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TMI Blog2015 (9) TMI 1438X X X X Extracts X X X X X X X X Extracts X X X X ..... ble range, by a taxing statute does not transgress the fundamental principles underlying the doctrine of equality and it would not be vulnerable to attack on the ground of discrimination merely because it taxes or exempts from tax some incomes or objects and not others. It could be seen that State legislature in its economic wisdom of taxation has chosen to provide for levy of tax on liquor sold by certain dealers namely, Bar and Restaurants operating in urban areas i.e., licence issued in Form No.CL-9 and in respect of Star Hotels, Clubs and Hotel, Boarding Houses and Lodges located anywhere in the State considering the potential for tax collection being huge, and at the same time, exemption has been extended to similar licence holders running Bar and Restaurants by operating them in rural areas considering the fact of low value addition between the price at which liquor is purchased and sold to customers in rural areas. However, a Hotel, Boarding House or Lodge holding licence in CL-7 though located in rural area would also serve liquor only to the residents of the Hotel and their guests who are elite customers and they can afford to pay more for the comfort they enjoy with varyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Karnataka Sales Tax Rules and even after KVAT Act coming into force, all the dealers in various categories through out the State enjoyed exemption from levy of VAT and in order to merge Sales Tax with duty, amendment to Karnataka Excise (Excise Duties and Fees) Rules, 1968 was brought whereunder additional duty was levied on Liquor, Fenny, Wine and Beer and imposition of sales tax was given up. On account of Rule 2AE and 2AF being added to the original Karnataka Excise (Excise Duty and Fee) Rules, 1968, sales tax was merged with additional excise duty and thereby uniform levy of all kinds of licences within the State of Karnataka being brought about has been now thwarted by deleting Entry in Sl.No.34 of I Schedule of KVAT Act and inserting Entry No.59A in III Schedule by levying tax at the rate of 5.5% and at the same time, correspondingly issuing notification dated 28.02.2014 under Section 5(1) of the Act exempting all categories of dealers other than person holding licence in Form No.CL-9 for vending Liquor in the Bruhat Bengaluru Mahanagara Palike area, City Municipal Corporation areas and Town Municipal Council or Town Panchayat areas issued under Karnataka Excise (Sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014. In support of their submission, they have relied upon the following judgments: (1) AIR 1963 SC 98 ORIENT WEAVING MILLS (P) LTD. AND ANOTHER vs UNION OF INDIA AND OTHERS (2) ILR 1999 KAR 1814 BASAVARAJ NAGOOR vs STATE OF KARNATAKA AND ANOTHER (3) ILR 2000 KAR 870 STATE OF KARNATAKA AND OTHERS vs BASAVARAJ NAGOOR AND OTHERS (4) AIR 1962 SC 1733 M/S.EAST INDIA TOBACCO CO. ETC. vs STATE OF ANDHRA PRADESH AND ANOTHER (5) AIR 1991 SC 1722 STATE OF MAHARASHTRA AND ANOTHER vs RAMESH NARAYAN PATIL (6) (1997)11 SCC 179 CHOKSI TUBE COMPANY LTD vs UNION OF INDIA AND OTHERS (7) (1981)2 SCC 410 VISHNUDAS HUNDUMAL AND OTHERS vs STATE OF MADHYA PRADESH AND OTHERS (8) AIR 1952 SC 75 THE STATE OF WEST BENGAL vs ANWAR ALI SARKAR AND ANOTHER (9) (1969)2 SCC 710 THE STATE OF RAJASTHAN AND ANOTHER vs M/S.GHASIRAM MANGILAL ETC. (10) (2007)10 SCC 342 STATE OF UTTAR PRADESH AND OTHERS vs DEEPAK FERTILIZERS AND PETROCHEMICAL CORPORATION LTD. (11) (2013)8 SCC 519 STATE OF MAHARASHTRA AND ANOTHER vs INDIAN HOTEL AND RESTAURANTS ASSOCIATION AND OTHERS (12) (2007)6 SCC 317 GUPTA MODERN BREWERIES vs STATE OF J & K AND OTHERS (13) 2006 (4) Kar.L.J 700 THE KARNATAKA BANK LIMITED, MANGALORE AND ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UTICALS LTD AND OTHERS vs STATE OF BIHAR AND OTHERS (5) (1976)1 SCC 916 INCOME TAX OFFICER, SHILLONG AND OTHERS vs R.TAKIN ROY RYMBAI AND OTHERS (6) (1969)1 SCC 681 N.VENUGOPALA RAVI VARMA RAJAH vs UNION OF INDIA AND ANOTHER (7) (1990)4 SCC 366 SHASHIKANT LAXMAN KALE AND ANOTHER vs UNION OF INDIA AND ANOTHER (8) (1989) SUPP (1) SCC 696 P.M.ASWATHANARAYANA SETTY AND OTHERS vs STATE OF KARNATAKA AND OTHERS (9) (1989)3 SCC 634 FEDERATION OF HOTEL AND RESTAURANT ASSOCIATION OF INDIA ETC. vs UNION OF INDIA AND OTHERS (10) (1978)2 SCC 1 PATHUMMA AND OTHERS vs STATE OF KERALA AND OTHERS (11) (1980)4 SCC 697 STATE OF KARNATAKA AND ANOTHER vs M/S.HANSA CORPORATION (12) (1996)10 SCC 304 KHODAY DISTILLERIES LTD. AND OTHERS vs STATE OF KARNATAKA AND OTHERS (13) AIR 1962 SC 955 KEDAR NATH SINGH vs STATE OF BIHAR (14) W.P.No.21792/2013 (DD 17.06.2013) S.P.SWAMINATHAN vs THE JOINT COMMISSIONER FOR TRANSPORT AND SECRETARY 5. Having heard the learned Advocates appearing for the parties and on perusal of the pleadings as well as the case laws cited at the Bar, this Court is of the considered view that following point would arise for consideration: "Whether clause (8) and (9) of the Karna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect to the proposals made in the Budget particularly to provide for levy of tax on sale of liquor including beer, fenny, liqueur and wine by bar and restaurants operating in urban areas and by clubs, lodging houses and star hotels, and matters connected therewith. Hence, the Bill." 8. Pursuant to said amendment, Notification - II bearing No.FD 21 CSL 2014 dated 28.02.2014 came to be issued by the State in exercise of its power under Section 5(1) of the KVAT Act, whereunder the liquor sold by Bars and Restaurants operating in Panchayat limits/rural areas are exempted from levy of tax which is impugned in these writ petitions. PREFACE: 9. At the outset it requires to be noticed that the citizen of the State has no fundamental right to trade or conduct business in liquor as beverage is considered to be an article which is extra commercium - Outside commerce and for this proposition, the law laid down by Hon'ble Apex Court in the case of KHODAY DISTILLERIES LIMITED & OTHERS vs STATE OF KARNATAKA reported in (1995)1 SCC 574 can be looked up. 10. Thus, keeping in mind the dicta laid down by Apex Court in mind, it can be safely concluded that State can place restrictions and limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 and NVR VARMA RAJAH vs UNION OF INDIA reported in AIR (1969)1 SCC 681 can be looked up. 13. A fiscal statute has to be strictly construed and nothing can be read into the provision and nothing can be implied and it would not be the endeavour of the Court to ascertain the intendment of the Legislature. It has been held by the Apex Court in the case of RANBAXY LABORATORIES LIMITED vs UNION OF INDIA reported in (2011)10 SCC 292 to the said effect and same reads as under: "14. It is a well-settled proposition of law that a fiscal legislation has to be construed strictly and one has to look merely at what is said in the relevant provision; there is nothing to be read in; nothing to be implied and there is no rule for any intendment. (see Cape Brandy Syndicate vs. IRC and Ajmera Housing Corporation vs. CIT)" 14. Keeping these principles in mind, the impugned legislation and the consequential exemption notification issued are required to be examined. Hence, it would be necessary to extract the relevant provisions of the KVAT Act and the erstwhile KST Act by way of comparison namely, Section 5 and 8-A of the said Acts respectively. They are as under: KVAT ACT, 2003 KST ACT, 1957 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in rate in respect of any tax payable under the said Act on the sale or purchase of any specified goods or class of goods or by any specified class of persons or on the sale or purchase of any specified goods by any specified class of dealers. Thus, under both the Acts, the specified goods or class of goods can be exempted from tax and Section 5(1) of the KVAT Act would indicate that such exemption would be subject to such restrictions and conditions as may be specified in the notification. 16. In the background of discussion made herein above, when the impugned notification is perused, it would indicate that it exempts tax payable on "sale of liquor" and it does not exempt the dealer as such. However, where such dealer of certain identified categories sells the liquor, such dealer would not be required to collect the tax as in case of other dealers they are required to do so. 17. A conjoint reading of Section 5(1) of the KVAT Act, Section 8A(1)(c) of KST Act, 1957 and the impugned notification dated 28.02.2014 would clearly indicate that under Section 8A(1)(c) of KST Act, State had power to notify exemption and reduction of tax in respect of any specified class of goods by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isable goods which are produced or manufactured - (i) In a free trade zone or a special economic zone and brought to any other place in India; or (ii) by a hundred per cent export- oriented undertaking and brought to any other place in India." (emphasis supplied) In exercise of such power conferred, Government of India has exempted excise duty payable by class of persons. 19. The Hon'ble Apex Court in the case of ORIENT WEAVING MILLS PVT LTD & ANOTHER vs UNION OF INDIA AND OTHERS reported in AIR 1963 SC 98 was examining the constitutional validity of Rule 8(1) of Central Excise Rules, 1944 as to whether it suffers from the vice of excessive delegation of power to exempt or not. Rule 8(1) of Central Excise Rules, 1944 reads thus: "8. Power to authorise exemption from duty in special cases: (1) The Central Government may from time to time, by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of the duty leviable on such goods." (emphasis supplied) In pursuance to the powers conferred under sub-rule (1) of Rule 8, notifications came to be issued vide notification No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as notification is not ultra vires and is within the State's power under Section 5(1) of the Act. RE: DISCRIMINATION: 21. The thrust of the arguments advanced by the learned Advocates appearing for the petitioners has been that impugned notification unreasonably discriminates between the dealers in liquor carrying on business selectively since a person holding licence in Form CL-9 carrying on business in village panchayat areas is exempted but it does not exempt a similar licence holder carrying on similar business in the same area and as such, there is no rationale and it amounts to discrimination and impedes free flow of trade and commerce and such levy is violative of Articles 14, 19 and 304-B of the Constitution of India. 22. There cannot be any dispute to the proposition that a legislation can be challenged on the grounds of:- (i) lack of legislative competence to make subordinate legislation; (ii) violation of fundamental rights; (iii) violation of any provisions of the Constitution of India; (iv) failure to conform to statute under which it is made or exceeding the limits of authority conferred by the enabling Act; (v) repugnancy to the laws of the land i.e, any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale price not exceeding the MRP indicated on the label of the container or bottle. However, such restriction is not imposed on Bars and Restaurants, Clubs, Star Hotels, Hotel, Boarding Houses and Lodges and this enables them to fix the sale price of the liquor being sold to the customers depending upon the varying degree of facilities provided by them to the customers. 28. The Legislature has inserted Entry 59A in the III Schedule to KVAT Act and has chosen to provide for levy of tax on liquor sold by certain licence holders. Notification - II bearing No.FD 21 CSL 2014 dated 28.02.2014 was issued granting exemption to liquor dealers holding licence to Form CL- 9 operating in Panchayat limits/Rural areas and liquor dealers holding licence in Form CL-2 or any other licence and has the effect of levying tax on liquor sold by dealers holding licence in Form CL-9 and operating in urban areas, licence in Form CL-4, Form CL-6A, Form CL-7. Thus it has to be examined as to whether exempted class can be considered as a separate class. 29. Article 14 of the Constitution of India forbids class discrimination by conferring privileges or imposing liabilities upon person arbitrarily selected o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded in the exemption list, whereas it is a matter of fact that the NPK 23:23:0 fertilizer is also a fertilizer of the same category, but it is omitted from the list. According to the notification dated 2-11-1994, the intention of the State was not to tax the sale of "potassium phosphatic fertilizers" but when we go into enquiry of nomenclature of these chemical compounds, we find that the NPK 23:23:0 is a "nitro-phosphate fertilizer" which has no potassium (K) ingredient. The Notifications dated 10-4- 1995 and 15-5-1995 clearly include NPK 20:20:0, which is also a nitro-phosphate fertilizer with zero content of potassium (K). This classification made under the notification dated 10-4-1995 does not hold good on the rational basis and is hence subject to scrutiny. The fact remains stagnant that the notifications include a fertilizer NPK 20:20:0 which is of the same category as that of fertilizer NPK 23:23:0, because both are nitro-phosphate fertilizers. This shows that the State has not classified the two commodities on a rational basis for the purpose of imposing tax. This court in the case of Tata Motors Ltd. v. State of Maharashtra and Ors. [(2004) 5 SCC 783] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given exemption from taxation whereas all other NPK fertilizers of the same category like that of NPK 20:20:0 are provided with the exemption from taxation." 32. It is also well settled law that certain latitude for classification in a taxing statute is extended to the Legislature with a wider note. Classification necessarily implies the making of a distinction or discrimination between the persons so classified and those who are not members of that class. In other words, it is the essence of a classification that upon the class or cast duties or burden different from those resting upon the general public. 33. The State will decide what economic and social policy it requires to pursue. The Courts give a larger discretion to the legislature in the matter of its preferences of economic and social policies and effectuate the chosen system in all possible and reasonable ways. Thus, if a legislation or the subordinate legislation would pass the test of reasonable classification namely, one which includes all who are similarly situated and none who are not, then it would pass the test of arbitrariness. In order to ascertain whether persons are similarly placed, one must look beyond the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Again tax laws are aimed at dealing with complex problems of infinite variety necessitating adjustment of several disparate elements. The Courts accordingly admit, subject to adherence to the fundamental principles of the doctrine of equality, a larger play to legislative discretion in the matter of classification. The power to classify may be exercised so as to adjust the system of taxation in all proper and reasonable ways the Legislature may select persons, properties, transactions :and objects; and apply different methods and even rates of tax, if the ,Legislature does so reasonably. Protection of the equality clause does not predicate a mathematically precise or logically complete or symmetrical classification : it is not a condition of the guarantee of equal protection that all transactions, properties, objects or persons of the same genus must be affected by it or none at all. If the classification is rational, the Legislature is free to choose objects of taxation, impose different rates, exempt classes of property from taxation, subject different classes of property to tax in different ways and adopt different modes of assessment. A taxing statute may contravene Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation. But the mere fact that the law could have been extended to another class of persons who have certain characteristics similar to a section of the Hindus but have not been so included is not a ground for striking down the law. In treating a Hindu Undivided Family as a unit of taxation under the Expenditure-tax Act and not a Non-Hindu Undivided Family, the Parliament has not attempted an "obvious inequality"". (ii) In the case of SHASHIKANT LAXMAN KALE AND ANOTHER vs UNION OF INDIA AND ANOTHER reported in (1990)4 SCC 366, Apex Court has held that Court must look beyond ostensible classification and to the purpose of the law and apply the test of 'palpable arbitrariness' in the context of the felt needs of the times and societal exigencies informed by experience to determine reasonableness of the classification. Apex Court while upholding the constitutional validity of Section 10-C of Income Tax Act, 1961 has held as under: "8. The main question for decision is the discrimination alleged by the petitioners. The principles of valid classification are long settled by a catena of decisions of this Court but their application to a given case is quite often a vexed qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to say, it must not only be based on some qualities or characteristics which are to be found in all the persons grouped together and not in others who are left out but those qualities or characteristics must have a reasonable relation to the object of the legislation. In order to pass the test, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others and (2) that differentia must have a rational relation to the object sought to be achieved by the Act. (8) The differentia which is the basis of the classification and the object of the Act are distinct things and what is necessary is that there must be a nexus between them. In short, while Article 14 forbids class discrimination by conferring privileges or imposing liabilities upon person arbitrarily selected out of a large number of other persons similarly situated in relation to the privileges sought to be conferred or the liabilities proposed to be imposed, it does not forbid classification for the purpose of legislation, provided such classification is not arbitrary in the sense above mentioned. * * * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicability of Article 14 of the Constitution of India. In this connection, Mr. Krishnamoorthy Iyer submitted in the first place, that the special treatment afforded to the debtors under Section 20 of the Act is wholly discriminatory and is violative of Article 14. Secondly, it was argued on behalf of the appellants in Civil Appeal No. 420 of 1973 that they being stranger auction-purchasers were selected for hostile discrimination as against a bonafide alienee who has been given complete exemption from the operation of the provisions of the Act. It is now well settled that what Article 14 forbids is hostile discrimination and not reasonable classification. Equality before law does not mean that the same set of law should apply to all persons under every circumstance ignoring differences and. disparities between men and things. A reasonable classification is inherent in the very concept of equality, because all persons living on this earth are not alike and have different problems. Some may be wealthy; some may be poor; some may be educated; some may be uneducated; some may be highly advanced and others may be economically backward. It is for the State to make a reasonable cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts by this Court as also of the various High Courts that Article 14 permits reasonable classification. But what Article 14 or Article 16 forbid is hostile discrimination and not reasonable classification. In other words, the idea of classification is implicit in the concept of equality because equality means equality to all and not merely to the advanced and educated sections of the society. It follows, therefore, that in order to provide equality of opportunity to all citizens of our country, every class of citizens must have a sense of equal participation in building up an egalitarian society, where there, is peace and plenty, where there is complete economic freedom and there is no pestilence or poverty, no discrimination and oppression, where there is equal opportunity to education, to work, to earn their livelihood so that the goal of social justice is achieved". 36. Apex Court in the case of STATE OF KARNATAKA AND ANOTHER vs M/S.HANSA CORPORATION reported in (1980)4 SCC 697 was examining as to whether classification legislation based on population criteria for the purpose of levy of tax i.e., 'rural' and 'urban' would amount to hostile discrimination and thereby attra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and then he must supplement the written word so as to give "force and life" to the intention of the legislature. That was clearly laid down (3 Co Rep 7b) by the resolution of the judges (Sir Roger Manwood, C.B., and the other barons of the Exchequer) in Heydon's case (1584) 3 Co. Rep. 7a, and it is the safest guide today. Good practical advice on the subject was given about the same time by Plowden in his note (2 Plowd. 465) to Eyston v. Studd (1574), 2 Plowd. 463. Put into homely metaphor it is this: A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out ? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases". This view was re-affirmed in Norman v. Norman (1950) 1 All ER 1082. 16. Let it be remembered that the impugned measure is a taxing statute and in the matter of taxing statute the legislature enjoys a larger discretion in the matter of classification so long as it adheres to the fundamental principle underlying the doctrine of classification. The power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto three groups, A, B and C for selecting rates to be levied on different scheduled goods. A mere glance at the local areas selected and those according to the petitioner excluded, viz., areas within the jurisdiction of various Gram Panchayats would bring in bold relief that population criterion appears to have been adopted in selecting local areas for levy of tax. Does population criterion provide a reasonable basis for classification vis-a-vis a tax levied on entry of goods in the area ? It would be undeniable that population basis would provide a reasonable criterion for selecting local areas for the purpose of levy tax simultaneously excluding those which do not answer the population criterion. One unquestionable element scientifically established about a taxing statute is that the yield from the tax must be sufficiently in excess of cost of collection so that the tax which is levied for augmenting public finances to be utilised for public good would be productive. Where the cost of administrative machinery required to be set up for collecting tax is either marginally lower or equal or marginally higher than the yield from the tax, the measure would be uneconomic if not counte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further curtailment of the State's power of taxation. 39. The classification of dealers for the purpose of levy of tax and granting exemption on the basis of turnover is held to be not hit by Article 14 of the Constitution by the Division Bench of this Court in the case of SHANTILAL & BROTHERS vs STATE OF KARNATAKA AND ANOTHER reported in (1985)59 STC 178 while upholding the constitutional validity of Section 6-B(i) of Karnataka Sales Tax Act, 1957 which provided for levy of one-half percent of "turnover tax" on every dealer whose turnover in a year exceeded ` 1 lakh and it came to be held that such classification does not bring in hostile discrimination against any class of dealers or an unreasonable restriction on the freedom of trade guaranteed to citizens and is not violative of rights guaranteed under Article 14 and 19(1)(g) of the Constitution of India. 40. KVAT Act has been enacted by the State Legislature under Entry 54 of List II of VII Schedule to the Constitution of India which provides for levy of tax on sale or purchase of goods in the State and said enactment is in force with effect from 1st April, 2005, on all commodities except Petrol, Aviation Turbine Fuel, Dies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Constitution, and has to pass like any other law, the equality test of that article, it must be remembered that the State has, in view of the intrinsic complexity of fiscal adjustments of diverse elements, a considerably wide discretion in the matter of classification for taxation purposes. Given legislative competence, the legislature has ample freedom to select and classify persons, districts, goods, properties, incomes and objects which it would tax, and which it would not tax. So long as the classification made within this wide and flexible range by a taxing statute does not transgress the fundamental principles underlying the doctrine of equality, it is not vulnerable on the ground of discrimination merely because it taxes or exempts from tax some incomes or objects and not others. Nor the mere fact that a tax falls more heavily on some in the same category, is by itself a ground to render the law invalid. It is only when within the range of its selection, the law operates unequally and cannot be justified on the basis of a valid classification, that there would be a violation of Article 14. (See East India Tobacco Co. v. State of Andhra Pradesh (AIR 1962 SC 1733)); Vivian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income, both were similarly situated 36. We are not persuaded to accept Mr.Lahiri's argument that the making of the exemption conditional upon the classification envisaged by sub-clause (a) would deter the members of the scheduled tribes from joining the mainstream of national life, or, would be inconsistent with the directive principle of State policy for promotion of educational and economic interests of the weaker sections of the people, particularly the scheduled castes and scheduled tribes. Its primary objective is to provide protection to the "weaker sections" of the society. Members of the scheduled tribes who are enterprising and resourceful enough to move out of the seclusion of the tribal areas and successfully compete with their Indian brethren outside those areas and rise to remunerative positions in service or business, cease to be "weaker sections". In any case, the State is the best judge to formulate its policies and to decide how far and for what period and in what situations, the members of a particular scheduled tribe residing in a particular tribal area, should be afforded the protection and benefit in the matter of promotion of their educational and econo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned Act. It was strongly contended on behalf of the petitioners that the prescription of different rates of additional sales tax depending upon the quantum of turnover of the different assessees is totally repugnant to the concept of levy of tax on sales. Another argument advanced by counsel for the petitioners was that since under the amended provisions of Section 2, two dealers selling the same commodity will be liable to pay additional tax at different rates depending upon their respective annual turnovers, there is a clear violation of Article 14 of the Constitution as dissimilar treatment is meted out to persons similarly situated. A further contention urged on behalf of the petitioners was that the levy in its present form is really a tax on 'gross income' and not a tax on 'sales' and hence it is ultra vires the State Legislature as it has no competence to levy a tax on income other than agriculture income. Another ground of attack pressed by Counsel was that the levy of additional sales tax under the impugned Act is confiscatory in nature, that it imposes unreasonable restrictions on the petitioner's right to carry on business and offends Article 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon transfers at death, so also in imposts upon business, the little man, by reason of inferior capacity to pay, should bear a lighter load of taxes, relatively as well as absolutely, than is borne by the big one. The flat rate is thought to be less efficient than the graded one as an instrument of social justice. The large dealer occupies a position of economic superiority by reason of his greater volume of his business. And to make his tax heavier, both absolutely and relatively, is not arbitrary discrimination, but an attempt to proportion the payment to capacity to pay and thus to arrive in the end at a more genuine equality. The economic wisdom of a tax is within the exclusive province of the legislature. The only question for the court to consider is whether there is rationality in the belief the legislature that capacity to pay the tax increases, by and large, with an increase of receipts. "Certain it is that merchants have faith in such a correspondence and act upon that faith…… If experience did not teach that economic advantage goes along with larger sales, there would be an end to the hot pursuit for wide and wider markets .....In brief, there is a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned notification where liquor is sold to the customers or served in loose quantities with food articles in the licenced premises as stipulated in the conditions of the licence. The CL-9 holder licences provide the facilities of varying degrees of comforts to different class of elite customers and as such, they would have the advantage of fixing the sale price with value addition without any restriction. It is in this background, as already noticed herein above, from the statement of objects and reasons, levy of tax on sale of liquor including Beer, Fenny, Liqueur and Wine came to be introduced. Thus, it could be seen that State legislature in its economic wisdom of taxation has chosen to provide for levy of tax on liquor sold by certain dealers namely, Bar and Restaurants operating in urban areas i.e., licence issued in Form No.CL-9 and in respect of Star Hotels, Clubs and Hotel, Boarding Houses and Lodges located anywhere in the State considering the potential for tax collection being huge, and at the same time, exemption has been extended to similar licence holders running Bar and Restaurants by operating them in rural areas considering the fact of low value addition between the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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