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TMI Blog1962 (4) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... of Virginia tobacco. The appellants are firms doing business in the export of tobacco. The usual course of that business is stated to be that they first enter into contracts with their customers abroad for the sale of tobacco, that thereafter they purchase the requisite quantities of goods locally and then export them to the foreign purchasers in performance of their contracts. Prior to October 1, 1953, the area wherein the appellants carried on business formed part of the State of Madras, and on that date the State of Andhra was constituted, and the area in question fell within that State. The law relating to sales tax in force in that area is the Madras General Sales Tax Act, IX of 1939. Section 5 of this Act provides for exemption of tax on sales of goods specified therein and section 6 confers on the State Government power to exempt the tax payable on the sale of any specified class of goods or by any specified class of persons. In exercise of the powers conferred by section 6 the Government of Madras issued on March 31, 1953, a notification No. 144 exempting the sales of unmanufactured tobacco from sales tax. After the Andhra State came into existence, the Legislature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reason that it singles out Virginia tobacco for taxation. (2) Is the impugned legislation in contravention of Article 286(1) (b) as imposing a tax on sales in the course of export. (1) On the first question the contention of the appellants may be thus stated. All laws must satisfy the requirements of Article 14. Taxation laws are no exception to it. In imposing a tax on the sale of Virginia tobacco and not on other kinds of tobacco the impugned Act is on the face of it discriminatory. It is therefore obnoxious to Article 14 and is void. It is not in dispute that taxation laws must also pass the test of Article 14. That has been laid down recently by this Court in Kunnathat Thathunni Moopil Nair v. The State of Kerala and Another A.I.R. 1961 S.C. 552. But in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting the persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. It is only when within the range of its selection, the law operates un- equally, and that cannot be justified on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. We are unable to agree with this contention. If a State can validly pick and choose one commodity for taxation and that is not open to attack under Article 14, the same result must follow when the State picks out one category of goods and subjects it to taxation. It should, in this connection, be remembered that under the law it is for the person who assails a legislation as discriminatory to establish that it is not based on a valid classification and it is well settled that this burden is all the heavier when the legislation under attack is a taxing statute. "In taxation even more than in other fields", it was observed by the Supreme Court of United States in Madden v. Kentucky, "Legislatures possess the greatest freedom in classification. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which must support it." How wide the powers of the Legislature are in classifying objects for purposes of taxation will be seen from the following resume of the law given by Rottschaefer, in his "Constitutional Law," page 668: "The federal Supreme Court has seldom held invalid any classification made in connection with the levying of prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itate to obstruct or burden and to yield to the policy or consider it is well within the concession or the power of the State expressed in the cases we have cited. The distinction in the treatment of the respective coals being within the power conceded by the cases to the State it has logical and legal justification and is necessarily, not unreasonable or arbitrary." In our judgment the differences which exist between the Virginia and (Nattu) country tobacco, as found by the learned Judges, are materials on which the State could treat Virginia tobacco as forming a class by itself for purpose of taxation, and the impugned legislation must be held to be not obnoxious to Article 14 of the Constitution. (2) It is next argued that the Amendment Act is ultra vires because in reality it imposes a tax on sales in the course of export and that is hit by Article 286(1)(b). The course of business followed by the appellants has already been set out. It may be assumed for the purpose of the present discussion that the purchases made by the appellants on which the tax is sought to be imposed were made for the purpose of executing specific orders which they had received from their foreign cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sale which occasions the export) 'cannot be dissociated from the export without which it cannot be effectuated, and the sale and the resultant export form parts of a single transaction'. It is in that sense that the two activities-the sale and the export-were said to be integrated. A purchase for the purpose of export like production or manufacture for export, is only an act preparatory to export and cannot, in our opinion. be regarded as an act done in the course of the export of the goods out of the territory of India', any more than the other two activities can be so regarded." We may refer to two other decisions of this Court where this question has been considered. In The State of Madras v. Gurviah Naidu Co., Ltd. [1955] 6 S.T.C. 717; A I.R. 1956 S.C. 158., the facts were that an assessee secured orders for the supply of untanned hides and skins from London purchasers and then, he purchased them locally in order to implement those orders and exported them, and the question was whether a tax on those purchases was hit by Article 286(1)(b). In holding that it was not, this Court observed: "Such purchases were, it is true, for the purpose of export but such purchases did ..... X X X X Extracts X X X X X X X X Extracts X X X X
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