1953 (9) TMI 13 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the legality of taxation on coarse and medium cotton cloth under the Hyderabad General Sales Tax Act of 1950. Interpretation of Article 286(3) of the Constitution regarding the President's assent for taxing essential commodities. Allegation of unjustifiable discrimination and denial of equal protection under the law.

Detailed Analysis:
The judgment involved applications for writs in the nature of mandamus or for appropriate directions under Article 226 of the Constitution by members of the Wholesale Cloth Merchants Association of Secunderabad challenging the taxation on coarse and medium cotton cloth under the Hyderabad General Sales Tax Act of 1950. The applicants contended that the taxation was illegal due to various grounds, including the absence of the President's assent for taxing essential commodities as per Article 286(3) of the Constitution. They argued that the levy and collection of tax without the President's assent constituted unjustifiable discrimination between subjects of different states. The judgment highlighted the need to adjudicate only two questions, primarily focusing on the interpretation of Article 286(3) and the issue of equal protection under the law.

The court analyzed the constitutional provisions and historical context to determine the validity of the taxation on coarse and medium cotton cloth. It emphasized that the assent of the President was necessary to validate a law imposing tax on commodities declared essential for the community by Parliament. The court rejected the interpretation that pre-existing laws were covered under Article 286(3), emphasizing the sequence of time implied by the provision. It cited precedents and legislative intent to support its conclusion that the taxation under the Hyderabad Act was validly levied, as it predated the Central Act declaring the commodities essential.

Furthermore, the judgment addressed the argument of colorable legislation and equality before the law. It clarified that the third amendment to the Hyderabad General Sales Tax Act was not colorable and fell within the legislative competence. The court also affirmed that territorial classification for taxation purposes did not violate the guarantee of equality before the law under Article 14 of the Constitution. The judgment concluded by rejecting the government's objection to the application for writs, stating that seeking redress through the court was appropriate for constitutional issues. Ultimately, the applications were dismissed on the grounds that the tax imposed was not illegal, with each party bearing their own costs.