1971 (4) TMI 78 - SC - VAT and Sales Tax

Vires and constitutionality of sections 2, 5, 8 and 9 of the Andhra Pradesh General Sales Tax (Amendment) Act, 1970 challenged - Held that - Appeal allowed. The mere fact that in many cases it was not collected because the assessment could not be completed cannot be a valid ground nor can it even now be made in regard to those assessments which are now pending (a matter upon which we do not pronounce) cannot be valid grounds to declare the classification as arbitrary or unreasonable, which reason seems to have weighed with the High Court. We think not only the classification reasonable but there is an intelligible differentia furnishing a nexus with the object, the Amendment Act seeks to achieve. In this view we set aside the judgment of the High Court declaring section 9 as unconstitutional and allow the appeal, but in the circumstances without costs.

Issues Involved:

1. Constitutionality of the Andhra Pradesh General Sales Tax (Amendment) Act, 1970.
2. Validity of section 11 read with the new proviso to section 5(1).
3. Validity of section 9 of the Amendment Act.
4. Discrimination under Article 14 of the Constitution.
5. Retrospective effect of the Amendment Act.
6. Validity of the tax collection and exemption provisions.

Issue-wise Detailed Analysis:

1. Constitutionality of the Andhra Pradesh General Sales Tax (Amendment) Act, 1970:

The petitioners challenged the constitutionality of the Andhra Pradesh General Sales Tax (Amendment) Act, 1970. The Act was scrutinized for its provisions, particularly sections 2, 5, 8, and 9, which introduced changes in the tax regime for jaggery. The court examined whether these provisions violated the principles of equality and non-discrimination under Article 14 of the Constitution.

2. Validity of section 11 read with the new proviso to section 5(1):

The new section 11, substituted by the Amendment Act, was given retrospective effect from August 1, 1963. This section made agents liable for tax on transactions conducted on behalf of resident principals, irrespective of the principals' liability. The court held that the classification of dealers in jaggery separately from other commodities was based on rational grounds and had a necessary nexus with the objectives of the Act. The court found no violation of Article 14, stating that the Legislature has the discretion to classify and impose taxes differently on various commodities.

3. Validity of section 9 of the Amendment Act:

Section 9 exempted dealers from paying tax if they had not collected it during the specified period. The High Court initially struck down this section as discriminatory. However, the Supreme Court, upon appeal, upheld section 9, stating that the classification between dealers who collected the tax and those who did not was reasonable and had a clear nexus with the legislative intent to avoid undue hardship.

4. Discrimination under Article 14 of the Constitution:

The petitioners argued that the Amendment Act discriminated against dealers in jaggery by removing the minimum turnover exemption and imposing a tax irrespective of the turnover. The court reiterated that the Legislature has broad discretion in matters of taxation and classification, provided it is reasonable and has a rational connection to the legislative objective. The court found the classification of jaggery dealers as a separate category to be justified based on administrative convenience and economic considerations.

5. Retrospective effect of the Amendment Act:

The Amendment Act was given retrospective effect to validate past assessments and collections. The court held that the Legislature has the power to enact laws retrospectively, provided it does not contravene fundamental rights. The retrospective application was deemed reasonable and necessary to prevent substantial revenue loss and administrative inconvenience.

6. Validity of the tax collection and exemption provisions:

The court examined the provisions related to tax collection and exemptions. It was argued that section 9, which exempted certain dealers from paying tax, created an unreasonable classification. The Supreme Court upheld the validity of section 9, stating that the exemption was based on a reasonable classification of dealers who had not collected the tax and was intended to avoid undue hardship.

Conclusion:

The Supreme Court upheld the constitutionality of the Andhra Pradesh General Sales Tax (Amendment) Act, 1970, except for section 9, which was initially struck down by the High Court but later upheld by the Supreme Court on appeal. The court found that the classifications made by the Act were reasonable and had a rational nexus with the legislative objectives, thereby not violating Article 14 of the Constitution. The retrospective application of the Act was also deemed valid and necessary.

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