1995 (7) TMI 432 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Notifications dated 31st January 1985 and 5th June 1985 excluding H.D.P.E. fabrics from sales tax exemption.
2. Alleged violation of Article 14 of the Constitution of India due to discriminatory treatment.
3. Competence of the State to levy sales tax on specific commodities.

Issue-Wise Detailed Analysis:

1. Validity of Notifications dated 31st January 1985 and 5th June 1985:
The petitioners challenged the validity of the Notifications dated 31st January 1985 and 5th June 1985, which excluded High Density Poly Ethylene (H.D.P.E.) fabrics from sales tax exemption. The petitioners argued that these notifications were arbitrary and void, seeking a writ of certiorari to declare them invalid. The court noted that the initial notification dated 25th November 1958 had exempted rayon and artificial silk fabrics from sales tax. However, the subsequent notifications specifically excluded H.D.P.E. fabrics from this exemption. The court emphasized that the government has the discretion to levy or exempt sales tax on particular commodities and found no basis to declare the notifications invalid.

2. Alleged Violation of Article 14 of the Constitution of India:
The petitioners contended that the exclusion of H.D.P.E. fabrics from sales tax exemption violated Article 14 of the Constitution, which guarantees equality before the law. They argued that H.D.P.E. fabrics should be treated similarly to rayon and artificial silk fabrics, which were exempted from sales tax. The court referred to previous judgments, including the Supreme Court's decision in Ayurveda Pharmacy v. State of Tamil Nadu, which stated that while the state can classify commodities for taxation, such classification must be rational and not arbitrary. The court held that H.D.P.E. fabrics are distinct due to their raw material and usage, primarily for packaging rather than human clothing. The court concluded that the exclusion of H.D.P.E. fabrics was based on reasonable classification and did not violate Article 14.

3. Competence of the State to Levy Sales Tax on Specific Commodities:
The respondents argued that the state has the discretion to levy sales tax on any commodity and can choose which commodities to exempt. The court upheld this view, stating that the state is competent to levy sales tax and make reasonable classifications for taxation purposes. The court emphasized that the presumption is always in favor of the constitutionality of an enactment, particularly in taxation laws, which allows for wide discretion in classifying items for tax purposes. The court found that the state's decision to exclude H.D.P.E. fabrics from the exemption was within its legislative competence and did not amount to hostile or unreasonable discrimination.

Conclusion:
The court dismissed the petition, upholding the validity of the notifications dated 31st January 1985 and 5th June 1985. The court found that the exclusion of H.D.P.E. fabrics from sales tax exemption was based on reasonable and rational classification and did not violate Article 14 of the Constitution. The court also affirmed the state's competence to levy sales tax on specific commodities and make reasonable classifications for taxation purposes. The petition was dismissed with costs assessed at Rs. 5,000, and the interim order dated 18-5-89 was vacated.