1961 (2) TMI 55 - HC - VAT and Sales Tax

Issues Involved:

1. Constitutionality of the proviso to section 3(1) of the Madras General Sales Tax Act, 1939.
2. Interpretation of the phrase "any other place" in the amended proviso.
3. Discrimination based on turnover exceeding Rs. 25,000.
4. Application of the ejusdem generis rule.
5. Reconsideration of the decision in Krishna Iyer v. State of Madras.
6. Validity of differentiation of dealers based on turnover.

Detailed Analysis:

1. Constitutionality of the Proviso to Section 3(1) of the Madras General Sales Tax Act, 1939:

The constitutionality of the proviso was challenged on the grounds that it violated Article 14 of the Constitution. The court previously held that the distinction between two classes of dealers with an annual turnover of Rs. 25,000 and more, specifically those selling in hotels, boarding houses, and restaurants versus elsewhere, had no reasonable or just relation to the object of the Act. This created apparent discrimination, making the proviso void and unenforceable.

2. Interpretation of the Phrase "Any Other Place" in the Amended Proviso:

The court examined whether the addition of "stall or any other place" to the original terms "hotel, boarding house or restaurant" removed the discriminatory nature of the tax imposition. The petitioner argued that "any other place" should be construed using the principle of ejusdem generis, meaning it should refer to places similar to hotels, boarding houses, and restaurants. The State argued for a broader interpretation. The court concluded that the phrase should be interpreted narrowly, maintaining the principle of ejusdem generis.

3. Discrimination Based on Turnover Exceeding Rs. 25,000:

Another ground of challenge was that the minimum turnover requirement of Rs. 25,000 created unreasonable discrimination. This classification placed dealers with turnovers exceeding Rs. 25,000 in an unfavorable position compared to those with lesser turnovers. The court noted that this issue was left undetermined in the previous case but did not resolve it in this judgment due to the conclusion reached on other grounds.

4. Application of the Ejusdem Generis Rule:

The court applied the ejusdem generis rule, which states that general words following specific words should be confined to things of the same kind. The court found a common feature in hotels, boarding houses, and restaurants: they are places where food and drink are prepared and sold for immediate consumption. This commonality justified applying the ejusdem generis rule, thus limiting the scope of "any other place" to similar establishments.

5. Reconsideration of the Decision in Krishna Iyer v. State of Madras:

The Advocate-General suggested reconsidering the Krishna Iyer decision, citing a different conclusion by the Andhra Pradesh High Court, which upheld the proviso's validity. However, the court found no compelling reason to reconsider its previous decision, noting that the Madras view had been followed in other jurisdictions, such as Mysore.

6. Validity of Differentiation of Dealers Based on Turnover:

The court referenced a decision by the U.S. Supreme Court in Stewart Dry Goods Co. v. Lewis, which addressed similar issues of differentiation based on turnover. However, the court did not delve into this argument, as the other grounds were sufficient to declare the amended proviso unconstitutional.

Conclusion:

The court concluded that the amended proviso still violated Article 14 of the Constitution due to its discriminatory nature and improper application of the ejusdem generis rule. The petition was allowed, and the petitioner was entitled to costs. The court declared the amended proviso unconstitutional and void.

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