1997 (9) TMI 561 - HC - VAT and Sales Tax

Summary

Issues:
Constitutional validity of section 6-B(i), (ii), and (iii) of the Karnataka Sales Tax Act, 1957 and Notification No. FD. 49 CSL 96(II) dated May 30, 1996.

Analysis:
The appellants challenged the constitutional validity of section 6-B(i), (ii), and (iii) of the Karnataka Sales Tax Act, 1957, and Notification No. FD. 49 CSL 96(II) dated May 30, 1996. The appellants, wholesale distributors, stockists, and/or manufacturers of drugs and medicines, contended that the impugned notification resulted in an enhancement of the tax rate beyond the State Government's competence under section 8-A of the Act. They also argued that the notification contradicted the Finance Minister's budget speech for the financial year 1996-97. The learned single Judge dismissed the writ petitions, holding that the withdrawal of exemption or reduction under section 8-A did not amount to an enhancement of the tax rate. The Judge also ruled that budget speeches are not enforceable until translated into law. The Court cited the case of B.K. Industries v. Union of India to support this point.

The Court further addressed the constitutional challenge to section 6-B of the Act. The appellants' arguments were compared to previous Division Bench judgments in B.P. Automobiles v. State of Karnataka and Shantilal & Brothers v. State of Karnataka. The Court noted that the incorporation of clauses (i), (ii), and (iii) to section 6-B(1) did not necessitate a reevaluation of the provisions' validity. The amendments introduced varying rates of turnover tax based on dealers' turnover, which was deemed reasonable and rational by the Court. It was established that the Legislature has the authority to provide different tax rates for different classes of dealers as long as the classification is clear, well-intended, and rational. Consequently, the Court found no merit in the appellants' arguments and dismissed the appeals without costs.