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TMI Blog2003 (4) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... u Acts Nos. 18 of 2002 and 22 of 2002, we state the relevant facts in Original Petitions Nos. 813 and 814 of 2002 as under: The petitioner who is a registered dealer under the Tamil Nadu General Sales Tax Act, 1959 and the Rules made thereunder files return and paying taxes. The petitioner is acting as authorised dealer from the year 1996 onwards to Ford cars. Initially, the petitioners used to effect purchases from Nasik factory of Ford Motors and subsequently, the sales were made by Ford from their Chennai stockyard at Maraimalai Nagar from 1999 onwards. Ford Mondeo cars are not manufactured by Ford India. They, acting on behalf of the petitioners, place orders with Ford Works AG, Belgium, the foreign supplier, who despatch the consignments of Ford Mondeo cars made, for the petitioners from Belgium. As and when the cars are arrived at JNPT Port at Navasheva, Mumbai, Ford clears the goods on behalf of the petitioners and on payment of customs duty despatches them to the petitioners, who pay the freight requirements for the movement. On such importation, the goods become part of the general mass of goods produced and traded within India. As and when the cars enter the State of Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l petitions Nos. 931 of 2002, 959 of 2002 and 1006 of 2002 are filed by dealers in cellular phone, (ii) Original Petition No. 969 of 2002 is filed by dealers in VCD Player and Recorder and LCD Projector, Handy Camera and Computer Monitors, (iii) Original Petition No. 996 of 2001 is filed by dealers in Beauty Equipments (imported goods), (iv) Original Petition No. 1081 of 2002 is filed by dealers in Vinyl flooring and mineral fibre board, G.I. Channel, etc., and are also challenging similar provision of Act No. 18 of 2002. Though the petitioners in O.P. No. 822 of 2002 challenge G.O. Ms. No. 29, C.T., dated March 27, 2002, in substance and reality, they challenge Act No. 18 of 2002. 5.. The petitioners in Original Petition No. 814 of 2002 challenge Act No. 22 of 2002 on the very same grounds. Original Petitions Nos. 814, 816, 818 and 820 of 2002 are filed by dealers of Ford Mondeo cars, (ii) Original Petition No. 902 of 2002 is filed by dealers of Electric cooker and microwave oven, (iii) Original Petitions Nos. 930 of 2002, 958 of 2002 and 1007 of 2002 are filed by dealers of cellular phone, (iv) Original Petition No. 942 of 2002 is filed by dealers in beauty equipments (imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-course among States.-Notwithstanding anything in article 301 or article 303, the Legislature of a State may by law- (a) impose on goods imported from other States (or the Union territories) any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and (b) impose such reasonable restrictions on the freedom of trade, commerce or inter-course with or within that State as may be required in the public interest: Provided that no Bill or amendment for the purpose of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President." The petitioners and the Revenue have relied on a decision of the Supreme Court in Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232 wherein their Lordships of the Supreme Court have held at para 34: "In drafting the relevant articles of Part XIII the makers of the Constitution were fully conscious that economic unity was absolutely essential for the stability and progress of the federal polity which had been adopted by the Constitution for the governance of the countr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estrictions except those which are provided by the other articles in Part XIII. What these restrictions denote may raise a larger issue, but in the present case we will confine our decision to that aspect of the matter which arises from the provisions of the Act under scrutiny. It is hardly necessary to emphasise that in dealing with constitutional questions courts should be slow to embark upon an unnecessarily wide or general enquiry and should confine their decision as far as may be reasonably practicable within the narrow limits of the controversy arising between the parties in the particular case. . The non obstante clause referring to article 301 would go with article 304(a), and that indicates that tax on goods would not have been permissible but for article 304(a) with the non obstante clause. This incidentally helps to determine the scope and width of the freedom guaranteed under article 301; in other words, article 304(a) is another exception to article 301. . There are, however, obvious differences in the powers of the Parliament and State Legislatures. In regard to an Act which the State Legislature intends to pass under article 304(b) no Bill ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of powers between the States and the Union, and if so understood, the concept must recognise the need and the legitimacy of some degree of regulatory control, whether by the Union or the States: This is irrespective of the restrictions imposed by the other articles in Part XIII of the Constitution. That which in reality facilitates trade and commerce is not a restriction, and that which in reality hampers or burdens trade and commerce is a restriction. It is the reality or substance of the matter that has to be determined. It is not possible a priori to draw a dividing line between that which would really be a charge for a facility provided and that which would really be a deterrent to a trade; but the distinction, if it has to be drawn, is real and clear. For the tax to become a prohibited tax it has to be a direct tax the effect of which is to hinder the movement part of trade. So long as tax remains compensatory or regulatory it cannot operate as a hindrance. .......................... The operation of the relevant articles in Part XIII cannot be restricted to legislation in respect of the entries relating to trade and commerce in any of the Lists of Seventh Schedule. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on apart from following the previous decisions reported in AIR 1961 SC 232 (Atiabari Tea Co. Ltd. v. State of Assam). In Synthetics Chemicals Ltd. v. State of U.P. [1991] 80 STC 270 (SC); AIR 1990 SC 1927, the Supreme Court held: " ..sovereign power which gives the States sufficient authority to enact any law subject to the limitations of the Constitution to discharge its functions. Hence, the Indian State as a sovereign State has power to legislate on all branches except to the limitation as to the division of powers between the Centre and the States and also subject to the fundamental rights guaranteed under the Constitution. The Indian State, between the Centre and the States, has sovereign power. The sovereign power is plenary and inherent in every sovereign State to do all things which promote the health, peace, morals, education and good order of the people. Sovereignty is difficult to define. This power of sovereignty is, however, subject to Constitutional limitations. This power, according to some constitutional authorities, is to the public what necessity is to the individual. Right to tax or levy imposts must be in accordance with the provisions of the Constitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtation, the goods enter into the domestic stream and the interest of the customer would be adversely affected, if the imported goods were to be taxed at a higher rate, exceeding the rate at which the goods of similar description manufactured in India is subject. The object of the declaration is to promote the interest of the consumer and to ensure the smooth flow of inter-State trade and commerce." 11.. Basing reliance on this decision, learned counsel for the petitioners have argued that these Ford Mondeo cars or other items imported no longer be termed as imported goods. We do not think that sugar and Ford Mondeo cars and other items concerned in other original petitions can be compared with one another as they are dissimilar in the very character and their physical appearance. Items like Ford Mondeo cars are manufactured by a foreign company and they are being imported into India. Even after such importation, they retain their characteristic feature and maintain their technical excellence. However, sugar is not such a substance which maintains its individual identity when compared with similar sugar manufactured in India or elsewhere. 12.. It was again argued on the side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons would indicate that this legislation was brought in order to compensate loss of revenue by consumers who avoid payment of the sales tax or purchase tax on the vehicle payable in the State by purchasing it in another State where the rate was lesser than the State of Maharashtra and then to bring the vehicle inside the State. The Legislature, therefore, clearly intended to avoid any loss of legitimate sales tax revenue by the State. But the levy cannot be held to be bad because the legislature intended to avoid any loss of sales tax in the State so long it is not found to be invalid either because of any constitutional or statutory violation. It is not the intention or propriety of a legislation but it is legality or illegality which renders it valid or invalid." From the above decision, it is clear that the entry tax levied by the State Legislature is valid. Their Lordships of the Supreme Court have upheld the entry tax levied by the State of Bihar in the said decision. Therefore, the contention raised by the petitioners herein questioning the levy of entry tax by the Tamil Nadu legislature cannot be accepted. 13.. Learned counsel for the petitioners have continued their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dships of the Supreme Court: "The States are free to encourage and promote the establishment and growth of industries within their States by all such means as they think proper, but they cannot, in the process, subject goods imported from other States to a discriminatory rate of taxation, i.e., a higher rate of tax vis-a-vis similar goods manufactured/produced within that State and sold within that State. Prohibition under article 304(a) of the Constitution of India is against discriminatory taxation by the States. It matters not how the discrimination is brought about." This decision deals with discrimination in the taxation in respect of the goods manufactured/produced within the State and the goods brought by inter-State trade or commerce and not goods of foreign origin imported into India. The entire object of Part XIII of the Constitution of India is to rule out the discriminatory taxation between the goods manufactured or produced in one State and similar goods brought from the other States by way of inter-State trade or intra-State trade or commerce. 16. The petitioners have relied on a decision of the Supreme Court in State of Travancore-Cochin v. Shanmugha Vilas Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to create discrimination. Exemption to the locally indigenous manufactured items is with the object to protect the local industries of the country. The levy of tax cannot be considered arbitrary or suffering from the vice of violating of article 14 of the Constitution. The classification is reasonable. If the levy of tax does not affect the movement of the goods then it cannot be considered to be violative of article 301 of the Constitution. As far as raw silk and silk yarn imported from other States is concerned, or even movement in this State, i.e., in the course of inter-State trade or commerce or intra-State or by way of transfer from other State it is equally treated. Imported raw silk and silk yarn have been considered to be a separate category from indigenously manufactured raw silk and silk yarn. There is no notification prohibiting the movement of the goods. The tax which has been levied on the imported material cannot be considered as affecting the freeflow of trade or the guarantee which has been given in the Constitution of India for free movement from one place to other in the same State or in inter-State or commerce. It does not directly and immediately restr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Acts Nos. 18 of 2002 and 22 of 2002, being State Acts, received the assent of the Governor on May 26, 2002 and published in Tamil Nadu Government Gazette Extraordinary No. 365-Part IV-Section 2, dated June 3, 2002, at pages 59 of 97 respectively. Therefore, the validity of those Acts cannot be questioned on the grounds raised by the petitioners herein. While considering the rate of tax, it is seen that the entries covered under Part E of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 are liable to be taxed at 16 per cent; Part F of the First Schedule to the Act are taxed at 18 per cent; Part G of the First Schedule to the Act at 20 per cent; Part H of the First Schedule to the Act at 24 per cent; Part I of the First Schedule to the Act at 20 per cent and Part JJ of the First Schedule to the Act at 50 per cent and Part K of the First Schedule at 70 per cent. Therefore, the Legislature, in its wisdom, has thought fit to levy tax at various rates and the petitioners herein cannot contend that the levy of tax at 20 per cent is exorbitant or not in accordance with law. From the abovesaid discussion, it is clear that Serial No. 8 of Part "G" of the First Schedule i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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