What did the Court decide about Section 5 (old)?

It was void because it gave uncontrolled power to the Government to levy tax without legislative guidance.

Is the amended Section 5 valid?

Yes. A capped range up to 2 pies in a rupee gave limited discretion—permissible in fiscal law.

Was Article 14 violated by purchase tax?

No. Tax targets purchases where goods are used in manufacture before they change identity; where no manufacture, sale is the taxable event.

What is the key takeaway on delegation?

Delegation needs clear guidance and limits; unfettered power is invalid, but narrow fiscal discretion is fine.

DEVI DAS GOPAL KRISHNAN AND ORS. V. STATE OF PUNJAB AND ORS

Q: Did Article 19(1)(g) help the assessees?

No. The levy was not an unreasonable restriction on the right to trade.

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Quick Summary

This case deals with purchase tax under the Punjab General Sales Tax Act, 1948 and the limits of delegated power. The Court said: the old Section 5 was void (no guidance, too much power). The amended Section 5 was valid because it fixed a small, clear range. The purchase tax did not break Article 14 or Article 19(1)(g). The appeals were dismissed.

Issues

Was the original Section 5 of the 1948 Act void for lack of guidance?
Did the amended purchase tax violate Article 14 (equality)?
Was there excessive delegation of legislative power to the Government?

Rules

Delegated legislation must have clear guidance; no unfettered power to tax.
A tax must not impose an unreasonable restriction on trade under Article 19(1)(g).

Facts (Timeline)

Act & Goods: Disputes under the 1948 Punjab General Sales Tax Act on oilseeds, iron/steel, and cotton.

Amendment: A purchase tax at 2% for goods used in manufacturing for sale was introduced.

Assessees: Oil mills (CAs 526, 527, 529/1964), steel rollers (CAs 39–43/1965), cotton manufacturers (CAs 81 & 540/1965) faced purchase tax notices.

HC Petitions: All petitioners lost before the Punjab & Haryana High Court.

Appeals: They moved the Supreme Court, raising Article 14, 19(1)(g), and delegation issues.

Arguments

Appellants (Assessees)

Old Section 5 gave uncontrolled taxing power—void.
Purchase tax is arbitrary (Article 14) and restricts trade (Article 19(1)(g)).
Excessive delegation to executive in fixing rates.

Respondents (State)

Amended Section 5 has a maximum cap; discretion is narrow.
Purchase tax targets manufacturing use before identity changes—rational basis.
Reasonable fiscal discretion is permitted; no fundamental right breach.

Judgment

Old Section 5: Void—it gave the Government uncontrolled taxing power without guidance.
Amended Section 5: Valid—rate limited to a small band (up to 2 pies in a rupee). This discretion is permissible.
Article 14: No violation. The Legislature may tax purchases where goods go into manufacture before losing identity; otherwise, tax at sale.
Article 19(1)(g): No unreasonable restriction on trade.
Result: Appeals dismissed; High Court upheld.

Ratio Decidendi

Guided delegation is valid; unguided power is not. A fiscal statute may grant narrow, capped discretion to the executive. Purchase tax on inputs used in manufacture has a reasonable basis and does not offend Articles 14 or 19(1)(g).

Why It Matters

Shows how courts draw the line between valid and excessive delegation.
Clarifies when a purchase tax is a fair classification.
Useful template for arguing Article 14 in tax cases.

Key Takeaways

Old S.5 void: no guidance, unfettered power.

Amended S.5 valid: capped, narrow discretion.

Purchase tax rational where inputs go into manufacture.

No breach of Arts. 14 or 19(1)(g).

Mnemonic + 3-Step Hook

Mnemonic: GUIDE = Guidance needed • Unfettered power void • Inputs taxed fairly • Discretion capped • Equality intact

Power Check: Is there clear legislative guidance?
Range Check: Is the discretion narrow and capped?
Use Check: Are purchases used in manufacture before identity changes?

IRAC Outline

I — Issue

Validity of Section 5 (old vs amended), Article 14/19(1)(g), and delegation limits.

R — Rule

Delegation needs guidance; taxes must be reasonable and non-arbitrary.

A — Application

Old S.5 gave unfettered power (void). Amended S.5: narrow cap; purchase tax classification rational.

C — Conclusion

Amended levy upheld; appeals dismissed.

Glossary

Purchase Tax: Tax on buying goods, often when used as inputs in manufacturing.
Excessive Delegation: When a statute gives the executive too much power without guidance.
Classification: Grouping for tax purposes; must be reasonable to pass Article 14.
Identity Change: When inputs become a new product through manufacture; affects tax event.