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Andhra Pradesh High Court
Judges : JAGMOHAN REDDY, P.CHANDRA REDDY
East India Sandal Oil Distilleries Ltd - Appellant
Versus
State OF A.P. - Respondent
Decided On : 06-28-61
CONSTITUTIONAL LAW - ARTICLE 14 - EQUAL PROTECTION OF LAWS - SECTION 8 OF THE CENTRAL SALES TAX ACT, 1956 - VALIDITY - DISCRIMINATION BETWEEN DEALERS OF DIFFERENT STATES - ARTICLE 303 - FREEDOM OF TRADE AND COMMERCE - PREFERENCE TO ONE STATE OVER ANOTHER - TAXING STATUTES - WHETHER COVERED BY ARTICLE 303.
Fact of the Case:
The petitioners, who are dealers in various commodities, challenged the constitutional validity of Section 8 of the Central Sales Tax Act, 1956, on the ground that it violated the equal protection of laws guaranteed under Article 14 of the Constitution. They contended that the section discriminated between dealers of different states by exempting from tax certain goods that were generally exempt in some states but not in others, resulting in a competitive disadvantage for dealers in states where such goods were taxable.
Finding of the Court:
The court held that Section 8 of the Central Sales Tax Act, 1956, was not violative of Article 14 of the Constitution and was a valid enactment. The court reasoned that the section did not discriminate between dealers of different states but merely recognized the total exemption granted by all the states and excluded from its operation certain goods in specified circumstances or conditions. It further held that the classification of goods for the purpose of granting exemption was made by the respective state governments based on local needs and that the central government, acting as their agent in the levy and collection of taxes, had to accept the selection devised by the different states. The court also rejected the argument that the section violated Article 303 of the Constitution, which prohibits discrimination between states in matters of trade and commerce, holding that Article 303 was specifically limited to entries concerning trade and commerce and did not touch the laws made under other entries, such as the Central Sales Tax Act, which fell under the category of taxing statutes.
Issues: 1. Whether Section 8 of the Central Sales Tax Act, 1956, violated the equal protection of laws guaranteed under Article 14 of the Constitution? 2. Whether the section discriminated between dealers of different states by exempting from tax certain goods that were generally exempt in some states but not in others? 3. Whether the classification of goods for the purpose of granting exemption was made by the respective state governments based on local needs? 4. Whether the central government, acting as their agent in the levy and collection of taxes, had to accept the selection devised by the different states? 5. Whether the section violated Article 303 of the Constitution, which prohibits discrimination between states in matters of trade and commerce?
Ratio Decidendi: 1. The court held that Section 8 of the Central Sales Tax Act, 1956, did not discriminate between dealers of different states but merely recognized the total exemption granted by all the states and excluded from its operation certain goods in specified circumstances or conditions. 2. The court reasoned that the classification of goods for the purpose of granting exemption was made by the respective state governments based on local needs and that the central government, acting as their agent in the levy and collection of taxes, had to accept the selection devised by the different states. 3. The court further held that Article 303 of the Constitution was specifically limited to entries concerning trade and commerce and did not touch the laws made under other entries, such as the Central Sales Tax Act, which fell under the category of taxing statutes.
Final Decision: The court dismissed all the writ petitions challenging the constitutional validity of Section 8 of the Central Sales Tax Act, 1956, holding that the section was not violative of Articles 14 and 303 of the Constitution.
( 1 ) THE constitutionality of section 8 of the Central Sales tax, (LXXIV of 1956) (hereinafter to be called the Act for the sake of convenience) is challenged in these petitions.
( 2 ) MOST of the petitioners carry on business in jaggery and export it to several states in the country, the others being dealers either in groundnut-oil, rice or niger seeds. While submitting returns, they claimed exemption in respect of the part of the turnover covering sales of inter-State character on the plea that the tax had already be n paid on the first sales. The exemption was disallowed on the ground that tax was leviable as the sales were subject to tax under section 8 of the central Sales Tax Act. Impugning the order of the assessing authorities, the aggrieved assessees have put in these petitions.
( 3 ) THE principal contention pressed upon us is that section 8 of the Central Act, which enables the Revenue to tax transactions in respect of which single point tax alone was leviable under the State law, is unconstitutional in that it is violative of the equal protection of laws embodied in Article 14 of the Constitution. It is maintained that, by reason of section 8, while dealers in several kinds of goods in some of the states are exempt from sales tax, dealers in the same commodities in this State are liable to pay tax on their inter-State sale , not with standinh the fact that tax is leviable on these goods in this State only at a single point and in fact tax was collected in the State on the first sales. Consequently dealers of one State are given preference over those of another and this amounts to a discrimination which is not permissible under Article 14 of the Constitution. The assessees of other States carrying on business in the same commodities enjoy an advantage over those of the state of Andhra Pradesh and this constitutes denial of the equal protection of laws to assessees of this State similarly situated, continues the counsel for the petitioners. For an appreciation of these points, it is useful to extract the relevant provisions of the Central Act and the Andhra Pradesh General Sales Tax Act (hereinafter to be called the State Act ).
( 4 ) SECTION 8 of the Central Act, in so far as it is material for the purpose of this enquiry says :" (1) Every dealer who, in the course of inter-State trade or commerce, sells to a registered dealer goods of the description referred to in sub-section 3 shall be liable to pay tax under this Act, which shall be one per cent, of his turnover : provided that, if under the sales tax law of the appropriate State, the sale or purchase of any goods by a dealer is exempt from tax generally and not in specified cases or in specified circumstances or is subject to tax (by whatever name called) at a rate or rates which is or are lower than the rate specified in sub-section (1), the tax payable under this Act on the turnover in relation to the sale of such goods in the course of inter-State trade or commerce shall be nil, and shall be calculated at the lower rate, as the case may be. (2) The tax payable by any dealer in any case not falling within sub-section (1) in respect of the sale by him of any goods in the course of inter-State trade or commerce shall be calculated at the same rates and in the same manner as would have been done if the sale had, in fact, taken place inside the appropriate State, and for the purpose of making any such calculation any such dealer shall be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law. * * * * * * (4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold, containing the prescribed particulars on a prescribed
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