1975 Supreme(AP) 213

Andhra Pradesh High Court
Judges : A.SAMBASIVA RAO, A.V.KRISHNA RAO
Mallela Ramaiah and Sons, Tenali - Appellant
Versus
Deputy Commercial Tax Officer, Tenali II, Tenali, Guntur District - Respondent
Decided On : 10-30-75

The classification made by the impugned Explanation is reasonable and does not violate Article 14 of the Constitution. The amendment is not unconstitutional because the assent of the President of India has not been obtained as required under the second proviso to Article 200 of the Constitution.

Headnote:

SAMBASIVA RAO, CJ. ( 1 ) BY Act IV of 1974, the Legislature of the State of andhra Pradesh effected certain amendments in the "andhra Pradesh General sales Tax Act, 1957 (hereinafter referred to as the Act ). In this batch of writ petitions, the validity of section 1 (2) (b) (i) and (ii), section 3 (a) and (b) including Explanation IV-A and sections 7 and 8 is challenged. The further and consequential relief of interdicting the State of andhra Pradesh and the Sales tax authorities from proceeding further in collecting sales tax for the assessment years 1972-72 onwards from the petitioners is also prayed for.

Fact of the Case:

The petitioners are Forest Contractors. They deal mainly in timber, firewood and bamboos. They obtained contracts of forest coupes having been the successful bidders in the auctions conducted by the forest department of the Government of andhra Pradesh. They cor tend that their purchases in the auction held by the forest department constitute the first sale of the forest produce like timber, firewood, bamboos etc. It has been clearly laid down by the Court in Vajhala Venkata ramana v. State of A. P, that the State government is a dealer when it sellstimber firewood etc. , grown in its forest to the forest contractors and consequently becams the first seller of those items of forest produce. 1 he sales in those auctions constitute the first point of sale, which alone is exigible to sales tax as per the relevant entries in the First Schedule to the Act. However, todefeat the very basis of that decision the Legislature passed the Amendment Actof 1974. The substance of the amendments as contained in the Explanation introduced by the Amendment Act,i974 is to make the sales by the forest contractors to third parties, which are really second sales, as the first sales so that tax can be levied on them as per the entries in the first Schedule. These amendments have been given retrospective effect from 1st August, 1963 in so far as timber and firewood are concerned, and from 1st. July, 1968 for the purpose of bamboos. There amendments and the explanation in particular are challenged from man y perspectives. It is said that they offend Article 14 of the Constitution. They create unreasonable restrictions on the contractor s right to carry on business in these commodities as they have been given retrospective effect, thus impinging upon the fundamental right guaranteed under Article 19 (1) (g) of the constitution. Further, the impugned Explanation usurps the power of the High court and is consequently bad. Moreover, it is beyond the legislative competence of the State Legislature. It goes beyond the scope of the three entries to which it is supposed to be the Explanation. It is repugnant to the provisions of section 5 (2) read with section 2 (a) and the three material entries of the Act. Lastly, they are also void as the assent of the president of India has not been obtained as required by the second proviso to Article 200.

Finding of the Court:

The impugned Explanation is reasonable and does not violate Article 14 of the Constitution. The classification made by the Explanation is based on an intelligible differentia distinguishing persons, transactions or things grouped together from others left out of the groups and the differentia has a rational relation to the object sought to be achieved by the Act. The amendment is not unconstitutional because the assent of the President of India has not been obtained as required under the second proviso to Article 200 of the Constitution.

Issues: 1. Whether the impugned Explanation is reasonable and does not violate Article 14 of the Constitution? 2. Whether the amendment is unconstitutional because the assent of the President of India has not been obtained as required under the second proviso to Article 200 of the Constitution?

Ratio Decidendi: 1. The classification made by the Explanation is based on an intelligible differentia distinguishing persons, transactions or things grouped together from others left out of the groups and the differentia has a rational relation to the object sought to be achieved by the Act. The object of the Act is to impose and collect a general tax on the sale or purchase of goods in the State. That is clearly for the purpose of avgmenting the revenues of the State. It must necessarily follow that the Legislature while imposing tax can choose points of objects where larger tax can be collected. This is of course subject to the fundamental rights in Chapter III of the Constitution. So long as the taxation does not violate those basic rights, it has every power to impose it in such a manner that it collects higher amount than otherwise. Now by this classification the State is able to realise larger amounts by way of sales tax on forest produce. The petitioners themselves submit and that is also an undeniable fact, that the amounts on which tax is leviable will be much larger in the case of sales by the forest contractors to third parties than the original bid amounts in the auctions ir which they have purchased. Therefore, more amount is realised that way. T he effect of the classification made by the Explanation and deeming the sales by the forest contractors as first sales is to bring larger revenues to the state than on the basis of the bid amounts in the auctions held by the forest department. Gathering revenue and more revenue is clearly an aim and object of the Act. Thus, the classification in the Explanation has clear nexus with the object of the Act. 2. The amendment is not unconstitutional because the assent of the President of India has not been obtained as required under the second proviso to Article 200 of the Constitution. After the amendment the law will have to be construed in its light. Before the amendment, as we have already said, the Government was considered as the dealer and now all the amounts of tax which had been collected as per the old law will have to be adjusted towards the new levies under the amendment. We have already refered to the decision of the supreme Court in Ahmedabad Corporation v. New S. S. and Wvg. Go. , in great detail. We see no flouting of the decision of the court and any derogation from the powers of the High Court. In our opinion, it is farfetched to say that the amendment comes within the ambit of the second proviso to Article 200.

Final Decision: All the writ petitions are dismissed. Having regard to the circumstances of the case, we make mo order as to costs. Advocate s fee Rs. 50 in each case. All petitions dismissed (except for a declaration that the tax already collected shall be given credit to. ).