9911796707
TMI Blog1995 (12) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... ver tax introduced as stated above under section 5(2A) levying per cent in the nature of turnover tax on the turnover of goods coming under the First and Fifth Schedules of the Act. It is needless to state that the commodities or goods that are the subject-matter of these petitions are stated to be covered under the above Schedules referred to. 3.. Section 10 empowers the State Government both in regard to exemption and reduction in the matter of taxation. The power to grant such exemption or reduction is exercised by the State Government by the issuance of a notification in the context, if such exemption or reduction is considered necessary in the public interest. 4.. The subject-matter of these petitions is the notification (exhibit P1) issued by the Government of Kerala having considered it necessary in the public interest so to do, to grant an exemption in respect of the turnover tax, referable to section 5(2A)(i)(g) of the Act. The quarrel is not with regard to the exemption granted, but with regard to the exception in regard thereto in the following phrase "except on the turnover relating to goods received on consignment and/or branch transfer". The text of the notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another as may be required in the public interest. In other words as is often said in common parlance, inter-State trade is the subject-matter of the Parliament which can by law impose restrictions in regard thereto, as may be necessary in public interest. This is provided by article 302. 10.. Placing reliance on article 303 it is pointed out that neither the Parliament nor the Legislature of a State can give any preference to one State over the other in the nature of a discrimination between one State and the other, emphasising that in any situation the Parliament would be supreme and cannot be prevented even in regard to a discrimination if it is necessary to do so for the purpose of dealing with a situation due to scarcity of any goods in any particular part of the country. 11.. It is placed for consideration that the situation that is available through articles 301, 302 and 303 would make it abundantly clear that the freedom of trade, commerce and intercourse is recognised by article 301 and it has certain exceptions, firstly in the matter of restrictions that are spoken about in article 302 in the public interest, and secondly recognising the power of the Parliament as Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other. It is submitted that the impugned notification is the worst kind of discrimination when except the goods received on consignment and/or branch transfer, the turnover tax as such introduced by section 5(2A)(i)(g) of the Act gets totally exempted for all others concerned either with regard to the goods manufactured and produced in the State or imported other than the categories in question. It is submitted that discrimination is an element of differentiation between the positive aspects of prices in regard thereto in the matter of taxation. In other words, to understand the submission normally the discrimination would be seen if the rates of taxes with regard to the goods manufactured and produced within the State shows any kind of differentiation in the matter of levy with regard to the goods imported into the State. It is submitted that when the situation that gets displayed by the impugned notification is of such a nature that a tax which is levied according to the statutory provision is exempted by resort to section 10 thereof, with regard to all goods of both the categories making an exceptional situation relating to the goods received on consignment and/or branch trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to levy of turnover tax, with regard to the turnover exceeding Rs. 50 lakhs at the rate of per cent at all points of sales or purchase, the Government had to consider various representations and objections received from the merchant community, on the basis of which a decision to restrict the levy of this turnover tax on the first sale point of goods received on branch transfer or consignment basis only. It means that the issuance of a notification toning down the levy of the turnover tax and restricting it to goods received on consignment and/or branch transfers has its origin in the demand of the merchant community. It also needs to be mentioned, as stated in the counter, that it is true that the dealers who bring goods into this State by inter-State purchase and sale of those goods in the State need not pay turnover tax, making it clear that such dealers may have to pay tax under the Central Sales Tax Act on the goods purchased by them making it clear by continuance of the following statement that levy of turnover tax on their sales within the State will be an additional liability on them. It is further pointed out that the goods manufactured in this State are exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State over another or discrimination between one State and another are definitely calculated to impede the freedom of trade, commerce and intercourse and therefore there is a prohibition both as regards the Parliament and also as against the Legislature of a State from enacting any law giving preference of such a character to one State over the other or any situation of any discrimination between one State and another. This is a guarantee with regard to the flow of inter-State trade, flow of trade from one State to Union Territory, taking necessary care and precaution to avoid discrimination as a result. 20.. In the process after observing that article 304 is a class by itself dealing with the process of taxation by the State in regard to a situation with regard to the goods manufactured and produced within the State in question in comparison with the goods imported into the State in question. The provision empowers reasonable restrictions on the freedom of trade by a State in question within its territory and with regard to the trade with other States. In the context article 304(b) in substance gives power to the State Legislature to do something similar to the power conferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With regard to the discriminatory process of taxation in the matter of lottery tickets of the State of Madras as compared to those of other States, the Supreme Court in [1986] 61 STC 165 (H. Anraj v. Government of Tamil Nadu) did not think otherwise, but to follow the Constitution Bench. It is observed that the purchaser gets right as a result of a sale of lottery tickets to him. It is a right of participation in the draw together with a right to claim a price contingent on the success in the draw as a process. It is observed that the impugned notification granting exemption from the sales tax with regard to the lottery tickets of the State of Tamil Nadu as against those from other States, violative of article 301 and article 301(a) of the Constitution of India could be unavoidable because the situation meted out discriminatory treatment in the matter of levy of sales tax with regard to imported lottery tickets from another State with a consequence of interference with the free-flow of trade, commerce and intercourse. The notification was struck down. It is necessary at this stage to mention that Justice Sabyasachi Mukharji (as he then was) constituted the Bench holding the notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f economic war between the States inter se or economic disintegration of the country as such would not arise if reduction of rate of tax in special cases for achieving industrial development or to provide tax incentive to attain economic equality in growth and development is kept in the background in the matter of granting exemptions on the basis of such factors. In the process of reasoning it is observed that in matters of 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. The learned Government Pleader has taken me through the decision, not disputing that the decision is at tangent with the constitutional judgment of the Supreme Court itself. Careful and cautious perusal of this judgment also reveals that it is nowhere to be seen that in this case the Supreme Court was aware that the decision in Atiabari Tea Co.'s case AIR 1961 SC 232 was the decision of a Constitution Bench of the same court. In fact perusal of the report especially where Atiabari Tea Co.'s case AIR 1961 SC 232 is referred to would be necessary in the context. The observations are at page 99 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te applicable to imported goods as we have read these cases. 29.. In other words it will have to be observed that the Supreme Court in Video Electronics' case [1990] 77 STC 82 was required to make out a special distinguishable case on factual matrix where the exemption to a special class was for a limited period and therefore consequently found out deviation in approach with regard to the one which should be considered as more than established and well-settled. 30.. The learned Government Pleader also laid emphasis on this decision to contend that the notification also would have to be considered having a force for a limited period having been withdrawn by the State Government during the pendency of these petitions. The Government Pleader submitted that in Video Electronics' case [1990] 77 STC 82 (SC) the limited period was already floating on the surface of record where the limited period is a situation which has occurred during the pendency of this petition. The learned Government Pleader therefore submitted that this situation should go up a long way for this Court to appreciate the situation because today the notification has ceased to exist. In my judgment the question is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods manufactured out of locally purchased raw material as against goods manufactured out of imported raw material, the Bench of equal strength of Judges has swayed the pendulum to the original situation inclined with the decision and declaration of law of the Constitution Bench in Atiabari's case AIR 1961 SC 232. It is held that similarity contemplated in article 304(a) of the Constitution is in the nature of quality and kind of goods and not with respect to whether they were already subject to a tax or not and if it is found that at the time of the sale, the finished goods manufactured out of locally purchased raw material are not different from those manufactured out of imported raw material, different in the process of taxation would attract for violation of the provisions of article 304(a) of the Constitution. It needs to be mentioned that the line of reasoning that has a golden thread of continuity from Atiabari's case AIR 1961 SC 232 appears to have been restored, thus the proposition that the Constitution Bench decision in Atiabari's case AIR 1961 SC 232 rules the situation in the matter of violation of the provisions of Part XIII of the Constitution is the rule of the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations, but in the light of the facility of trade in a particular commodity, the market conditions-internal and external-and the likelihood of consumers not being scared away by the price which includes a high rate of tax. 35.. In my judgment considering the two decisions which are also referred to subsequently, the question which is raised in these petitions and falls for consideration and consequent decision is altogether different in character. There is no question of difference in the rate of tax. The impugned notification, as stated hereinbefore, would have to be termed as worse than discriminatory in the sense that except consignments and branch transfer transactions, all others in the relevant incidence of taxation are out of the field getting total exemption as per the provisions of section 10 of the Kerala General Sales Tax Act, 1963. The situation would show that this is not a case of discrimination simpliciter, but a much worse situation of consequence in regard thereto. It will also have to be stated that the contention that this was of a temporary character in regard to its period of enforcement is also not available in the process of bringing the factual matrix ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
