1963 (8) TMI 40 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of the Andhra Pradesh General Sales Tax (Second Amendment) Act, 1959.
2. Whether the amended Act requires the President's assent.
3. Whether the Act is a colorable piece of legislation.

Analysis of the Judgment:

1. Constitutionality of the Andhra Pradesh General Sales Tax (Second Amendment) Act, 1959:
The petitioners challenged the Act on the grounds that it imposes restrictions on the freedom of trade as per Part XIII of the Constitution, specifically Article 304(b). The Court held that the tax on the sale or purchase of goods does not interfere with the flow of trade, commerce, or intercourse. It emphasized that taxes levied for augmenting state revenues do not fall within the ambit of Article 304(b) unless they directly affect trade or commerce. The Court cited the Supreme Court's decision in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, which clarified that a tax becomes prohibited only if it directly hinders the movement part of trade. Indirect or remote consequences do not attract Article 304(b). The contention that sales tax falls within the scope of Article 304(b) was rejected, and the Court concluded that the impugned Act does not violate the freedom of trade and commerce.

2. Requirement of the President's Assent for the Amended Act:
The petitioners argued that since the parent Act was assented to by the President, the amended Act also required the President's assent. The Court rejected this argument, stating that the President's assent to the parent Act does not make the President an integral part of the State Legislature. The Court referred to Article 304's proviso, which specifically mentions "amendment" independent of the Bill, indicating that only amendments imposing reasonable restrictions on trade require the President's previous sanction. The Court further examined various constitutional provisions and concluded that not every amendment requires the President's assent, only those affecting the free flow of trade or commerce. The impugned Act, being a minor amendment, did not necessitate the President's assent.

3. Allegation of Colorable Legislation:
The petitioners contended that the Act was a colorable piece of legislation intended to evade the payment of taxes under the Central Sales Tax Act. The Court dismissed this argument, stating that the reasons and motives behind the legislation are not justiciable. The doctrine of colorable legislation pertains to legislative competence, not the reasons for the legislation. The Court confirmed that the Andhra Pradesh Legislature had the authority to legislate on taxes on sales and purchases under entry 54 of List II. The Act merely increased the tax rate on certain commodities and did not affect inter-State trade or commerce. Therefore, the impugned Act was within the legislative competence of the State Legislature and could not be considered colorable legislation.

Conclusion:
The Court dismissed the writ petitions, upholding the validity and constitutionality of the Andhra Pradesh General Sales Tax (Second Amendment) Act, 1959. The Act did not violate the freedom of trade, did not require the President's assent, and was not a colorable piece of legislation. The petitions were dismissed with costs, and the Court awarded an advocate's fee of Rs. 50 for each petition.