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TMI Blog2001 (7) TMI 1249X X X X Extracts X X X X X X X X Extracts X X X X ..... s: The petitioners are proprietorship concerns or limited companies incorporated under the provisions of the Companies Act, 1956, and they are engaged in the manufacture and sale of poultry feed supplements, medicines, etc. Prior to August 1, 1996 with effect from which date Amendment Act No. 27 of 1996 was brought into force, the petitioners were assessed to tax under entry 80 of the First Schedule to the APGST Act. Before the amendment, this Court and the Supreme Court in number of cases had opined that the poultry feed ingredients/poultry feed supplements are to be treated as poultry feed and as such the rate of tax applicable to both should be the same. In view of this settled position in law, the Commercial Tax Officers in the State of Andhra Pradesh are levying tax on the poultry feed supplements as the item falling under entry 80 of the First Schedule to the APGST Act at the rate of 4 per cent. The State Legislature by amending the APGST Act by Amendment Act No. 27 of 1996 added new entry, entry 80A, and in view of this amendment, the poultry feed supplements which were hitherto subjected to tax at 4 per cent are liable to be taxed at higher rate of 9 per cent. Poultry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue for developmental activities of the State and therefore introduction of new entry 80A is neither discriminatory nor violative of articles 14 and 19(1)(g) of the Constitution. 4.. We heard Sri J.V. Rao, learned counsel for the petitioners and the learned Special Government Pleader for Taxes. Sri J.V. Rao, would strenuously contend that the Supreme Court and this Court in number of cases opined that the poultry feed and the poultry feed supplements constitute as one commodity covered by entry 80 of the First Schedule and therefore both of them are liable to be taxed at the same rate, i.e., at 4 per cent. The learned counsel would submit that the Andhra Pradesh State Legislature to wriggle out of the above well-settled position in law has deliberately introduced entry 80A with a motive to generate more revenue for the State and has made an irrational classification of the same items earlier covered by entry 80 into two entries now, i.e., entry 80 and entry 80A. The learned counsel would contend that as a consequence of the amendment, the poultry feed supplements which were liable to be taxed at 4 per cent before the amendment are liable to be taxed at 9 per cent after the amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hosen to subject the feed supplements differently as regards tax liability and such a course is undoubtedly permissible for any competent Legislature. The sales tax being non-compensatory in nature, the petitioners cannot have any valid grievance simply because the feed supplements are subjected to tax at a higher rate. The learned Special Government Pleader placing reliance on the judgment of the division Bench of this Court in Good Year India Limited v. State of Andhra Pradesh [1995] 97 STC 249; (1994) 19 APSTJ 247 would contend that whatever may be the opinions of the Supreme Court and this Court delivered on the question whether poultry feed includes poultry feed supplements after Amendment Act No. 27 of 1996 with effect from August 1, 1996, the position is altered and those decisions cannot be pressed into service in support of the contention that even after the amendment, feed supplements, nutrients, mineral mixture, vitamins, medicines and any other category of feed supplements which are used in poultry feed, fish feed and prawn feed and feed for livestock should be treated as integral part and component of poultry feed and cattle feed and therefore they should be taxed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 14 if there is no reasonable basis behind the classification made by the Legislature. However, if the taxation, generally speaking, imposes a similar burden on every one with reference to a particular kind and extent of property, on the same basis of taxation, the law shall not be open to attack on the ground that the result of the taxation is to impose unequal burdens on different persons. There is no violation of article 14 if there is a reasonable basis for the classification. 8.. A power conferred on the Legislature to levy tax must be widely construed. It must include the power to impose a tax and select the articles or commodities for the exercise of such power; it must likewise include the power to fix the rate and prescribe the machinery for the recovery of tax including provisions necessary to prevent evasion of tax. The Legislature can also appoint authorities for collecting taxes and may prescribe the procedure for determining the amount of taxes payable by any person. All these provisions are subsidiary to the main power to levy a tax. Nevertheless, all this is subject to the Constitutional limitations as pointed out supra. Therefore, it becomes necessary that eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has decided to tax certain articles and no others. The freedom of the Legislature is conceded not only in the choice of the articles to be taxed but also as regards the manner and rate of taxation, i.e., to prescribe different rates for different categories of goods, persons and transactions, as held by the Supreme Court in Twyford Tea Co. Ltd. v. State of Kerala AIR 1970 SC 1133. It is also well-settled that the court would be slow to interfere with the legislative discretion in the matter of choice of persons, transactions or objects or different rates, even if no reasons are disclosed for such choice, unless it is shown to be capricious or whimsical, in the circumstances of the case. Now in the premise of the abovenoted well-settled principles governing the challenge to constitutional validity of taxation law, let us consider the contentions raised by the learned counsel for the petitioners. 9.. Entries 80 and 80A of the First Schedule to the APGST Act read: "80. Poultry feed and cattle feed. 80A. Feed supplements, nutrients, mineral mixture, vitamins, medicines and any other category of feed supplements which are used in poultry feed, fish feed, prawn feed and feed for li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no enactment can be struck down by just saying that it is arbitrary or unreasonable. The Supreme Court in State of Andhra Pradesh v. McDowell Co. AIR 1996 SC 1627; (1996) 3 SCC 709 in para 43 has observed: "...........No court in the United Kingdom can strike down an Act made by the Parliament on any ground. As against this, the United States of America has a Federal Constitution where the power of the Congress and the State Legislatures to make laws is limited in two ways, viz., the division of legislative powers between the States and the Federal Government and the fundamental rights (Bill of Rights) incorporated in the Constitution. In India, the position is similar to the United States of America. The power of the Parliament or for that matter, the State Legislatures is restricted in two ways. A law made by the Parliament or the Legislatures can be struck down by courts on two grounds and two grounds alone, viz., (1) lack of legislative competence and (2) violation of any of the fundamental rights guaranteed in Part III of the Constitution or of any other constitutional provision. There is no third ground. We do not wish to enter into a discussion of the concepts of proced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 720]. It would be rather odd if an enactment were to be struck down by applying the said principle when its applicability even in administrative law sphere is not fully and finally settled. It is one thing to say that a restriction imposed upon a fundamental right can be struck down if it is disproportionate, excessive or unreasonable and quite another thing to say that the court can strike down enactment if it thinks it unreasonable, unnecessary or unwarranted." 12.. In S. Bharat Kumar v. Government of Andhra Pradesh 2000 (6) ALD 217 a division Bench of this Court speaking through one of us (S.R. Nayak, J), has observed in para 27 as follows: "27. It is trite law that mandamus is the proper relief to be asked for where the petitioner seeks a declaration that an 'Act' or 'Ordinance' is unconstitutional and a consequential direction restraining the State and its officers or the concerned statutory authorities, as the case may be, from interfering or giving effect to the provisions of such unconstitutional law. It is also trite law that the presumption is always in favour of the constitutionality of an enactment, and the burden is upon him who attacks it to show that there has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further observed as under: "Although non-arbitrariness, reasonableness and fairness are postulates of article 14 of the Constitution, when an enactment is sought to be struck down on the ground of arbitrariness and unreasonableness, the reviewing court should find some or other constitutional infirmity in addition to those grounds before invalidating the enactment. An enactment cannot be struck down merely on the ground that the court thinks it is unjustified and unwise. This position is fairly well-settled by the decision of the Supreme Court in State of Andhra Pradesh v. McDowell Co. AIR 1996 SC 1627 at 1637. It is not open to a court to declare an enactment unconstitutional and void solely on the ground of unwise and harsh provisions or that it is supposed to violate some of the perceived natural, social, economic or political rights of the citizen, unless it can be shown with satisfactory proof that such injustice is in fact prohibited or such rights guaranteed or protected by the Constitution." 14.. The court has further held in para 40 as follows: "...It is true that it will become the duty of the Constitutional courts under our Constitution to declare a law enacted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution nor are the courts at liberty to declare an enactment unconstitutional, because in their opinion it is opposed to a spirit supposed to pervade the Constitution, but not expressed in words or discernible from the context. It is not permissible to limit the legislative power of the Legislatures by judicial interposition, except so far as the expressed words a written Constitution gives that authority to the court. In 'A Treatise on the Constitutional Limitations' by Thomas M. Cooley, it is aptly stated that the law-making power of the State recognises no restraints, and is bound by none except such as or imposed by the Constitution itself placing reliance on the opinion handed down in Sill v. Village of Corning 15 NY 303. The abovenoted well recognised principles and propositions fully answer many of the aspects of the second contention urged before us by the learned counsel for the petitioners." 15.. It is relevant to note that in the field of taxation, the courts have permitted the Legislature to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qual protection on the ground that the law does not apply to other persons. However, in order to pass the test of permissible classification, two conditions must be fulfilled, viz., (i) that the classification must be founded on an intelligible differential which distinguishes persons or things that are grouped together from others left out of the group and (ii) that, that differential must have a rational relation to the object sought to be achieved by the statute in question. In the counter-affidavit filed on behalf of the State, it is stated that the items included in entry 80 and feed supplements and other items included in entry 80A are added in appropriate quantities in different ratios depending upon the stages of life of birds or other livestock. It is also stated that new entry 80A has been incorporated by way of amendment with objective to get more revenue for developmental activities of the State. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration as held by the apex Court in Kedar Nath Bajoria v. State of West Bengal AIR 1953 SC 404; [1954] SCR 30; 1954 Crl. LJ 1679, P.B. Roy v. Union of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inatory and violative of article 14. The Supreme Court in Sociedade De Fomento Industrial Pvt. Ltd. v. Mormugao Dock Labour Board (1995) Supp 1 SCC 534 has opined that no economic measure has yet been devised which is free from discriminatory impact and that in such a complex arena in which no perfect alternatives exist, the court does well not to impose too rigorous a standard of criticism, under the equal protection clause, while reviewing fiscal matters. 17.. Article 14 guarantees right of equality before the law and equal protection thereunder. The content and reach of article 14 today is no more confined to "classification". The Supreme Court in E.P. Royappa v. State of Tamil Nadu AIR 1974 SC 555; (1974) 4 SCC 3 has observed: "Equality is a dynamic concept with many aspects and dimensions and it cannot be 'cribbed, cabined and confined' within traditional and doctrinaire limits. From a positivistic point of view, equality is antithetic to arbitrariness. In fact equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an Act is arbitrary, it is implicit in it that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ya Vaidya Pharmacy v. State of Tamil Nadu [1989] 73 STC 346; AIR 1989 SC 1230; (1989) 8 APSTJ 179 (SC), State of Andhra Pradesh v. Blue Cross Farms [1995] 97 STC Frsc 6, Cooch Behar Contractors' Association v. State of West Bengal [1996] 103 STC 477, Chiranjit Lal Anand v. State of Assam [1985] 60 STC 89, and a judgment of this Court in Navodaya Traders v. Commissioner, Commercial Taxes [1998] 111 STC 125, in support of his contention. In our considered opinion, none of these authorities would in any way support or advance the contention of the learned counsel. In Arya Vaidya Pharmacy v. State of Tamil Nadu [1989] 73 STC 346; AIR 1989 SC 1230; (1989) 8 APSTJ 179 (SC), the Supreme Court held that arishtams and asavas (ayurvedic medicines containing alcohol) are medicinal preparations and even though they contain a high alcohol content, so long as they continue to be identified as medicinal preparations they must be treated, for the purposes of the Sales Tax Law, in like manner as medicinal preparations generally, including those containing a lower percentage of alcohol and that levy of higher rate of sales tax on these two ayurvedic medicinal preparations on ground that they contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods involved in the execution of a works contract at a uniform rate which may be different from the rates applicable to individual goods because the goods which are involved in the execution of the works contract when incorporated in the works can be classified into a separate category for the purpose of imposing the tax and a uniform rate may be prescribed for sale of such goods." 22.. The above observation of the Supreme Court is, in fact, against the petitioners. From the observation of the Supreme Court that a uniform rate of tax may be applied to all the goods which are involved in the execution of the works contract, it cannot be said that the State Legislature lacks legislative competence to tax differently the goods involved in the execution of the works contract. In that case, the Legislature in its wisdom has chosen to tax similarly all the goods involved in the execution of the works contract. As an analogy, what could be culled out from the above observation of the Supreme Court is that, it is equally permissible for the State Legislature to tax the goods involved in the execution of the works contract at different rates also. We need not dilate this aspect further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Ltd. [1989] 74 STC 47. On behalf of the Commercial Tax Department, it was contended that the said judgment of Division Bench has no application after entry 101 was inserted in the First Schedule under which transmission beltings are one of the specified items exigible to tax at the point of first sale in the State. The division Bench, after referring to entry 101 of the First Schedule and entry 5 of the Fourth Schedule and the earlier Bench decision in State of A.P. v. Goodyear India Ltd. [1989] 74 STC 47 (AP), held as under: "That case pertained to the assessment year 1975-76 when entry 101 of Schedule I was not in statute book. After entry 101 was inserted in Schedule I the position has changed. The transmission beltings are one of the items specifically covered by entry 101 of Schedule I and so exigible to tax at the prescribed rate at the point of first sale in the State. It is settled law [vide State of Gujarat v. Patel Ramjibhai Danabhai [1979] 44 STC 137 (SC); (1979) 3 SCC 347] that when there is a conflict between special provision and general provision the special provision prevails. The law as laid down by this Court in State of Andhra Pradesh v. Goodyear India Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, in respect to the subject-matter of the Act, the manner in which its object is to be accomplished, and the mode of enacting it, has kept within the constitutional limits and observed the constitutional conditions. If so, the courts are not at liberty to inquire into the proper exercise of the power in any case. They must assume that legislative discretion has been properly exercised. If evidence was required, it must be supposed that it was before the Legislature when the Act was passed; and if any special finding was required to warrant the passage of the particular Act, it would seem that the passage of the Act itself might be held equivalent to such finding. And although it has sometimes been urged at the Bar, that the courts ought to inquire into the motives of the Legislature where fraud and corruption were alleged, and annul their action if the allegation were established, the argument has in no case been acceded to by the judiciary, and they have never allowed the inquiry to be entered upon." 27.. The judgments of the Supreme Court in Mohan Lal Tripati v. District Magistrate, Rae Bareilly AIR 1993 SC 2042 and in State of Himachal Pradesh v. Kailash Chand Mahajan AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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