Case: Sita Ram Bishambher Dayal &amp; Ors Vs. State Of U.P. &amp; Ors

2. The appellant are dealers in Rab. In respect of their dealers in Rab, they have been levied purchased tax as per the notification issued by the Government under Section 3 (D) (1) of the Act. They are challenging the validity of the levy on the grounds mentioned above3. 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 Section 3-D is a valid power. It opined that the conferment of power on the executive to fix the rate of tax within the limits laid down in the section is not impermissible. Further it held that the section is not hit by Article 14 of the Constitution.

Court's reasoning:
5. It is true that the power to fix the rate of a tax is a legislative power but if the legislature lays 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 rates 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 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 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 Text book doctrines evolved in the 19th century have become out of date.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 legislatures have neither the time, nor the required detailed information 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 possible8. We are unable to accept the contention of Mr. Goyal learned Counsel for the appellant that the Maximum rate fixed under Section 3-D is unreasonably high. At any rate there is no material before us on the basis of which, we can come to that conclusion10. 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 purchases of goods notified in sub-section (1) of Sec. 3-D in an intelligible form and in such manner, if any, as may be prescribed and further he must furnish to the assessing authority the details of the aforesaid transaction together with the name and particulars of the purchaser and the number and date of the registration certificate filed by the purchaser under Section 8-A and such other information regarding the transactions as may subject to rule, if any, in this behalf be required11. Hence 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 hat 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 permitted 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 into rule out classification. 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 Section 3-D is violative of Article 14.