1974 (7) TMI 98 - HC - VAT and Sales Tax

Issues Involved:
1. Taxability of ice under the Jammu and Kashmir Sales Tax Act.
2. Constitutionality of Section 4 of the Jammu and Kashmir Sales Tax Act, 1962.
3. Discrimination in the imposition of sales tax on halwais compared to bakerywallas.

Detailed Analysis:

1. Taxability of Ice Under the Jammu and Kashmir Sales Tax Act:

In Writ Petition No. 93 of 1972, the petitioners, who manufacture and sell ice, contended that ice should be exempt from sales tax as it is merely a frozen form of water, which is exempt under Item 37 of Schedule II of Notification No. S.R.O. 157. The petitioners supported their argument with a letter from the Excise and Taxation Commissioner, stating that ice should be categorized under 'water and aerated water.'

The court, however, determined that the letter from the Excise and Taxation Commissioner was a personal opinion and lacked statutory force. The court emphasized that although ice is derived from water, it undergoes a change of state, becoming a distinct entity with different physical properties such as specific gravity and melting point. The court concluded that the notification's exemption of water did not extend to ice, as the government would have explicitly included ice if that were the intention. Additionally, the court noted that water is a necessity, while ice is considered a luxury item, justifying its taxation. Therefore, the court overruled the petitioners' contention that ice should be exempt from sales tax.

2. Constitutionality of Section 4 of the Jammu and Kashmir Sales Tax Act, 1962:

In Writ Petition No. 99 of 1972, the petitioner challenged the constitutionality of Section 4 of the Act, arguing that it conferred unguided and uncanalised powers on the government, violating Article 14 of the Constitution of India. The petitioner claimed that the section allowed the government to fix any rate of tax without clear guidelines or criteria.

The court analyzed Section 4 and found that it contained two clear guidelines: a ceiling of 12% on the tax rate and a further limit of 3% for goods taxable under the Central Sales Tax Act. The court referenced several Supreme Court decisions, which established that the legislature could delegate details of taxation laws to the executive, provided there were sufficient guidelines. The court concluded that the ceiling on the tax rate constituted a sufficient guideline, and the delegation of power to the government did not amount to excessive delegation. Therefore, the court held that Section 4 was intra vires and not violative of Article 14.

3. Discrimination in the Imposition of Sales Tax on Halwais Compared to Bakerywallas:

The petitioner in Writ Petition No. 99 of 1972 also argued that the impugned notification (S.R.O. 729 dated 11th October 1972) was discriminatory. The notification imposed a sales tax on halwais with a turnover exceeding Rs. 40,000, while bakerywallas were exempt from such taxation. The petitioner contended that both halwais and bakerywallas were similarly placed, making the differential treatment discriminatory.

The court reviewed the history of various notifications and noted that both halwais and bakerywallas were initially treated similarly. However, the impugned notification introduced a distinction by exempting bakerywallas from taxation while imposing tax on halwais. The court found no reliable materials to support the state's argument that halwais catered to affluent customers while bakerywallas served the general masses. The court concluded that the classification lacked a reasonable basis and amounted to hostile discrimination against halwais. Consequently, the court held that item 34 and the second proviso of the notification were discriminatory and violative of Article 14, and thus, quashed these parts of the notification.

Conclusion:

- Writ Petition No. 93 of 1972 was dismissed, upholding the taxability of ice.
- Writ Petition No. 99 of 1972 succeeded, with the court striking down the discriminatory provisions of the impugned notification, while upholding the constitutionality of Section 4 of the Act.

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