# SITA RAM BISHAMBHER DAYAL & ORS v. STATE OF U.P. & ORS

- **Citation:** [1972] 2 S.C.R. 141
- **Court:** Supreme Court of India
- **Decided:** 1971-10-21
- **Case number:** ; Civil Appeals Nos. 362 and 1672 of 1969
- **Bench:** K. S. Hegde, H. R. Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sita-ram-bishambher-dayal-ors-v-state-of-u-p-ors-5504
- **Pages:** 5

## Headnote

U.P. Sales Tax Act, 1948, s. 3D(l)-Its validity-Whether delegation
of authority under the section excessive and bad in law-ls the section
violative of Art. 14 of the Canstitution.
The appellants are dealers in Rab.
The St,ate Government under s.
30(1) of the U.P. Sales Tax Act, 1948, levied purchase tax in respect of
their dealings in Rab. Section 30(1) of the Act, inter a/ia, provides that
for each assessment year, there shall be levied and. paid a tax on the turnover of first purchases made by a dealer or through a dealer in respect of
such goods, at such rates not exceeding 2, paise per rupee in the case of
foodgrains .and 5 paise in respect of other goods and in the explanation it
is provided that "in the case of purchase made by a registered dealer
through a licensed dealer, the registered dealer shall be the first purchaser
and in every other case of fresh purchase, the dealer through whom the
first purchase is made shall oe deemed to be the first purchaser. The
appellants challenged the vires of s. 3(d) (1) of the Act before the High
Court but the High Court held against the appellants.
In appeal this Court, it was contended by the appellants that in empowering the Government to levy tax on goods other than foodgrains at
a rate not exceeding 5 paisa in a rupee, the legislature had given an unduly
wide power to the executive.
Such a delegated power was,
therefore,.
excessive anc! bad in law and secondly, s. 30( 1) in'fringed Art. 14 of the
Constitution because it discriminated between registered dealers who pur·
chased through licensed dealers and the registered dealers who purchased
through other dealers.
Dismissing the appeals,
HELD : ( i) The power to fix the rate of tax is a legislative power, but
if the legislature Jays down the legislative policy and provides the necessary
guidelines that power can be delegated to the executive, Though a tax
is levied primarily for the purpose of gathering revenue, in selecting
the objects to be taxed and in determining the rate of tax, various social
and economic factors are to_ be considered and since the Jegislatures have
very little time to go. into details, they have to delegate certain powers
to the Executive. This Court has ruled that if a reasonable upper limit
ts prescribed, the leg1slature can always delegate the power of fixing the
rate of purchase tax or sales tax. [143 EJ
Devi Dass Gopal Krishnan v. State of Punjab, 20 S.T.C. 430, followed.
. In the present case, taking into ~onsiderat~on the legislative practice in
this coun_try and the rate of tax levied 0F- lev1able under the various sales
tax laws tn force. in this c_ountry, it cannot be said that the power delegated
to th~ executtve is e~cess1ve and in the absence of any material, it cannot
be said that the maximum rate fixed under s. 30( 1) is unreasonably high
[144 E-FJ
.
(ii) Section 3IJ: is not_ violative of Art. 14 of the Constitution. In the
~resent case, t~ere IS nothmg wrong for the legislature to make a classificalton between bce~sed. dealers and dealers who are not licensed. A licemed
dealer has to mamtam true and correct accounts and other particulars o'i
-·-·
142
SUPREME COURT REPORTS
[1972] 2 S.C.R.
purchasers whereas dealers who are not registered are not required to
maintain any accounts. Hence, if registered dealers are permitted to make
purchases through dealers who are not licensed and those dealers
are
themselves not liai>le to be taxed, then opportunity for evasion of tax becomes larger. Under the circumstances, the classification is not unjustified.
[145 G]
State of Madras v. Gan/llOn Dunker/ay & Co. (Madras)
Ltd., [1959]
S.C.R. 379 and Devi Deo Gopa/ Krishna v. State of Punjab, 20 S.T.C. 430,
referred to.

## Text

c
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SITA RAM BISHAMBHER DAYAL & ORS.
v.
STATE OF U.P. & ORS.
October 21, 1971
[K. S. HEGDE AND H. R. KHANNA, JJ.]
U.P. Sales Tax Act, 1948, s. 3D(l)-Its validity-Whether delegation
of authority under the section excessive and bad in law-ls the section
violative of Art. 14 of the Canstitution.
The appellants are dealers in Rab.
The St,ate Government under s.
30(1) of the U.P. Sales Tax Act, 1948, levied purchase tax in respect of
their dealings in Rab. Section 30(1) of the Act, inter a/ia, provides that
for each assessment year, there shall be levied and. paid a tax on the turnover of first purchases made by a dealer or through a dealer in respect of
such goods, at such rates not exceeding 2, paise per rupee in the case of
foodgrains .and 5 paise in respect of other goods and in the explanation it
is provided that "in the case of purchase made by a registered dealer
through a licensed dealer, the registered dealer shall be the first purchaser
and in every other case of fresh purchase, the dealer through whom the
first purchase is made shall oe deemed to be the first purchaser. The
appellants challenged the vires of s. 3(d) (1) of the Act before the High
Court but the High Court held against the appellants.
In appeal this Court, it was contended by the appellants that in empowering the Government to levy tax on goods other than foodgrains at
a rate not exceeding 5 paisa in a rupee, the legislature had given an unduly
wide power to the executive.
Such a delegated power was,
therefore,.
excessive anc! bad in law and secondly, s. 30( 1) in'fringed Art. 14 of the
Constitution because it discriminated between registered dealers who pur·
chased through licensed dealers and the registered dealers who purchased
through other dealers.
Dismissing the appeals,
HELD : ( i) The power to fix the rate of tax is a legislative power, but
if the legislature Jays down the legislative policy and provides the necessary
guidelines that power can be delegated to the executive, Though a tax
is levied primarily for the purpose of gathering revenue, in selecting
the objects to be taxed and in determining the rate of tax, various social
and economic factors are to_ be considered and since the Jegislatures have
very little time to go. into details, they have to delegate certain powers
to the Executive. This Court has ruled that if a reasonable upper limit
ts prescribed, the leg1slature can always delegate the power of fixing the
rate of purchase tax or sales tax. [143 EJ
Devi Dass Gopal Krishnan v. State of Punjab, 20 S.T.C. 430, followed.
. In the present case, taking into ~onsiderat~on the legislative practice in
this coun_try and the rate of tax levied 0F- lev1able under the various sales
tax laws tn force. in this c_ountry, it cannot be said that the power delegated
to th~ executtve is e~cess1ve and in the absence of any material, it cannot
be said that the maximum rate fixed under s. 30( 1) is unreasonably high
[144 E-FJ
.
(ii) Section 3IJ: is not_ violative of Art. 14 of the Constitution. In the
~resent case, t~ere IS nothmg wrong for the legislature to make a classificalton between bce~sed. dealers and dealers who are not licensed. A licemed
dealer has to mamtam true and correct accounts and other particulars o'i
-·-·
142
SUPREME COURT REPORTS
[1972] 2 S.C.R.
purchasers whereas dealers who are not registered are not required to
maintain any accounts. Hence, if registered dealers are permitted to make
purchases through dealers who are not licensed and those dealers
are
themselves not liai>le to be taxed, then opportunity for evasion of tax becomes larger. Under the circumstances, the classification is not unjustified.
[145 G]
State of Madras v. Gan/llOn Dunker/ay & Co. (Madras)
Ltd., [1959]
S.C.R. 379 and Devi Deo Gopa/ Krishna v. State of Punjab, 20 S.T.C. 430,
referred to.
CIVIL APPELLATE JURISDICTION ; Civil Appeals Nos. 362 and
1672 of 1969.
Appeals from the judgments and orders dated May 17, 1968
of the Allahabad High Court in Writ Petitions Nos. 310 and 627
of 1968.
J. P. Goyal and Sob hag Mal Jain, for tbe appellants (in both
the appeals) .
A
B
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L. M. Singhvi and 0. P. Rana, for the respondents (in both
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the appeals) .
The Judgment of the Court was delivered by
. · Hegde, J.
These are appeals by certificate.
They raise a
common question of law for decision. The only contention arising for decision in these appeals is as to the vires of s. 3-D (I)
E
of the U.P. Sales Tax Act, 1948 (to be hereinafter referred to as
the Act). The validity of that section has been assailed on two
diffen~nt grounds viz. (I) that the power delegated to the execu -
tive under s. 3-D(l) is excessive and as such bad in law and (2)
Section 3-D infringes Art. 14 of the Constitution in as much as it
discriminates between the registered dealers who purchase through
F
the agency of licensed dealers and the
registered dealers
who
purchase through other dealers.
The appellants are dealers in Rab. In respect of their dealings in Rab, they have been .. levied purchase tax as per the notification issued by the Government under s. 3(D)(l) of the Act.
They are challenging the validity of the levy on the grounds
mentioned above.
The High Court has repelled both the above contentions.
The High Court has come to the conclusion that the power conferred on the State Government under s. 3-D is a valid power.
It opined that the conferment of power on the executive to fix
tl;Je rate of tax within the limits laid down in the section is not
impermissible. Further it held that the section is not hit by Art.
14 of the Constitution.
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SITA RAM v. U.P. STATE (Hegde, J.)
143
Before proceeding to consider the correctness of the contentions advanced on behalf of the appellant, it is necessary to read
s. 3-D(l). It says: -
"Except as provided in sub-section ( 2), there shall be
levied and paid, for each assessment year or part thereof, a tax on the turnover, to be determined in such manner as may be prescribed, of first purchases made by a
dealer or through a dealer, acting as a purchasing agent
in respect of such goods or class of gocds; and at such
rates, not exceeding two paisa per rupee in the case of
foodgrains, including cereals and pulses, and five paisa
per rupee in the case of other goods and with effect
from such date, as may, from time to time, be notified
by the State Government in this behalf.
Explanation.-In the case of a purchase made by
a registered dealer through the agency of a licensed
dealer, the registered dealer shall be deemed to be the
first purchaser, and in every other case of a first purchase, made through the agency of a dealer, the dealer
who is the agent shall be deemed to be the first purchaser."
It is ·true that the power to fix the rate of a tax is a legislative
power but if the legislature Jays down the legislative policy and
proTides the necessary guidelines, that power can be delegated
to the executive. Though a tax is levied primarily for the purpose
of gathering revenue, in selecting the objects to be taxed and in
determining the rate of tax, various economic and social aspects,
such as the availability of the goods, administrative convenience,
the extent of evasion, the impact of tax levied on the various
sections of the society etc. have to be considered. In a modern
society taxation is an instrument of planning. It can be used to
achieve the economic and social goals of the State.
For that
reason the power to tax must be a flexible power. It must be
capable of being modulated to meet the exigencies of the situation.
In a Cabinet form of Government, the executive is expected to
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reflect the views of the legislatures. In fact in most matters it
gives the lead to the legislature.
However, much one might
deplore the "New Despotism" of the executive, the very complexity of the modern society and the demand it makes on its Government have set in motion forces which have made it absolutely
necessary for the legislatures to entrust more and more powers
H
to the executive. Text book doctrines evolved in the 19th Century have become out of date. Present position as regards delegation of legislative power may not be ideal, but in the absence
of any better alternative, there is no escape from it. The legisla-
144
SUPREME COURT REPORTS
[1972] 2 S.C.R.
tures have neither the time, nor the required detailed information
A
nor even the mobility to deal in detail with the innumerable problems arising time and again.
In certain matters they can only
lay down the policy and guidelines in as clear a manner as
possible.
"
Iii State of Madras v.
Gannon Dunkerley & Co. (Madras)
B
Ltd. (1) this Court observed :
"Now, the authorities are clear that it is not unconstitutional for the legislature to leave it to the .executive
to determine details relating to the working of taxation
laws, such as the selection of persons on whom the tax
is to be levied, the rate at which it is to be charged in
C
respect of different classes of goods and the like".
It was not contended before us that the power delegated to
1=be executive to select the goods on which the purchase tax is to
pe levied was an excessive delegation nor was it contended· that
the ·power granted to the executive to determine the rate of tax
D
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by itself amounts to an excessive delegation.
All that was said
was that in empowering the Government to levy tax on goods
other than foodgrains at a rate not exceeding 5 paise in a rupee,
the legislature parted with one of its essential legislative functions
.
as the power given to the executive is an unduly wide one. We
are unable to accede to this conteation. Whether a power. deleE
gated by the legislature to the executive has exceeded the permissible limits in a given case depends on its facts and circumstances.
That question does not admit of any general rule. It
depends upon the nature of the ·power delegated and the purposes
intended to be achieved. Taking into consideration the legislative practice in. this country and the rate of tax levied or leviable
under the various sales tax laws in force in this country, it cannot F
be said that the power delegated to the executive is excessive. 'In
Devi Dass Gopal Krishnan and or1>. v. The State of Punjab and
ors( 2 ) this Court ruled that it is open to the legislature to delegate
the power of fixing the rate of purchase tax or sales tax if the
legislature prescribes a reasonable upper limit.
We are unable to accept the contention of Mr. Goyal, learned
G
Counsel for the appellant that the maximum rate fixed under s.
3-D is unreasonably high. At any rate there is no material before us on the basis of which, we can come to that conclusion.
This takes us to the contention that s. 3-D is ultra vires Art.
14 of the Constitution. The argument on this question proeee4s
H
thus : The explanal!ion to s. 3-D provides that in the case of
(1) [19S9] S.C.R. 379.
(2) 20 S.T.C. 430.
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SITA RAM v. U.P. STATE (Hegde, J.)
145
purchase made by a registered dealer through the agency of a
licensed dealer, the registered dealer would be deemed to be the
first purchaser whereas in every other case of a first purchase
made through the agency of a dealer, the dealer who is the agent
would be deem.ed to be the first purchaser.
This difference according to Mr. Goyal is discriminatory in character. He urged that
there was no justification for making an agent liable to pay sa~es
tax merely because he is an unlicensed agent. According to him
there is no rational distinction
between the purchases
made
through
licensed dealers and those
made through unlicensed
dealers.
The power to levy tax includes within itself the power to
provide against evasion of tax. A licensed dealer has to function
according to the conditions of his licence. He is bound to maintain true and correct accounts of his day to day transactions of
sales and purchase of goods notified in sub-s. ( l) of s. 3-D in an
intelligible form and in sucb manner, if any, as may be prescribed
and further he must furnish to the assessing authority the details
oi the aforesaid transactions together with the name and particulars of the purchaser and the number and date of the registration certificate filed by the purchaser under s. 8A and such other
information regarding the transactions as may, subject to rule, if
any, in this behalf be required.
Hen~e whenever a purchase is made through a licensed agent,
the authorities have the opportunity to know what purchases have
been made and from whom those purchases were made but that
would not be the case when purchases are made through dealers
·who are not licensed. They are not required by law to maintain
any accounts or submit any returns. Hence if registered dealers
are pem1itted to make purchases through dealers who are not
licensed and those dealers themselves are not liable to be taxed then
opportunity for evasion becomes larger. The rule of discrimination does not ruTe out elassification. The power of classification
under a fiscal law is larger than in the case of other laws. Hence
there was nothing wrong in the legislature making a classification between licensed dealers and dealers who are not licensed.
Even when a dealer who is not licensed is liable to pay purchase
tax, the ultimate burden falls on his principal. For these reasons.
we do not see any basis for the contention that s. 3-D is violative
of Art. 14.
For the reasons mentioned above these appeals fail and they
are dismissed with costs--one set.
S.N.
Appeals dismissed.