1968 (12) TMI 86 - HC - VAT and Sales Tax

Issues Involved:
1. Discrimination and Violation of Article 14: Whether the imposition of sales tax on cane jaggery while exempting palm jaggery is discriminatory and violates Article 14 of the Constitution of India.
2. Legality of Legislative and Executive Actions: Whether the legislative and executive machineries adopted by the State in imposing the levy and granting the exemption are legal.
3. Freedom of Trade and Commerce: Whether the imposition of sales tax on cane jaggery impedes inter-State trade and commerce, violating Articles 301 and 304(b) of the Constitution.
4. Arbitrariness and Excessive Delegation: Whether the power conferred on the State by section 59 of the Act to amend the Schedules without proper guidance is arbitrary and illegal.
5. Reasonableness of Restrictions: Whether the imposition of sales tax on cane jaggery and exemption for palm jaggery constitute an unreasonable restriction on trade.

Issue-wise Detailed Analysis:

1. Discrimination and Violation of Article 14
The petitioners argued that the imposition of sales tax on cane jaggery, while exempting palm jaggery, is discriminatory and violates Article 14 of the Constitution. They claimed that both commodities were previously exempt from taxation and that the sudden imposition of tax on cane jaggery alone is hostile discrimination. The Court, however, found that the two commodities are distinct and have been treated differently historically. The exemption for palm jaggery was justified as it is a cottage industry involving poor toddy-tappers, and the exemption aimed to encourage this industry. The Court concluded that the classification was reasonable and had a rational nexus to the objective of promoting the palm jaggery industry, thus not violating Article 14.

2. Legality of Legislative and Executive Actions
The petitioners contended that the legislative and executive actions taken by the State in imposing the levy on cane jaggery and granting exemption to palm jaggery were illegal. The Court found that the State acted within its powers under sections 59 and 17 of the Madras General Sales Tax Act, 1959. The notification under section 59(1) became law under section 59(2) with the passing of Act 2 of 1968. The executive exemption granted under section 17 was also within the State's discretion and competence, considering the economic policies and surrounding circumstances. The Court held that there was no excessive delegation of powers and that the actions were legal and valid.

3. Freedom of Trade and Commerce
The petitioners argued that the imposition of sales tax on cane jaggery impeded inter-State trade, violating Articles 301 and 304(b) of the Constitution. The Court rejected this argument, stating that a tax on the sale of goods does not directly impede the free movement or transport of goods. The Court emphasized that the imposition of sales tax is a regulatory measure and does not constitute an unreasonable restriction on trade. The Court also noted that the petitioners failed to provide evidence that the tax significantly affected their trade. Thus, the Court concluded that the imposition of sales tax on cane jaggery did not violate Articles 301 and 304(b).

4. Arbitrariness and Excessive Delegation
The petitioners claimed that the power conferred on the State by section 59 of the Act to amend the Schedules without proper guidance was arbitrary and illegal. The Court found that the State's actions were guided by economic policies and the need to support the palm jaggery industry. The Court held that the delegation of powers to the executive was not excessive and that the actions taken were within the framework of the law. The Court emphasized that the legislative and executive actions were based on rational considerations and were not arbitrary.

5. Reasonableness of Restrictions
The petitioners argued that the imposition of sales tax on cane jaggery and the exemption for palm jaggery constituted an unreasonable restriction on trade. The Court held that the reasonableness of a restriction must be determined objectively, considering the interests of the general public. The Court found that the exemption for palm jaggery was justified to support the cottage industry and the poor toddy-tappers. The imposition of sales tax on cane jaggery was not arbitrary, as it was based on the clarification that cane jaggery is not sugar and is subject to tax. The Court concluded that the restrictions were reasonable and necessary in the public interest.

Conclusion:
The Court dismissed the writ petitions, holding that the imposition of sales tax on cane jaggery and the exemption for palm jaggery were legal, valid, and did not violate the Constitution. The Court found no unreasonable restriction on trade or discrimination against cane jaggery traders. The actions of the State were within its powers and justified by economic policies and the need to support the palm jaggery industry.

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