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2025 Supreme(Mad) 2609
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Anita Sumanth, C.Kumarappan, JJ.
H.P.Textiles Mills - Petitioner
Versus
The State of Tamil Nadu Rep. by Secretary, Commercial Taxes Commercial Taxes Department and ors. – Respondents
W.P.Nos.34885 & 34886 of 2004, 46479, 42240 & 37807 of 2002, 24016, 20488, 17027 & 11116 of 2003, 12087 of 2008, 11682 & 18854 of 2005 & W.A.No.3615 of 2003 and W.P.M.P.No.21291 of 2003, 20403 & 12749 of 2005, W.A.M.P.No.5902 of 2003 & W.P.M.P.No.67594 of 2002
Decided On : 07-04-2025
Advocate Appeared:
For the Petitioner: Ms. Lakshmi Sriram for Mr. T.RameshKutty, Mr. A. Chandrasekaran, Mr. C. Subramanian for Mr. K.J. Chandran, Mrs. R.Hemalatha, Mr. Rajesh for Mr. S. Sivanandan
For the Respondent:Mr. Haja Nazirudeen AAG assisted by Mr. Prashanth Kiran Government Advocate and Mr. P. Hari Babu Government Advocate
The imposition of conditions for concessional tax rates that discriminate against certain dealers infringes their constitutional right to trade and lacks rational justification.
Headnote:(A) Central Sales Tax Act, 1956 - Section 6(a) - Constitution of India - Article 301 - The impugned Government Orders impose discriminatory conditions restricting concessional tax rates for dealers engaging in branch/consignment transfers, thereby infringing the right to trade as protected under Article 301. (Paras 5, 10, 28, 30)
(B) Taxation - Conditions imposed for concessional tax rates must not be arbitrary or discriminatory and must have a reasonable nexus with the goods involved. The absence of such rationale renders the imposition invalid. (Paras 32, 34)
Facts of the case:
Petitioners challenged Government Orders imposing conditions for concessional tax rates on hosiery and yarn, arguing the restrictions were arbitrary, discriminatory, and impeded their rights to trade. The Orders limited benefits for those engaging in branch or consignment transfers.
Findings of Court:
The court concluded that conditions imposed under the Government Orders were arbitrary and non-correlative to the objects sought, quashing the orders that denied the grants based on branch transfers.
Issues: Whether the conditions imposed by the Government Orders were valid and did not violate the petitioners' right to free trade under Article 301.
Ratio Decidendi: The court established that the conditions imposed infringed on the constitutionally guaranteed rights to trade, were discriminatory, and lacked a sound rationale, thereby warranting quashing.
Result: All Writ Petitions are allowed.
| Table of Content |
|---|
| 1. validity of government orders (Para 2 , 3 , 18) |
| 2. disposal of writ petitions based on tax conditions. (Para 4) |
| 3. arguments against imposed conditions (Para 5 , 6 , 7 , 10) |
| 4. arguments against discriminatory tax conditions. (Para 8) |
| 5. state's rationale and counterarguments (Para 11 , 12 , 15 , 17) |
| 6. government rationale for tax conditions. (Para 13 , 14) |
| 7. evaluation of conditions imposed (Para 21 , 22 , 24) |
| 8. critique of imposed tax conditions on dealers. (Para 28) |
| 9. discrimination against dealers due to conditions (Para 29 , 32 , 33 , 34) |
| 10. final findings on discriminatory practices. (Para 30 , 31) |
| 11. quashing of government orders and conclusions (Para 35 , 36) |
ORDER :
ANITA SUMANTH., J.
This common order disposes 12 writ petitions and 1 writ appeal as the issue that arises for resolution is one and the same.
2. The Writ Petitions raise the question of validity of two Government Orders issued by the Commercial Taxes Department in G.O.Ms.No.273 in No.II(1)/CTRE/84(a-2)/96 dated 05.08.1996 and G.O.Ms.No.73, No.II(1)/CTRE/22(a-6) dated 05.03.1997 read with G.O.Ms.No.108, Commercial Taxes and Religious Endowments in No.II(1), CTRE/43(d-2) dated 07.04.1998 (collectively referred to as impugned Government Orders).
3. The petitioners may be broadly divided into two categories, one, dealers in hosiery garments engaged in both domestic and interstate sales (referred to as Group I), and two, spinning mills, also engaged in both domestic and interstate sales of yarn (referred to as Group II). G.O. (Ms.) No.273 dated 5.8.96 touches upon those dealers dealing in hosiery goods and G.O.(Ms).No.73 read with G.O.(Ms).No. 108 touches upon those dealers dealing in yarn.
4. We have heard the detailed submissions of Ms.Lakshmi Sriram for Mr.T.RameshKutty, Mrs.R.Hemalatha, Mr.A.Chandrasekaran & Mr.C.Subramanian for the petitioners and Mr.Haja Nazirudeen, learned Additional Advocate General, assisted by Mr.Prasanth Kiran, learned Government Advocate and Mr.P.Hari Babu, learned Government Advocate, for the Commercial Taxes Department.
5. The submissions of the petitioners in one voice are as follows. They argue that the impugned Government Orders impinge upon their right to trade which should be free and unfettered as guaranteed under Article 301 of the Constitution of India.
6. The dealers are offended by the condition imposed under the impugned Government Orders to the effect that they would be extended concessional rate of 1 % (in the case of dealers in Group I) and 2 % (in the case of dealers in Group II) upon condition that they are not engaged either in branch or consignment transfers. They see no logic either in fact or in law, in the imposition of this condition.
7. They would argue that the condition imposed is discriminatory insofar as it creates a cleavage within a class of identically placed dealers. The dealers constitute one homogenous class, engaging in manufacture and sales of either hosiery or yarn. However, by the imposition of this condition, the State has carved out an unreasonable and discriminatory restriction in respect of those dealers within the class, who are engaged in effecting branch or consignment transfers.
8. Such branch/consignment transfers may be in respect of any goods whatsoever as there is no elaboration on the goods that must be the subject matter of the branch / consignment transfers in order for the condition to operate.
9. They rely on the judgments in:-
(i) Jindal Stainless Limited and another v State of Haryana and others , (2017) 12 SCC 1
(ii) Atiabari Tea Co., Ltd v State of Assam and others , AIR 1961 SC 232
(iii) State of West Bengal v Kesoram Industries Ltd and others , (2004) 10 SCC 201
(iv) Minerva Talkies, Bangalore & Ors v State of Karnataka &Ors., AIR 1988 SC 526
(v) State of Madras v V.G.Row, Union of India & State, AIR 1952 SC 196
(vi) Mohd. Faruk v State of Madhya Pradesh , AIR 1970 SC 93
(vii) A. Anraj v Government of Tamil Nadu, 61 STC 165
(viii) Weston Electronics and another v State
