R. S. Joshi, S.T.O. Gujarat Vs. Ajit Mills Ltd., Ahmadabad & ANR [1977] INSC 169 (31 August 1977)
KRISHNAIYER, V.R.
KRISHNAIYER, V.R.
BEG, M. HAMEEDULLAH (CJ) CHANDRACHUD, Y.V. BHAGWATI, P.N.
UNTWALIA, N.L.
FAZALALI, SYED MURTAZA KAILASAM, P.S.
CITATION: 1977 AIR 2279 1978 SCR (1) 338 1977 SCC (4) 98
CITATOR INFO :
R 1979 SC1588 (17) RF 1979 SC1803 (19) R 1984 SC1543 (22) R 1985 SC 218 (20) R 1986 SC 178 (1,2,3,4,7) F 1987 SC 27 (4,5)
ACT:
Bombay Sales Tax Act, 1959-Ss. 37, 46, 63 validity of-Act prohibited collection of any sum not payable by way of sales tax or in excess of tax payable-Amounts so collected forfeited-Forfeiture, it within the legislative competence of the State Legislature.
Constitution of India, 1950-Entries 54 and 64-List IIConstitutional validity of an enactment-Rests for determination of-Forfeiture, if a penalty.
Words and phrases-"Colourable", "forfeiture" "collected";
"shall be forfeited"-Meaning of.
HEADNOTE:
Section 46(1) of the Bombay Sales Tax Act, 1959 (as applicable to the State of Gujarat) enacts that no person shall collect any sum by way of tax in respect of sale of any goods on which by virtue of s. 5 no tax is payable Subsection (2) provides that no person, who is not a registered dealer and liable to pay tax in respect of any sale or purchase, shall collect on the sale of any goods any sum by way of tax from any other person and no registered dealer shall collect any amount by way of tax in excess of the amount of tax payable by him under the provisions of the Act.
Section 63(1)(h) provides that whoever contravenes any of the provisions of s. 46 shall, on conviction be punished with simple imprisonment or 'With, fine or with both.
Section 37(1) which deals with imposition of penalty departmentally for contravention of s. 46 provides in cl. (a) that if any person, not being a dealer liable to pay tax under the Act collects any sum by way of tax in excess of the tax payable by him or otherwise collects tax in contravention of the provisions of s. 46 he shall be liable to pay, in addition to any tax for which he may be liable, a penalty as prescribed in cl. (i). Clause (i) states that where there has been a contravention referred to in cl. (a) a penalty of an amount not exceeding two thousand rupees .... and in addition any sum collected by the person by way of tax in contravention of s. 46 shall be forfeited to the State Government.
The respondents, who were registered dealers of sales tax, collected from various customers amounts qua sales tax prohibited by s. 46 of the Act. Acting on the prohibition plus penalty contained in s. 46 read with s. 37(1) of the Act the Sales Tax officers imposed penalties and forfeited the sums collected in contravention of s. 46 (less amounts refunded).
The High Court struck down the last limb of the forfeiture provision contained in s. 37(1)(a) as being unconstitutional on the ground that it was not competent for the State Legislature to forfeit to the public exchequer punitively, under entry 54 read with entry 64 of List U, sums collected by dealers by way of sales tax which was not exigible under the Act. (The High Court of Bombay took an opposite view while other High Courts ranged themselves on one side or the other of the controversy).
Allowing the appeals
HELD : Per Beg C.J., Chandrachud, Bhagwati, Krishna Iyer, Untwalia, Murtaza Fazal Ali, JJ.
The punitive impost in s. 37(1)(a) is legitimate and valid.
[349 D] 339 The High Court was wrong in denouncing the impugned legislation as exceeding legislative competence or as a colourable device or as supplementary, not complementary.
[348 F]
1. (a) The true key to constitutional construction is to view the equity of the statute and sense the social mission of the law, language permitting against the triune facets of justice highlighted in the Preamble to the Paramount Parchment, read with a spacious signification of the listed entries concerned. A law hasto be adjudged for its constitutionality by the generality of cases it covers,not by the freaks and exceptions it martyrs. [348 H] (b) The professed object of the law being clear, the motive of the legislature is irrelevant to, castigate an Act as a colourable device. The interdict on public mischief and the insurance of consumer interests against likely, albeit, unwitting or ex abundanti cautela excesses in the working of a statute are not merely an ancillary power but a necessary obligation of a social welfare state. One potent prohibitory process for this consummation is to penalise the trader by casting a no-fault or absolute liability to 'cough up' to the state the total unjust takings snapped up and retained by him by way of tax, where tax is not so due from him. [348 D-E] (c)In a developing country, with the mass of the people illiterate and below the poverty line, and most of the commodities concerned constitute their daily requirements, there is sufficient nexus between the power to tax and the incidental power to protect purchasers from being subjected to an unlawful burden. Social justice clauses integrally connected with the taxing provisions, cannot be viewed as a mere device or wanting in incidentality. [355 H] (d)The legal test that divides the constitutional from the unconstitutional is that if all that the legislation means to do is to take over, whatever the verbal veils worn, the collections which were ex-hypothesi not sales tax but were illegal additives as if sales tax were due, then such an expropriation of' the expropriators is beyond entry 54 and, therefore, ultra vires. On the other hand, all real punitive measures, including the dissuasive penalty of confiscating the excess collections, are valid, being within the range of ancillary powers of the legislature competent to exact a sales tax levy. [349 B-C]
2. (a) "Colourable" is not 'tainted with bad faith or evil motive"; it is not pejorative or crooked. Conceptually 'colourability' is bound up with incompetency 'Colour' according to Black's Legal Dictionary, is 'an appearance, semblance or simulacrum, as distinguished from that which sereal........ a deceptive appearance...... a lack of reality'. A thing is colourable which is, in appearance only not in reality, what it purports to be., In Indian terms, it is maya. In the jurisprudence of power, colourable exercise of or fraud on legislative 'power or fraud on the Constitution are expressions which merely mean that the legislature is incompetent to enact a particular law, although the label of competency is stuck or it, and then itis colourable legislation. [349 F] (b) If the legislature is competent to pass theparticular law, the motives which impel it to pass the law are really irrelevant.If a legislation, apparently enacted under one Entry in the List, falls in plaintruth and fact, within the content, not of that Entry but of one assigned to another legislature it can be struck down as colourable even if the motive were most commendable. [349 H] (c)If the questions : what is the pith and substance of the Act; does it fall within any entry assigned to that legislature in pith and substance, or as covered by the ancillary power implied in that Entry, can the legislation be read down reasonably to bring it within the legislature's constitutional powers ? can be answered affirmatively, the law is valid. Malice or motive is beside the point and, it is not permissible to suggest parliamentary incompetence on the score of mala fides. [356 A] 3.Having regard to the object of s. 37 read with s. 46, forfeiture has a punitive impact. [350 F] 340 (a)If forfeiture is punitive in infliction, it falls within implied powers. If it is an act of mere transference of money from the dealer to the State, then it falls outside the legislative entry. [350 E] (b)Black's Legal Dictionary states that 'to forfeit' is 'to lose, or lose. the right to, by some 'error, fault, offence or crime', 'to incur a penalty'. 'Forfeiture', as judicially annotated is 'a punishment annexed by law to some illegal act or negligence. .. something imposed as a punishment for an offence or delinquency.' The word, in this sense, is frequently associated with the word penalty'. [350 G] State of Maryland v. The Baltimore & Ohio RR Co.-(11 Led.
714, 722) and Bankara Municipality v. Lalji Raja & Sons:
(AIR 1953 SC 248, 250) referred to.
(c)The word 'forfeiture' must bear the same meaning of a penalty for breach of a prohibitory direction. [351E-F] (d)In the instant case the fact that there was arithmetical identity between the figures of the illegal collections made by the dealers and the amounts forfeited to the State cannot create a conceptual confusion that what is provided is not punishment but a transference of funds. If this view be correcting must be held that it is so-the legislature, by inflicting the forfeiture, does not go outside the crease when it hits out against the dealer and deprives him, by the penalty of the law, of the amount illegally gathered from the customers. The Criminal Procedure Code, Customs & Excise Laws and several other penal statutes in India have used diction which accepts forfeiture as a kind of penalty. [351 F-G] (e)The contention that s. 37(1) fastens a heavy liability regardless of fault has noforce in depriving the forfeiture of the character of penalty. The notionthat a penalty or a punishment cannot be cast in the form of an absolute or no-fault liability but must be preceded by mens rea should be rejected. The classical view that 'no mens rea, no crime' has long ago been eroded and several laws in India and abroad, especially regarding economic crimes and departmental penalties, have created severe punishments even where the offences have been defined to exclude mens rea.
[352 A] 4.(a) The decision in Abdul Quader demarcates the constitutional watershed between merely laying hands upon collections by way of tax by traders although they are not exigible from traders and the policing by penalizing, including forfeiting illegal exactions of 'the working of a taxing statute and inhibiting injury to the public. The ratio in Abdul Quader lies in the sentence : "it does not provide for a penalty (for) collecting the amount wrongly by way of tax from purchasers which may have been justified as a penalty for the purpose of carrying out the objects of the taxing legislation." In other words, had there been a penalty including forfeiture, coupled with a prohibition against collecting any amount wrongly by way of tax from purchasers, it 'may have been justified as a penalty for the purpose of carrying out the objects of the taxing legislation.' [354 D-E, A] (b)Although in Orient Paper Mills this Court held that if competence to legislate for granting refund of sales-tax improperly collected be granted, there is no reason to exclude the power to declare that refund shall be claimable only by the person from whom the dealer has actually realised the amounts by way of sales tax or otherwise, in Ashoka Marketing it was held that the taking over of sums collected by dealers from the public under guise of tax solely with a view to return them to the buyers so deprived was not 'necessarily incidental' to 'tax; on the sale and purchase of goods'. [355 F-G] Abdul Quader [1964] 6 S.C.R.
867, approved.
Ashoka Marketing [1970] 3 S.C.R. 455, not approved. Orient Paper Mills [1962] 1 S.C.R.
549, referred to. Forfeiture in. s. 37(1) is competent legislation. [357 F] 341 5.(a) The word "forfeit" in the inartistically worded section is plainly punitive, not nakedly confiscatory. The marginal note to s. 37(1) treats the forfeit also as a penalty. When it says that the wrongful collections shall be forfeited it means what it says. Forfeiture being penal, it must bear the same sense here too. [357 D] (b)The spirit of the provision contained in s. 37(1) lends force to the construction that "collected" occurring in the expression "any sum collected by the person shall be forfeited" means 'collected and kept as his' by the trader.
If the dealer merely gathered the sum by way of tax and kept it in suspense account because of dispute about taxability or was ready to return it if eventually it was not taxable, it was not collected. The word 'collected' does not cover amounts gathered tentatively to be given back if found nonexigible from the dealer. [358 E] (c)The meaning of the expression "shall be forfeited" should be limited to "shall be liable to be forfeited".
Section 37 itself contains a clear clue indicative of the sense in which 'shall be forfeited' has been used. Section 37(2) directs the Commissioner to issue notice to the assessee to show cause why a penalty, with or without forfeiture, should not be imposed on him. stich a notice, with specific reference to forfeiture, points to an option in the Commissioner to forfeit or not to forfeit or partly to forfeit. This is made planner in s. 37(3) which reads :
"The Commissioner shall, thereupon, hold an enquiry and shall make such order as he thinks fit". This order embraces penalty and forfeiture. Therefore the Commissioner is vested with a discretion to forfeit the whole or any lesser sum or none at all. [359 B-C] Attorney General v. Parsons [1956] A.C. 421, referred to.
(d)The forfeiture should operate only to the extent and not in excess of, the total collections less what has been returned to the purchasers. Moreover. it is fair and reasonable for the Commissioner to consider any undertaking given by the dealer that he will return the amounts collected from purchasers to them. [359 E] (e)Section 37(4) properly read forbids penalty plus prosecution but permits forfeiture plus prosecution. The word "penalty" in its limited sense in s. 37(1) and s. 37(4) does not include forfeiture which is a different punitive,.
category. Forfeiture is a penalty, in its generic sense, but not a penalty in the specific signification in s. 37(1) and (4). [360 A] Kailasam, J. (concurring) Section 37(1) is within the legislative competence of the State Legislature. [373 D] 1.(a) The principle in construing words conferring legislative power is that the most liberal construction should be put on the words so that they may have effect in their widest amplitude. None of the items in the List is to be read in a narrow, restricted sense. Each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. All powers necessary for the levy and collection of the tax concerned and for seeing that the tax is not evaded ,ire comprised within the legislative ambit of the entry as ancillary or incidental. It is also permissible to levy penalties for attempted evasion of taxes or default in the payment of taxes properly levied. [362 EF] (b)The plea of a device or colourable legislation would be irrelevant it the legislature is competent to enact a particular law. In other words, if the legislature is competent to pass a particular law the motive which impelled it to act is not relevant. [371 ] (c)if what is levied is a penalty for the proper enforcement of the taxing legislation it will be valid; if on the other hand, it is a device to, collect the amount unauthorisedly collected, it will be invalid. [371 E] 2.(a) In Abdul Quadar's case this Court held that in regard to sums collected by a dealer by way of tax, which are not in fact exigible as tax, the 342 State legislature cannot direct them to be paid over to the Government because the ambit of ancillary or incidental power does not permit the State Legislature to provide that the amount which is not exigible as tax under the law shall be paid over to the Government as if it were a tax. [370 EF] (b)In Orient Paper Mills' case this Court held that the Legislature was competent to grant refund of a tax unauthorisedly collected and paid to the Government, to a person from whom the dealer had realised the amount. This view had been approved by this Court both in Abdul Quadar's case is well as in Ashoka Marketing. case. In Ashoka Marketing case, however, this Court held that Orient Paper Mills' case does not support the plea that the State Legislature is competent to legislate for demanding payment to the State or retaining by the State of the amount recovered by a registered dealer, which were not due as sales tax. These cases, as also the decision of this Court in Kanti Lal Babulal, clearly laid down that it is competent for the State Legislature to provide for a penalty for correcting any amount wrongly? by way of tax, if it is levied, for,. the purpose of carrying out the objects of taxing legislation. [370 F-G] R.Abul Quader and Co. v. Sales Tax Officer, Hyderabad.
[1964] 6 S.C.R. 867, followed.
Orient Paper Mills Ltd. v. The State of Orissa & Ors. [1962] 1 S.C.R. 549, Ashoka Marketing Ltd. v. State of Bihar & anr.
[1970] 3 S.C.R. 455, and Karti Lal Babulal v. H. C. Patel [1968] 1 S.C.R. 735, referred to.
3.The assessee's contention that forfeiture is not a penalty cannot be accepted. [372 C] (a)Forfeiture is one form of penalty. Forfeiture of property is one of the punishments provided for in the Indian Penal Code. For contravention of the sales tax law the section provides two forms of punishment : levy of penalty and forfeiture. Therefore, the use of the word forfeiture" as distinct from penalty will not make forfeiture any the less a penalty. [372 C] (b)A combined reading of s. 37 and s. 55 (which deals with appeals) makes it clear that it is not obligatory on the part of Commissioner to direct that the entire amount collected by way of tax in contravention of the provisions of the Act be forfeited. Nor again, is it obligatory on the authorities to levy a penalty which is identically the same as the amount unauthorisedly collected. The amount to be forfeited will have to be determined taking into account all the relevant circumstances. Therefore, the contention that the forfeiture is only a device for recovering the unauthorised collection has no force. [372 F-G] (c)The plea that penalty should be confined only to wailful acts of omission and commission in contravention of the provisions of an enactment cannot be accepted because penal consequences can be visited on acts which are committed with or without a guilty mind. For the proper enforcement of various provisions of law it is common knowledge that absolute liability is imposed and acts without mens rea are made punishable. [372 H] (d)Further, Courts cannot declare that an Act is beyond the legislative competence of the State Legislature on the ground that, while under the Act the amounts erroneously or innocently collected by the assessees were forfeited, an obligation remained with the assessees to refund the amounts to the persons from whom they were collected. The mere fact that in some cases dealers were prejudiced would not affect the validity of the legislation. [373 B-C] (e)Section 46(2) is not unconstiutional. For the enforcement of sales tax law such a provision is absolutely necessary, for, without such prohibition unauthorised collection of tax can never be checked. Sales tax law will have to demarcate articles on which tax can be collected and prohibit collection of tax in any manner not authorised by law. [373 E-F] 343 4.The pleaas to contravention of art. 14 has no force.
No arbitrary or uncanalised power has been given to the authorities. While the proceedings are in the nature of penalty and forfeiture under s. 37, it is punishment by criminal prosecution under s. 63(1)(h). Section 37 makes it clear that when proceedings are taken under that section, no prosecution can be instituted under s. 63(1)(H) on the same facts. [374 A]
5. The plea based on infringement of art. 19(1)(f) must also fail. [374 C] The plea which was available in. Kantilal Babulal's case, namely, that the :forfeiture was enforced without prior enquiry and for that reason the section was invalid, is not available in this case because s. 37(3) prescribes the procedure which makes it obligatory on the part of the Commissioner to give notice of show cause against levy of penalty or forfeiture. Further, under this Act, there are provisions for appeal and revision against the Commissioner's ,orders. [374 B]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 533 and 1004 ,of 1975.
From the Judgment and Order dated 16-8-73 of the Gujarat High ,Court in S.C.A. Nos. 421 and 508 of 1971 and CIVIL APPEALS NOS. 1410 and 1671-1685/75 From the Judgment and Order dated 16-8-73 of the Gujarat High Court in SCA No. 400, 377 and 1220/70 and 30, 129, 155, 184, 362, 363, 391, 406, 822, 823 and 1764/71 and 234 and 449/72.
S.T. Desai and R. M. Mehta, M. N. Shroff and Miss Radha Rangaswami for the Appellants in CAs. 533, 1004, and 1410 and 16711685/75.
F.S. Nariman, M. N. Shroff and Miss Radha Rangaswami for the Intervener (State of Maharashtra) in CA No. 1410/75.
Kanishkar H. Kaji, Mrs. S. Bhandare, M. S. Narasimhan, A. K. Mathur, A. K. Sharma, and Miss Nalini Paduval for Respondent in CA 1671/75.
K. J. John for Respondents in CA 1685/75.
B. Sen (CA 533/75) I. N. Shroff for Respondent No. 1 in CA 533 and RR in C.As. 1677-78, 1680 and 1682-1683/75.
The following Judgments of the Court were delivered KRISHNA IYER, J. This bunch of appeals brought by the State of Gujarat by certificate has a pan-Indian impact, as the sale-tax project which has been struck down by the High Court may adversely affect cousin provisions in like statutes in the rest of the country. Contradictory verdicts on the constitutionality of a certain pattern of sales-tax legislation, calculated to counter consumer victimisation by dealers, have been rendered by different High Courts and what complicates the issue is that seasonings in the prior rulings of this Court on the topic have been pressed into service by both sides. This slippery legal situation makes it necessitous for the Constitution Bench of this Court (numerically expanded, almost to breaking point, by the recent 42nd 344 Constitution Amendment) to declare the law with relative certitude, reviewing, in the process, its previous pronouncements and over-ruling, 'if required, the view of one High Court or the other so that the correct position may finally be restated. The certainty of the law is the safety of the citizen and, having regard to the history of judicial conflict reflected in the rulings we will presently unravel, an authoritative: decision is overdue.
A prefatory caveat. When examining a legislation from the angle of its vires, the Court has to be resilient, not rigid, forward-looking, not static, liberal, not verbal in interpreting the organic law of the nation. We must also remember the constitutional proposition enunciated by the U.S. Supreme Court in Munni v. Illinois(1) viz 'that courts do not substitute their social and economic beliefs for the judgment of legislative bodies'. Moreover, while trespasses will not be forgiven, a presumption of constitutionalty must colour judicial construction. These factors, recognised by our Court, are essential to the modus vivendi between the judicial and legislative branches of the State, both working beneath the canopy of the Constitution.
The meat of the matter-rather, the core of the disputeignoring,. for the moment, minor variations among the several appeals which we may relegate for separate treatment-is as to whether it is permissible for the State Legislature to enact, having regard to the triple Lists of the Seventh Schedule and Articles 14 and 19, that sums collected by dealers by way of sales tax but are not exigible under the State lawand, indeed, prohibited by itshall be forfeited to the public exchequer punitively under Entry 54 read with Entry 64 of List II. The Gujarat State whose law, in this behalf, was held ultra vires by the High Court, has, in its appeal by certificate, raised this issue squarely and argued for an answer affirmatively. The law we are concerned with is the Bombay Sales Tax Act, 1959 (Bombay Act LI of 1959) (for short, the Act) applicable during the relevant period to the Gujarat State, although the State of Maharashtra itself has since modified, the law, as pointed out by Shri Nariman, who intervened on behalf of that State, to supplement and substantiate the validity of the legislation.
The statutory provisions which have succumbed to unconstitutionality (as expounded by the High Court) are ss. 37(1) and 46 of the Act. The High Court of Maharashtra, however, has taken a diametrically opposite view and other High Courts have ranged themselves on one side or the other in this controversy, while dealing with more or less similar statutes. We confine our judgment to the Act that is before us and do not go into the validity of the other statutes which have been incidentally referred to in court. The point involved is so critical, yet delicate, that, that even short but significant variations in the scheme of the statute may well spell a result which is opposite.
We will now proceed to project preliminarily the factuallegal setting in order to appreciate whether the legicidal blow delivered by the High Court is merited or not.
Fortunately, the facts are few and (1) (1876) 94 U.S. 113 (quoted in Lahor Board v. Jones and Laughlin, 301 U.S. 1, 33-34-Corwin, Constitution of the U.S.A., Introduction, p. xxxi).
345 not in dispute and lend themselves to sharp focus on the legal screen. The respondent, a registered dealer under the Act, was, by implication of the provisions, eligible to pass on sales-tax leviable from him to the purchaser but several commodities, especially the necessaries of life, were not liable to tax (s. 5). Other situations of non-exigibibty also exist. Yet several dealers showed a tendency, under the guise of sales tax levy, to collect from buyers such tax even in regard to taxfree items or sums in excess of the tax payable by them or where the dealers were not even assessable. The likelihood of such abuse of the sales-tax law induced the legislature to protect the public from this burden by enacting a prohibition under s. 46 against such collection from customers. A mere prohibitory provision may remain a 'pious wish', unless, to make it effective, the statute puts teeth into it. Section 37(1) (a) and s. 63 (1) (h) are the claws of s. 46 which go into action, departmentally or criminally, when there is violation. Even here we may read s. 46 (1) and (2) :
"46(1) No person shall collect any sum by way of tax in respect of sale of any goods on which by virtue of section 5 no tax is payable.
(2)No person, who is not a Registered dealer and liable to pay tax in respect of any sale or purchase, shall collect on the sale of any goods any sum by way of tax from any other person and no Registered dealer shall collect any amount by way of tax in excess of the amount of tax payable by him under the provisions of this Act.
Although there is no specific provision enabling the dealer to pass on the tax to the customer, there is a necessary implication in s. 46 authorising such recovery, it being optional for him to do so or not. The primary liability to pay the tax is on the dealer but it is a wellestab lished trade practice which has received express or implied legislative cognisance, that the dealer is not prohibited from passing on the tax to the other party to the sale. Such a usage is implicit in s. 46 of the A&. although what is explicit in the provision is that nothing shall be collected by way of tax in respect of sale of any goods exempted under s. 5 and no registered dealer shall exact by way of tax any sum exceeding what is payable under the Act. Of course one who is not a registered dealer, cannot collect any sum by way of tax from any other person. In short, there is a triple taboo writ into s. 46. This prohibitory project is made operational, as stated earlier, by two other provisions one sounding in criminal and the other in departmental proceedings.
Section 63 (1) (b) makes it an offence to contravene the provisions of s. 46 (read above) and imposes, on conviction, a punishment of simple imprisonment (upto 6 months) with or without fine (upto Rs. 2.000/-). We may excerpt s. 63 (1) (h) since that may have, to be referred to later "63 (1) (b) W however contravenes any of the provisions of section 46, shall on conviction, be punished with simple imprisonment 11-768SCI/77 346 which may extend to six months or with fine not exceeding two thousand rupees, or with both; and when the offence is a continuing one, with a daily fine not exceeding one hundred rupees during the period of continuance of the offence." Section 37(1) relates to imposition of penalty departmentally for contravention of s. 46. It reads "37(1) (a) If any person, not being a dealer liable to pay tax under this Act, collects any sum by way of tax in excess of the tax payable by in, or otherwise collects tax in contravention of the provisions of section 46, he shall be liable to pay, in addition to any tax for which he may be liable, a penalty as follows :
(i)where there has been a contravention referred to in clause (a), a penalty of an amount not exceeding two thousand rupees;.'. .
and, in addition,. . . . any sum collected by the person by way of tax in contravention of section 46 shall be forfeited to the State Government." (emphasis supplied).
The provisions impugned are ss. 46 and 37(1) (especially the underscored part) and the grounds urged to make out unconstitutionality are dealt with below.
It is fair to state that Shri Kaji and Shri B. Sen, appearing for two separate dealers, did dispel the impression that the Trade was often to blame for abuse and did make out that in many cases the Revenue drove the dealers to collect, by way of tax, sums from the customers since the law was uncertain and was often overzealously interpreted against the assessees by the Caesarist officials of the department. For instance, the assessing authority construed the entries in the Act habitually against the assessees or wriggled out of legal and constitutional bans compelling them to go up in litigation to the High Court and the Supreme Court and win their point only to find that, after all the expense and delay and strenuous endeavour to establish that the tax was not exigible, the department quietly resorted to the forfeiture provision. 'Heads I win, tails you lose'-was the comfortable of the Revenue, thanks to the draconic attitude of the tax collectors to view with hostility any legitimate claim for exemption. The purchasing public eventually suffered, as the merchants were not eager for phyrric victories by litigating for tax exemption.
Shri Kaji mentioned, for instance, the case of works contracts, forward contracts, hire-purchase agreements, compulsory transfers, casual sales, artistic works and the like where the persistence of the department drove dealers to achieve victorious futilities, for, at the end of the litigation, they did succeed in law but lost in fact, the money being claimed back under S. 37(1) (a) by the Commissioner.
Shri B. Sen, appearing for the respondent in Civil Appeal No. 533 of 1975 bad a more sorrowful tale to tell. The honest dealer made 347 a return of the total slims collected by him on the turnover and it was discovered by the sales tax officer that certain items were not taxable and, therefore, refund was due. He directed refund and followed it up with an ironic postscript, as it were, forfeiting that amount under s. 37(1) (a) of the Act. Certainly, these illustrations do emphasize that the scope of s. 37(1) (a) is not restricted to sums collected along with the price by dealers by way of tax with a touch of turpitude but also innocently on the strength of the actual or anticipated (albeit) erroneous view of the tax officers themselves. Certainly, the fiscal minions of Government, if they blatantly misuse power and overtax to bring discredit to a benignant State, must be publicly punished since respect for the law is not a one-way street.
We will bear this in mind when discussing the vires of the challenged provisions, although even here we must mention that a large number of dealers for whom the legislation is made apparently envisage guilty levies under the guise of sales tax. A law has to be adjudged for its constitutionality by the generality of cases it covers, not by the freaks and exceptions it martyrs. In any view, the fact is not disputed that the dealers against whom s. 46 and s. 37 (1) (a) have been applied have collected sums by way of tax which are not exigible as tax. The respondents have all collected from their customers amounts qua sales tax which come within the coils of s. 46. The tax officials discovered this deviance and, acting on the prohibition plus penalty contained in s. 46 read with s. 37(1), imposed penalties and forfeited the sum collected by the persons by way of tax in contravention of s. 46 less amounts shown to have been refunded to the customers as wrong levy of sales tax. The last limb of forfeiture, sustainable if s. 37(1) were intro vires in toto, has been invalidated by the High Court; and the aggrieved State, bewailing the huge financial implications of this holding and urging that the morality and competency of the impugned provision is unassailable, has appealed. We may also state that Sbri S. T. Desai has assured the Court that the conscionable stand of the State is-and they will abide by this assurance-that if the dealer repays to the purchaser the forfeiture will not apply to such sums.
The trinity of points in controversy turns on (a) legislative competency; (b) contravention of Art. 19; and (c) breach of processual equality guaranteed under Art. 14.
The pivotal problem is one of legislative competency. The other two, if good, are sufficient to void the provisions under challenge but have been feebly put forward, counsel being perhaps aware of the bleak prospects.
He who runs and reads gets the facts without difficulty since the Revenue has done nothing more than forfeit the sums recovered from customers by dealers in the teeth of s. 46, less refunded sums, if any. Even so, the State, under our constitutional scheme, has limited legislative powers restricted to List IT and List III of the Seventh Schedule.
If s. 37(1) (a) spills over the Entries in List 11 (Entries 54 and 64) and cannot be salvaged under the doctrine of ancillary powers, the law must be bad, morality notwithstanding. The State has no divine right to rob the robber. The money, if illegally gathered either by mistake or by mendacity, must go back to whom it belongs, and not to the State. Nor is there any legislative entry which arms the State to 348 sweep all illegal levies connected with sales from the merchant community into its coffers. This is the kernel of the submission which has appealed to the High Court. The counter-argument which has been urged by Shri S. T. Desai, for the State, reinforced by added glosses by Shri Nariman, is that the State has the right not merely to impose tax on sales but to ensure that the sales tax law is not misused by the commercial community to fob off pseudo-fiscal burden upon the consumer community. It is elementary economic theory that while the legal burden of sales tax falls upon the dealer, the fiscal impact is eventually on the consumer.
A Welfare State, with its logos and legend as social justice, has a sacred duty while it exercises its power of taxation to police the operation of the law in such manner as to protect the public from any extra burden thrown on it by merchants under cover of the statute.
Bearing in mind the quintessential aspects of the rival contentions, let us stop and 'take stock. The facts of the case are plain. The professed object of the law is clear.
The motive of the legislature is irrelevant to castigate an Act as a colourable device. The interdict on public mischief and the insurance of consumer interests against likely, albeit, unwitting or 'ex abundanti cautela' excesses in the working of a statute are not merely an ancillary power but surely a necessary obligation of a social welfare state. One potent prohibitory process for this consummation is to penalize the trader by casting a no-fault or absolute liability to 'cough up' to the State the total 'unjust' takings snapped up and retained by him 'by way of tax' where tax is not so due from him, apart from other punitive impositions to deter and to sober the merchants whose arts of dealing with customers may include 'many a little makes a mickle'. If these steps in reasoning have the necessary nexus with the power to tax under Entry 54 List 11, it passes one's comprehension how the impugned legislation can be denounced as exceeding legislative competence or as a 'colourable device' or as 'supplementary, not complementary'. But this is precisely what the High Court has done, calling to its aid passages culled from the rulings of this Court and curiously distinguishing an earlier Division Bench decision of that very Court a procedure which, moderately expressed, does not accord with comity, discipline and the rule of law. The puzzle is how minds trained to objectify law can reach fiercely opposing conclusions.
Expressions like 'colourable device' and 'supplementary and not complementary' have a tendency to mislead., Logomachy is a tricky legal trade; semantic nicety is a slippery mariner's compass for courts and the three great instrumentalities have, ultimately, to render account to the justice-constituency of the nation. The true diagnosis of interpretative crises is as much the perplexity of deciphering the boundaries of constitutional power as attitudinal ambivalence and economic predilections of those who sit to scan the symboland translate their import.
Shakespeare unconsciously haunts the balls of justice : 'Thy wish was father, Harry, to that thought' (Henry IV, Scene 5). In our view, the true key to constitutional construction is to view the equity of the statute and sense the social mission of the law, language permitting, against the triune facets of justice high-lighted in the Preamble 349 to the Paramount Parchment, read with a spacious signification of the listed entries concerned. If then we feed this programme into the judicial cerebration with the presumption of constitutionality superadded, the result tells us whether the measure is ultra vires or not. The doctrine of ancillary and incidental powers is also embraced within this scheme of interpretation.
An overview of the relevant string of rulings of this Court may now be undertaken. The basic ratio, if we may condense the legal test that divides the constitutional from the unconstitutional, is that if all that the legislation means to do is to take over, whatever the verbal veils worn, the collections which were ex hypothesis not sales tax but were illegal additives as if sales tax were due, charged along with the price by the dealer, then such an expropriation of the expropriators (putting it in a morally favourable, though exaggerated, light for the State) is beyond Entry 54 and therefore ultra vires. On the other hand, all real punitive measures, including the dissuasive penalty of confiscating the excess collections, are valid, being within the range of ancillary powers of the legislature competent to exact a sales tax levy. The punitive impost in S. 37 (1) (a) is therefore legitimate and valid. If we accept this test, the appeals must succeed, so far as this point is concerned.
Before scanning the decisions to discover the principle laid down therein, we may dispose of the contention which has appealed to the High Court based on 'colourable device'.
Certainly, this a malignant expression and when flung with fatal effect at a representative instrumentality like the Legislature, deserves serious reflection. If, forgetting comity, the Legislative wing charges the Judicative wing with " colourable' judgments, it will be intolerably subversive of the rule of law. Therefore, we too must restrain ourselves from making this charge except in absolutely plain cases and pause to understand the import of the doctrine of colourable exercise of public power, especially legislative power. In this branch of law, 'colourable' is not tainted with bad faith or evil motive';
it is not pejorative or crooked. Conceptually, 'colorability' is bound up with incompetency. 'Colour', according to Black's Legal Dictionary, is 'an appearance, semblance or simulation, as distinguished from that which is real... a deceptive appearance ... a lack of reality'. A thing is colourable which is, in appearance only and not in reality, what it purports to be. In Indian terms, it is may. In the jurisprudence of power, colourable exercise of or fraud on legislative power or, more frightfully, fraud on the Constitution, are expressions which merely mean that the legislature is incompetent to enact a particular law, although the label of competency is stuck on it, and then it is colourable legislation. It is very important to notice that if the legislature is competent to pass the particular law, the motives which impel it to pass the law are really irrelevant. To put it more relevantly to the case on hand, if a legislation, apparently enacted under one Entry in the List, falls in plain truth and fact, within the content, not of that Entry but of one assigned to another legislature, it can be struck down as colourable even if the motive were most commendable. In other words, the letter of the law notwithstanding, what is the pith and substance of the Act ? Does 350 it fall within any entry assessed to that legislature in pith and substance, or as covered by the ancillary powers implied in that Entry? Can the legislation be read down reasonably to bring it within the legislature's constitutional powers ? If these questions can be answered affirmatively, the law is valid. Malice or motive is beside the point, and it is not permissible to suggest parliamentary incompetence on the score of mala fides.
So much is well-established law. Therefore, if the dealers in the appeals before us charge the enactment with the vice of colourability, they must make out that in pith and substance the impugned legislation does not fall within Entry 54 read with Entry 64 of List II, that it is not embraced even by the expansive connotation of ancillary powers and that it is not possible to save the law even by reading down some of the wide expressions used. In the present case, the narrow issue is as to whether the forfeiture clause in S. 37(1) is bad because of the besetting sin of colourability. If it is a punitive measure to protect public interest in the enforcement of the fiscal legislation, it falls squarely within the area of implied powers. Therefore, the finer point stressed by Shri Kaji is that the expression 'forfeiture' is a ritualistic recital to cover up a secret design to snatch from the traders sums which cannot be reached at except by the device of forfeiture. III frank fact, it is not a measure of penalty but an oblique methodology to do an illegitimate thing which is beyond the legislature's legitimate reach. We have, therefore, to examine this short point in the light of the decisions of this Court.
Coming to 'forfeiture', what is the true character of a ‘forfeiture’? Is it punitive in infliction, or merely another form of exaction of money by one from another ? If it is penal, it falls within implied powers. If it is an act of mere transference of money from the dealer to the State, then it falls outside the legislative entry. Such is the essence of the decisions which we will presently consider. There was a contention that the expression 'forfeiture' did not denote a penalty. This, perhaps, may have to be decided in the specific setting of a statute.
But, speaking generally, and having in mind the object of s.
37 read with S. 46, we are inclined to the view that forfeiture has a punitive impact. Black's Legal Dictionary states that 'to forfeit' is 'to lose, or lose the right to, by some error, fault, offence or crime', 'to incur a penalty.' 'Forfeiture', as judicially annotated, is 'a punishment annexed by law to some illegal act or negligence. . . ., 'something imposed as a punishment for an offence or delinquency.' The word, in this sense, is frequently associated with the word 'penalty', According to Black's Legal Dictionary.
"The terms 'fine', 'forfeiture', and 'penalty', are often used loosely, and even confusedly; but when a discrimination is made, the word 'penalty' is found to be generic in its character, including both fine and forfeiture. A 'fine' is a pecuniary penalty, and is commonly (perhaps always) to be collected by suit in some form. A 'forfeiture' is a penalty by which one loses his rights and interest in his property." 351 More explicitly, the U. S. Supreme Court has explained the concept of 'forfeiture' in the context of statutory construction. Chief Justice Taney, in the State of Maryland v. The Baltimore & Ohio RR Co.(1) observed "And a provision, as in this case, that the party shall forfeit a particular sum, in case he does not perform an act required by law, has always, in the construction of statutes, been regarded not as a contract with the delinquent party, but as the punishment for an offence. Undoubtedly, in the case of individuals, the word forfeit is construed to be the language of contract, because contract is the only mode in which one person can become liable to pay a penalty to another for breach of duty, or the failure to perform an obligation. In legislative proceedings, however, the construction is otherwise, and a forfeiture is always to be regarded as a punishment inflicted for a violation of some duty enjoined, upon the party by law; and such, very clearly, is the meaning of the word in the act in question." The same connotation ha.-; been imparted by our Court too. A Bench has held : (2) "According to the dictionary meaning of the word 'forfeiture' the loss or the deprivation of goods has got to be in consequence of a crime, offence or breach of engagement or has to be by way of penalty of the transgression or a punishment for an offence. Unless the loss or deprivation of the goods is by way of a penalty or punishment for a crime, offence or breach of engagement it would not come within the definition of forfeiture." This word 'forfeiture' must bear the same meaning of a penalty for breach of a prohibitory direction. The fact that there is arithmetical identity, assuming it to be so, between the figures of the illegal collections made by the dealers and the amounts forfeited to the State cannot create a conceptual confusion that what is provided is not punishment but a transference of funds. If this view be correct, and we hold so, the legislature, by inflicting the forfeiture, does not go outside the crease then it hits out against the dealer and deprives him, by the penalty of the law, of the amount illegally gathered from the customers.
The Criminal Procedure Code, Customs & Excise Laws and several other penal statutes in India have used diction which accepts forfeiture as a kind of penalty. When discussing the rulings of this Court we will explore whether this true nature of 'forfeiture' is contradicted by anything we can find in ss. 37(1), 46 or 63. Even here we may reject the notion that a penalty or a punishment cannot be cast in the form of an absolute or no-fault liability but must be preceded by mens rea. The classical view that 'no mens rea, no crime' has long ago been eroded and several laws in India and (1) 11 Led. 714, 722.
(2) Bankura Municipality v. Lalji Raja and Sons : A.I.R.
1953 S.C. 248, 250.
352 abroad, especially regarding economic crimes and departmental penalties, have created severe punishments even where the offences have been defined to exclude mens rea.
Therefore, the contention that S. 37 (1) fastens a heavy liability regardless of fault has no force in depriv the forfeiture of the character of penalty.
We shall now turn to the plethora of precedents which have, accumulated over the years dealing with sales tax legislations from different States, the patterns varying in structure, although the financial impact on the dealers is the same. The landmark case is Abdul Quader(1), although Ashoka Marketing Co.(2) and Annapoorna Biscuit Mfg. Co.(3), among others are also pertinent decisions. While there are earlier decisions, we may as well start off with Abdul Quader(1). There, the appellant dealer collected sales tax from the purchasers of betel leaves but did not pay the amount so collected to the government. When the tax authorities directed the appellant to pay the said amounts into the treasury, he filed a writ petition questioning the validity of S. 1 1 (2) of the Hyderabad General Sales Tax Act, 1950 which was the authority relied on by the government to make the direction. The problems and the answer thereto squarely stated by Shri Justice Wanchoo, speaking for the Court. We may except that portion which formulates the question and furnishes the answer.
"The first question therefore that falls for consideration is whether it was open to the State legislature under its powers under Entry 54 of List II to make a provision to the effect that money collected by way of tax, even though it was not due as a tax under the Act, shall be made over to Government. Now it is clear that the sums so collected by way of tax are not in fact tax exigible under the Act. So it cannot be said that the State legislature was directly legislating for the imposition of sales or purchase tax under Entry 54 of List II when it made such a provision, for on the face of the provision, the amount, though collected by way of tax, was not exigible as tax under the law. The provision however is attempted to be justified on the ground that though it may not be open to a State legislature to make provision for the recovery of an amount which is not a tax under Entry 54 of List 11 in a law made for that purpose, it would still be open to the legislature to provide for paying over all the amounts collected by way of tax by persons, even though they really are not exigible as tax, as part of the incidental and ancillary power to make provision for the levy and collection of such tax. Now there is no dispute that the heads of legislation in the various Lists in the Seventh Schedule should be interpreted widely so as to take in all matters which are of a character incidental to the topics mentioned therein. Even so, there is a limit to such incidental or ancillary power flowing from the legislative entries in (1)[1964] 6 S.C.R. 867.
(2)[1970] 3 S.C.R. 455.
(3)[1973] 3 S.C.R. 987.
353 the various Lists in the Seventh Schedule.
These incidental and ancillary powers have to be exercised in aid of the main topic of legislation, which, in the present case, is a tax on sale or purchase of goods. All powers necessary for the levy and collection of the tax concerned and for seeing that the tax is not evaded are comprised within the ambit of the legislative entry as ancillary or incidental. But where the legislation under the relevant entry proceeds on the basis that the amount concerned is not a tax exigible under the law made under that entry, but even so lays down that though it is not exigible under the law, it shall be paid over to Government, merely because some dealers by mistake or otherwise have collected it as tax, it is difficult to see how such provision can be ancillary or incidental to the collection of tax legitimately due under a law made under the relevant taxing entry. We do not think that the ambit of ancillary or incidental power goes to the extent of permitting the legislature to provide that though the amount collected-may be wrongly-by way of tax is not exigible under law as made under the relevant taxing entry, it shall still be paid over to Government, as if it were a tax. 'The legislature cannot under Entry 54 of List 11 make a provision to the effect that even though a certain amount collected is not a tax on the sale or purchase of goods as laid down by the law, it will still be collected as if it was such a tax. This is what s. 1 1 (2) has provided. Such a provision cannot in our opinion be treated as coming within incidental or ancillary powers which the legislature has got under the relevant taxing entry to ensure that the tax is levied and collected and that its evasion becomes impossible. We are therefore of opinion that the provision contained in S. 1 1 (2) cannot be made under entry 54 of List II and cannot be justified even as an incidental or ancillary provision permitted under that entry." (pp. 872873).
The Court proceeded to refer to an attempt made to justify the provision as providing for a penalty, but found nothing in the text to justify the impugned sub-section (2) of s.
11, as a penalty for breach of any prohibition under the Act. On the other hand, in the setting of the statute, the Court came to the contrary conclusion :
"Section 11 (2) in our opinion has nothing to do with penalties and cannot be justified as a penalty on the dealer. Actually S. 20 makes provision in cl. (b) for penalty in the case of breach of S. 11(1) and makes the person committing a breach of that provision liable, on conviction by a Magistrate of the first class, to a fine...... In this connection we may refer to cl. (c) of s. 20 which provides that any person who fails to pay the amounts specified in subsection (2) of section 11 within the prescribed time' shall, on a conviction by a Magistrate, be liable to fine.
It is remarkable that this provision makes the person punishable for his failure to pay the amount which is not authorised as a tax at all under the law, to Government. it 354 does not provide for a penalty (sic) collecting the amount wrongly by way of tax from purchasers which may have been justified as a penalty for the purpose of carrying out the objects of the taxing legislation. If a dealer has collected anything from a purchaser which is not authorised by the taxing law, that is a matter between him and the purchaser, and the purchaser may be entitled to recover the amount from the dealer. But unless the money so collected' is due as a tax, the State cannot by law make it recoverable simply because it has been wrongly collected by the dealer. This cannot be done directly for it is not a tax at all within the meaning of Entry 54 of List II, nor can the State legislature under the guise of incidental or ancillary power do indirectly what it cannot do directly." (p. 874) (underscoring ours) The crucial ratio lies in the underscored passage. Had there been a penalty, including forfeiture, coupled with a prohibition against collecting any amount wrongly by way of tax from purchasers, it 'may have been justified as a penalty for the purpose of carrying out the objects of the taxing legislation. In a sense, Abdul Quader (supra) demarcates the constitutional watershed between merely laying hands upon collections by way of tax by traders although they are not exigible from traders (a provision for which the State is underpowered by Entry 54 of List II even expanding it by the doctrine of implied powers) and the policing by penalizing, including forfeiting illegal exactions, the working of a taxing statute and inhibiting injury to the public.
We may now pass on to Ashoka Marketing Co. (supra) where this Court had to consider a slightly different provision from what fell for decision in Abdul Quader (supra). In the latter, the provision directed that every person who had collected any amount by way of tax otherwise than in accordance with the provisions of the Act should pay over to the government .... the amount so collected by him......
This was a naked seizure of money collected by the dealer there being no prohibition and no penalty and not obligation for the government to return such sums to the purchasers from whom they were taken. In Ashoka Marketing Co. (supra) the provision in S. 20A went further. While the illegal collections were to be made over to the Government treasury it was further provided that such amounts shall be held by the State Government in trust for the person from whom it was realized by the dealer and the dealer himself on depositing these sums into Government treasury shall be discharged from his obligation to return the sums to the purchasers. There was an incidental direction that, on a claim being made by aggrieved buyers, these dribblers shall be refunded. The scheme of cl. (8) of S. 20A made it clear that the legislation was in public interest, that while suits against dealers to recover paltry sums by a large number, of customers would lead to endless and expensive litigation, a simpler process of returning those sums on application by the relevant purchasers would protect the common buyer while depriving the dealers of their unjust gains. It was manifestly a consumer protection 355 measure, as we see it. Shah, J. speaking for the Court, held that this pro bono publico purpose did not dissolve the constitutional disability and ruled :
"The State Legislature may under entry 54 List II, be competent to enact a law in respect of matters necessarily incidental to 'tax on sale and purchase of goods'. But a provision compelling a dealer who has deliberately or erroneously recovered an amount from the purchaser on a representation that he is entitled to recover it to recoup himself for payment of tax, to pay over that amount to the State, cannot, in our judgment, be regarded as necessarily incidental to levying an amount as tax which the State is incompetent to levy. A mere device cannot be permitted to defeat the provision of the Constitution by clothing the claims in the form of a demand for depositing the money with the State which the dealer has collected, but which he was not entitled to collect." (p. 463-464) This decision has been followed by a smaller Bench in Annapoorna (supra) with no additional reasons adduced.
In Ashoka (supra) the Bench did not follow Orient Paper Mills(1) where fairly similar provisions were attacked, but repulsed by this Court with the observation :
"The Legislature of the Orissa State was therefore competent to exercise power in respect of the subsidiary or ancillary matter of granting refund of tax improperly or illegally collected, and the competence of the Legislature in this behalf is not canvassed by counsel for the assessees. If competence to legislate for granting refund of sales-tax improperly collected be granted, is there any reason to exclude the power to declare that refund shall be claimable only by the person from whom the dealer has actually realized the amounts by way of sales-tax or otherwise ? We see none." (p. 461 : Ashoka) Despite this holding in Orient(1) the Court-a larger Benchheld that the taking over of sums collected by dealers from the public under guise of tax solely with a view to return them to the buyers so deprived was not 'necessarily incidental' to 'tax on the sale and purchase of goods'. We respectfully disagree.
In a developing country, with the mass of the people illiterate and below the poverty line, and most of the commodities concerned constitute their daily requirements, we see sufficient nexus between the power to tax and the incidental power to protect purchasers from being subjected to an unlawful burden. Social justice clauses, integrally connected with the taxing provisions, cannot be viewed as (1) [1962]1 S.C.R. 549.
356 a mere device or wanting in incidentality. Nor are we impressed with the contention turning on the dealer being an agent (or not) of the State vis a vis sales tax; and why should the State suspect when it obligates itself to return the moneys to the purchasers ? We do not think it is more feasible for ordinary buyers to recover from the common run of dealers small sums than from government. We expect a sensitive government not to bluff but to hand back. So, we largely disagree with Ashoka(supra) while we generally agree with Abdul Quader(supra). We must mention that the question as to whether an amount which is illegally collected as sales tax can be forfeited did not arise for consideration in Ashoka (supra).
We may conclude with the thought that Parliament and the State Legislatures will make haste to inaugurate viable public interest litigation procedures cutting costs and delays. After all, the reality of rights is their actual enjoyment by the citizen and not a theoretical set of magnificent grants. 'An acre in Middlesex', said Macaulay, 'is better than a principality in Utopia'. Added Prof.
Schwartz : 'A legal system that works to serve the community is better than the academic conceptions of a bevy of Platonic guardians unresponsive to public needs'.(1) A march past the other decisions of this Court having some relevance to the point at issue is at this stage useful.
Kantilal Babulal(2) dealt with a provision substantially similar to the one that falls for consideration in the present case. After laying down a prohibition against collection by dealers from purchasers of amounts by way of sales tax 'unless he is a registered dealer and is liable to pay tax himself', Section 12A of the concerned Act (Bombay Sales Tax Act V of 1946) provided that collections contrary to the provision ,hall be forfeited to the State Government.
The Revenue urged that S. 12A(4), which dealt with 'forfeiture' was a penal provision incidental to; the power to tax sales. The, Court expressly declined to investigate whether the provision was penal at all. However, it was assumed that a penal provision was within the legislative competence of the State Legislature and the entire discussion, and therefore. the sole ratio, turned on the alleged violation of Art. 19(1)(f). It was held that Art.
19 was violated because, in the Court's view the forfeiture clause was silent as to the machinery and procedure to be followed in determining the question as to whether there had been a contravention of s. 12A(1) and (2) and, if so, to what extent. Processual reasonableness being absent Art.
19(1)(f) stood contravened. In short, the whole decision focussed on the procedural portion of the law being repugnant to Art. 19(1) (f) read with Art. 19(5). It did not engage in a consideration of legislative competence.
(1) Bernard Schwartz; The Law in America; p. 7 : American Heritige-Bigentennial Series.
(2) [1968] 1 S.C.R. 785.
357 Aside from this case, the other rulings of this Court like Maneklal(1), George Ooakes (2), Jhaveri(3) and Abdulla(4) have only a peripheral relevancy. While we have listened, persued and reflected over these citations, we have screened them from specific reference in this judgment since these decisions were cited by counsel merely to drive home the significance of some stray thought expressed in these judgments having but marginal m
