GWALIOR RAYON SILK MFG. (WVG.) CO. LTD. versus THE ASSTT. COMMISSIONER OF SALES TAX & ORS.

Citation: [1974] 2 S.C.R. 879 · Decided: 21-12-1973 · Supreme Court of India · Bench: A.N. RAY · Disposal: Dismissed

Cited by 16 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

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GWALIOR RAYON SILK MFG. (WVG.) CO. LTD. 
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THE ASSTT. COMMISSIONER OF SALES TAX & ORS. 
December 21, 1973 
[A. N. R;.Y, C.J., K. K. MATHEW, H. R, KHANNA, 
A. ALAGJRJSWAMI AKO P. N. BiiAGWAT!, I/.] 
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.Central Salis Tax Act, 1956-S. 8(1) (h)-Whether it suffers fronz the lice of 
t'.H:'essil•c delegation. . 
Sec. 8(2)(b) of the Central Sales Tax Act 19S6, provides that tbe tax payable 
by any dealer on his turnover, in so far as it relates to the sale of goods in the 
course of intcr·state trade or-commerce not falling -wi_thin sub-sec. (1),~,.....­
ia· cas_e of· ioods other than declared goods, shall bo Calcu_Iated at the rate Of ,ten 
per -cent or at the rate applicable to the sale or purchase of such 1:0Qds jnside·tbe 
:.i.ppropriate state, 'whichever is higher ... ·.etc. 
The short-question which arose ·ror determination in these four _ ilppcals . , \\'as 
whether the provisions of sec. 8(2)(b) Of the Central Sales Tax Act, 1956 5iJ.lI~r 
from the vice of excessive delegation because the parliament, 'in not fixing tlie'_Tate 
itself and in- adopting the rate applicable to the sale or purchase of goods iDside 
the appropriate State had not laid down any legislative policy and thus-.. abd~c;tcd 
its· Ie!::islittive function. 
The High Court ti:nsw~re~_-th!~ quc:stion_in the .nc.gati\re 
and upheld" the Constitutionul" validity of those -prOviSions. 
Dismiss.Ing ihe appeals, 
HELD : (I) There is cl~ar Jegislati\"C policy which can be found in the _prod· 
sions of Sec. -8(2)(b) of the Central Sales Tax Act ·19S6 .. The polie'y cif"-the law 
in _this _respect is. that .in_ case the rate of local &ales :tax.l:Je less than 1_-0 pe;r:-;ce11-t,,, in 
such an event; the dealer, if the case- doc!s ·!lot fall within Sec. R(l') Of . t.be_: Act, 
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shoiJltf pay Central S;ilcs Tax at the rare of JO per cent. If, ho\\cvi:r, the J~te of 
local s<iles tax for the goods concerned be more than 10 per cent, in that e\·ent, 
the policy is that the rate of the Central Sales Tax shall also be the same as that 
of lhh local sales tax for the said goods. 
The object of the law thus is that the 
fJtC of the _CCotral Sales tax: shall in no event be less than the rate of loc<if' &ales 
1a.i.: for- the goods in question though it may exceed the Joc~.l rate in case thoit rate 
be le~s than JO per cent. [984 A] 
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For example, if the local rate of tax in the appropriate State· tor the uon-
declared goods be 6 per cent, in such an event a dealer, whose case is not covered 
by sec. 8(1) of the Act, would hu\'e to pay Central Sales Tax at a rate of 10 per 
cent. 
Jn ca'!e, ho\vever, the rate of Jocal sa1es tax for such goods be 12 per cent 
tbe rate of Central Sales tax \\'ould also be 12 per cent because otherwise, if the 
rate of Central Sates Tax were _only IO per cent, the unregistered dealer who pur-
chases goods in the course of inter.State trade would be in a better position than 
.:n intru-Slate purchaser and there would be no disincentive to the dealers to 
desist fron1 selling goods to unre¥tstcre<l purchasers in course of inter-State trade. 
The object of the law apparently t'i to deter inter-State sales to unregiStered deale-rs 
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as such inter-Stnte Sales \\'OUld facilitate evasion of tax. [984 CJ 
(2) Jl is also not possible to fix the maximum rate under Sec. 8(2) (b) because 
the local sa!es tax: varies from State to State. The rate of Jocal sales tax' can also 
be changed by the State legislatures front time to time. Jt is not within the com· 
DCtence of the parliament to fix the maximum rate of local Sales tax. _The fixa· 
lion Of the rate of local Sales tax is essentially a matter for the State·legisl_atures 
aod the parliament does not ha\'e any control in the matter. The parliament has 
therefore necessarily, if it wants to prevent evasion o[ payment of Central Sales 
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Tax, to tack the rate of such tax \\'ith that of local sales tax, in case the rate of 
local sales tax _exceeds a partict1lar limit. [984 E] 
Sta" of Madras v. N. K. Nalarain Mridaliar, [1968] 3 S.C.R. 829, referred I<> 
and 
l&-748SCI/74 
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SUPREME COURT RE~ORTS 
[1974] 2 s.c.11. 
B. Sfl(1111a Rao \'. The Union Territory of Po11dicllerry, [1967] 2 S.C.R. 650, 
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explained and distinguished. 
(3) The growth of the' legislative power of the executive is a significant dev::-
lo_pment of the twentieth century. The theory of laissez-faire has been given a 
go-by and large and comprehensive powers are being assumed by the State with

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