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TMI Blog1968 (12) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... 30th December, 1967, whereby the tax payable on all sales of palm jaggery was executively exempted. Tracing the history of the law regarding the imposition of sales tax on jaggery, it is stated that under the Madras General Sales Tax Act, 1959, under item 5 of the Third Schedule to that Act, jaggery and gur were exempt from taxation. This exemption was in force from April, 1959, till December, 1967. On 1st January, 1968, the Government of Madras, in exercise of their powers under section 59(1) of the Act, amended the Third Schedule, and in particular, the above entry thereto by withdrawing both jaggery and gur from the exemption which the commodities were enjoying. This became law as Act 2 of 1968 when the Legislature approved the notification initially issued by the Government. On the same day, but in exercise of their powers under section 17(1) of the Act, the State of Madras passed the impugned G.O. referred to above granting exemption in respect of the tax payable on all sales of palm jaggery. Such an executive exemption granted by the respondent in exercise of their powers under the Act is the subject-matter of the complaint and attack. According to the petitioner, the imposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is well within their powers and also maintain that the impugned notification is quite legal, valid and well within their jurisdiction. They would state that in accordance with the exigencies of the policy of the Government and regard being had to the resources of the State, certain goods are brought within the net of taxation and certain other commodities are relieved from such incidence and its burden. Such matters are purely within the field of administration and certainly within the competent ambit of both the Madras Legislature and the State Executive and no question therefore of any excessive delegation of powers under section 59 of the Act would even arise. Further, the notification having become law with effect from 1st January, 1968, with the passing of Act 2 of 1968, it is quite out of place to consider whether the delegation to the executive is excessive or not, excepting it be for academic purposes. Alternatively, it is contended that the exercise of the powers conferred on the Government under section 59 of the Act, particularly in the instant cases, is a matter within their discretion, competence and depending upon the contingencies prevalent during the particular per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dwelling places which mostly consist of huts. Palmyrah jaggery or palm jaggery being a seasonal product these toddy-tappers who are essentially the persons who are engaged in this trade are having such seasonal employment only. Such being the nature of the palm gur industry, the respondent, in order to safeguard the interests of the poor toddy-tappers and to encourage this cottage industry, has taken out of the pale of taxation the sales of palm jaggery. This is by virtue of the policy of the Government and particularly to safeguard the interests of a class of the community who were thrown out of employment years ago due to the introduction of prohibition. The respondent has furnished statistics to show the reasons which prompted the Government to grant exemption in favour of palm jaggery. It is stated but not refuted, that the utilisation of palm jaggery as an edible product by indigenous manufacture is still in its embryonic stage and the trade in the product is lagging far behind that of cane jaggery trade. As a fillip to the development of palm gur industry, it is stated that the Government has exempted a premier company in the State which is purchasing palmyrah jaggery and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 as long as it is unguided, any notification thereunder issued is ineffective in the eye of law and even so any legislation passed subsequent to and pursuant to the same. Particularly he would say that when the two commodities were enjoying the privilege and benefit of exemption for a considerable length of time, it is bad enough to withdraw the exemption without any justifiable reason to disturb the earlier pattern of taxation and it is indeed worse if one amongst the two of such commodities is granted an exemption by an executive fiat. He referred to Automobile Transport Ltd. v. State of RajasthanA.I.R. 1962 S.C. 1406., Freightlines etc., Ltd. v. State of N.S.W.[1967] 2 All E.R. 433., Westminster Bank, Ltd. v. Reverley B.C.[1968] 2 All E.R. 104. and Shri Ram Krishna Dalmia v. Shri Justice S.R. Tendolkar and Others[1959] S.C.R. 279; A.I.R. 1958 S.C. 538. The corner-stone of his argument is that the impact of Act 2 of 1968 read with the impugned G.O. resulted in discriminating cane jaggery from palm jaggery which are similar in many respects and such a discrimination violates Article 14 of the Constitution of India. Besides, the procedure adopted by the State has made inroads in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the exemption granted to sales of palm jaggery are acts of the respondent which cannot stand scrutiny. The learned Assistant Government Pleader, in reply, maintains that the products in question though classified as products of village industries, are totally different in composition and as they are commercially and popularly understood. The sucrose content in cane jaggery is reported to be 69.43 per cent. whereas such content in palm jaggery is 76.86 per cent. The total output during 1966-67 of cane jaggery appears to be 3,42,260 metric tons as against 39,455 metric tons of palm jaggery. The price per quintal of cane jaggery varied from Rs. 140 to Rs. 160 and that of palm jaggery was Rs. 180 per quintal. Both the products are neither popularly, scientifically or commercially understood as "sugar". He relied on East India Tobacco Company v. State of Andhra Pradesh[1962] 13 S.T.C. 529. , where Virginia tobacco was held to be different from nattu tobacco. The ratio in Liberty Oil Company v. London National Bank67 Lawyers' Edition 237. and Tungabhadra Industries Ltd. v. State of Andhra Pradesh[1966] 17 S.T.C. 366. were pressed into service. He urged that sales tax being non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit of exemption from sales tax, continued to be liable for such tax till 1957. Dr. P.S. Lokanathan who was invited to make recommendations regarding the simplification and improvement of sales tax system in Madras, recommended the withdrawal of the exemption granted to palm jaggery amongst other products of palm gur industry and opined that such exemption introduces discrimination in general trade. In point of time it happens the Madras Government by G.O. 1457, Revenue, dated 15th April, 1958, exempted all sales of cane jaggery from tax with effect from 1st April, 1958. This exemption brought the two articles, cane jaggery and palm jaggery, on a par and accordingly when Madras Act 1 of 1959 (Madras General Sales Tax Act, 1959) was enacted, the exemption continued and was noted in item 5 of the Third Schedule to the Act. It is not however known whether the exemption so granted was on the basis of Dr. Lokanathan's report or otherwise. Even before us no material was placed to persuade us to conclude that the exemption afforded to cane jaggery from 1st April, 1958, was to avoid discrimination. The result of this analysis is palm jaggery was practically and for all purposes exempt f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ege enjoyed by the palm jaggery industry throughout the State, the Government exempted the said commodity from payment of sales tax in exercise of their powers under section 17 of the Act by passing the impugned G.O. With the above background the contentions of counsel have to be considered. Is the imposition of sales tax on cane jaggery and contemporaneous exemption granted to palm jaggery an unreasonable restriction on the freedom of trade? The yard-stick to measure the reasonableness or otherwise of an Act of the Legislature or the delegated authority ultimately depends on the verdict of a judicial and well-instructed mind before whom the subject comes up for review. As pointed out by the Supreme Court in M.H. Quareshi v. State of BiharA.I.R. 1958 S.C. 731.: "Though the Court starts with the assumption that the Legislature is the best judge of what is good for the community, by whose suffrage it comes into existence, the ultimate responsibility for determining the reasonableness of the restriction, from the point of view of the interests of the general public rests with the Court and the Court cannot shirk this solemn duty cast on it by the Constitution." Objectively viewi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he peculiar circumstances of these petitions, the means selected for safeguarding the interests of the toddy-tappers in general and the lingering village industry consisting of the manufacture of palm jaggery in particular, the purposes underlying the grant of the exemption to palm jaggery in the prevailing conditions of its trade, have a rational and substantial nexus to the object which the State Government wished to achieve, namely, encouraging the palm jaggery industry and reiterate the long legislative practice of according exemption from tax on sales of palm jaggery. This might have resulted in the continuance of the levy of sales tax on cane jaggery. But it is certainly irrational to hold that it has resulted in an unreasonable restriction on cane jaggery trade. That way every tax would become unreasonable. We are not persuaded to agree with this extreme contention. According to the petitioners, the imposition of sales tax not only affects intra-State sales in cane jaggery, but impedes inter-State trade. This argument also has to be repelled. We are unable to appreciate how the law of the State imposing tax on a commodity would be unconstitutional on the ground of an unrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpts another group, both of them occupying substantially the same relation towards the subject-matter of the legislation?" If the answer to the poser is in the negative, as it ought to be in the instant case under review, then no question of an unreasonable restriction arises. The policy of taxation is flexible and a provision empowering the executive to exempt particular goods from a duty is valid-see Orient Weaving Mills v. Union of IndiaA.I.R. 1963 S.C. 98., Ram Bux v. State of Rajasthan[1961] 12 S.T.C. 330; A.T.R. 1963 S.C. 351., Gopal Narain v. State of Uttar Pradesh A.I.R. 1964 S.C. 370. and Khyerbari Tea Co. v. State of AssamA.I.R 1964 S.C. 925. As has been succinctly put by the Supreme Court in Ameerunnisa Begum v. Mahboob Begum[1953] S.C.R. 404 at p. 414., the Legislature has to deal with diverse problems arising out of an infinite variety of human relations. Therefore it has the power to make special laws to attain particular objects and for that purpose it must have powers of selection or classification of persons and things upon which such laws are to operate. We are therefore not satisfied that by reason of the exemption there has resulted in the imposition of any unre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proviso to Article 304(b). We have already expressed that in the instant case, neither Article 301 nor 304 is violated. The proviso to Article 304(b) necessarily has to be brushed aside for consideration. In so far as the sales tax law is concerned the State has the exclusive right to legislate provided it does not impinge Article 301 or 304 of the Constitution. Under the proviso to Article 304(b) no amendment to an existing law shall be introduced without the previous sanction of the President. This is on the supposition that the main Act requires such a sanction. It is not so in the instant case. Even otherwise this argument overlooks the fact that the executive exemption granted by the respondent under section 17 of the Act is not in the nature of an amedment to an existing law. A clear-cut legislative policy is created by the Act and various mandates directed against the State Government are provided thereunder. Sections 59 and 17 are illustrative of such a designed policy and mandate. To contend that every amendment of the Schedule to the Act, to effectuate which a defined procedure is set, and every executive exemption granted by the Government under their delegated power t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... propriety or legality of Madras Act 2 of 1968. We have rendered our reasons earlier. How discrimination is sought to be made out is that the impugned G.O., by granting an executive exemption to palm jaggery, left cane jaggery alone to be dealt with under Madras Act 2 of 1968. As a result of this, cane jaggery is in the teeth of taxation while palm jaggery is free. It should be remembered that both are different commodities. A classification which is plausible has been made by the Legislature in its wisdom and to achieve its beneficial object of avoiding unnecessary burden over an indigenous industry whose annual turnover is about 10 per cent. of the turnover of the trade in cane jaggery in the State and incidentally also to protect the ex-toddy-tappers as a part of the community who are still in a developing stage. If thus the Government have chosen to exempt palm jaggery from tax, it is for the petitioners to prove by facts and figures that they, as traders in cane jaggery, have been spotted out for hostile discrimination. No such acceptable material has been placed before us and the onus heavily cast on the petitioners to establish such discrimination has not been discharged. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acco but exempted sales of country tobacco could not be said to be discriminatory and was not obnoxious to Article 14 of the Constitution." In the instant case it is not in dispute that cane jaggery and palm jaggery are different commodities and we have already dealt with their composition. Such a proved distinction has prompted the State Government to logically and legally differentiate the products for tax purposes. There is nothing unjustified about it and no discrimination therefore arises. We shall conclude by quoting the observations of the Full Bench of the Andhra Pradesh High Court in Tungabhadra Industries Ltd. v. State of Andhra Pradesh[1966] 17 S.T.C. 366. which reads at page 367: "Article 14 ensures equality amongst equals. It is designed to protect all persons placed in similar circumstances against legislative discrimination, but if the Legislature takes care to reasonably classify persons for legislative purposes and if it deals equally with all persons belonging to a well-defined class, such action is not open to the charge of denial of equal protection on the ground that the law does not apply to all persons." It is therefore abundantly clear that no question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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