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TMI Blog2007 (9) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... either the impugned Act is violative of Article 14 or the imposition of higher rate of sales tax for imported goods would in any way amount to restriction of trade under Part XIII of the Constitution of India. Equally the submission as to the impugned Act requires the assent of the President under Article 304(b) also cannot be accepted. Further, as the classification is reasonable, the submission as to the restriction for levy of tax on sale or purchase of goods based on Article 286(3) is also not available to the petitioners. Accordingly, point nos. (i) & (ii) are answered. Merely because the GATT agreement recognises the relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, etc., that will not in any way curtail the State Government to identify the imported goods as separate class and to levy higher rate of sales tax so long as the power of the State Government to levy sales tax even on imported goods is not questioned. Accordingly, point no. (iii) is also answered. W.P. dismissed. - 17424, 17425, 16825, 16826, 22414, 23198-23201 of 2003, 2597 of 2004 & 24476 of 2005 - - - Dated:- 7-9-2007 - D. Murugesan and P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in case the imported goods classifiable under Entry 9 of the Eleventh Schedule are liable to tax at the rate of 20% on first sales inside the State of Tamil Nadu. On the basis of the clarification dated 21-7-2002 issued under Section 28-A of the TNGST Act by the Special Commissioner and Commissioner of Commercial Taxes, Chennai, if car audio systems, cordless phones, handy cameras, computer monitors and cellular phones are imported goods having foreign markings, then, when sold in Tamil Nadu, they will be liable for 20% sales tax under Entry 9 of the Eleventh Schedule to the Act. As the petitioners are liable to pay sales tax only at the rate of 12% in terms of Entry 14(vi) and (viii) of Part-D of the First Schedule, they had collected and paid sales tax at the rate of 12% on the goods imported from outside India at Delhi and Mumbai and stock transferred to Chennai and sold in Chennai and the demand for payment of differential tax had resulted in burden on consumers. 5. Aggrieved by the clarification dated 21-7-2002, they approached the Tamil Nadu Taxation Special Tribunal by filing O.P. Nos. 969 970 of 2002 564 565 of 2004 praying to declare the provisions contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entry 9 of Eleventh Schedule to the TNGST Act, it approached the Taxation Tribunal in O.P. No. 626 of 2003 questioning the levy of 20% sales tax on the ground of violation of Part XIII of the Constitution of India, more particularly, Articles 301 and 304(a) of the Constitution of India. However, the challenge was negatived by the Taxation Tribunal vide order dated 18-6-2003. Hence the above writ petition seeking to declare the impugned provisions ultra vires of the Constitution. 7. M/s. MPL Cars Limited is the petitioner in W.P. Nos. 23198 to 23201 of 2003. It is a registered dealer under the provisions of the TNGST Act and CST Act and is an assessee on the file of the Commercial Tax Officer, T. Nagar (East) Assessment Circle, Chennai. According to the petitioner, it is carrying on the business as authorised dealers of M/s. Ford India Private Limited and selling Ford cars from the year 1996. Initially the petitioner used to effect purchase of Ford cars from the Nasik factory and thereafter, sales were made from the Chennai stockyard. From December, 2001 onwards, the petitioner also began to effect sale of Ford Mandeo cars, which are manufactured in Ford Werks AG, Belgium. M/s. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. He imports goods from outside India and sell them in the local market. According to him, medium density fibre boards and pre-laminated/veneered medium density fibre boards are taxable only at the rate of 8% from 1-4-1999 to 26-3-2002 and 10% from 27-3-2002 under item 20 Part-C of the First Schedule of the TNGST Act. As the goods covered under Entry 8, Part-G of the First Schedule upto 30-6-2002 and Entry 9 of the Eleventh Schedule from 1-7-2002 under the impugned provisions are taxable at a higher rate of sales tax and the medium density fibre board which is taxable at 10% under Part-C of First Schedule has been included along with those imported goods, the petitioner has filed the above writ petition seeking to declare the impugned provisions invalid, illegal, unconstitutional and ultra vires of the Constitution. 9. M/s. Theni Glass House, Theni is the petitioner in W.P. No. 2597 of 2004 and is an assessee under the provisions of the TNGST Act on the file of the Commercial Tax Officer, Theni. According to the petitioner, during the course of business, it is importing medium density fibre boards from foreign countries and reselling all kinds of glasses and plywoods. On simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the TNGST Act was applicable for the period from 27-3-2002 to 30-6-2002. On and after 1-7-2002, the Eleventh Schedule is made applicable. He would contend that the finding of the Taxation Tribunal that protection under Part XIII of the Constitution of India for free trade is not available to the imported goods is contrary to law. He would also submit that in any case when there is discrimination in the tax pattern as to the restrictions in the enactment, the assent of the President under Article 304-B of the Constitution of India for such enactment is necessary. 13. Mr. T.V. Lakshmanan, learned counsel appearing for the petitioner in W.P. No. 24476 of 2005, in addition to the above submission of Mr. N. Saiprakash, has also placed reliance on certain clauses of the General Agreement on Tariffs and Trade, 1994, shortly known as (GATT) and submitted that there cannot be a different rate of sales tax for the goods manufactured and sold within India in a particular State or manufactured in one State and sold in another State and the goods imported and sold in India. According to the learned counsel, the discrimination in the tax structure would amount to infringement of the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the levy of 20% sales tax on imported goods by the amended provision as against the levy of 12% sales tax for the goods manufactured in India would be discriminatory in the wake of Articles 301 to 304 of the Constitution? (iii) Whether by virtue of the Agreement (GATT), the State would be competent to bring the goods imported and levy higher rates of sales tax and in such circumstances, whether such enactment would require the assent of the President under Article 304(b) of the Constitution of India? 17. Point Nos. (i) (ii): In order to drive home the above points, Mr. Arvind P. Datar, learned senior counsel would firstly rely upon the judgment of the Andhra Pradesh High Court in Minerals and Metals Trading Corporation v. State of Andhra Pradesh (1998) Vol. 110 STC 394 (AP) and submit that once an assessment is made and on filing of the bill of entry the goods are cleared, the goods get mingled with the general mass of goods and merchandise of the country and the goods get the eligibility to be declared as local goods after clearance. The same will be the position even if the goods are not physically removed from the port premises. It is his further contention that the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present cases, which question the power of the State to levy sales tax on imported goods. The question before the Court basically was as to when the goods can be said to have crossed the customs frontiers. The judgment also arose under the Customs Act. The relevant consideration for the purpose of levy of sales tax is as to whether even after the customs clearance, such goods lose their character or identity of imported goods . In our view, that judgment cannot be made applicable to the facts of the present case relating to the power of the State to levy sales tax on the goods sold in the State. 18. The learned senior counsel would further rely upon yet another judgment of this Court in State Trading Corporation of India Ltd. v. State of Tamil Nadu and another (Vol. 129 STC 294). Again that was a case relating to the consideration of the goods crossing the customs frontiers . In fact the interpretation set out in the judgment of the Andhra Pradesh High Court in Vol. 110 STC 394 was considered and this Court did not agree with the said interpretation on crossing customs frontiers . The Court held that the goods imported by the assessee had been warehoused and the clearanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods. It must be held that for the purpose of levy of sales tax, an assessment, filing of bill of entry, clearance of goods from the customs frontiers are also not relevant, as they will be relevant only for the purpose of levy of customs duty and not otherwise. 20. The power of the Central Government to make law for levying customs duty is traceable to Entry 83 of List 1 of Seventh Schedule. On the other hand, the power of the State Government to make law for levying sales tax is traceable to Entry 54 of List II of Seventh Schedule. We must firstly mention that none of the petitioners questions the power of the State in making the law levying sales tax on goods brought and sold in the State, but only questions the different yardstick in fixing the tax pattern namely, that for the goods manufactured in one State and sold in other State and goods imported into India and sold in other State. Keeping in mind the above, the challenge to the impugned Acts and the clarification should be considered. The issue boils down to the narrow compass as to whether there could be a classification between the goods imported from other countries brought to one State and sold in other State and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and reasonable ways. (See Khandige Sham Bhatt v. Agricultural Income Tax Officer (supra). 15. It is well settled that a Legislature does not have to tax every thing in order to tax something. It can pick and choose districts, objects, persons, methods and even rates of taxation as long as it does so reasonably. (Willis, Constitutional Law of the United States, 587)...... When a statute divides the objects of tax into groups or categories, so long as there is equality and uniformity within each group, the tax cannot be attacked on the ground of its being discriminatory..... Likewise, the mere fact that a tax falls more heavily on some in the same group or category is by itself not a ground for its invalidity, for them hardly any tax, for instance, sales tax and excise tax, can escape such a charge. (Twyford Tea Co. Ltd. v. State of Kerala (AIR 1970 SC 1123). 23. A conspicuous reading of the law laid down by the Court would show that (i) the power of the State to levy sales tax on goods brought and sold in the State is traceable to Entry 54 of List II of Seventh Schedule; (ii) that the State while making law levying tax has a wide latitude in the matter of classification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the State keeping in view of the inherent complexity of physical adjustment of diverse elements, such decision to levy higher rate of sales tax should be considered to be one of larger discretion available to the legislature in the matter of classification. 25. It has been also well settled that taxation law cannot be claimed immunity from the equality class of the Constitution and the taxation statutes shall not also be arbitrary and oppressive, but at the same time the Court cannot for obvious reasons meticulously scrutinise the impact of its burden on different persons and its interest. In M/s. East India Tobacco Co. etc. v. State of Andhra Pradesh (AIR 1962 SC 1733), the Supreme Court had observed that where there is more than one method of assessing tax and the legislature selects one out of them, the Court will not be justified to strike down the law on the ground that the legislature should have adopted another method, which in the opinion of the Court is more reasonable, unless it is convinced that the method adopted be capricious, fanciful, arbitrary or clearly unjust . While broadlining the power of the Court to interfere with the legislation on the ground of dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt was approved by the Supreme Court of India in the judgment in the Twyford Tea Co. Ltd. and another v. The State of Kerala and another (AIR 1970 SC 1133). The petitioners have raised the issue of discrimination only on the ground that the imported goods will lose their character as imported goods once if they are cleared from customs and therefore there cannot be a further classification between the imported goods and indigenous goods. The said submission is totally a misconception. Though the imported goods after removal may mingle with the indigenous goods, they never lose their identity as either imported goods or foreign goods. The petitioners have not discharged their burden while pleading discrimination. 27. The law on the power of the State Government to validly pick and choose one commodity for taxation and it was not open to attack under Article 14 was stated in East India Tobacco Company Ltd. (supra). In the same case, the Supreme Court has also held that the power indicates a wide range of selection and freedom in appraisal not only in the object of taxation and the manner of taxation, but also in the discrimination of rate or rates applicable. 28. Learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a possibility. Free movement and exchange of goods throughout the territory of India is essential for the economy of the nation and for sustaining and improving living standards of the country. The provision contained in Art. 301 guaranteeing the freedom of trade, commerce and intercourse is not a declaration of a mere platitude, or the expression of a pious hope of a declaratory character; it is not also a mere statement of a directive principle of State policy; it embodies and enshrines a principle of paramount importance that the economic unity of the country will provide the main sustaining force for the stability and progress of the political and cultural unity of the country. In all these cases, the tax was imposed on the goods manufactured in one State and moved into other State for sales. On the above undisputed facts, the Supreme Court held that there must be uniformity in tax pattern. 30. Whether Part XIII could be made applicable to imported goods is a further question for consideration in this case. Part XIII of the Constitution relates to the restriction on inter-State and intra-State trade on goods. Inter-State trade would mean where the goods manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods. That apart, the impugned amendment Act fixing higher rate of tax for imported goods is on intelligible differentia and on the basis of reasonable classification and therefore we do not find any reason to hold that either the impugned Act is violative of Article 14 or the imposition of higher rate of sales tax for imported goods would in any way amount to restriction of trade under Part XIII of the Constitution of India. Equally the submission as to the impugned Act requires the assent of the President under Article 304(b) also cannot be accepted. Further, as the classification is reasonable, the submission as to the restriction for levy of tax on sale or purchase of goods based on Article 286(3) is also not available to the petitioners. Accordingly, point nos. (i) (ii) are answered. 31. Point No. (iii): Mr. T.V. Lakshmanan, learned counsel placing reliance on certain clauses of the GATT agreement submitted that India is a signatory to the above agreement and the object of the above agreement would also include recognising the relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... National Courts cannot say yes if Parliament has said no to a principle of international law. National Courts will endorse international law but not if it conflicts with national law. National courts being organs of the National State and not organs of international law must perforce apply national law if international law conflicts with it. But the Courts are under an obligation within legitimate limits, to so interpret the Municipal Statute as to avoid confrontation with the comity of Nations or the well established principles of International law. But if conflict is inevitable, the latter must yield. 33. In view of the above law declared by the Supreme Court, we are of the considered view that merely because the GATT agreement recognises the relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, etc., that will not in any way curtail the State Government to identify the imported goods as separate class and to levy higher rate of sales tax so long as the power of the State Government to levy sales tax even on imported goods is not questioned. Accordingly, point no. (iii) is also answered. 34. For the forego ..... X X X X Extracts X X X X X X X X Extracts X X X X
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