Legislative competence of Parliament to enact Section 8(2)(b) of the Act.

In this batch of cases the constitutional validity of clause (b) of sub-section (2) of section 8 of the Central Sales Tax Act, 1956 and of the opening words of sub-section (4) of that section which make sub-section (1) inapplicable in certain contingencies is raised. In Larsen and Toubro Ltd. v. Joint Commercial Tax Officer 1, to which one of us was a party, this Court struck down sub-sections (2) (2-A) and (5) of section 8 on the ground that they violated Articles 301 and 303 (1) of the Constitution. This was on the view that the differential rates or exemptions in various States laid an unequal burden on same or similar goods which affected their free movement or flow of inter-State trade and commerce. It was pointed out that the differential rates or exemptions obtaining in the several States if automatically applied by virtue of section 8 (2) to Central taxation, they would certainly have the effect of discriminating between the goods of one State and the goods of another and might affect the free flow of trade in such goods as between the States and that further sub-sectoins (2-A) and (5) of section 8 only aggravated the discrimination. Neverthe less that case is sought to be distinguished by stating that the assessees in these cases are not questioning the scheme of the Act on any argument that the Central Sales Tax rate should be single or uniform throughout India but contend that the amendment to section 8 (2) (b) by Act XXXI of 1958 is void. The scope of the argument on their behalf is limited to the specific ground that sub-section (2) (b) is void insofar as it provides for the inter-State tax at a rate higher than that of the State multipoint tax. They admit that sub-section (1) prescribing the rate of two per cent. till 30th June, 1966 and three per cent thereafter is valid as to the sales to the Government and registered dealers subject to sub-section (2-A). They do not also object to sub-section (4) but accept it as valid insofar as it prescribes declaration in Form ‘C ‘and certificate in Form ‘D ‘But they contend that sub-section (4) is invalid only insofar as it makes sub-section (1) inapplicable if ‘C ‘and ‘D ‘Forms are not produced. This is so because, according to the assessees, the rate under subsection (1) being prescribed for particular types of transactions, it must be open to them to prove their character and show the sales to be to registered dealers and Government otherwise than by production of ‘C ‘or ‘D ‘Form. The effect of these contentions is that the State of Madras may validly levy under sub-section (2) (b) tax on sales not shown to be to a registered dealer 01 Government or sales to consumers at the rate of 2 per cent upto 30th June, 1966, at the rate of 2½ per cent, between 1st July, 1966 and 30th June, 1967 and at the rate of 3 per cent. from 1st July, 1967.

Before we proceed further, we shall notice the facts in these cases and refer to the salient statutory provisions at diffrent stages which will enable a full and proper appreciation of the questions raised. In W.P. No. 983 of 1967 the petitioner is a limited liability company started with the collaboration of Messrs. London Rubber Company, London, stated to be one of the biggest manufacturers of contraceptives and birth control appliances known all over the world under the name and style “Durex” and "Durapac” . We are told that they are used all over India in the family planning programme of various Governments. The sales made by the petitioner of its manufactured goods to various Government departments were on the basis of orders placed with it by the Directorates of Health of various States’ Family Planning Units,. For the year 1965-66, the petitioner returned under the provisions of the Central Sales Tax Act a turnover of Rs. 27,11,514-79 representing inter-Stater sales of contraceptives manufactured by it. Out of this amount, exemption was claimed for a sum of Rs. 1,15,147-50 on the ground that the relative saxes were can