1988 (9) TMI 330 - HC - VAT and Sales Tax

Issues Involved:
1. Legislative competence of the Andhra Pradesh State Legislature to enact the Act under Entry 52 of List II.
2. Nature of the tax levied by the Act.
3. Definition and scope of "local area" under the Act.
4. Uniform rate of taxation and its compliance with Article 14 of the Constitution.
5. Compliance with Article 301 and Article 304(b) of the Constitution.
6. Validity of the President's assent.
7. Laying of Rules before the Legislature.

Issue-wise Comprehensive Details:

1. Legislative Competence:
The petitioners argued that Entry 52 of List II is meant exclusively for augmenting the income of local authorities, and the Act, which raises revenues for the State Government, is beyond the legislative competence of the Andhra Pradesh State Legislature. The Court held that the State Legislature has the exclusive power to make a law imposing taxes on the entry of goods into a local area for consumption, use, or sale therein, and the Act is within its legislative competence. The Court concluded that the absence of a provision in the Act to make over the tax collected to local authorities does not invalidate the Act.

2. Nature of the Tax:
Petitioners contended that the tax levied by the Act is essentially a sales tax on sales tax. The Court found no substance in this argument, stating that sales tax and entry tax are provided by different entries in List II, i.e., Entry 54 and Entry 52, respectively. The machinery created under the Sales Tax Act being employed for the purpose of implementing the Act does not make it a sales tax on sales tax.

3. Definition and Scope of "Local Area":
Petitioners argued that the entire State of Andhra Pradesh cannot be treated as one local area. The Court clarified that "local area" means an area under the administration of a local authority, like a municipality or a gram panchayat, and the Act does not declare the entire State as one local area.

4. Uniform Rate of Taxation:
Petitioners claimed that a uniform rate of taxation without reference to population and volume of business conducted in a particular area violates Article 14 of the Constitution. The Court held that the levy of a uniform rate of tax is not discriminatory or violative of Article 14, as the tax is unrelated to the services rendered or facilities provided by a particular local authority.

5. Compliance with Article 301 and Article 304(b):
Petitioners argued that the tax constitutes a restriction on the freedom of trade and movement guaranteed by Article 301. The Court found no material to show that the tax impedes the free flow of trade, commerce, or intercourse. Even if it does, the rate of tax is reasonable, and the assent of the President cures any defect in not obtaining the previous sanction before introducing the Bill.

6. Validity of the President's Assent:
Petitioners contended that the President's assent is invalid as it is contrary to assurances given by the Prime Minister. The Court found no substance in this argument, noting that the Act received the President's assent, which cures any procedural defects.

7. Laying of Rules before the Legislature:
Petitioners argued that the Rules have not been laid before the Legislature as required by sub-section (3) of section 31 of the Act. The Court noted that this contention was not raised in the writ petitions and was informed that the Rules were indeed laid before the Legislative Assembly in the first session after they were made.

Conclusion:
The Court dismissed the writ petitions, upholding the constitutional validity of the Andhra Pradesh Entry of Goods into Local Area Tax Act, 1987. The oral request for a certificate under Article 132 of the Constitution was also rejected.

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