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2015 (8) TMI 1397 - HC - VAT and Sales TaxLevy of VAT - interpretation of statute - The petitioners case is that live chicken comes within the meaning of live stock and exempt from payment of Value Added Tax - The challenge to the impugned amendment to the Puducherry Value Added Tax Act is primarily on the ground that the impugned enactment is discriminatory and violative of Article 14 of the Constitution of India - Held that - It is well settled legal principle that the State does not have to tax everything in order to tax something; it enjoys a wide discretion in the matters of taxation and enjoys more freedom for classifying the objects to be taxed and the rates of taxation and the burden for proving discrimination is heavier still when a taxing statute is under attack. Further, the State can validly pick and choose one commodity for taxation and the same is not open to attack under Article 14 - the burden is on the petitioners to show that the impugned amendment is discriminatory and offends Article 14 of the Constitution. In taxation, the legislature possess greater freedom in classification and the petitioners to succeed in striking down the impugned amendment should be able to demonstrate that the impugned amendment makes an improper discrimination, it is arbitrary and amounts to class legislation. The argument of the petitioners is that the live chicken sold in Mahe region alone cannot be subjected to payment of tax and it amounts to a class legislation as the same product is exempted from tax in other regions in the Union Territory of Puducherry. For the petitioners to succeed, it is not sufficient for the petitioners to state that it is a class legislation. What is required to be established is that such legislation makes an improper discrimination. Therefore, it has to be seen as to whether the Government of Puducherry was justified in making such a distinction and whether the same was reasonable and had a valid basis - the basis for bringing about the impugned amendment, which in fact came into effect from 01.01.2012, initially as a notification, is based on valid and reasonable classification and does not offend Article 14 of the Constitution of India. Petition dismissed - decided against petitioner.
Issues Involved: Constitutionality of Puducherry Value Added Tax (Amendment) Act, 2012; Discrimination and violation of Article 14 of the Constitution of India; Tax imposition on live chicken in Mahe region.
Issue-wise Detailed Analysis: 1. Constitutionality of Puducherry Value Added Tax (Amendment) Act, 2012: The petitioners, registered dealers under the Central Sales Tax Act and the Puducherry Value Added Tax Act, 2007, challenged the Puducherry Value Added Tax (Amendment) Act, 2012, seeking a declaration that it is unconstitutional, illegal, and void. They argued that live chicken falls within the meaning of "live stock" under Entry 39 of the First Schedule of the Act and is hence exempt from tax. However, the amendment split Entry 39 into 39A and 39B, thereby excluding live chicken sold in Mahe region from the exemption. The court noted that the amendment, which came into effect on 01.01.2012, was reasonable and justified, as it aimed to generate additional revenue for developmental activities and was based on valid and reasonable classification. 2. Discrimination and Violation of Article 14 of the Constitution of India: The petitioners contended that levying tax on live chicken sold only in Mahe region was discriminatory and violated Article 14 of the Constitution, which ensures equality before law. They argued that such selective taxation created an improper class within a class, as other regions in Puducherry were exempt from this tax. The court, however, observed that the classification was reasonable and based on the geographical and economic context. Mahe region, adjoining Kerala where live chicken is taxed at 14.5%, saw dealers selling at Kerala's rates despite the exemption, thus not passing the benefit to consumers. The court held that the amendment did not amount to improper discrimination or class legislation, and the State enjoys wide discretion in taxation matters. 3. Tax Imposition on Live Chicken in Mahe Region: The petitioners argued that the imposition of a 5% tax on live chicken in Mahe region was arbitrary and discriminatory. The court found that the imposition was justified as it aimed to prevent dealers from unfairly benefiting from the exemption while selling at higher Kerala rates. The additional revenue generated (Rs. 6.7 crores annually) was utilized for welfare measures, indicating a valid and reasonable basis for the tax. The court emphasized that the State has a wide discretion in classifying objects for taxation and the petitioners failed to prove that the amendment was arbitrary or discriminatory. Conclusion: The court concluded that the amendment to the Puducherry Value Added Tax Act was based on valid and reasonable classification, did not violate Article 14 of the Constitution, and was not discriminatory. The petitioners' challenge was dismissed, and the court noted that the petitioners had defaulted on tax payments and appeared to be attempting to avoid their tax liability. The writ petitions were dismissed with no costs, and the connected miscellaneous petition was closed.
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