1956 (11) TMI 28 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of Section 2 of the Madras General Sales Tax and the Madras Tobacco (Taxation of Sales and Registration) (Amendment) Act, 1955.
2. Whether the tax imposed by the Amendment Act XIII of 1955 is a duty of excise or a tax on the sale of goods.
3. Alleged violation of Article 14 of the Constitution due to discriminatory taxation.
4. Validity of Section 3(1-A) of the Madras General Sales Tax Act, 1939, as amended by Act VIII of 1955.

Issue-wise Detailed Analysis:

1. Constitutional Validity of Section 2 of the Madras General Sales Tax and the Madras Tobacco (Taxation of Sales and Registration) (Amendment) Act, 1955:
The petitioners challenged the constitutional validity of Section 2 of the impugned Act, which amended Section 5 of the Madras General Sales Tax Act, 1939. The amendment introduced a single-point tax on the first sale of certain tobacco products and raw tobacco. The petitioners argued that this amendment was ultra vires the State Legislature as it imposed a duty of excise, which is exclusively a Union subject under Entry 84 of the Union List.

2. Whether the Tax Imposed by the Amendment Act XIII of 1955 is a Duty of Excise or a Tax on the Sale of Goods:
The petitioners contended that the tax on the first purchase of raw tobacco under the amended Section 5(viii) was, in substance, a duty of excise. They argued that this tax was an addition to the excise duty levied by the Central Excise Act, I of 1944, and was therefore ultra vires the State Legislature. The court referred to the Federal Court's judgment in the C.P. Petrol case and the Province of Madras v. Boddu Paidanna and Sons case, which distinguished between excise duties and sales tax. The court held that a tax on the first sale by a producer or manufacturer is a tax on the sale of goods and not a duty of excise. Therefore, the tax levied by the impugned Act was within the legislative competence of the State Legislature.

3. Alleged Violation of Article 14 of the Constitution Due to Discriminatory Taxation:
The petitioners argued that the impugned Act violated Article 14 of the Constitution by introducing unreasonable discrimination between different classes of manufacturers. They contended that manufacturers who purchased tobacco from dealers did not pay any tax, while those who purchased from growers had to pay the purchase tax, although they were entitled to a rebate. The court found no merit in this argument, stating that a single-point tax does not violate Article 14. The court held that there was no unreasonable discrimination between different classes of manufacturers under the impugned enactment.

4. Validity of Section 3(1-A) of the Madras General Sales Tax Act, 1939, as Amended by Act VIII of 1955:
The petitioners challenged the validity of Section 3(1-A), which allowed for the assessment, levy, and collection of tax in advance during the year in monthly or quarterly installments. They argued that this provision imposed a tax on anticipated sales, which was beyond the legislative competence of the State. The court rejected this contention, stating that the provision was merely a machinery for securing the tax due and payable to the State. The court held that the provision was within the legislative power of the State as it was incidental or ancillary to the subject matter of taxes on the sale of goods under Entry 54 of the State List.

Conclusion:
The court dismissed all the writ petitions, upholding the constitutional validity of Section 2 of the impugned Act and the validity of Section 3(1-A) of the Madras General Sales Tax Act, 1939, as amended. The court found no merit in the arguments challenging the tax as a duty of excise or alleging discrimination under Article 14. The rules nisi issued were discharged, and there was no order as to costs in any of the petitions.

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