2017 (7) TMI 827 - HC - VAT and Sales Tax

Rate of tax - live chicken - it is contended that only in Mahe region, tax was sought to be levied at 5% and that the same is in violation of Article 14 of the Constitution of India - Held that - Pondicherry Value Added Tax is discriminatory, and violative of Article 14 of the Constitution of India, and to the power of the Government in levying tax, classification and class legislation, rate of tax levied in the proximate State, namely, Kerala, a Hon ble Division Bench of this Court, while upholding the validity of Puducherry Value Added Tax, 2012 - Contention of the Writ Petitioner that the Writ Court has failed to take note of the floor rate of ₹ 73.50 per kg. to live chicken, cannot be countenanced, as the Hon ble Division Bench has taken note of the tenable grounds of challenge to the validity on an enactment - appeal dismissed - decided against appellant.

Summary

Issues:
Challenge to G.O.Ms.No.68/F2/2011 dated 31.12.2011 imposing tax on live chicken sold in Mahe region at 5% w.e.f. 01.01.2012, alleging violation of Article 14 of the Constitution of India.

Detailed Analysis:

1. Discriminatory Taxation and Article 14 Violation:
The case involved a challenge to the imposition of a 5% tax on live chicken sold in Mahe region, under G.O.Ms.No.68/F2/2011, on grounds of regional discrimination and violation of Article 14 of the Constitution of India. The petitioners contended that the tax was discriminatory as it targeted only Mahe region, leading to inequality. The court examined the constitutional validity of the tax in light of previous legal precedents and principles.

2. Legal Precedents and Justification for Taxation:
The court referred to legal principles established by the Hon'ble Supreme Court, emphasizing that a taxing statute must not lead to inequality and must have a reasonable basis for classification. It was noted that the State enjoys discretion in taxation matters and classification of taxed objects. The court analyzed the justification provided for the tax, including preventing tax evasion due to differing rates in neighboring states and generating revenue for developmental activities.

3. Reasonable Distinction and Classification:
The court highlighted that the tax on live chicken in Mahe region was a reasonable classification based on substantial differences between regions and the need to prevent tax evasion. The court emphasized that the State has the flexibility to classify objects for taxation as long as it adheres to fundamental principles and the doctrine of classification. The court found the tax to be a valid exercise of legislative power.

4. Upholding the Tax and Dismissal of Appeals:
After considering the arguments presented by both parties, the court upheld the tax on live chicken in Mahe region as valid and not violative of Article 14 of the Constitution. The court dismissed the appeals challenging the tax imposition, citing previous judgments and the reasonable basis for the classification. The court concluded that there were no valid grounds to interfere with the order of the learned Single Judge, thereby affirming the imposition of the tax.

In conclusion, the High Court of Madras upheld the imposition of a 5% tax on live chicken sold in Mahe region, rejecting the challenges based on regional discrimination and violation of Article 14 of the Constitution of India. The court found the tax to be a valid exercise of legislative power, considering the reasonable basis for classification and the State's discretion in taxation matters.