1990 (5) TMI 228 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the validity of Entry No. 71 of Schedule B of S.R.O. No. 80 dated March 12, 1982, under the Jammu and Kashmir General Sales Tax Act, 1962, on grounds of being ultra vires of articles 14, 301, and 304(a) of the Constitution of India. Imposition of tax on second-hand clothes imported from outside the State and exemption for locally purchased second-hand clothes. Allegation of discriminatory taxation and demand for quashing the tax imposition and demand notice.

Detailed Analysis:
The petitioner challenged Entry No. 71 of Schedule B of S.R.O. No. 80 dated March 12, 1982, under the Jammu and Kashmir General Sales Tax Act, 1962, claiming it to be ultra vires of constitutional provisions. The entry imposed tax on second-hand clothes imported from outside the State while exempting locally purchased clothes, leading to alleged discrimination. The petitioner argued that such discrimination violated articles 14, 301, and 304(a) of the Constitution by restricting free trade and imposing unequal tax burdens on similar goods based on their origin.

The court examined the legality of the impugned entry and the discrimination between second-hand clothes imported from outside the State and those purchased locally. It emphasized that while the State can make distinctions, they must be reasonable and have a nexus to the intended purpose. The court noted that the respondents failed to justify the discrimination, leading to a conclusion that the entry violated constitutional principles by unfairly burdening certain traders and disrupting the free flow of trade and commerce.

Referring to relevant legal precedents, including the Weston Electroniks case and the Firm A.T.B. Mehtab Majid Co. case, the court highlighted the importance of non-discriminatory taxation on goods from other states. It reiterated that taxes should not unfairly disadvantage imported goods compared to locally produced ones. The court also cited the Anraj case, emphasizing that discriminatory tax treatment hampers free trade and commerce, contravening constitutional provisions.

Ultimately, the court declared Entry No. 71 of Schedule B unconstitutional and void, as it failed to demonstrate a reasonable classification and violated constitutional provisions. The judgment set aside the tax imposition on second-hand clothes imported from outside the State, holding the petitioner not liable for the demanded amount. However, the ruling did not prevent the respondents from imposing taxes on all dealers of second-hand clothes, regardless of their origin. The parties were directed to bear their own costs, and the interim order of the court was vacated, concluding the writ petition accordingly.