1997 (9) TMI 554 - HC - VAT and Sales Tax

Summary

Issues:
1. Challenge to the validity of the amending Act regarding the taxation rate increase.
2. Challenge to the classification based on turnover for composition method eligibility.

Analysis:

Issue 1:
The petitioner challenged the amending Act that raised the tax rate from 4% to 8% under a specific entry. The court upheld the legislative competence to levy taxes and the freedom of the legislature to choose items and rates for taxation. The court found no constitutional aberration in enhancing the tax rate, as it falls within the legislative discretion. The challenge to this amendment was rejected by the court.

Issue 2:
The petitioner contested the amended provision restricting composition method eligibility based on turnover, arguing it created discriminatory classification. The court analyzed the classification based on economic considerations permissible under Article 14 of the Constitution. It found the classification rational and with a nexus to the legislative objective. The court held that different tax rates based on turnover were constitutionally valid, citing precedent cases supporting such classifications. The court emphasized the legislature's economic wisdom in tax matters and upheld the classification as just and in line with social justice principles. Consequently, the challenge based on Article 14 of the Constitution was dismissed, and the writ petition was rejected.

In conclusion, the court dismissed the writ petition challenging the taxation rate increase and the classification based on turnover for the composition method, upholding the legislative discretion and the constitutionality of the classifications made.