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TMI Blog1994 (11) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... th the batches of the petitions are either dealers in dry fruits and some other items locally based within the Jammu and Kashmir State, or are importers from outside the State and import mostly edible oils. The Government of Jammu and Kashmir issued a notification vide S.R.O. No. 124 dated June 27, 1994 whereby, in exercise of powers conferred upon it under section 4(1) of the Jammu and Kashmir General Sales Tax Act, 1962 ("the Act" for short) it incorporated certain amendments in the notification issued vide S.R.O. No. 135 dated March 29, 1989. Section 4(1) of the Act is a charging section under which the State has the power to impose tax on goods. Sub-section (1) of section 4 reads as under: "4. Liability to tax under this Act.-(1) Subject to the provisions of this Act, every dealer, except the one dealing exclusively in goods declared tax-free under section 5, shall pay for each year tax on his taxable turnover at a rate not exceeding twelve per cent of such turnover as may be determined by the Government and notified by the Government in the Government Gazette and such tax shall be charged on the sale of goods once only." In 1989 Notification S.R.O. No. 135 dated March 29, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxing the edible oil manufactured by the units located in Jammu and Kashmir State which have been granted exemption from payment of sales tax for varying periods. It has been contended by the petitioners that the State has discriminated against the importers by granting the aforesaid exemption which in effect and substance therefore, has resulted not only in violation of article 14 of the Constitution denying the equality of opportunity, but also has infringed articles 301 and 304 of the Constitution restricting the free-flow of trade and commerce between Jammu and Kashmir State and other States. It is on these two sets of contentions that the two questions of law formulated in the opening part of this judgment are based and shall, therefore, be dealt with in the following parts of this judgment. The power to grant exemption from payment of sales tax to any class of dealers or goods is to be found in section 5 of the Act which reads thus: "5. Exemption from tax.-The Government may, subject to such restrictions and conditions as may be prescribed, including conditions as to licence and licence fee, by order exempt in whole or in part from payment of tax any class of dealers o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secretary to Government, Finance Department." Annexure "A" of Notification S.R.O. No. 93 dated March 7, 1991. "Serial No. Extent of exemption Date up to which exemption is available 1. 100% 31-3-1995 2. 50% 31-3-1998 3. 25% 31-3-2000" We first deal with the argument relating to the challenge about the very power of the State to impose tax. In the case of East India Tobacco Company v. State of Andhra Pradesh reported in [1962] 13 STC 529; AIR 1962 SC 1733, the Supreme Court while dealing with the power of the State to impose taxes held that the State has a wide discretion in selecting the persons or objects it would tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. It has also been held that it is for the person who assails a legislation as being violative of some rights to establish that it is not based on a valid classification and that this burden is all the heavier when the legislation under attack is a taxing statute. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it. In the case of V. Venugopala Ravi Varma Rajah v. Union of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose. Merely because a class of goods was not being taxed, till a particular point or that this class of goods is being taxed at a rate lower in a neighbouring State is no ground for challenging the legality or constitutionality of the taxing statute. Similarly, it does not lie in the mouth of a person to come and complain in the court that economic hardships would be caused or that the prices of goods become dearer because of imposition of this tax. It is for the State to decide in its wisdom as to whether impose tax. and if so, to, what extent and at what rate. It is not for the courts to interfere in the matter of either selecting the goods for taxation or decide the rates at which the tax has to be imposed. In the same line of thinking would fall the other argument of the petitioners that the purpose of rationalising the tax structure in the area was being defeated by the Government because, according to the petitioners, the tax in the neighbouring States was lower than in Jammu and Kashmir State. First of all, on facts, it is not correct that the tax either on edible oil or on dry fruits is lower in States neighbouring Jammu and Kashmir than in Jammu and Kashmir State. On the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s bad, illegal or unconstitutional, would be patently contrary to the well-established norms of equity, fair play and good conscience, as also contrary to the principles of natural justice, not having been challenged, the question of examination of the discrimination part practically becomes out of consideration. Despite the fact that the exemption notification has not been challenged and despite the reluctance of the court to return any finding on the question relating to the discrimination part, it should clearly be understood that the grant of exemption to local SSI units in respect of the goods produced by them is a general phenomena, covering goods of all types and embracing within its ambit dealers of all kinds. Had it been a case of singling out either the goods of a particular type or a dealer of a specified category, perhaps one could say that the State was practising hostile treatment against the importers or that it was bestowing favourable treatment to a selected favourite. In this case, had the exemption notification specified the local SSI units engaged in manufacturing edible oil only, things might have been different. As it will be seen, exemption notification doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or to provide tax incentives to attain economic equality in growth and development. When all the States have such provisions to exempt or reduce rates the question of economic war between the States inter se or economic disintegration of the country as such does not arise. It is not open to any party to say that this should be done and this should not be done by either one way or the other. It cannot be disputed that it is open to the States to realise tax and thereafter remit the same or pay back to the local manufacturers in the shape of subsidies and that would neither discriminate nor be hit by article 304(a) of the Constitution. In this case and as in all constitutional adjudications the substance of the matter has to be looked into to find out whether there is any discrimination in violation of the constitutional mandate." Similarly, in the case of Amrit Banaspati Co. Ltd. v. State of Punjab reported in [1992] 85 STC 493; [1992] 2 SCC 411, their Lordships of the Supreme Court held as under: "Exemption from tax to encourage industrialisation should not be confused with refund of tax. They are two different legal and distinct concepts. An exemption is a concession allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement is direct and immediate or indirect and remote? It is precisely because the words used in article 301 are so wide, and in a sense vague and indefinite that the problem of construing them and determining their exact width and scope becomes complex and difficult. The following portion from para 51 of the judgment may be reproduced with advantage. "...........However, in interpreting the provisions of the Constitution we must always bear in mind that the relevant provision 'has to be read not in vacuo but as occurring in a single complex instrument in which one part may throw light on another' (vide James v. Commonwealth of Australia [1936] AC 578 at page 613). In construing article 301 we must, therefore, have regard to the general scheme of our Constitution as well as the particular provisions in regard to taxing laws. The construction of article 301 should not be determined on a purely academic or doctrinaire considerations; in construing the said article we must adopt a realistic approach and bear in mind the essential features of the separation of powers on which our Constitution rests. It is a federal Constitution which we are interpreting, and so the impact of article 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 928, again while dealing with the question relating to free-flow of trade and commerce guaranteed under articles 301 and 304, their Lordships of the Supreme Court held as under: "It is therefore now well-settled that taxing laws can be restrictions on trade, commerce and intercourse, if they hamper the flow of trade and if they are not what can be termed to be compensatory taxes or regulatory measures. Sales tax, of the kind under consideration here, cannot be said to be a measure regulating any trade or a compensatory tax levied for the use of trading facilities. Sales tax, which has the effect of discriminating between goods of one State and goods of another, may affect the free-flow of trade and it will then offend against article 301 and will be valid only if it comes within the terms of article 304(a). Article 304(a) enables the Legislature of a State to make laws affecting trade, commerce and intercourse. It enables the imposition of taxes on goods from other States if similar goods in the State are subjected to similar taxes, so as not to discriminate between the goods manufactured or produced in that State and the goods which are imported from other States. This means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion advanced by the learned counsel for the petitioners may also be recounted. The petitioners' case is that respondents had imposed toll tax at Re. 0.60 kg. and that the imposition and levy of the toll tax at this rate was in lieu of the imposition of sales tax and that, by now issuing the impugned notification, they have subjected goods to double taxation, apart from respondents having gone back on their promises of levying toll tax only and, leaving out the sales tax. The argument is not only self-defeating, but patently erroneous. The toll tax is an entirely and altogether different item of taxation than the General Sales Tax Act. The toll tax is a levy for import or export of goods from toll post, chargeable under the levy of Tolls Act and it has nothing in common with the levy of sales tax under the General Sales Tax Act, which is a tax on sale of goods, totally unconnected with the levy of tolls. It cannot be said that the imposition of the toll tax could be or in fact was in lieu of the levy of sales tax. The argument is without any force and as such is rejected. On both the counts, therefore, I have no hesitation in holding that the petitioners have failed to establis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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