1955 (4) TMI 27 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the articles sold by the applicant can be treated as "cloth manufactured on handlooms" within the meaning of the notification.
2. Whether the exemption from payment of sales tax of the departments of the State or Central Governments and specified institutions is unjustifiable as it is not based on any reasonable classification.
3. Whether the provisions of section 3, proviso (1), and section 4(1)(b) create an unfair discrimination.
4. Whether the impugned provisions are severable from the rest of the Act.

Detailed Analysis:

1. Classification of Articles Sold by the Applicant:
The court determined that the articles sold by the applicant cannot be treated as "cloth manufactured on handlooms" within the meaning of the notification. The court distinguished between "cloth" and "clothes" or garments, stating that cloth is the fabric from which clothes are made. The applicant's articles, such as saris, bed covers, and quilt covers, are considered "clothes" or garments and not "cloth" as per the notification.

2. Exemption from Sales Tax:
The court examined whether the exemption from payment of sales tax for the departments of the State or Central Governments and specified institutions like the Spinners Association and Gandhi Ashram, Meerut, was unjustifiable. The court noted that the State acts in both sovereign and commercial capacities. When acting in a commercial capacity, the State must compete on equal terms with private individuals. However, the court found that the State's involvement in promoting cottage industries, as mandated by Article 43 of the Constitution, justified its separate classification. Similarly, the Spinners Association and Gandhi Ashram were also found to be legitimately classified separately due to their objective of encouraging cottage industries.

3. Provisions of Section 3, Proviso (1), and Section 4(1)(b):
The court addressed whether the provisions of section 3, proviso (1), and section 4(1)(b) created unfair discrimination. The court concluded that since no notification had been made under these provisions, they could not be challenged as creating unfair discrimination. The court held that the legislature, by merely empowering the State Government to make a notification, had not itself created discrimination. Therefore, the applicant could not question the validity of these provisions in the absence of any discriminatory notification.

4. Severability of Impugned Provisions:
The court considered whether the impugned provisions were severable from the rest of the Act. The court referred to established principles of severability, noting that the dominant intention of the legislature in enacting the Sales Tax Act was to raise revenue. The exemptions were secondary in importance. The court concluded that even if the exemptions were invalid, the rest of the statute could still be enforced. The court found that the exempted clauses could be separated from the rest of the Act without changing its nature or structure.

Conclusion:
The court dismissed the petition, holding that the articles sold by the applicant were not "cloth" within the meaning of the notification, the exemptions for the State and specified institutions were justified, the provisions of section 3, proviso (1), and section 4(1)(b) did not create unfair discrimination, and the impugned provisions were severable from the rest of the Act. The petition was dismissed with no order as to costs.