1960 (3) TMI 39 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of the General Sales Tax (Amendment) Act, No. XIV of 1959.
2. Infringement of petitioners' rights under Article 19(1)(g).
3. Infringement of freedom of trade, commerce, and intercourse under Article 301.
4. Requirement of President's previous sanction under Article 304(b).
5. Requirement of Governor's recommendation under Article 207.
6. Estoppel against the State Government in levying new tax.
7. Classification of toddy sales as agricultural income.

Detailed Analysis:

1. Constitutionality of the General Sales Tax (Amendment) Act, No. XIV of 1959:
The petitioners challenged the constitutionality of the General Sales Tax (Amendment) Act, No. XIV of 1959, which imposed a tax on toddy sales and amended sections of the General Sales Tax Act, XI of 1125. The amendments included defining "toddy" in section 2, modifying section 4 to include toddy, and amending Schedule I to impose a tax rate of two naye paise per rupee on toddy sales.

2. Infringement of petitioners' rights under Article 19(1)(g):
The petitioners argued that the Act infringed their rights under Article 19(1)(g) to practice any profession or carry on any occupation, trade, or business. They claimed the Act was not saved by Article 19(6) as it did not reasonably restrict their rights in the interest of the general public. The court held that the power to tax is a distinct head of the State's right and should not be confused with other powers. Taxing statutes need not be justified as reasonably restricting the right and freedom to trade in the interest of the general public. The court cited various decisions to support this view, concluding that the tax was not so unreasonable as to destroy the petitioners' right to carry on their trade.

3. Infringement of freedom of trade, commerce, and intercourse under Article 301:
The petitioners contended that the Act infringed their freedom of trade, commerce, and intercourse under Article 301 and was passed without the President's previous sanction, violating Article 304(b). The court clarified that Article 301 would be infringed only if the freedom of trade was directly restricted by the legislation. Since the tax was levied on individuals' sales turnover and not intended to restrict trade freedom, Article 301 was not violated.

4. Requirement of President's previous sanction under Article 304(b):
The petitioners argued that the Act required the President's previous sanction under Article 304(b) as it imposed restrictions on trade. The court held that the pith and substance of the legislation should be considered. The Act's primary purpose was to levy a tax on toddy sales, which was within the State's legislative power under item 54 of List II. Therefore, the requirement of the President's previous sanction was not applicable.

5. Requirement of Governor's recommendation under Article 207:
The petitioners claimed the Act violated Article 207 as it was not recommended by the Governor. The court noted that Article 207 is part of the legislative procedure in financial matters, and Article 212 precludes courts from inquiring into any alleged irregularity of such procedure. Hence, the absence of the Governor's recommendation did not affect the Act's constitutionality.

6. Estoppel against the State Government in levying new tax:
The petitioners argued that the State, having granted them licenses, was estopped from levying a new tax, thereby reducing the benefits under the earlier licenses. The court held that a taxing statute covered by item 54 of List II of the Seventh Schedule cannot be challenged on grounds of estoppel or contractual obligations. Therefore, the legality of the new amendment was not affected by any equitable estoppel against the State Government.

7. Classification of toddy sales as agricultural income:
The petitioners contended that toddy sales should be classified as agricultural income and excluded from the turnover under section 3 of Act No. XI of 1125. The court dismissed this objection, noting that it was not raised in the writ petitions. Additionally, the court referenced previous cases to support the view that prices obtained by petitioners tapping trees under licenses were not agricultural incomes.

Conclusion:
The court dismissed all the petitions, holding that the General Sales Tax (Amendment) Act, No. XIV of 1959, was constitutional. The objections concerning infringement of rights under Article 19(1)(g), freedom under Article 301, requirement of President's sanction under Article 304(b), and Governor's recommendation under Article 207 were all rejected. The court also dismissed the objections related to estoppel against the State Government and classification of toddy sales as agricultural income. The petitions were dismissed with costs, and counsel fees were fixed at Rs. 50 in each petition.