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1984 (10) TMI 202 - SC - VAT and Sales TaxWhether there is rationality in the belief of the legislature that capacity to pay the tax increases, by and large, with an increase of receipts? Held that - Appeal dismissed. As the contentions put forward by the petitioners that the impugned enactment is devoid of legislative competence inasmuch as it imposes not a tax on sales but a tax on income, that the adoption of a slab system for determining tax liability is alien to the concept of sales tax and that the levy of additional tax under the impugned enactment violates articles 14 and 19 of the Constitution are all totally devoid of merit. We do not also see any substance in the plea raised in the writ petitions that the provisions of the impugned Act are violative of article 301 of the Constitution.
Issues Involved:
1. Constitutional validity of the Tamil Nadu Additional Sales Tax (Amendment) Act, 1976. 2. Legislative competence of the State Legislature to enact the impugned Act. 3. Alleged violation of Article 14 of the Constitution. 4. Alleged violation of Article 19 of the Constitution. 5. Alleged violation of Article 301 of the Constitution. Issue-wise Detailed Analysis: 1. Constitutional Validity of the Tamil Nadu Additional Sales Tax (Amendment) Act, 1976: The petitioners challenged the constitutional validity of the Tamil Nadu Additional Sales Tax (Amendment) Act, 1976, which amended the Tamil Nadu Additional Sales Tax Act, 1970. The amendments included substituting a new provision for section 2, omitting section 3, and introducing section 3A. The primary contention was that the State Legislature could not enact further statutes for additional sales tax after already providing for a sales tax and a surcharge. The Court rejected this contention, stating that the impugned enactment merely amended the 1970 Act and did not introduce a new tax. The amendment provided a different method of computation of the additional tax, linking it to the taxable turnover instead of the tax assessed under the 1959 Act. 2. Legislative Competence of the State Legislature to Enact the Impugned Act: The Court upheld the legislative competence of the State Legislature to enact the impugned Act, referencing the Constitution Bench decision in Kodar v. State of Kerala, which validated the 1970 Act. The Court noted that the nature and identity of the additional sales tax imposed by the 1970 Act were not altered by the impugned Act, which only changed the mode of computation. The constitutional validity of the levy of additional tax was not affected by this change. 3. Alleged Violation of Article 14 of the Constitution: The petitioners argued that the different rates of additional sales tax based on the quantum of turnover violated Article 14, as it resulted in dissimilar treatment of similarly situated persons. The Court rejected this argument, citing the Kodar case where it was held that classification based on turnover for tax purposes is not unconstitutional. The Court emphasized that a legislative classification making the tax burden heavier in proportion to the turnover is reasonable and not arbitrary discrimination. The classification aimed to proportion the payment to the capacity to pay, achieving more genuine equality. 4. Alleged Violation of Article 19 of the Constitution: The petitioners contended that the levy of additional sales tax was confiscatory and imposed unreasonable restrictions on their right to carry on business, violating Article 19. The Court dismissed this contention, referencing the Kodar case, which held that the additional tax was a tax on sales, not on income, and was not shown to be confiscatory. The prohibition against passing on the tax burden to consumers did not make the tax unreasonable. The Court noted that the reasonableness of a tax is generally a matter for legislative judgment, and as long as the tax retains its character and is not confiscatory, it is outside judicial scrutiny. 5. Alleged Violation of Article 301 of the Constitution: The petitioners argued that the additional tax imposed unreasonable restrictions on their right to carry on trade, commerce, and intercourse within India, violating Article 301. The Court found no substance in this plea, reiterating that the contentions were covered by the Kodar case. The Court concluded that the impugned enactment did not violate Article 301. Conclusion: The Supreme Court dismissed all the writ petitions, upholding the constitutional validity of the Tamil Nadu Additional Sales Tax (Amendment) Act, 1976. The Court found no merit in the contentions regarding legislative competence, violation of Articles 14, 19, and 301, and the nature of the tax. The petitions were dismissed with costs.
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