1968 (9) TMI 97 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of item 6 of Schedule III to the Andhra Pradesh General Sales Tax Act, 1957.
2. Discrimination between millers and other dealers under Article 14 of the Constitution.
3. Levy of tax exceeding the maximum fixed under section 15(a) of the Central Sales Tax Act, 1956.

Issue-wise Detailed Analysis:

1. Validity of Item 6 of Schedule III to the Andhra Pradesh General Sales Tax Act, 1957:
The petitioners challenged item 6 of Schedule III on the grounds that it designates two stages of taxation for groundnuts, which are "declared goods" under section 14 of the Central Sales Tax Act, 1956. They argued that this is contrary to section 6 of the State Act because it permits levy at both the first purchase by millers and the last purchase by other dealers. The court examined the provisions of the Central Act, which restricts the tax on declared goods to a maximum of 3% and mandates that such tax should not be levied at more than one stage. The court concluded that the State Act's provision for taxing groundnuts at two stages is invalid as it violates section 15(a) of the Central Act.

2. Discrimination Between Millers and Other Dealers Under Article 14 of the Constitution:
The petitioners contended that the classification of dealers into millers and non-millers is discriminatory and violates Article 14 of the Constitution. They argued that this classification bears no rational relation to the statutory purpose and results in potential multiple taxation. The court, however, held that the classification is not arbitrary and has a rational basis. The objective is to tax declared goods at one point before they lose their identity or leave the state. The court found that the Legislature intended to fix a single point of levy, either at the first purchase by millers or the last purchase by other dealers, thus rejecting the contention of discrimination.

3. Levy of Tax Exceeding the Maximum Fixed Under Section 15(a) of the Central Sales Tax Act, 1956:
The petitioners argued that the tax levied under the State Act exceeds the maximum of 3% prescribed by section 15(a) of the Central Act. The court acknowledged that while the State Act defines turnover more broadly than the Central Act defines sale price, leading to potential excess taxation, this does not justify striking down item 6 of Schedule III. Instead, the court modified the application of the State Act to ensure compliance with the Central Act's restrictions. The tax payable under the State law should not exceed 3% of the sale or purchase price as defined in the Central Act.

Conclusion:
The court directed that the tax under item 6 of Schedule III should not exceed the maximum rate of 3% on the sale or purchase price as defined in the Central Act. The sales tax authorities were instructed to apply this ruling to both pending assessments and those already completed, with provisions for re-examination and revision where necessary. The writ petitions were dismissed with costs.