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Andhra Pradesh High Court
Judges : P.KODANDA RAMAYYA, Y.V.ANJANEYULU
Mahindra and Mahindra Limited - Appellant
Versus
State OF A.P. - Respondent
Decided On : 01-23-86
CONSTITUTION OF INDIA, 1950 - ARTICLES 14, 301, 304(A) - ANDHRA PRADESH GENERAL SALES TAX ACT, 1957 (A. P. ACT VI OF 1957), SECTION 9(1) - CENTRAL SALES TAX ACT, 1956 (ACT 74 OF 1956) - NOTIFICATION ISSUED BY THE STATE GOVERNMENT UNDER SECTION 9(1) OF THE A. P. G. S. T. ACT AND THE CENTRAL SALES TAX ACT GRANTING CONCESSION OF LEVY OF LESSER RATE OF TAX PAYABLE BY THE SECOND RESPONDENT-COMPANY - CHALLENGE - VALIDITY - WHETHER THE NOTIFICATION IS ULTRA VIRES THE POWERS OF THE STATE GOVERNMENT AS IT FALLS OUTSIDE THE PURVIEW OF SECTION 9 OF THE A. P. G. S. T. ACT - WHETHER THE NOTIFICATION IS HIT BY ARTICLE 14 AS THERE IS NO VALID CLASSIFICATION - WHETHER THE NOTIFICATION IS ALSO VIOLATIVE OF ARTICLE 304(A) OF THE CONSTITUTION OF INDIA.
Fact of the Case:
The petitioners challenged the notifications issued by the State Government under the Andhra Pradesh General Sales Tax Act, 1957, and the Central Sales Tax Act, 1956, granting a concession of levy of lesser rate of tax under those Acts payable by the second respondent-company.
Finding of the Court:
The court held that the notification was not ultra vires the powers of the State Government as it fell within the purview of section 9 of the A. P. G. S. T. Act. The court also held that the notification was not hit by article 14 as there was a valid classification. The court further held that the notification was not violative of article 304(a) of the Constitution of India as it did not discriminate against the importers as such and it was in the nature of a subsidy granted by the State to the second respondent.
Issues: 1. Whether the notification is ultra vires the powers of the State Government as it falls outside the purview of section 9 of the A. P. G. S. T. Act? 2. Whether the notification is hit by article 14 as there is no valid classification? 3. Whether the notification is also violative of article 304(a) of the Constitution of India?
Ratio Decidendi: 1. The court held that the notification was not ultra vires the powers of the State Government as it fell within the purview of section 9 of the A. P. G. S. T. Act. The court observed that the words “specified class of goods” occurring in section 9(1) qualify the word “goods” and do not operate as words of limitation on the power of the Government to notify the exemption under section 9(1). The court further observed that the notification may cover goods or persons generally or may specify them if necessary. 2. The court held that the notification was not hit by article 14 as there was a valid classification. The court observed that the classification between small manufacturers and big manufacturers is justified not being violative of article 14. The court further observed that the second respondent-company constituted a class by itself as it was a Government company, situated in a backward area notified by the Central Government for providing employment opportunities to the residents of that area, and it was a new entrant and a small unit which requires protection. 3. The court held that the notification was not violative of article 304(a) of the Constitution of India as it did not discriminate against the importers as such and it was in the nature of a subsidy granted by the State to the second respondent. The court observed that the notification has not singled out the importer or the imported goods. The court further observed that the exemption granted under the notification is not an impost within the meaning of article 304(a).
Final Decision: The writ petition was dismissed.
( 1 ) THE first petitioner in the above writ petition is a public limited company incorporated under Indian Companies Act, 1913, having its registered office at Bombay. It is a manufacture of light commercial vehicles. The second petitioner is the shareholder of the first petitioner-company.
( 2 ) IN this writ petition, two notifications issued by the first respondent, State of Andhra Pradesh, under the Andhra Pradesh General Sales Tax Act, 1957, and the Central Sales Tax Act, 1956, granting a concession of levy of lesser rate of tax under those Acts payable by the second respondent-company are challenged.
( 3 ) IT is averred in the affidavit that in the motor vehicles market, light commercial vehicles form a distinct class being vehicles of a load carrying a capacity of three metic tonnes and several manufacturers in India including the first petitioner-company and the second respondent-company manufacture these vehicles and compete with each order. The second respondent-company has recently established a plant is Zaheerabad, Medak District in Andhra Pradesh, for the manufacture of light commercial vehicles and the said company was formed and promoted by Hyderabad Allwyn Limited which is an undertaking managed by the Andhra Pradesh State Government, and the said Hyderabad Allwyn Company has invested six crores in the equity shares of the second respondent-company and thus the first respondent is interested in the second respondent-company. Under the notification published on 22/04/1985, the first respondent-State, in exercise of its powers under section 9 (1) of the A. P. G. S. T. Act (6 of 1957), directed that the tax leviable under clause (a) to sub-section (2) of section 5 red with item No. 1 in the First Schedule to the said Act shall, in respect of the sales of the light commercial vehicles manufactured by the second respondent-company, be at the reduced rate of 4 paise in a rupee during the period 1/04/1985, to 31/03/1987. A similar concession was given in the rate of tax payable by the second respondent under the Central Sales Tax Act (74 of 1956) issued on the same day. It is further averred that these two concessions given to the second respondent-company granting individual exemptions are illegal and ultra vires the powers of the State Government, and it constitutes an invidious discrimination in favour of individual manufacturer and consequently a hostile discrimination against other manufacturers including the petitioner. It is stated that there is no reasonable classification much less any nexus for making such classification in favour of the individual manufacturer and the second respondent was singled out for undue favourable treatment in order to promote the sales of products of the company and hence those notifications are hit by articles 14, 301 and 304 (a) of the Constitution of India. It is also averred that the issuing of these notifications is a mala fide act.
( 4 ) THE State Government and the company filed separate counter-affidavits refuting these allegations. It is enough if was state broadly their contentions as their defence is common. It is stated that the second respondent-company was floated by the Hyderabad Allwyn Limited which is a Government company and also the Nissan Motor Company of Japan and the company set up a factory at Zaheerabad in Medak District which is a backward area notified by the Central Government, providing considerable employment opportunities to that area and the notifications were issued to enable this public sector undertaking to market this class of light vehicles manufactured by them without having disadvantage to bear the additional tax burden as the other manufacturers of neighbouring States are enjoying tax concession under the Central Sales Tax Act. It is also averred that the light commercial vehicles manufactured by the second respondent-company has a special technology and a different trade name and they are not similar goods compared with
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