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2006 Supreme(Kar) 8
Karnataka High Court
Judges : D.V.Shylendra Kumar
MARICO INDUSTRIES LTD. - Appellant
Versus
STATE OF KARNATAKA - Respondent
Writ Petition 28125 Of 2002
Decided On : 01/03/2006
Advocates Appeared :
G.RABINATHAN, G.Sarangan, M.Thirumalesh, T.K.Vedamurthy
Headnote:Karnataka Sales Tax Act - Preamble-Origin of the law: [D.V. Shylendra Kumar J.]: Levy of sales tax on goods is an indirect tax and the tax is inevitably passed on to the consumer and not borne by the dealer though under the Act the dealer is looked upon by the State to gather the tax. A dealer by himself though may not be one who bears the brunt of the tax and therefore cannot complain as it can be passed on to the consumer to the extent that an illegal levy if has the effect of affecting his business prospects or other activities, even a dealer has the locus to question the constitutional validity of a suspect legislation and that is how this writ petition is entertained and examined.
Cases Referred: 124 STC 196; AIR 1954 TRA-Co. 34; AIR 1958 SC 538; AIR 1976 SC 182; AIR 1989 SC 2015; (1963) 14 STC 355 (SC); (1988) 78 STC 57 (SC); (1989) 73 STC 346; (1989) 74 STC 102 (SC);(1990) 78 STC 243 (SC); (2001) 121 STC 294; 1994 STC 355; AIR 1970 SC 498; 12 STC 286; 2003 (54) Kar. L.J. 208(DB).
Interpretation of Taxing Statutes - Fiscal statutes - Interpretation of [D.V. Shylendra Kumar J.]: In fiscal statutes, the object being only to raise revenue. Any provision which seeks to levy tax so long it is within the competence of the enacting Legislature, it definitely has a nexus. But the further question will be whether that classification is based on any intelligible criterion.
Cases Referred: 124 STC 196; AIR 1954 TRA-Co. 34; AIR 1958 SC 538; AIR 1976 SC 182; AIR 1989 SC 2015; (1963) 14 STC 355 (SC); (1988) 78 STC 57 (SC); (1989) 73 STC 346; (1989) 74 STC 102 (SC);(1990) 78 STC 243 (SC); (2001) 121 STC 294; 1994 STC 355; AIR 1970 SC 498; 12 STC 286; 2003 (54) Kar. L.J. 208(DB).
Karnataka Sales Tax Act - Schedule II, Part E, Entries 1 and 17A -Tax on branded coconut oil - Legislative Developments - Shows intention to treat branded coconut oil differently - Legality of classification. [D.V. Shylendra Kumar J.]: The distinct feature urged on behalf of the State is that coconut oil sold under brand name is not merely used as an edible oil, but in fact the counter goes on to say that it is almost exclusively used as a hair oil, i.e. to the extent of 95% of the users and only a small portion of it used as an edible oil i.e. only 5% of the users use it for cooking purpose and therefore it is separated from the group of other edible oils. If this is to be the fact situation, there cannot be any doubt that it can definitely constitute a valid classification to subject coconut oil used for such purpose to tax at a different rate. Courts normally do not examine as to whether what percentage of the users or to what extent the product is used for a distinguishing purpose can constitute the criteria for making a valid classification. It is here that the precise test is not applied as in the case of a solution to a mathematical problem or with an arithmetical precision, the question is required to be answered. But, unfortunately, in the present case, the respondent-State has not made good its stand that coconut oil sold under brand name is essentially used as a hair oil by majority of the users by placing any material or facts or figure before the Court. It is not as though the State is unaware of its obligations towards citizens in the light of Article 14 of the Constitution and even after 50 years of the Constitutional functioning, if the State has not learned the lessons as to in what manner such legislation has to be defended, it is only a poor reflection on either the ability and competence or the responsibility shown by the State in defending such action before the Court. In the present case, it is nothing but sheer callousness and the lukewarm attitude on the part of the respondents, which has made it inevitable to declare the law as unconstitutional. It is hoped at least henceforth when enacting such laws due attention is paid by the respondent-State not only before ushering in such law but also while defending the validity of such laws before Courts.
Cases Referred: 124 STC 196; AIR 1954 TRA-Co. 34; AIR 1958 SC 538; AIR 1976 SC 182; AIR 1989 SC 2015; (1963) 14 STC 355 (SC); (1988) 78 STC 57 (SC); (1989) 73 STC 346; (1989) 74 STC 102 (SC); (1990) 78 STC 243 (SC); (2001) 121 STC 294; 1994 STC 355; AIR 1970 SC 498; 12 STC 286; 2003 (54) Kar. L.J. 208 (DB).
Karnataka Value Added Tax Act - Tax on branded coconut oil - Legislative Developments - Shows intention to treat branded coconut oil differently - Legality of classification. See, KST Act - Schedule II, Part E & Entries 1 & 17-A.
Cases Referred: 124 STC 196; AIR 1954 TRA-Co. 34; AIR 1958 SC 538; AIR 1976 SC 182; AIR 1989 SC 2015; (1963) 14 STC 355 (SC); (1988) 78 STC 57 (SC); (1989) 73 STC 346; (1989) 74 STC 102 (SC);(1990) 78 STC 243 (SC); (2001) 121 STC 294; 1994 STC 355; AIR 1970 SC 498; 12 STC 286; 2003 (54) Kar. L.J. 208(DB).
( 1 ) A failed effort on the part of the Revenue to bring to tax coconut oil sold in branded form and in containers as a toilet article,. e. , as hair oil subject to tax under entry No. 10 of Part of the second Schedule to the Karnataka Sales Tax Act, 1957 (for short, "the Act") at the rate of 15 per cent as against the rate of four per cent claimed by the very petitioner-assessee as an edible oil taxable at four per cent in entry No. 1 of Part "e" of the Second Schedule to the Act in which effort the Revenue failed in terms of the judgment of this court in the case of State of Karnataka v. Marico Industries Ltd, reported in [2001] 124 STC 196, has given rise to the present legislation by introduction of entry No. 17-A in Part "c" of the Second Schedule to the Act, with effect from April 1, 2001 by Act 5 of 2001 which is again challenged by the petitioner-dealer on the ground that the Legislature by introduction of this entry subjected coconut oil sold under a brand name to tax at a higher rate in comparison to other edible oils though sold under a brand name as under entry No. 1 of Part "e" of the Second Schedule to the Act has been discriminatory, violative of article 14 of the Constitution of India and liable to be declared as unconstitutional.
( 2 ) IT is this challenge thrown by the petitioner-dealer registered under the provisions of the Act which is required to be met by the respondent-State in this writ petition.
( 3 ) THE sole ground of attack on the validity of the legislation rather the change in law brought about by Act No. 5 of 2001 is that it is one resulting in invidious discrimination as against coconut oil sold or marketed in a branded form and in containers whether sachets, bottles or plastic cans is alone subjected to differential treatment vis-a-vis all other edible oils that are marketed in similar fashion. It is the act of the Legislature in singling out branded coconut oil for levy of tax at the rate of 15 per cent from April 1, 2001 to March 31, 2002 and at 20 per cent with effect from April 1, 2002 to July 31, 2004 in terms of Act 5 of 2001 as against levy of tax on other edible oils at four per cent for major part of this period and at five per cent for the period from June 1, 2003 to July 31, 2004 which has given rise to the present round of litigation and this writ petition.
( 4 ) THE petitioner is a dealer registered under the provisions of the Karnataka Sales Tax Act, 1957 and sells, amongst other products, coconut oil in a branded form presented in sachets and plastic cans.
( 5 ) THE writ petition is on the premise that subjecting coconut oil sold in branded form to levy of tax at a higher rate has substantially affected the business of the petitioner in the particular product; that the State is not justified in making artificial distinction as between coconut oil and other edible oils. The provisions under which the coconut oil alone is subjected to tax at a higher rate has to be declared as unconstitutional and for such relief, the present writ petition.
( 6 ) LEVY of sales tax on goods is an indirect tax and the tax is inevitably passed on to the consumer and not borne by the dealer though under the Act the dealer is looked upon by the state to gather the tax. A dealer by himself though may not be one who bears the brunt of the tax and therefore cannot complain as it can be passed on to the consumer to the extent that an illegal levy if has the effect of affecting his business prospects or other activities, even a dealer has the locus to question the constitutional validity of a suspect legislation and that is how this writ petition is entertained and examined.
( 7 ) APART from elucidating as to how the impugned legislation fails to pass the test of article 14 of the Constitution of India by placing reliance on several decided cases in this regard, the petitioner has also sought to call in aid the provisions of articles 301 and 304 of the Constitution of India
