# KANTI LAL BABULAL v. B. C.PATEL

- **Citation:** [1968] 1 S.C.R. 735
- **Court:** Supreme Court of India
- **Decided:** 1967-09-29
- **Case number:** Special Civil Application No. 641 of 1962
- **Bench:** K. N. Wanchoo, R. S. Bachawat, V. Ramaswami, G. K. Mitter, K. S. Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/kanti-lal-babulal-v-b-c-patel-4283
- **Pages:** 7

## Headnote

Bombay Sales Tax Act (Bom. 5 of 1946) S. 12A(4)-If infringes
Art. 19(1)(f), Constitution.
A
B
In view of Art. 286 \ll (a) of the Constitution •. as it stood at
the relevant time, the sa es by the appellants-(reg1stered dealers)
outside the State of Bombay were not exigible to tax; The appelC
!ants were directed to refund amounts collected by them from their
purchasers in respect of these sales by way of tax, failing which the
amounts would be forfeited under s. 12A(4) of the Bombay Sales
Tax Act. The appellants filed a writ petition in the High Court to
restrain the respondents from taking action against them under
s. 12A(4). The High Court dismissed the petition. In appeal, this
Court,
D
Held: S. 12A(4) of the Bombay Sales Tax Act was void being
violative of Art. 19(1)(f) of the Constitution.
Prima facie the appellants were entitled to. get the amount
ordered to be refunded to them. It was for the respondents to establish that the same was liable to be forfeited. Even according to the
E
respondents that amount could be forfeited only as a measure of
penalty. Under our jurisprudence no one can be penalised without
a proper enquiry. (740 E-F].
The impugned provision
which
provided. forfeiture of the
amount in the hands of the dealers, did not lay down any procedure
for ascertaining whether in fact the dealer concerned had collected
any amount by way of tax from his purchasers outside the State p
and If so ,what that amount was. Neither S. 12A(4) nor any rule
framed wider the Act contemplated any enquiry, much less a reasonable enquiry in which the person complained of could plead and
prove his case or satisfy authorities that their asswnptiona were
either wholly or partly wrong, This section did not contemplate adjudication nor provide for making any order. Hence, it was doubtful
whether any appeal could be filed against a demand made under
G
that section under S. 21 (740 G-H; 741-E].
Abdul Quadar and Co. v. Sales Tax Officer, Hyderabad (1964]
6 S.C.R. 867, Dr. N. B. Khare v. State of Delhi. (1950] S.C.R. 519.
State of MadW1$ v. V. G. Rao. (1952] S.C.R. 597 followed.
Ram Gopal. v. Sales Tax Officer, Surat and another, 16 S.T.C.
1005 disapproved.
OVIL APPELLATE JURISDICTION: Civil Appeal No. 126 of B
1966.
Appeal from the judgment and order dated November 29,
and December 2, 1963 of the Gujarat High Court in Special Civil
Application No. 641 of 1962.
735
7Sti
SUPBllllB oouwr 1181'01\TS
[1968) l 8.0.B.
A
K. R. Chaudhuri, for the appellant.
R. M. Hazarnavis, K. L. Hathi and S. P. Nayar, for the respondents.
S. T. Desai and /. N. Shroff, for the intervener.

## Text

KANTI LAL BABULAL
v
B. C.PATEL
September 29, 1967
(K. N. WANCHOO, C. J., R. S. BACHAWAT, V. RAMASWAMI,
G. K. MITTER, AND K. S. HEGDE, JJ.J
Bombay Sales Tax Act (Bom. 5 of 1946) S. 12A(4)-If infringes
Art. 19(1)(f), Constitution.
A
B
In view of Art. 286 \ll (a) of the Constitution •. as it stood at
the relevant time, the sa es by the appellants-(reg1stered dealers)
outside the State of Bombay were not exigible to tax; The appelC
!ants were directed to refund amounts collected by them from their
purchasers in respect of these sales by way of tax, failing which the
amounts would be forfeited under s. 12A(4) of the Bombay Sales
Tax Act. The appellants filed a writ petition in the High Court to
restrain the respondents from taking action against them under
s. 12A(4). The High Court dismissed the petition. In appeal, this
Court,
D
Held: S. 12A(4) of the Bombay Sales Tax Act was void being
violative of Art. 19(1)(f) of the Constitution.
Prima facie the appellants were entitled to. get the amount
ordered to be refunded to them. It was for the respondents to establish that the same was liable to be forfeited. Even according to the
E
respondents that amount could be forfeited only as a measure of
penalty. Under our jurisprudence no one can be penalised without
a proper enquiry. (740 E-F].
The impugned provision
which
provided. forfeiture of the
amount in the hands of the dealers, did not lay down any procedure
for ascertaining whether in fact the dealer concerned had collected
any amount by way of tax from his purchasers outside the State p
and If so ,what that amount was. Neither S. 12A(4) nor any rule
framed wider the Act contemplated any enquiry, much less a reasonable enquiry in which the person complained of could plead and
prove his case or satisfy authorities that their asswnptiona were
either wholly or partly wrong, This section did not contemplate adjudication nor provide for making any order. Hence, it was doubtful
whether any appeal could be filed against a demand made under
G
that section under S. 21 (740 G-H; 741-E].
Abdul Quadar and Co. v. Sales Tax Officer, Hyderabad (1964]
6 S.C.R. 867, Dr. N. B. Khare v. State of Delhi. (1950] S.C.R. 519.
State of MadW1$ v. V. G. Rao. (1952] S.C.R. 597 followed.
Ram Gopal. v. Sales Tax Officer, Surat and another, 16 S.T.C.
1005 disapproved.
OVIL APPELLATE JURISDICTION: Civil Appeal No. 126 of B
1966.
Appeal from the judgment and order dated November 29,
and December 2, 1963 of the Gujarat High Court in Special Civil
Application No. 641 of 1962.
735
7Sti
SUPBllllB oouwr 1181'01\TS
[1968) l 8.0.B.
A
K. R. Chaudhuri, for the appellant.
R. M. Hazarnavis, K. L. Hathi and S. P. Nayar, for the respondents.
S. T. Desai and /. N. Shroff, for the intervener.
The Judgment of the Court was delivered by
B
Hegde, J.-The main controversy in this appeal by certificate
is as to the constitutional validity ·of s. 12A(4) of the Bombay Sales
Tax 1946, to be hereinafter referred to as the Act. As in our judgment that provision is void, the same being violative of Art.
19(l)(f) of the Constitution, we have not thought it necesssry to
examine the other contentions raised in the appeal.
C
The facts material for the purpose of deciding the question
formulated above, are these: The appellants are dealers registered
under the Act carrying on business in art silk, cotton and band•
loom cloth. During the period January 26, 1950 to March 31, 1950,
the appellants effected various sales outside the State of Bambay.
D As those sales were protected by Art. 286(l)(a) of the Constitution,
they were outside the reach of the Act. But yet the ssles tax officer
assessed the turnover relating to those sales. The tax levied in
respect of that turnover was Rs. 4,494/3/9. In appeal, the order
-0f the sales tax officer was affirmed by the Assistant Collector of
sales tax. But the Additional Collector of ssles tax in revision reE vised the levy to some extent and ordered a
refund
of
Rs. 2.238/0/6. That amount wru; paid to the assessees. Not being
satisfied with the order of the Additional Collector of ssles tax.
the appellants took up the matter in revision to the Sales Tax
Appellate Tribunal. But even before they moved the Tribunal
in revision, the Additional Collector of ssles tax by his letter
F dated May 17, 1958, informed the appellants that unless they
furnished to the sales tax officer proof of their having refunded
the amount paid to them in pursuance of his order to the pur·
chasers. within a period of three months from the date of that
notice, the same would be liable to be forfeited under s. 12A(4).
The Tribunal by its order dated November 26, 1958, allowed the
6 claim of the appellants in full and directed the refund of an additional sum of Rs. 2,256/2/6.
During the period April 1, 1950 to March 31, 1951 the appellants effected various sales outside the State of Bombay. The turnover relating to those sales was also brought to tax by the sales
tax officer and in that connection a tax of Rs. ·23,806 / 3 / 6 was
levied on the appellants. In appeal, the Assistant Collector of sales·
H tax allowed the appellants' claim in part and ordered a refund of
Rs. 12,154/15/- but. at the same time he informed them that that
amount would be forfeited to the State Government if not refunded to the purchasers from whom the same had been collected. Not
being satisfied with the relief obtained, the appellants went up in
revision to the Additional Collector of sales tax. That officer by
' '
KAl!iTI LAL BA.BU UL V. H. 0. PA'flliL (Hegde, J.)
7117
his order dated November 1. 1958 granted further relief by order- A
ing refund of an additional sum of Rs. 3.588 / l / 9. But the sales
tax officer did not give effect to that order. As the Additional
Collector did not accept the appellants' claim in full, they went
up in revision to the Tribunal. The Tribunal allowed their claim
in full. The Revenue took up the matter in reference to the High
Court but that reference was rejected. From the foregoing it is
seen that in respect of the perit>d April 1, 1950 to March 31, B
1951, the appellll'llts are entitled to get a refund of Rs. 23,806/3/6.
Despite the aforementioned orders, the sales tax officer did not
pay the amounts ordered to be refunded. On the other hand, he
threatened to take steps to forfeit the same by having recourse
to s. 12A(4).
On June 27, 1962, the sales tax officer called upon the asses- c
sees to remain present in their office on July 2, 1962 with particulars of the amount collected by them by way of sales tax from
the purchasers in other States during the period January 26, 1950
to March 3 I, 195 I. At that stage, the appellants approached the
High Court of Gujarat by special civil application No. 641 of 1962
under Art. 226 of the Constitution. In that application, they prayD
ed for several reliefs, the most important of which was to direct
the respondents to comply with the orders of refund and to refrain
from taking any action against them under s. 12A(4). The High
Court dismissed that application. Hence. this appeal.
The. Act provides for the levy of tax on the sale of goods in
the then State of Bombay. It came into force on March 8, 1946. E
Any person who carries on business of selling qr supplying goods
in the State of Bombay whether for commission, remuneration or
otherwise, is defined as a dealer in s. 2(c). Section 8 and s. 8(a)
of the Act provide for the registration of dealers. As mentioned
earlier the appellants are registered dealers. Under s. 2(k) of
the Act, the assessment year is the financial year. Section 5 presF
cribes the incidence of taxation. Section 10 prescribes the returns
to be made by the dealers. The assessment is made under s. 11.
Section 11 (a) provides for taxing the turnover escaping assessment. Section 12 provides for the payment and recovery of tax.
Section 12A is the one with
which we are concerned in this
appeal. It reads:
"(1) No person shall collect any amount by way of
tax under this Act in respect of sales or supplies of any
goods which are declared, from time to time. under section 7 as sales or supplies on which the tax is not payable.
(2) No person selling or supplying any goods shall
collect from the purchaser any amount by way of sales tax
unless he is a registered dealer and is liable' to pay tax
under this Act in respect of such sale or .supply:
Provided that this sub-section shall not apply In
cases where a person is required to collect such amount
of tax separately in order to comply with the conditions
G
B
A
B
0
D
BUPllEW: COUl\1' REPORTS
[1961] I s.c.11.
and restrictions imposed on him under the provisions of
any law for the time being in force.
(3) Every registered dealer whose gross turnover ex-
. ceeds Rs. 60,000 a year shall issue a bill or Cll'Sh memorandum signed and dated by him or his servant, manager
or agent to the purchaser in respect of the goods sold or
supplied by him showing the particulars of the goods
and the price at which the goods are sold or supplied
shall keep the counterfoil or duplicate of such bill t>r cub
memorandum duly signed and dated and preserve it for
a period of not less than two years from such date.
(4) If any person collects any amount by way of tax
in contravention of the provisions of sub-section (I) or (2)
or if any registered dealer collects any amount by way of
tax in excess of the amount payable by him under this Act,
the amounts so collected shall, without prejudice to any
prosecution that may be instituted against such person or
dealer for an offence under this Act be forfeited to the
State Government and such person or dealer, as the case
may be, shall within the prescribed. period, pay such
amount into a Government treasury and in default of such
payment, the amount shall be recovered as an arrear of
land revenue."
E
. In view of Art. 286(l)(a) of the Constitution as it stood at the
relevant time, the appellants' sales outside the State of Bombay
were not exigible to tax. Therefore if the appellants had collected
any amount from their purchasers in respect of those sales by way
of ':tax they had undoubtedly contravened sub-s. 2 of s. 12A
Sub.s. 4 of s. 12A provides for the forfeiture to State government
F any amount collected by a dealer by way of tax in excess of the
amount payable by him under the Act For the purpose of deciding the point in issue it is not necessary to find out the scope
-0f the expression "collects any · amount by way of tax" in s.
!2A(4i. We shall assume, without deciding, the collection made
by the appellants, if any, was by way of tax.
G
. It was not contended nor could it have been contended that
the impugned provision is a taxation measure bringing to tax
directly or indirectly the sales effected outside the State of Bombay. In Abdul Quadar and Co. v. Sales Tax Officer, Hyderabad,(')
interpreting s. 11(2) of the Hyderabad · General Sales Tax Act
1952, a provision som~what similar to the impugned provision,
this Court observed that legislation under Entry 54 . of List II
B of the Constitution (similar to Entry 48 of List II of the Government of India Act, 1935, the entry with which we are concerned
in this ease) proceeds on the basis · that the amount concerned
is not a tax exigible under the law made under that entry, but
(') [1964] 6 S.C.R. 86'1.
KANTI LAL RABU LAL ~. B. C. PATEL (Hegde, J,)
739
even so lays down that though it is not exigible under the law, A
it shall be paid over to the government merely because some
dealers by mistake or otherwise have collected it as tax; hence,
it is difficult to see how such a provision can be ancillary or
incidental to the collection of tax legitimately due under a law
made under the relevant taxing entry. Therein it was held that
it cannot be said that the State legislature was directly legislating
for the imposition of sales or purchase tax under Entry 54 of B
List II when it made the provisions of s. 11 (2), for on the basis
of the provision the amount that was collected by way of tax
was not exigible as tax under the law.
According to the Revenue s. 12A(4) is a penal provision; and
it provides for the imposition of penalty cm those who contravene
C
s. 12A(l) and (2). It was said on its behalf that power to enact such
a provision. is incidental to the power to tax sales. In support of
that contenfon reliance was placed on the decision of the Gujarat
High Court ;n Ram Gopal v. Sales Tax Officer, Surat and
A not her('). That decision upheld the validity of s. 12A(4). If
that decision lays down the law correctly, then the appellants D
are out of court. But we think that the said decision cannot be
sustained.
We shall not go into the question whether from the language
cf the impugned provision it is possible to hold that it is a penal
provision. For our present purpose we shall assume it to be so.
We shall also assume that the legislature had legislative competence
E
to enact that provision. But the question is whether it is violative
of Art. 19(1)(f) which guarantees the freedom to hold property.
Prima facie the appellants are entitled to get the amount ordered
to be refunded to them. It is for the respondents to establish that
the same is liable to be forfeited. Even according to the respondentS that amount can be forfeited only as a measure of penalty for F
the contravent'on of s. 12A(l) and (2). Under our jurisprudence no
01~.e can be penalised without a proper enquiry. Penalising a person
without an enquiry is abhorrent to our sense of justice. It is a violation of the principles of natural justice, which we value so much.
The impugned provision which provides for the forfeiture
of the amount in the hands of the dealers, does not lay down any G
procedure for ascertaining whether in fact the dealer concerned had
collected any . amount by way of tax from his purchasers outside
the State and if so what that amount is. Neither s. 12A(4) nor any
rule framed under the Act contemplates any enquiry much less .a
reasonable enquiry in which the person complained of tan p!""d
and prove his case or satisfy the authorities that their assumptions
are either wholly or partly wrong.
R
The Att 'is silent as to the machinery and procedure to be
followed in determining the question as to whether there has been
a contraventio'n of ss. 12A(l) and (2), and if so, to what extent.
(') 16 S.T.C. 1005.
L.'P(N)7 SCI-~
740
SUPllBllll OOUJIT BllPOBTS
[1968] l S.C.B,
A Hence it would be open to the department to evolve all the requisite machinery and procedure which means that the whole thing,
from the beginning to end, is treated as of a purely administrative
character, completely ignoring the legal position. The imposition
of a penalty on a person is at least of a quasi-judicial character.
The impugned provision does not concern itself only with the
B amount admittedly cdllected by a person in contravention of subss. l and 2 of s. 12A. Even if there is any dispute either as to the factum of collection or as to the amount collected, such a case also
comes within the scope of s. 12A(4). Yet that section does not provide for any enquiry on disputed questions of facts. or law. The forfeiture provided for in s. 12A(4) prima focie infringes Art. 19(1)(f).
0 Therefore it is for the respondents to satisfy the Court that the irr ..
pugned provision is a reasonable restriction imposed in the interest
of the general public.
Section 12A(4) does not contemplate the making of any order.
D As mentioned earlier; that sectinn prescribes that if any registered
dealer collects any amount by way of tax in excess of the amount
payable by him under the Act, the amount so collected shall, without prejudice to any prosecution that may be instituted against him
for an offence under the Act, be forfeited to the State government
and he shall within the prescribed period pay such amount into a
government treasury and in default of such payment the amount
• shall be recovered as arrears of land revenue. This section does not
contemplate adjudiQ&tion. NC'!' does it provide
for mak:ng any
order. Hence, it is doubtful whether any appeal can be filed against .
a demand made under that section under s. 21.
The question whether appellants in the instant case had been
• afforded a reasonable opportunity to establish their case or not is
besides the point Tbe constitutional validity of a provision has to
be determined on construing it reasonably. If it passes the test of
reasonableness, the possibility of powers conferred being improperly used, is no ground for pronouncing it as invalid, and conG versely if the same properly interpreted and tested in the light of
the requirements set out in Part ID of the Constitution, does not
pass the test, it cannot be pronounced valid merely because it is
being administered in the. manner which might not conflict with
the ron.tlitutlonal requirements. On a reasonable interpretation of
the impugned provision, we have no doubt that the po~ conferred under s. 12A(4) is unguided, uncanalised and uncontrolled. It
is an arbitrary ~·
As held by this Court in Dr. N.B. Khare v,
B State of Delhi('), whether the restrictions imposed by a legislative
enactlllent upon a fundamental right guaranteed by Art. 19(1) are
rea8onable within the meaning of Art. 19(5) would depend as much
on the procedural portion of the law as the subslll'ntive rart of it.
(') [1950] S.C.R. 519.
KANT! LAL BABU LAL v. B. C, PATllL (Hegde, J.)
74.1
Rao(') wherein it was observed that in consider!ng the reasonablo- A
That view was reiterated by this Court in State Of Madras v. V. G.
ness of laws imposing restrictions on fundamental rights both the
substantive and procedural aspects of the impugned law should be
examined from the point of view of reasonableness. This Court
has taken that view consistently. A provision like the one with
which we are concerned in this case can hardly be considered
B
reasonable.
For the reasons mentioned above, this appeal is allowed. The
order of the High Court is set aside and a writ of mandamus will
be issued to the respOndents to comply with the refund order set
out in the petition flied before the High Court and to refrain from
0
proceeding against the appellants under s. 12A(4). The appellants
are entitled to their costs both in this Court and in the High Court.
Y.P.
Appeal allowed.
·---·---·------
(') [1952] $.C.R. 59'1.
P(N)7SCI-8(a)