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TMI Blog1971 (8) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the Act, that the demand is liable to be quashed on certiorari. The preamble to the Act says that since it was considered necessary to levy an additional tax on the sale or purchase of goods it has been enacted to provide for it. In the counteraffidavit filed on behalf of the State, it is said that the Act has been made in order to increase the resources of the State. The Act was published in the Tamil Nadu Government Gazette, Extraordinary, dated 28th May, 1970, but by section 1(2), it shall be deemed to have come into force on 1st April, 1970. Apart from section I relating to the short title and commencement, the Act has three other sections. Section 2(1) provides that the tax payable under the Tamil Nadu General Sales Tax Act, 1959, shall, in the case of a dealer whose total turnover for a year exceeds 10 lakhs of rupees, be increased by an additional tax at the rate of 5 per cent. of the tax payable by that dealer for that year. The provisions of the General Sales Tax Act, 1959, shall apply in relation to the additional tax as they apply in relation to the tax payable under the said Act. The sub-section has a proviso which, in the case of declared goods and of such a deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant to the levy of sales tax. According to him, the additional tax, therefore, offends article 19(1)(g) as well as article 14 of the Constitution. His second submission is that the proviso to section 2(1) is inconsistent with section 15(a) of the Central Sales Tax Act which, as he says, contemplates only one rate and at one stage, and not different rates at different stages on sales of different commodities. Thirdly, he argues that the inhibition of collection of the additional tax is not a matter ancillary or incidental to the power to levy tax on sale or purchase of goods, and in enacting sub-section (2) of section 2, the Legislature has not minded its business, and exceeded its powers. Collection of additional tax, he would say, can only refer to a bargain for including tax in the price and such a provision goes against the price control regulations, and particularly the provisions of section 64-A of the Sale of Goods Act. Lastly, he maintains that sub-section (3) of section 2 is, therefore, not authorised by entry 64 of the State List. These submissions are mutatis mutandis extended as well to the validity of the provisions of section 3 of the impugned Act. On the first co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the effect that the additional tax has been resorted to in order to augment the revenues of the State, and that is well within the taxing power of the Legislature. So, too, the classification in section 2(1) for attracting the additional tax cannot be said to be irrelevant to sales tax or arbitrary. The classification of dealers depending on the quantum of turnover for purposes of exemption from tax has been upheld in several decided cases. We do not see why a different approach is called for, or is justified to the validity of similar classification of dealers for applying additional tax. Rottschaefer in his hand book of American Constitutional Law (1939 Edition) draws attention at page 671 to Stewart Dry Goods Co. v. Lewis(1) as having held that the progressively graduated tax construed as sales tax was violative of the equal protection clause. Parts of the majority opinion have been read out to us. In that case it is noteworthy that the rate charged increased with the specified progressive slabs of turnover, and that the increased rates were applicable only in respect of sales in each successive brackets. The majority opinion held the tax to be violative of the equal protection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.T.C. 133. upheld the validity of a like section (section 5-A) of the Andhra Pradesh General Sales Tax Act, 1957. The court rejected the contention that the section was beyond the legislative competence, or that it violated article 14. Stewart Dry Goods Co. v. Lewis79 Law. Ed. 1054. was referred to in that case. But the court would appear to have preferred the opinion of Cardozo, J. In our opinion, therefore, section 2(1) of the impugned Act is competent, and does not offend either article 19(1)(g) or article 14. We think also that the validity of the proviso to section 2(1) cannot be successfully challenged. The object of the proviso is to make the additional tax to conform to the provisions of section 15 of the Central Sales Tax Act. What clause (a) of section 15 enjoins is, that in respect of declared goods, the tax on intra-State sale or purchase shall not be subject to tax exceeding 3 per cent. of the price, and that such tax should not be levied at more than one stage. The tax under the General Sales Tax Act and the additional tax under the impugned Act have to be read together, and are not levied at more than one stage. As to the validity of sub-section (2) of section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. 1355., negativing a contention that as sales tax was an indirect tax which the seller would pass on to his purchaser, it could not be imposed retrospectively after the sale transaction had been concluded by the passing of the title from the seller to the buyer, for it cannot, at that stage, be passed on to the purchaser, held that though from the point of view of the economists, and as an economic theory, sales tax might be an indirect tax on the consumers, legally it need not be so. It follows that opportunity to pass on is not of the essence of the character of the tax as sales tax. Pausing on the validity of the retrospective levy of sales tax as in The Tata Iron and Steel Co. Ltd. v. The State of Bihar[1958] 9 S.T.C. 267 (S.C.); [1958] S.C.R. 1355., the Supreme Court in J.K. Jute Mills Co. v. State of Uttar Pradesh[1961] 12 S.T.C. 429 (S.C.); A.I.R. 1961 S.C. 1534. held: "It is no doubt true that a sales tax is, according to accepted notions, intended to be passed on to the buyer, and provisions authorising and regulating the collection of sales tax by the seller from the purchaser are a usual feature of sales tax legislation. But it is not an essential characteristic of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10; I.L.R. 1954 Mad. 569. That case was decided under the Madras Motor Vehicles (Taxation of Passengers and Goods) Act, 1952. Section 3 of that Act levied a tax on passengers and goods carried by stage carriages and public carrier vehicles, at the rate of nine pies in the rupee on the fares and freights payable to the operators of such stage carriages, and at the rate of six pies in the rupee on the freights payable to the operators of such public carrier vehicles. Then came a proviso which said that provided that the fare charged by an operator inclusive of the tax leviable under the section should not exceed the maximum fare prescribed by the Government under the Motor Vehicles Act, 1939, and in force at the commencement of the Act. The court held that while the operators would be bound to pay the tax, they would not be entitled to pass on the tax to the passengers or consignors because the proviso expressly laid down that the fare inclusive of the tax leviable under section 3, should not exceed the maximum fare prescribed by the Government, and in force at the commencement of the Act. The proviso, in its opinion, therefore, did injuriously affect the exercise of the petitioner's ..... X X X X Extracts X X X X X X X X Extracts X X X X
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