2001 (7) TMI 1249 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of the incorporation of the new entry 80A in the First Schedule of the Andhra Pradesh General Sales Tax Act, 1957 (APGST Act).
2. Allegation of arbitrariness, discrimination, and violation of Articles 14 and 19(1)(g) of the Constitution.
3. Classification of poultry feed supplements as distinct from poultry feed for taxation purposes.
4. Legislative competence and the power to tax.
5. Allegation of colorable legislation and extraneous motives behind the amendment.

Detailed Analysis:

1. Constitutionality of the Incorporation of Entry 80A:
The petitioners contested the constitutionality of the new entry 80A, which was added to the First Schedule of the APGST Act by Amendment Act No. 27 of 1996, effective from August 1, 1996. They argued that this new entry, which increased the tax rate on poultry feed supplements from 4% to 9%, was arbitrary and discriminatory.

2. Allegation of Arbitrariness, Discrimination, and Violation of Articles 14 and 19(1)(g):
The petitioners claimed that the amendment was arbitrary and discriminatory, violating Articles 14 and 19(1)(g) of the Constitution. They argued that poultry feed and poultry feed supplements should be considered one commodity and taxed at the same rate. The respondents countered that the items under entry 80A are distinct from those under entry 80 and that the classification was justified to generate more revenue for the State.

3. Classification of Poultry Feed Supplements:
The court noted that entry 80A includes not only poultry feed supplements but also nutrients, mineral mixtures, vitamins, medicines, and other categories used in various feeds. The court found that the items in entry 80A are different in kind and nature from those in entry 80, justifying a separate classification for taxation purposes.

4. Legislative Competence and the Power to Tax:
The court emphasized that the power to tax is an incident of sovereignty, subject to constitutional limitations. The Legislature has the discretion to classify items for tax purposes and to determine tax rates. The court upheld the Legislature's competence to introduce entry 80A and to tax the items therein at a higher rate.

5. Allegation of Colorable Legislation:
The petitioners alleged that the amendment was a piece of colorable legislation, introduced with extraneous motives to generate more revenue. The court rejected this contention, stating that no motive can be attributed to the Legislature, and that the enactment was within the legislative competence.

Conclusion:
The court upheld the constitutionality of the incorporation of entry 80A in the First Schedule of the APGST Act by Amendment Act No. 27 of 1996. It dismissed the writ petitions, concluding that the classification of poultry feed supplements for a higher tax rate was neither arbitrary nor discriminatory, and did not violate Articles 14 and 19(1)(g) of the Constitution. The court also rejected the allegation of colorable legislation, affirming the Legislature's competence and discretion in tax matters.