VAT - Writ court cannot stike down certain enactment merely because it finds such law to be unreasonable: HC
By TIOL News Service
INDORE, NOV 01, 2018: THE ISSUE BEFORE THE BENCH IN THE PRESENT CASE WAS - Whether any legislation can simply be declared as arbitrary & unreasonable, without demonstrating as to how the legislature lacked the competence to make such law or that such law infringes upon any Fundamental Right or controvenes some provision of the Constitution. NO IS THE VERDICT.
Facts of the case
The assessee company a manufacturer of 'spirit' and 'alcoholic beverages' in the State of Madhya Pradesh. Further, the assessee was holding valid licence for manufacture of Spirit in a Distillery. Further, also the assessee was duly registered having TIN No.23581200555. During the assessment, the assessee had deposited VAT on sale of Rectified Spirit at the rate of 5%. However, the adjudication authority held that, the assessee was liable to pay VAT at the rate of 5% whereas, the 'Rectified Spirit' does not come within the Schedule and, therefore, the assessee was liable to pay VAT at the rate of 14% and vide assessment order, directed to pay difference along with interest and penalty.
Further, the assessee appealed before the CCT if assessee was dissatisfied with the order of first Appellate Authority u/s 46(6). Hence, the assessee challenged the Constitutional validity of the procedure prescribed u/s 46 and 53 read with Rule 60 and to declare the levy of VAT tax @ of 14% on a 'Rectified Spirit' is arbitrary, unfair, unjust, unreasonable and ultra vires. There is no power to appellate authority to waive or reduce the quantum of pre-deposit in appropriate cases of undue hardship.
In writ, the High Court held that,
++ The Apex Court repeatedly stated that legislative enactment can be struck down by Court only on two grounds, namely (i), that the appropriate Legislature does not have competency to make the law and (ii), that it does not take away or abridge any of the fundamental rights enumerated in Part-III of the Constitution or any other Constitutional provisions. There is no third ground. if an enactment is challenged as violative of Article 14, it can be struck down only if it is found that it is violative of the equality clause/equal protection clause enshrined therein. Similarly, if an enactment is challenged as violative of any of the fundamental rights guaranteed by clauses (a) to (g) of Article 19(1) it can be struck down only if it is found not saved by any of the clauses (2) to (6) of Article 19 and so on. No enactment can be struck down by just saying that it is arbitrary or unreasonable. Some or other constitutional infirmity has to be found before invalidating an Act. An enactment cannot be struck down on the ground that court thinks it unjustified. Parliament and the legislatures, composed as they are of the representatives of the people, are supposed to know and be aware of the needs of the people and what is good and bad for them. The court cannot sit in judgment over their wisdom;
++ while dealing with constitutional validity of a taxation law enacted by Parliament or State Legislature, the Court must have regard to the following principles: (i), there is always presumption in favour of constitutionality of a law made by Parliament or a State Legislature (ii), no enactment can be struck down by just saying that it is arbitrary or unreasonable or irrational but some constitutional infirmity has to be found (iii), the court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as the Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence (iv), hardship is not relevant in pronouncing on the constitutional validity of a fiscal statute or economic law and (v), in the field of taxation, the Legislature enjoys greater latitude for classification.
(See 2018-TIOL-2314-HC-MP-VAT)
