus:

(1) [1962] 2 S.C.R. 503.
(2) [1963]2 $.C.R. 111.
\3) [l960j 3 S.C.R,. S~,
. 228 SUPREME COURT REPORTS [1983] 3 s.c.a. ·

"A law which creates a civil liability in respect of a
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)

B If the statute fixes criminal liability for contravention
of the prohibition or the command which is made appli·
cable 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
c not amount to infringement of Art. 20(1) of the Consti·
tution. Undoubtedly for failure to discharge liability to
a
pay compensation, person may be imprisoned, under
the statute providing for recovery of the amount, e.g.,
the Bombay Land Revenue. Code, but failure to discharge
D 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)
E
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.(') the High Court of Patna held that the amendment
F 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 p malty of 0

forfeiture of the amounts collected earlier by dealers in contravention
"of the provisions of section 14A, without. prejudice to any punish·
ment for an offence under that Act, was violative of Article 20(1)
of the Constitution. We have gone through that decision. We do
G 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.(') the judgment of the High Court
was confirmed on the ground that the penalty of forfeiture was not
H
(!) [195617 S.T.C. 609.
(2) A.I.R.. 1960 S.C. n~.
SHIV DU1'T V. UNION (Venkataramiah, J.) 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 A
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 ti
which when they took place· were not subject to any charge or
liability under that Act was opposed to Article 20(1) of the Consti-
tution. In that case the facts were that. as a result of the modifica- •
lion 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 C
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 prosecuti.pn
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 D
that case. The observations made by this Court in Commissioner of •
Wealth Tax, Amritsar v. Suresh Seth('! at page 430 to the effect:
... "In the case of acts amounting to crimes the punish-
ment to be imposed cannot be enhanced at all under our
Constitution by any subsequent legislation ·by reason of E
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 com.mission of the offence. In other
cases, however, even though the liability may be enhanced
it can only be done by a subsequent law (of course F
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 Mohall Lal v. Income-tax
II
(I) [1973] 32 S.T.C. 368.
(2) (1981] 3 S.CR: 419,
SUPREME COURT REPORTS fl9S3l 3 s.c.k.
Appal/ate Tribu110/, Delhi Bench & Ors.( 1 ) that Article 20 of the
A 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,
B Indore Region, Indore Anr.('Y 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 tbat the word 'penalty' used in Article 20( I) cannot
·C be construed as including a 'penalty' levied nnder the sales tax laws
by the departmental authorities for violation of statutory provisions.
A penalty imposed by the sales tax authorities is only a civil liability,
th9ugh penal in character. It may be relevant to notice that sub-
section (2-A) of sectioi;1 9 of the Act specifical]y refers to certain
D acts and omissions which are offences for which a ·crimina!prose-
cution 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, there.fore,
rejected. ·

E ·:The next point to be considered is whether the imposition and
collection of penalty with retrospective effect amounts to an imposi-
tion 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
indicat~d above the circumstances under which it becomes necessary
to levy pehalties 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)
G 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 retrospectwe effect

H
(I) [J9;0j 75 I.T.R, 741.
(2) [1980] 46 S.T.C. 379.
(3) [1962] Supp. 2 S.C.R. I.
SHIV DUTT v. UNION (Venkataramiah, f.) 23i

being given to the law, the assessees. were incapable elf passing on
the excise duty to the buyers. After considering certain American A
decisions, Ayyangar J. observed. at page 37 thus :

"It would thus be seen that even under the constitu·
tion of the United States of America the unconstitutiona-·
lity of a retrospective tax is rested on what has been
B
--_j termed "tlie 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 c
unconstitutional on the ground of its infringing the right
to hold property under Art. 19(l)(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 D
would. undoubtedly riot 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
bis business activity." 'E
The Court was more emphatic "in Rai Ramkrishan & Ors. v.
The State of Bihar(1) 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 F
to make a law, therefore, includes within its scope to make all relevant
provisions which are ancillary or incidental to it. The provision for
levying of interest and to levy penalties retrospectively and to validate
earlier proceedings under laws which ,have been declared unconsti-
tutional after removing the clement of unconstitutionality is included G
within the scope of legislative power. In the above mentioned case
of Rai Ramkrishna·& Ors. (supra), a Bibar Act levying a tax on
~assengers and good~ passed in 1950 was declared to be u.nconstitu-
t1onal by thJS Court m December, 1960. An Act validating the said
levy after removing constitutional deficiencies in it was passed with H
(I) [1964] I S.C.R. 897,
232 SUPREME COURT REPOR'tS t19!\3l ~ s.c.R..
the assent of the President in ,September 23, 1961 and thl!t Act was
.A 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
B conimenced 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 ihereunder 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
c and conducted in accordance with the provisions of the validating
.Act and ·if not alroady completed should be continued and completed
in accordance with the validating Act was opposed to Article 304(b)
and Article 19(l)(f) and. (g). H was urged in that case on the basis
of the observation made in Sutherland on 'Statutes and Statutory
Constructions' to the effect that :
D
"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"
E
that the length of retrospectivity, that is, eleven years was an un• ,-.
reasonable restriction on the rights guaranteed under Artide 19(I)(f)
(g). This contention was rejected by this Court at pages 915 and
916 of the Report as follows :
F
•'We do not think that such a mechanical test c:an be
applied in determining the validity of the retrospective
operation of the Act. It is conceivable that casei may
arise in which the retrospective operation of a taxing or
other statute may introduce such an element of unreason·
G ableness 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 op•~ration
cannot, by itself, necessarily be a decisive test. We may
have a statute whose retrospective operation covers a
H 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
sHiv DUTT v. UNION (Venkataramiah, J.) . ~33

retrospective operation. On the other hand, we may
get cases where the period covered by the retrospective A
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 ulti-
mately sustained and the statute is struck down, it is not B
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 ·C
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 retrpspective
operation covers a long period, therefore, the restriction
imposed by it is unreasonable. That ii why we think
the test of the length of time covered by the retrospective D
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 E
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. ln other
words, between 1950 and 1960 proceedings were pending F
· in Courl in which tbe · 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 G
pressed into service for challenging the reasonableness of
the retrospective operation of the Act."

r
In the instant case, the facts are one shade better. There is no H
dispute in this case about the validity of the tax payable under the
Act during the period between January I, 1957 and the date of
commencement of the Amending Act. It has to. be presumed that
!
•
SUPREME COURT REPORTS lt9S31 3 s.c.~.
all the tax has been collected by the dealers from their customers.
A There is also no dispute that the law required' the dealers to pay the
tax within the specified time. The dealers had also the knowlflge 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
B utilised the money which should have been paid to the Government .'
and have comr'nitted 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 thf:re has .
been any unreasonable restriction imposed on the rights guaranteed
c. under Article 19(1) (f) and (g) of the Constitution, even though the
period of retrospectivity is nearly ninteen years. It is also pertinent
to refer here to sub-section (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 con-
D nection therewith or:for claiming-any refund in accordance with the
Act as amended by the Amending Act read with sub-section (I) of
section 9 of the Amending Act. Explanation to su.b-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 judg-
E ·ment in Khemka's case (supra) was delivered upto the date of the
commencement cif the Amending Act in computing the period of
1imitation for questioning any order levying penalty. In those pro-
ceedings 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(1J(f 1 and (g)
F 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:
G "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
H 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 particnlar, the

•
SHIV DUTT v. UNION (Venkataramiah, J.)

. Commissioner or any person appointed to assist him
under sub-section (I) of section 3 may after affording A
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 Jess 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
B
not ress than one hundred rupees but not exceeding one
thousand rupees."

The argument urged on behalf of the dealers in the State of
Haryana is thlt this section which authorises the levy of penalty at
c
'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 aboui the quantum of penalty. There is no substance in
this plea. The provision in question itself suggests that the levy to D
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 E
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
F
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( 1 ) 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 G
VII thereof. In 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 lev)ing
"penalty. This contention should, therefore, fail.

(I) !191011 s.c.R, 753.,
SUPREME COURT REPoRTS h983) 3 s.c.R.
In Writ Petition No. 7220 of 1982 it was 'faintly suggested that
A 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 autho-
rised 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) oft4e Haryana General Sales Tax Rules, 1975. We do not
B 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 <:osts.

c H.S.K. Petiti1ms dismissed.