1978 (3) TMI 183 - HC - VAT and Sales Tax

Summary

Issues Involved: Violation of Articles 301 and 14 of the Constitution.

Detailed Analysis:

1. Violation of Article 301:

The removal of "tapioca" from item 10 of the Third Schedule of the Kerala General Sales Tax Act, 1963, and its insertion as a specific item in entry No. 72 of the First Schedule, was challenged as violative of Article 301 of the Constitution. Section 5 of the Act imposes tax at specified rates and points against goods in the First or Second Schedule, while Section 9 grants exemption to goods in the Third Schedule. The court noted that to violate Article 301, the law must directly and immediately affect the movement part of the trade. Referring to precedents like Atiabari Tea Co. Ltd.'s case, the court emphasized that the impugned provision did not establish such contravention. The court also reviewed the conditions of the tapioca trade and industry but found the allegations insufficient to prove a violation of Article 301. The court reiterated that the tax must directly impede trade movement to contravene Article 301, which was not established in this case.

2. Presidential Assent and Article 304:

It was contended that the legislative amendments lacked the President's consent, as required under Article 304(b). However, the court held that Article 304(b) applies only if there are restrictions on the freedom of trade under Article 301. Since no violation of Article 301 was established, the need for Presidential assent was not warranted. The court referenced decisions like Firm A.T.B. Mehtab Majid and Co. v. State of Madras, which elucidated that sales tax could be a restriction on trade if it discriminates between goods of different states. However, the court found no such discrimination or violation in this case.

3. Impact on Trade with Tamil Nadu:

The appellants argued that the amendments adversely affected trade with Tamil Nadu, particularly with Salem and Dharmapuri. However, the court found insufficient evidence to substantiate that the amendments directly caused a decrease in trade. The court noted the lack of concrete records or accounts demonstrating that the amendments directly and immediately impacted the movement of trade. Consequently, the argument of trade impact was not upheld.

4. Violation of Article 14:

The challenge based on Article 14 was that the selective removal of "tapioca" from the Third Schedule and its inclusion in the First Schedule was discriminatory. The court rejected this argument, stating that the power to exempt or tax commodities lies with the government for revenue purposes. The court found no discriminatory practice in the legislative amendments and upheld the government's decision to subject tapioca to tax under the First Schedule.

Conclusion:

The court dismissed the writ appeals and petitions, finding no violation of Articles 301 or 14 of the Constitution. The petitions for stay and direction were also dismissed, with no orders as to costs.