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TMI Blog1971 (10) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of the assessment order has been filed as annexure 'C' to the petition. This order of respondent No. 3 has been challenged in the present writ petition. One of the grounds for challenging the assessment by respondent No. 3 was that he had not been appointed to perform the functions and duties of an Assistant Sales Tax Officer/Assessing Authority under the Act as he was appointed by the Lt. Governor only by an order dated 26th April, 1968, while he purported to act as an Assistant Sales Tax Officer/Assessing Authority on 23rd April, 1966, much earlier than the date of order of his appointment. This ground, however, was specifically given up before us at the time of the arguments by the learned counsel for the petitioner Mr. Khanna. This was done apparently because the appointment of respondent No. 3 has been validated by means of an Act which was passed validating the appointments of certain officers under the Bengal Finance (Sales Tax) Act, 1941 by the Bengal Finance (Sales Tax) (Delhi Validation of Appointments and Proceedings) Act, 1971. This ground therefore no longer survives. Section 8 of the Act of 1956 for the relevant period provides that every dealer, who in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " It will be seen that all transactions which are subject to tax under section 6 of the Act of 1956 are divided into two categories by section 8. A part of those transactions come within the meaning of section 8(1) and the remaining part fall within section 8(2). In the present case, the petitioner did not furnish the declaration forms C and D. Section 8(1) was thus inapplicable to him and he was liable to pay tax as provided in section 8(2) of the Act. Now clause (b) of sub-section (2) of section 8 provides that in the case of goods other than declared goods, the tax payable shall be calculated at the rate of 7 per cent. or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher. It is a common case that for the relevant period, the rate for the goods sold to the unregistered dealers within Delhi was 3.8 per cent. As the rate in clause (b) of 7 per cent. was higher respondent No. 3 naturally applied the rate of 7 per cent. to the inter-State sales made by the petitioner. The grievance of the petitioner is that before the amendment made in subsection (2) of section 8 in 1958, sub-section (2) of section 8 provided that the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that having regard to the importance of inter-State trade, it is ultra vires to authorise any State to levy on inter-State sale any tax at a higher rate than that it levies on inside sale. The Division Bench negatived the contention that the higher rate was unreasonable or amounted to a penalty. It also negatived the second contention that section 8(2)(b) was not within the competence of Parliament under entry 92-A. It, however, accepted the third contention of the assessee and held that section 8(2)(b) was constitutionally invalid so far as it provides for a rate higher than the single or multi-point State rate on inside sale. In arriving at this conclusion, the learned judges mainly relied on an earlier judgment of the same court reported in Larsen and Toubro Ltd. v. joint Commercial Tax Officer, Mount Road II Division, Madras-2[1967] 20 S.T.C. 150., decided on 7th April, 1967, wherein they had held that imposition of varying local rates of taxes in different States on same or similar inter-State transactions, and the resultant inequality in the burden of tax affects and impedes inter-State trade, commerce and intercourse and, therefore, sub-sections (2), (2A) and (5) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 8(2)(b) also on the same grounds which prevailed with it in striking down section 8(2) earlier. The judgment of the Supreme Court was given on 18th April, 1968, in the State of Madras' case(2), by which the earlier Division Bench judgment of the Madras High Court in Larsen and Toubro Ltd.'s case(1) was reversed. The later Division Bench deciding Sitalakshmi Mills' case(3), therefore, had not the benefit of the judgment of their Lordships of the Supreme Court given in the State of Madras v. N.K. Nataraja Mudaliar[1968] 22 S.T.C. 376 (S.C.). But now that the judgment of the Supreme Court in the Madras' case(2) is available to us, we are not persuaded to hold that we can embark on an inquiry about the constitutional invalidity of section 8(2) in spite of sub-section (2) of the section having been declared to be valid and constitutional by the Supreme Court. It has been held by the Supreme Court in Smt. Somawanti v. State of PunjabA.I.R. 1963 S.C. 151 at 160. that the binding effect of a decision does not depend upon whether a particular argument was considered therein or not, provided that the point with reference to which the argument was specifically advanced was actually decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revailing for tax on intra-State sale and inter-State trade, a local dealer within a State who does inter-State trade is discriminated against and is placed at a disadvantage compared with the dealers who carry on local trade. Sitalakshmi Mills' case(8) has held that the effect of this on the freedom of inter-State trade, commerce and intercourse is writ large: such a higher discriminatory rate will seriously impede, if not altogether stop, the inter-State sales or purchases as between a local dealer and out of State unregistered dealer or consumer in respect of all goods other than declared goods. In our opinion, it is a fallacy to compare the case of a dealer who carries on local trade with that of a dealer who does inter-State trade. In our opinion, the two are not similarly situated and the question of any discrimination arising between the two does not arise. It is by now well-settled that article 14 is not violated if there is a reasonable basis for the differentia. If a law deals equally with members of a well-defined class, it is not obnoxious and it is not open to the charge of denial of equal protection on the ground that it has no application to other persons. Before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent States on transactions of sales in various commodities are not uniform and that the different rates in various States impose an unequal burden on the same or similar goods which impeded their free movement or flow in the inter-State trade and that a higher rate of tax worked as a barrier to the free movement of similar goods to another State, where there was no tax or a low rate of tax, and that for trade to be free throughout the territory of India, the rate of tax must be uniform. This argument was the basis of the decision given by the Madras High Court in Larsen and Toubro Ltd.'s case[1967] 20 S.T.C. 150. The Supreme Court however in the State of Madras' case[1968] 22 S.T.C. 376 (S.C.). observed: "We are unable to accept the view propounded by the High Court. The flow of trade does not necessarily depend upon the rates of sales tax: it depends upon a variety of factors, such as the source of supply, place of consumption, existence of trade channels, the rates of freight, trading facilities, availability of efficient transport and other facilities for carrying on trade. Instances can easily be imagined of cases in which notwithstanding the lower rate of tax in a particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in State of Madras v. N.K. Nataraja Mudaliar[1968] 22 S.T.C. 376 (S.C.). , where Hegde, J., who wrote a separate but a concurring judgment observed as follows at page 398: "Then we come to clause (b) of section 8(2), which deals with goods other than declared goods. Here the law at the relevant time was that the tax shall be calculated at the rate of seven per centum of the turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher. As could be seen from the report of the Taxation Enquiry Committee, the main reason for this provision was to prevent as far as possible the evasion of sales tax. The Parliament was anxious that inter-State trade should be canalised through registered dealers over whom the appropriate Government has a great deal of control. It is not very easy for them to evade tax. A measure which is intended to cheek the evasion of tax is undoubtedly a valid measure. Further, inter-State trade carried on through dealers coming within section 8(2), must be in the very nature of things very little. It is in public interest to see that in the guise of freedom of trade, they do not evade the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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