1976 (7) TMI 154 - HC - VAT and Sales Tax

Summary

Issues:
1. Inclusion of tapioca in the First Schedule of the Kerala General Sales Tax Act, 1963.
2. Constitutionality of the impugned legislation under Article 304.
3. Guidelines for establishing turnover exemption under the Act.
4. Applicability of Article 301 in relation to the movement of trade in tapioca.
5. Imposition of tax by the legislature under section 58.

Analysis:

1. The primary issue in this case was the inclusion of tapioca in the First Schedule of the Kerala General Sales Tax Act, 1963, making it a taxable commodity. The petitioners argued that this inclusion was arbitrary and amounted to colorable legislation. They contended that most tapioca dealers were exporters, and the real purpose of the inclusion was to prevent tapioca export from the State.

2. The Court held that the State has the authority to choose objects for taxation as long as it is reasonable. It was established that the levy of 2% tax on tapioca purchases was not unreasonable or confiscatory. The Court rejected the argument that the legislation was colorable, emphasizing that the State's competence to tax tapioca was not in violation of the Constitution.

3. Another issue raised was the lack of guidelines for proving turnover exemption under the Act. The petitioners argued that no specific method was prescribed for establishing turnover below Rs. 35,000 for domestic consumption. The Court acknowledged this argument and agreed that no specified method of proof was outlined, allowing assesses to establish exemption in any reasonable manner.

4. The question of whether the impugned legislation was saved by Article 304 of the Constitution was also discussed. The Court noted that Article 301 was not relevant in this case as there was no hindrance to the movement of trade in tapioca. Therefore, the issue of saving the tax under Article 304 did not arise for consideration.

5. Additionally, the argument based on section 58 was brought up, contending that the imposition of tax on tapioca was by the legislature and not the Government. The Court swiftly rejected this argument, stating that the imposition of tax fell within the legislative domain.

6. Ultimately, the Court dismissed the original petitions, ruling in favor of upholding the inclusion of tapioca in the taxable commodities list under the Kerala General Sales Tax Act, 1963. No costs were awarded in this case.

This judgment clarifies the State's authority to tax specific commodities, the absence of strict guidelines for certain exemptions, and the constitutional validity of taxation laws within the realm of state legislation.