1998 (3) TMI 648 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Section 30 of the Madhya Pradesh General Sales Tax (Amendment) Act, 1990.
2. Constitutionality of the notification issued on June 28, 1990, reducing the rate of tax on exercise books.
3. Alleged violation of Articles 301 and 304(a) of the Constitution.
4. Alleged violation of Articles 14 and 19(1)(g) of the Constitution.
5. Claim for refund of tax collected on exercise books.

Issue-wise Detailed Analysis:

1. Validity of Section 30 of the Madhya Pradesh General Sales Tax (Amendment) Act, 1990:
The petitioners challenged the amendment to Section 30, which altered column 3 of entry 14 of Schedule I, imposing conditions for tax exemption on exercise books. The amendment required that exercise books be manufactured from paper purchased from dealers registered under the Act for a reduced tax rate of 5% to apply. The court examined the validity of this provision, despite the repeal of the M.P. General Sales Tax Act, 1958, by the M.P. Vanijyik Kar Adhiniyam, 1994, as the petitioners sought a refund based on the previous act's operations.

2. Constitutionality of the Notification Issued on June 28, 1990:
The notification reduced the tax rate on exercise books under specific conditions. The petitioners argued that it created a discriminatory tax structure, favoring exercise books made from paper purchased within the state over those made from paper purchased outside the state. The court scrutinized the notification's alignment with constitutional principles, particularly those ensuring free trade and non-discriminatory taxation.

3. Alleged Violation of Articles 301 and 304(a) of the Constitution:
The petitioners contended that the amendment and notification violated Articles 301 and 304(a) by obstructing the free flow of trade and commerce across state boundaries. The court referred to precedents, including Firm A.T.B. Mehtab Majid & Co. v. State of Madras, which held that discriminatory taxation affecting inter-state trade violates these constitutional provisions. The court concluded that the amendment and notification indeed hampered free trade by imposing discriminatory tax conditions.

4. Alleged Violation of Articles 14 and 19(1)(g) of the Constitution:
The petitioners argued that the amendment and notification violated Article 14 (equality before the law) and Article 19(1)(g) (freedom to practice any profession or to carry on any occupation, trade, or business). The court found no merit in the Article 14 violation claim, stating that exercise books and regular books are distinct categories and cannot be equated for tax exemption purposes. Similarly, the court dismissed the claim under Article 19(1)(g), noting that the policy of providing concessions to cooperative societies did not constitute discrimination.

5. Claim for Refund of Tax Collected on Exercise Books:
The petitioners sought a refund of the tax collected on exercise books made from paper purchased outside the state, along with interest. The court, having declared the partial exemption unconstitutional, considered the relief sought. It noted that the petitioners had already passed the tax burden onto consumers, and granting a refund would result in unjust enrichment. Consequently, the court refused the refund request.

Conclusion:
The court declared the amendment to Section 30 of the Act and the notification reducing the tax rate on exercise books unconstitutional as they violated Articles 301 and 304(a) of the Constitution. However, it denied the petitioners' claim for a tax refund to prevent unjust enrichment. The writ petitions were disposed of without any order as to costs.