1962 (1) TMI 35 - SC - VAT and Sales Tax

Legality of the amendment introduced in section 15 of the Assam Sales Tax Act, 1947 (Act XVII of 1947) by section 2 of the Assam Sales Tax (Amendment) Act, 1960 (Act XIII of 1960) by which sub-section (b) of item (i) of sub-clause (b) of clause (1) was deleted and thereby sales of goods to a registered dealer intended for use in production of goods for sale became liable to sales tax challenged Held that - Appeal dismissed. It has not been shown how the imposition of this tax is an unreason- able restriction on the rights of the petitioner to carry on trade, but it was submitted that by this means the petitioner will not be able to compete with the manufacturers outside the State of Assam. Assuming that this is so, it is clear that goods which are purchased are put to different uses and if the Legislature thinks that certain classes of goods should pay the tax and not others that is a question of policy into which the courts cannot enter.

Summary

Issues:
Challenge to the legality of the amendment in section 15 of the Assam Sales Tax Act, 1947, Discrimination between manufacturers, Excessive restriction violating Article 19(1)(f), Refusal to amend registration certificate affecting rights under Article 19(1)(f).

Analysis:
The judgment delivered by KAPUR, J. addressed a petition challenging the legality of an amendment in the Assam Sales Tax Act, 1947. The petitioner, a limited company engaged in manufacturing iron and steel materials in Assam, contested the amendment that made sales of goods to a registered dealer liable to sales tax if intended for use in production of goods for sale. The petitioner raised three key points. Firstly, it alleged that the amendment violated Article 14 by discriminating between manufacturers supplying goods based on orders and those selling goods they manufacture themselves. Secondly, it argued that the restriction imposed was excessive and contravened Article 19(1)(f). Lastly, the petitioner contended that the refusal to amend the registration certificate infringed its rights under Article 19(1)(f).

The court examined the scheme of the Assam Sales Tax Act, particularly focusing on sections related to registration, certificates, and exemptions. The amendment in question deleted sub-section (b) of item (i) of clause (1), impacting the tax liability on goods purchased for manufacturing taxable goods. The petitioner claimed discrimination between materials used for manufacturing and selling goods against a contract, asserting that the amendment was unreasonable and lacked an intelligible differentia for classification. However, the court held that the legislature has the authority to decide which articles to tax to raise revenue, and the differentiation was not discriminatory as it targeted persons, not articles.

Regarding the alleged violation of Article 19(1)(f) due to the tax imposition hindering competition with manufacturers outside Assam, the court emphasized that the legislature's policy decision on taxable goods is not subject to judicial review. The court rejected the petitioner's arguments, stating that the tax imposition did not unreasonably restrict trade rights. Consequently, the refusal to amend the registration certificate was deemed irrelevant in light of the court's decision on the previous points.

In conclusion, the petition was dismissed, and the rule was discharged, with the petitioner directed to bear the costs of the respondent. The judgment upheld the validity of the amendment in the Assam Sales Tax Act, emphasizing the legislative prerogative in determining taxable articles and rejecting claims of discrimination and excessive restriction on trade rights.