1998 (6) TMI 547 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Tamil Nadu Act 31 of 1996.
2. Discrimination between dealers based on the location of their head office.
3. Violation of Articles 14, 301, and 304(a) of the Constitution of India.

Summary:

1. Validity of Tamil Nadu Act 31 of 1996:

The petitioners challenged the validity of Tamil Nadu Act 31 of 1996, i.e., the Tamil Nadu Additional Sales Tax (Amendment) Act, 1996. The unamended Tamil Nadu Additional Sales Tax Act, 1970, provided for the levy of additional tax on certain dealers. The validity of this Act had previously been upheld in S. Kodar v. State of Kerala, where it was held that the Additional Sales Tax Act is a tax on sales and not on the income of the dealer.

2. Discrimination between dealers based on the location of their head office:

The impugned amendment Act 31 of 1996 introduced a distinction between dealers based on the location of their head office. Dealers with head offices outside Tamil Nadu were subjected to additional sales tax even for turnovers below one hundred crores of rupees, which was not the case for dealers with head offices within Tamil Nadu. This was claimed to be arbitrary and discriminatory, affecting interstate trade and commerce.

3. Violation of Articles 14, 301, and 304(a) of the Constitution of India:

The petitioners argued that the amendment violated Articles 14, 301, and 304(a) of the Constitution of India. They cited several decisions, including Atiabari Tea Co. Ltd. v. State of Assam and Shree Mahavir Oil Mills v. State of Jammu and Kashmir, which emphasized that taxation should not discriminate against goods imported from other states. The court found that the impugned Act created an invidious discrimination between dealers within and outside Tamil Nadu, thus violating the constitutional provisions.

Conclusion and Relief:

The court held that the impugned Act was in violation of Articles 301, 303, and 304(a) of the Constitution of India. It was decided that clause (a) of sub-section (1) of section 2 of the principal Act, Act 14 of 1970, should be deleted. Additionally, certain words in section 2(1)(aa) as amended by Tamil Nadu Act 31 of 1996 were also ordered to be deleted to ensure that the exemption up to rupees one hundred crores would be equally applicable to all dealers. The petitions were allowed, and no order as to costs was made.