1991 (7) TMI 304 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Discrimination and arbitrariness of the notification under Article 14.
2. Violation of the right to trade under Article 19(1)(g).
3. Validity of the notification's conditions regarding cubic capacity and fuel efficiency.

Detailed Analysis:

1. Discrimination and Arbitrariness of the Notification under Article 14:
The petitioner argued that the notification dated 30th March 1988, which imposed a lower sales tax rate of 0.5% on fuel-efficient light commercial vehicles with engine capacities between 3200 cc and 3500 cc, was discriminatory. The petitioner claimed that the TATA-407, despite being fuel-efficient with an engine capacity of 2956 cc, did not receive the same tax concession, thus violating Article 14 of the Constitution. The State of Punjab countered that cubic capacity is a globally recognized term and a relevant consideration for vehicle performance, safety, and operational efficiency. The court found that the classification based on cubic capacity and fuel efficiency was reasonable and not arbitrary. It emphasized that absolute equality in taxation is impossible and that the notification did not single out any person or class for discrimination.

2. Violation of the Right to Trade under Article 19(1)(g):
The petitioner contended that the notification restricted their right to trade by disadvantaging the sale of TATA-407 vehicles, thus violating Article 19(1)(g) of the Constitution. The court held that the notification did not impose any restrictions on the petitioner's right to trade. It merely set conditions for tax concessions that were applicable to all manufacturers meeting the specified criteria. The petitioner failed to provide evidence, such as sales records or financial statements, to prove that their business was adversely affected by the notification.

3. Validity of the Notification's Conditions Regarding Cubic Capacity and Fuel Efficiency:
The court examined whether the conditions set by the notification were reasonable and relevant. It concluded that both fuel efficiency and cubic capacity were pertinent factors for granting tax concessions. The State's rationale that higher cubic capacity engines provide better safety, longer vehicle life, and improved performance, especially in challenging terrains, was found to be logical and aligned with the government's policy priorities. The court determined that the notification created a clear and identifiable class of vehicles based on relevant considerations, and thus, the conditions were neither arbitrary nor discriminatory.

Conclusion:
The court dismissed the writ petition, upholding the validity of the notification. It ruled that the notification did not violate Articles 14 or 19(1)(g) of the Constitution, as it was based on reasonable classification and did not restrict the petitioner's right to trade. The petitioner's failure to provide evidence of business impact further weakened their case. The court emphasized that practical equality in taxation is constitutional and that the notification operated uniformly on all similarly situated persons.