STATE OF HARYANA AND ORS. versus SANT LAL AND ANR.

Citation: [1993] SUPP. 2 S.C.R. 238 · Decided: 09-09-1993 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed
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Judgment (excerpt)

A 
B 
STATE OF HARYANA AND ORS. 
v. 
SANT LAL AND ANR. 
SEPTEMBER 9, 1993 
(B.P. JEEVAN REDDY AND S.P. BHARUCHA, JJ.) 
Haryana General Sales Tax Act, 1973: Section 3&-Constitutional 
validity of-Held ultra vires and beyond the purview of State Legislature. 
C 
Haryana General Sales Tax Rules, 1975: Rules 48, 52 and 53-Validity 
of-Held ultra vires and bad in law. 
Constitution of India, 1950: Seventh Schedul~ist II-Entries-Inter-
pretation of 
D 
Entry 54-'Tax on sale or purchase of goods'-Power of state Legisla-
t!':re-Includes ancilliary or subsidiary matters,-Provisions of Section 38 of 
Haryana General Sales Tax Act-Held beyond the ancilliary and subsidiary 
powers of State Legislature. 
E 
Ta;r-Penalty for evasion-Reasonableness of~ust bear a proportion 
to the tax evaded. 
Under section 38(1) of the Haryana General Sales Tax Act, 1973 read 
with Rule 53 of the Haryana General Sales Tax, 1975 every clearing or 
forwarding agent, 'dalal' or any other person transporting goods, within 
p 
the State, who, during the course of his business handled documents of 
title to goods, for or on behalf of any dealer is obliged to furnish to the 
assessing authority the particulars and information in respect of the 
transactions of the goods in the prescribed forms viz. regarding the 
consignments handled by him from month to month. Under sub-section 
G (2) of Section 38 read with rule 48 all clearing or forwarding agents, 'dalal' 
or other persons transporting goods within the State are debarred from 
carrying on their business unless they are licensed under the Act. Sub-sec-
tion (3) of Section 38 provides that contravention of the provisions of 
sub-sections (1) or (2) would entail a penalty of an amount equivalent to 
20% of the value of goods in respect of which no particulars and informa-
H tion has been furnished under sub-section (1). 
238 
STATE v. SANT LAL 
239 
The respondents carrying on business of clearing and forwarding A 
agents, filed a petition challenging the constitutional validity of these 
provisions. The State contested the petition contending that the trade of 
getting the goods booked with the railways on behalf of dealers and getting. 
the delivery of the goods from the railway by the dealers through the 'dalal' 
was ancillary and incident to the business of sale and purchase of goods. B 
Therefore, the State Legislature was empowered under Entry 54 of List-II 
in the Seventh. Schedule to the Constitution to enact law for taxation on 
the sale or purchase of goods. 
The High Court struck down Section 38 and Rule 53 as unconstitu· 
tional holding (i) that it could not be said that the provisions contained C 
in Section 38 were intra vires the State Legislature being ancillary and 
incidental to the power to levy sales tax under Entry 54, List II of the 
Seventh Schedule to the Constitution; (ii) a cl1!3ri~g or forwarding agent 
or 'dalal' was a stranger to the transaction of sale or purchase of the goods. , 
He was not iiable to pay sales tax nor was he responsible for its evasion 
inasmuch as be was not a dealer; there was no justification to raise a 
presumption of evasion of sales tax in the transactions in respect of which 
an agent or 'dalal' was required, or had failed to furnish particulars and 
information. Against the decision of the High Court State preferred an 
appeal in this Court. 
Dismissing the appeal, this Court 
HELD : 1. Section 38 of the Haryana General Sales Tax Act is beyond 
the purview of the State Legislature. It is ultra vires and bad in law. 
Consequently, all rules and forms in the said Rules related to the said 
D 
E 
section are also bad in law. (253-B] 
F 
2. There can be no doubt that the State Legislature had by reason of 
Entry 54 of List II in the Seventh Schedule to the Constitution the power 
to legislate in respect of taxes on the sale or purchase of goods, and it had, 
therefore, the power to legislate with respect to the imposition of a sale G 
tax, to prescribe the machinery for the collection of such tax, to designate 
officers by whom such liability could be enforced and in respect of all 
matters ancillary or subsidiary thereto which could fairly and reasonably 
be said to be comprehended within the legislative entry. (250-BC] 
Navinchandra Mafatlal v. C.l. T., A.I.R. (1955) S.C. 58, United Provin-
H 
240 
SUPREME COURT REPORTS [1993] SUPP. 2 S.C.R. 
A ces v. Mt. Atiga Begum, A.l.R. (1941) FC and Baldeo Singh v. CIT, A.l.R. 
(1961) S.C. 736, referred to. 
3.
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