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SUPREME COURT OF INDIA
RANGANATH MISRA AND M.M. DUTT, JJ.
The Indian Cement and others, Petitioners
Versus
State of A.P. and others, Respondents.
Writ Petn. (Civil) No.422 of 1987, D/- 12-1-1988.
Advocates appeared
Dr. Y. S. Chitale, Advocate, Mr. K. J. John, Mr. Atul Chitale and Miss. Naina, Advocates with him, for Petitioners; Mr. K. Parasaran, Atterney General; Mr. T. S. Krishnamoorthy Iyer, Mr. G. A. Shah, Advocates, Mr. V. Jagannadha Rao, Advocate General, Mr. B. B. Ahuja, Miss Subhasini, Mr. T. V. S. N. Chari, Miss.Vrinda Grover, Mr. Badri Nath, Dr. N. M. Ghatate, Mr. M. Veerappa, Mr. A. M. Khanhilkar, Mr. A. S. Bhasme, Mr. R. Mohan, Mr. R. Ayyam Perumal, Ms.A. Subba Rao, Mr. M. N. Shroff, Mr. J. R. Das, Mr. D. K. Sinha, Mr. S. N. Khare, Mr. T. C. Sharma, Mr. S. K. Bhattacharya, Mr. Kailash Vasudev and Mr. Probir Choudhary, Advocates with them, for Respondents.
Andhra Pradesh General Sales Tax Act, 1957 – Section 9 – Constitution of India – Article 32, 302 – Sales Tax - Inter-State tax – Notification - Petitioners in this application Article 32 of the Constitution are manufacturers of cement, each of them having its manufacturing unit as also registered offices located within the State of Tamil Nadu are shareholders of respectively and are citizens of India, while the remaining petitioners are authorised stockists of the different manufacturers having their places of business at different places located in the States of Karnataka, Kerala and Tamil Nadu - Maunufacturer-petitioners have been selling their cement in the States of Karnataka and Kerala and for such purpose they have places of business within those States in exercise of powers conferred under subsection (1) of Section 9 of the Andhra Pradesh General Sales Tax Act, 1957 made an order reducing the rate of tax on sale of cement made to the manufacturing units of cement products in the State of Andhra Pradesh –Held, In other words it was to discourage inter-State sale to unregistered dealers that Parliament provided a high rate of tax, namely – But even that might not serve the purpose if the rate applicable to intra-State sales of such goods was more than – Rate of 10 would then be favourable and they would be at an advantage compared to local consumers – It is because of this that Parliament provided, as a matter of legislative policy that the rate of tax shall be 10 or the rate applicable to intra-State sales whichever is higher – If prevention of evasion of tax is a measure in the public interest, there can be no doubt that Parliament is competent to make a provision for that purpose even if the provision would impose restrictions on the inter-State trade or commerce – Variation of the rate of inter-State sales tax does affect free trade and commerce and creates a local preference which is contrary to the scheme of Part XIII of the Constitution – Notification extends the benefit even to unregistered dealers and the observations of Hegde, J. on this aspect of the matter are relevant – Both the notifications of the Andhra Pradesh Government are, therefore, bad and are hit by the provisions of Part XIII of the Constitution – They cannot be sustained in law – Now coming to the notification of the Karnataka State, Court have already pointed out that no return has been made and no attempt has been made, therefore, to place facts, and circumstances to justify the action –Petitions allowed
Judgment
RANGANATH MISRA, J.:- The India Cement Limited, Chettinad Cement Corporation, Dalmia Cement (Bharat) Limited and Tamil Nadu Cement Corporation Limited being petitioners 1, 6,9 and 12 in this application under Article 32 of the Constitution are manufacturers of cement, each of them having its manufacturing unit as also registered offices located within the State of Tamil Nadu; petitioners 2, 7 and 10 are shareholders of petitioners 1, 6 and 9 respectively and are citizens of India, while the remaining petitioners are authorised stockists of the different manufacturers having their places of business at different places located in the States of Karnataka, Kerala and Tamil Nadu. Maunufacturer-petitioners have been selling their cement in the States of Karnataka and Kerala and for such purpose they have places of business within those States. The State of Andhra Pradesh in exercise of powers conferred under subsection (1) of Section 9 of the Andhra Pradesh General Sales Tax Act, 1957 made an order on January 27, 1987 (Annexure-A) reducing the rate of tax on sale of cement made to the manufacturing units of cement products in the State of Andhra Pradesh. That order runs thus :-
"In exercise of the powers conferred by sub-section (1) of Section 9 of the Andhra Pradesh General Sales Tax Act, 1957 (Andhra Pradesh Act No. VI of 1957), the Governor of Andhra Pradesh hereby directs that the tax leviable under clause (a) of sub-section (2) of Section 5 read with Item 18 in the First Schedule to the said Act, shall, in respect of Cement manufactured by Cement Factories situated in the State and sold to the manufacturing units situated within the State for the purpose of manufacture of Cement products such as Cement sheets, Asbestos sheets, Cement flooring stones, Cement concrete pipes, hume pipes, Cement water and sanitary fitting, concrete poles and other Cement products, be at the reduced rate of four paise in the rupee at the point of first sale in the State with effect on and from the 1st January, 1987."
2. On the same day, another order was made to the following effect :-
"In exercise of the powers conferred by sub-section (5) of Section 8 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), the Governor of Andhra Pradesh hereby directs that the tax leviable under the said Act, shall, in respect of the sales of cement in the course of inter-State trade or commerce be at a lower rate of two per cent with or without C Form, with effect from 1st January, 1987."
3. The State of Karnataka issued the following notification on 28-2-1987 :-
"In exercise of the powers conferred by sub-sec. (5) of S. 8 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), the Government of Karnataka, being satisfied that it is necessary so to do in public interest, hereby reduces with immediate effect the rate of tax payable under the said Act on the sale of cement made in the course of inter-State trade or commerce from 15 to 2 ".
4. Petitioners in this application challenge the vires of S. 8(5) of the Central Sales Tax Act, 1956 (Central Act 74 of 1956) and the notifications referred to above as ultra vires the provisions contained in Part XIII of the Constitution providing that trade, commerce and intercourse throughout the territory of India shall be free. According to the petitioners the three orders referred to above create trade barriers and directly impinge upon the freedom of trade, commerce and intercourse provided for in Art. 301 of the Constitution.
5. Since the vires of S. 8(5) of the Central Act 74 of 1956 had been assailed, notice had been issued to the Union of India and learned Attorney General. Notice was also directed to all the States. Pursuant to the notice, the States of Madhya Pradesh and Sikkim have filed their affidavits with reference to the challenge against S. 8(5) of the Act. At the hearing of the writ petition, however, learned counsel for the petitioners gave up that challenge. In that view of the matter, referen
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