1969 (7) TMI 86 - SC - VAT and Sales Tax

Whether the expression sugar included guy? Held that - Appeal dismissed. cane jaggery and palm jaggery are not commodities of the same class, and in any event in imposing liability to tax on transactions of sale of cane jaggery and exempting palm jaggery , no unlawful discrimination denying the guarantee of equal protection was practised. There is no substance in the contention that the Act which imposes tax on cane jaggery and the notification which exempts palm jaggery from liability to tax imposes a colourable exercise of authority. If the Legislature has the power to impose the tax, its authority is not open to challenge on a plea of colourable exercise of power.

Summary

Issues Involved:

1. Discrimination and violation of the equality clause of the Constitution.
2. Restriction on trade and commerce contrary to Part XIII of the Constitution.
3. Excessive delegation of legislative authority to the executive.
4. Colourable exercise of legislative power.

Issue-wise Detailed Analysis:

1. Discrimination and Violation of the Equality Clause of the Constitution:

The appellants argued that the levy of tax on "cane jaggery" while exempting "palm jaggery" was discriminatory and violated the equality clause of the Constitution. They contended that "cane jaggery" and "palm jaggery" were identical commodities and had been treated similarly under previous Sales Tax Acts. However, the court observed that the notification under section 59(1) of the Madras General Sales Tax Act, which modified the Third Schedule, had received legislative sanction by Madras Act 2 of 1968. The court further noted that "cane jaggery" and "palm jaggery" were commercially different commodities, produced through different methods, consumed by different sections of the community, and sold at different prices. The court concluded that the classification was rational and did not constitute unlawful discrimination, thereby upholding the legislative discretion in taxation matters.

2. Restriction on Trade and Commerce Contrary to Part XIII of the Constitution:

The appellants claimed that the levy of tax on "cane jaggery" imposed a restriction on trade and commerce, contrary to the provisions of Part XIII of the Constitution. The court, however, found no merit in this argument. It held that the imposition of tax on transactions of sale of "cane jaggery" did not affect the freedom of trade within the meaning of Article 301 of the Constitution. The court referenced the State of Madras v. N.K. Nataraja Mudaliar case, which stated that while a tax may restrict or hamper the free flow of trade in certain cases, not every imposition of tax does so. Therefore, the court concluded that the tax on "cane jaggery" did not infringe the freedom of trade and commerce.

3. Excessive Delegation of Legislative Authority to the Executive:

Initially, the appellants argued that there was excessive delegation of legislative authority to the executive, making the levy of tax invalid. However, this argument was abandoned before the court because the State of Madras enacted Act 2 of 1968, which authorized the levy of tax on the sale of jaggery by amending Schedule III to the Madras Act 1 of 1959. This legislative action negated the claim of excessive delegation, as the amendment now flowed from legislative authority.

4. Colourable Exercise of Legislative Power:

The appellants also submitted that in levying tax on the turnover from the sale of "cane jaggery," legislative power had been colourably exercised. The court dismissed this contention, stating that if the legislature had the power to impose the tax, its authority could not be challenged on the grounds of colourable exercise of power. The court referenced K.C. Gajapati Narayan Deo v. State of Orissa to support this conclusion. The court found no evidence of colourable exercise of authority in the legislative actions concerning the tax on "cane jaggery."

Conclusion:

The Supreme Court dismissed the appeals, concluding that there was no unlawful discrimination between "cane jaggery" and "palm jaggery," no infringement on the freedom of trade and commerce, no excessive delegation of legislative authority, and no colourable exercise of legislative power. The court upheld the validity of the tax on "cane jaggery" under the Madras General Sales Tax Act, 1959, as amended by Madras Act 2 of 1968.