1954 (3) TMI 33 - SC - VAT and Sales Tax

VALIDITY OF PROVISION IMPOSING TAX ON PURCHASERS - SCOPE OF ENTRY 48, LIST II, SCHEDULE VII, OF GOVERNMENT OF INDIA ACT, 1935 AND ENTRY 54, LIST II, SCHEDULE VII, OF CONSTITUTION OF INDIA, 1950

Summary

Issues:
1. Legislative competency under the Government of India Act of 1935.
2. Constitutionality under Article 14 of the Constitution.
3. Validity of Rule 16(5) in relation to Section 5(vi) of the Act.

Detailed Analysis:

1. Legislative Competency:
The appeals arose from challenges to the Madras General Sales Tax Act and Turnover and Assessment Rules in the High Court of Madras. The petitioners contended that the Provincial Legislature lacked the authority under the Government of India Act of 1935 to impose a tax on purchasers. The High Court rejected this argument, emphasizing that the legislative competency under entry 48 of List II of the Seventh Schedule to the Government of India Act was broad enough to encompass a law imposing tax on the purchaser of goods. The Court noted that the Constituent Assembly's intention in entry 54 of List II in the Seventh Schedule to the Constitution validated this interpretation. The argument that the legislative competency was limited was deemed fallacious, and the Court upheld the High Court's decision on this issue.

2. Constitutionality under Article 14:
The appellants raised concerns under Article 14 of the Constitution, alleging that the Act discriminated by taxing purchasers of specific commodities only. The Court referenced the equal protection clause and the principle of legislative classification. It highlighted the need for classification to be based on a reasonable differentia related to the law's objective. Citing previous cases, the Court emphasized that the burden of proving unconstitutional discrimination rested on the challengers. In this case, the appellants failed to demonstrate that purchasers of other commodities were similarly situated as those of hides and skins. The Court concluded that the appellants did not meet the burden of proof required to establish arbitrary discrimination, and the majority decision in a relevant case applied to the present situation.

3. Validity of Rule 16(5) in relation to Section 5(vi) of the Act:
The appellants contended that Rule 16(5) violated Section 5(vi) of the Act. The High Court had already found this sub-rule to be ultra vires, and the Advocate-General did not dispute this. However, as the sub-rule only impacted unlicensed dealers, and the appellants were licensed, it did not affect them. The Court determined that the sub-rule was severable and did not invalidate the rules within the Act. No other defects in the rules were brought to the Court's attention. Consequently, the Court found no merit in the appeals and dismissed them with costs.