9911796707
TMI Blog2022 (5) TMI 1359X X X X Extracts X X X X X X X X Extracts X X X X ..... .1 & 2 of 2007, 1,1,1,1,1,1 & 1 of 2008, 1,1,1,1,1,1,1,1,1,1,1 & 2 of 2009, 1,1,1,1,1 , 2 & 3 of 2010, 1,1,1 & 2 of 2011, 1,1,1,1,1,1,1,1,1,1,1,1,1,1 of 2012, 1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,2,2,2,2 & 2 of 2013, 1,1,1,1 & 1 of 2014 and WMP.Nos.12367, 12368, 34116, 34117, 34118 and 34119 of 2016 WP No. 29096 of 2007 For Petitioners : Mr. K. Vaitheeswaran in WP.Nos. 29096/2007, 7692/2008, 16722/2009, 16723/2009 and 13988/2011 Mr. K.J. Chandran in WP No. 26788 of 2007 WP.Nos.10036 of 2008 & 880 of 2009 Mr. Ramani, Senior Advocate for Mr. P.V. Sudhakar in WP.Nos. 27530/2012&29433/2014 Mr. P.J. Rishikesh for Mr. K.R. Krishnan in WP.Nos.10639/2009 & 10223/2009 Mr. N. Inbarajan in WP Nos. 8103, 8104, 8105 and 8106/2012 Mr. Joseph Prabhakar in WP.No.29120 of 2007& 4992 of 2012 Mr. N. Murali in WP No. 2580/2008, 8028 to 8031 of 2012 Mrs. R. Hemalatha in WP.Nos.5288, 5289/08, 3253/2012, 18189/2012, 892/2013, 893/2013, 894/2013, 895/2013, 33505/2016, 33506/2016, 33507/2016, 33508/2016 and 33509/2016 Mr. N.R. Rajagopalan in WP.Nos.29464/2008, 313/2009, 314/2009, 315/2009, 19654/2009 and 19655/2009 Mr. R. Kumar in WP.No.2291/2010, 28209/2010 and 13201 of 2010 Mr. S. Ramanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing contained in this Act, every dealer, other than the dealer who purchases goods from outside the State or imports goods from outside the Country may, at his option, instead of paying tax in accordance with section 5, pay, on the total value of the works contract executed by him in a year, tax calculated at the following rate, namely:- i) Civil works contract: two per cent of the total contract value of the civil works executed; ii) Civil maintenance works contract: two per cent of the total contract value of the maintenance works executed; iii) All other works contracts: [ Five] per cent of the total contract value of the works executed (2) Any dealer, who executes works contract, may apply to the assessing authority along with the first monthly return for the financial year or in the first monthly return after the commencement of the works contract, his option to pay the tax under sub-section (1) and shall pay the tax during the year in the monthly installments and for this purpose, he shall furnish such return within such period and in such manner as may be prescribed. (3) The option exercised under sub-section (1) shall be final for that financial year. (4) A d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct for a building, after finding that there was transfer of property in goods, held that such contract nevertheless was an indivisible contract for construction involving both labour and material/goods and it was impermissible for the States to levy tax on such transactions inasmuch as sale under Entry 48 of the Government of India Act, 1935 which corresponds to Entry 54 of List II of the VII Schedule to the Constitution of India, was "nomen-juris" and the expression "Sale of goods" was a term of well - recognized legal import and should be interpreted as having the same meaning as in the "Sale of Goods Act, 1930". In other words, the competence of the State legislature was limited only to tax those transactions which qualified as a sale in terms of "Sales of Goods Act 1930" and works contract was thus held to be beyond the pale of the power of taxation of the State legislature. Soon thereafter in addition to building contracts (works contract), the Hon'ble Supreme Court examined/considered certain other transactions and applying the principles laid down in 1st Gannon Dunkerly case, held the same to be not sales and liable to payment of sales tax, even though they involve trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Goods" under the Constitution. 10. Pursuant to the recommendation of the Law Commission, the 46th Amendment to the Constitution was introduced in Article 366 of the Constitution, whereby clause 29-A was inserted and the same is extracted below: "Clause 29-A of Article 366 is in the following terms: (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration: (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract ; (c) a tax on the delivery of goods on hire-purchase or any system of payment by installments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable considerations; (e) a tax on the supply, by way of or as part of any service or in an other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, or cash, deferred payment or other valuable consideration, and such transfer, delivery or su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categories of mutant sales which by a fiction was deemed to be a sale. The challenge was primarily on the premise that the power of the States to levy tax which stood expanded pursuant to the 46th Amendment to the Constitution, was subject to the same discipline/limitation which a regular/conventional sale would be subject to. The Hon'ble Supreme Court also examined the question, as to what would constitute the measure of tax pursuant to the 46th Amendment in relation to works contract. Ultimately, the Hon'ble Supreme Court summarized its conclusion as under: "51. The aforesaid discussion leads to the following conclusions: (1) In exercise of its legislative power to impose tax on sale or purchase of goods under Entry 54 of the State List read with Article 366(29-A)(b), the State Legislature, while imposing a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract is not competent to impose a tax on such a transfer (deemed sale) which constitutes a sale in the course of inter-State trade or commerce or a sale outside the State or a sale in the course of import or export. (2) The provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e account books produced by him are not found worthy of credence by the assessing authority the legislature may prescribe a formula for deduction of cost of labour and services on the basis of a percentage of the value of the works contract but while doing so it has to be ensured that the amount deductible under such formula does not differ appreciably from the expenses for labour and services that would be incurred in normal circumstances in respect of that particular type of works contract. It would be permissible for the legislature to prescribe varying scales for deduction on account of cost of labour and services for various types of works contract. (8) While fixing the rate of tax it is permissible to fix a uniform rate of tax for the various goods involved in the execution of a works contract which rate may be different from the rates of tax fixed in respect of sales or purchase of those goods as a separate article." IV. NATURE OF COMPOSITION SCHEME WITH REGARD TO WORKS CONTRACT 14. The State's power to levy tax on works contract having been held to be limited to tax the transfer of property involved in the execution of works contract in Gannon Dunkerley's case and the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme and highlighted its features, as under: A. The composition scheme provides a convenient and simple method of assessment. B. By opting to alternative method the contractor saves himself the botheration of book-keeping, assessment and appeals. C. The composition scheme is rough and ready method of assessment of tax and leaves it to the contractor either to opt to it or to be governed by the regular/ normal method. D. The option of composition scheme can be availed at the discretion of a contractor if he thinks it advantageous to him. E. The object of the composition scheme is the same as that of the regular method and it was only that they follow a different route to arrive at the same destination. 18. The above view of the Hon'ble Supreme court was reiterated in the case of Mycon Constructions v. State of Karnataka and others [(2002) 127 STC 105(SC)]. V. LEGAL BACKGROUND OF THE SECTION 19. The petitioners in these batches of writ petitions are engaged in works contract. Earlier, the Tamil Nadu General Sales Tax Act, 1959 was in force, which was the taxing statute, as per Section 3-B of which, a dealer engaged in the business of transfer of property in goods in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, the dealers engaged in works contract were treated differently from those who are engaged in manufacturing, re-selling or transfer of right to use goods, who had no such option. 21. Now, coming to VAT regime, there are two classes of dealers in 'works contract' viz., works contractor of the general scheme covered under Section 5 and the other covered under Section 6, which is optional. A dealer covered under Section 5 is liable to pay tax for each year on his taxable turnover relating to his business of transfer of properties and goods involved in the works contract, either in the same form or in some other form, which may be arrived at in such a manner as specified under the first schedule of the Tamil Nadu Value Added Tax Act, 2006 (Tamil Nadu Act 32 of 2006). On the other hand, the dealers who opt under Section 6 of the Act, are liable to pay a compounded tax on the actual value of works contract executed by them at the rate of 2% in the case of civil works contract and maintenance works contract and at 4% on all other works contract. 22. Subsequently, the impugned Act 21 of 2007 was passed by the Legislative Assembly and published in the Government Gazette, TNGG E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as relied upon to contend that the State governments are empowered to grant exemptions from taxes/levies to the developers. In order to support SEZ developers, exemption at that point of purchase was extended by G.O. Ms. No.193, Commercial Taxes and Registration Department dated 30.12.2006 and therefore, the subsequent sales inside the State of Tamil Nadu are exempted by Section 12 of the SEZ Act. Thus, the various materials purchased and transferred and deemed to have been sold by the petitioners were meant to carry on the authorised operations, within the meaning of Section 12(1)(a) of the SEZ Act, without which the petitioners could not carry on or execute the work. While so, the classification made by virtue of the impugned amendment is discriminatory. 26. It is stated by the learned counsel that the classification contained under Section 3 (i) of the impugned amendment, on the basis of antecedent purchases and taxes paid on the same by a works contractor, bears no nexus to the object sought to be achieved under Section 6 of the Act. It is also submitted that in the absence of any Statement of objects and reasons being appended to the impugned amendment, it may have to be unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs outside the state, which is in the nature of restriction forcing the dealers to purchase goods from dealers within the state and hence, violates the rights guaranteed under Part XIII of the Constitution. 30. It is also submitted by the learned counsel that Section 27 (1) (a) or (b) of the TNVAT Act, 2006 cannot be invoked to revise the assessment while rejecting the option under Section 6, where the total contract value is assessed and not the turnover. In this regard, reliance was placed upon the judgment of this Hon'ble Court in Sinetech v. CTO [(2008) 15 VST 398 (Mad)]. The learned counsel, in support of his contentions, also relied upon the following judgments in Income Tax Officer v. Lawrence Singh Ingty [AIR 1968 SC 658], Ranjit Thakur v. Union of India and others [1987 (4) SCC 611], Ayurveda Pharmacy and another v. State of Tamil Nadu [1989 (2) SCC 285], Shashikant Laxman Kale & another v. Union of India and another [1990 (4) SCC 366], State of Kerala and another v. Builders Association of India and others [1997 (2) SCC 183], Ahmedabad Pvt. Primary Teachers Association v. Administrative Officers and others [2004 (1) SCC 755], Peekay Re-rolling Mills (P) Ltd v. Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is a vast and different treatment among the dealers, by virtue of insertion of the impugned provision under Section 6 of the Act and it is in gross violation of Article 14 of the Constitution of India. 33. It is also submitted by the learned counsel that Article 304 (a) mandates the States to levy tax on goods having its origin outside the State at the same rates as local goods and prohibits the States from levying taxes at different rates on the basis of its origin. But in this case, for the goods belonging to the same class, the respondents have adopted discriminatory treatment by bringing in the impugned legislation. In this context, the learned counsel relied on the decision of the Constitutional Bench of the Honourable Supreme Court in the case of Jindal Stainless Limited and another v. State of Haryana and others [(2017) 12 Supreme Court Cases 1]. 34. Adding further, the learned counsel submitted that the term 'manufacture' used in Section 2 (27) of the Act is given a wider connotation and it includes within the definition 'works contract'. It is contended that the works contract comes under the purview of 'manufacture' and therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds outside the State or imports goods from outside the Country. It is also stated illustratively that mere inter-state purchase of one item, out of 25 items required by the assessee, for execution of work should not deprive the assessee the benefit under the Act which existed prior to amendment. Even though the impugned amendment has no application to the petitioners, who purchase the goods locally except a few goods, if at all, the petitioners have to be directed to pay enhanced tax for the few items which were purchased outside the State as contemplated under Section 3 (2) of the Act and such purchase should not disturb or affect the other items purchased locally. Even if the impugned amendment is declared to be valid, it cannot be made applicable to the petitioners, who have purchased almost all the goods locally, bearing a very few items purchased outside the State, for execution of work. The learned counsel therefore prayed for allowing all the writ petitions, by quashing the notices issued by the Assessing Officers. 37. Mr. K. Vaitheeswaran, learned counsel for the petitioner in WP No. 29096 of 2007 etc., would contend that the petitioners are engaged in undertaking works co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from a dealer, who executes the works contract procuring goods locally. The learned counsel further submitted that the works contractors formed a single class and relying upon the judgment of the Andhra Pradesh High Court in Maruthi Constructions case (supra) submitted that similar restriction was held to be discriminatory and restrictive. According to the learned counsel, if a concessional rate of duty was granted to one importer, but it was denied to the other without any justification, it would amount to discrimination. To buttress this submission, the learned counsel placed reliance on the decision of the Hon'ble Supreme Court in Jain Exports Private Limited v. Union of India [1991 AIR SC 1721] and submitted that merely because a dealer made purchase from outside the State, he cannot be deprived of the benefit of the scheme of compounding. 40. Placing reliance on the observation of the Hon'ble Supreme Court in the case of Nagaraj M v. Union of India [(2006) (9) JT 191] that "equality is the essence of democracy and is the basic structure of the Constitution, it is submitted that the amendment to Section 6 of the Act conspicuously restricted inter-state purchase and sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Tata Sky Limited v. State of Tamil Nadu and another [(2013) 62 VST 69] wherein it was held that except for the technology difference, there is no difference between the Cable TV and DTH and the object of introducing Tamil Nadu Entertainments Tax Act appears to levy tax on entertainment, when the content of entertainment does not undergo any change, except for the medium through a technique of receiving signals through satellite. Therefore, it was held that the classification made is arbitrary insofar as the differential tax treatment meted to the DTH as a separate class and it offends Article 14 of The Constitution of India. The appeal preferred by the State was dismissed for non-prosecution in 2018 SCC Online 2412. 43. It is further submitted by the learned counsel that the Value Added Tax (VAT) was implemented across the Country to ensure uniform implementation of tax law on sale of goods. The other States have simply provided for a compounding scheme as an alternative system of taxation for works contracts without restricting any procurement from other States or from outside India. However, two States namely Karnataka and Andhra Pradesh have provided for a rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase of the goods. It was also stated that there is a trade diversion and the Government found it essential to rectify the anomaly and to negate the inequality among the dealers. Such a reason assigned in the counter affidavit is nothing but an assumption without any basis. In any event, merely because some dealer is able to operate in a tax efficient manner and control costs, that would not be a ground to provide a statutory mechanism to deny such dealer the benefit conferred prior to the amendment and to impose a restriction. The learned counsel, in addition to the judgments referred above, relied upon the judgments in Bhagat Ram v. State of HP [AIR 1983 SC 454], Appu Food Products Ltd v. Akram and others [2019 SCC Online Mad 12378]; and Deputy Commissioner of Income Tax and another v. Pepsi Foods Limited [2021 (49) GSTL 113] and prayed for allowing the writ petitions. 46. Mr. N. Murali, learned counsel appearing for the petitioners in WP Nos. 8028, 8029, 8030 and 8031 of 2012 would contend that the impugned amendment is in the nature of restricting the purchase of goods from outside the State or importing goods outside the country thereby depriving the dealers who have opted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompounding dealer. It is further stated that enough restrictions were already in existence under Section 6 of the Act. In this context, the learned counsel placed reliance on the decision of the Honourable Supreme Court in Shyara Bano and others v. Union of India [2017 (9) Supreme Court Cases 1] wherein it was held that the tests of arbitrary action which apply to executive actions, do not necessarily apply to delegated legislation. In order that delegated legislation can be struck down, such legislation must be manifestly arbitrary a law which could not be reasonably expected to emanate from an authority delegated with the law making power. By pointing out the said observation of the Honourable Supreme Court, the learned counsel submitted that the impugned amendment seeks to restrict the benefit of compounding only based on the source of purchase of goods and it is manifestly arbitrary. The dealers who effect interstate purchase, are denied the benefit on local purchase as well, which is arbitrary. There is an additional burden on the petitioners, who are now forced to purchase higher rate of tax. The learned counsel also relied upon the judgement in Deputy Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the works in the State by procuring goods from outside the State or by importing them outside the country, were paying tax under Section 6 of the Act at a low compounding rate of 2% on civil works and civil maintenance works and 4% on other works. They were not paying Value Added Tax as prescribed under Section 5 of the said Act as they were procuring goods from outside the State or importing from outside the country. Therefore, the Government found that such contractors, by claiming deduction in terms of the provisions in section 5 of the said Act, were depriving the exchequer of the tax revenue lawfully due under Section 5 of the Act. Further, certain contractors executing works in the State have resorted to purchase goods for execution of works only from dealers outside the State or by import from outside the country and use the goods in the execution of the works. Such contractors, taking advantage of Section 6 of the Act, prior to amendment, were paying only the compounded rate of tax at 2%. In this fashion, the contractors were benefited, saving the tax legitimately payable by them on the purchase of goods. This has led to large scale trade diversion by which the local tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Advocate General also placed reliance on the decision of the Honourable Supreme Court in the case of Indian Dairy Machinery and Co. Ltd. v. Assistant Commissioner of Commercial Taxes, [(2008) 3 Supreme Court Cases 698] wherein similar amendment made to Karnataka Sales Tax Act, excluding the dealers who received goods from outside the State for using the same in execution of works contract, was upheld by the Honourable Supreme Court. 55. As regards the submissions made on the side of the petitioners / assessees that there is a violation of Article 14 of the Constitution of India, it is submitted by the learned Additional Advocate General that a taxing statute can be held to be contravening Article 14 of the Constitution of India only in cases where it imposes on the same class of dealers, who are similarly placed, an incidence of taxation that leads to obvious inequality. When the dealers form two different classes of their own, the challenge based on Article 14 of The Constitution of India cannot be sustained. In this context, the learned Additional Advocate General placed reliance on the decision of the Honourable Supreme Court in (i) Chunilal v. Union of India [221 ITR 459] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the right of a citizen guaranteed under Articles 14 and 19 (1)(g) of the Constitution of India. In this case, having regard to the legislative background of the provisions of Section 7C of the Act, there is no element of unreasonableness involved in the retrospective operation of clause (1) of Section 6 of the Act. Further, in order to have an equal treatment of dealers in taxation without impairing the free flow of trade and commerce, under Part XIII of the Constitution of India, the provision has been amended retrospectively in view of the specific reasons to get over the infirmity so long as it is based on differential criteria. In any event, by virtue of the amendment, it is open to the dealers to withdraw their option exercised for adopting the compounding system of tax. In the absence of any practical conditions expressed which are incapable or beyond performance and compliance, the petitioners cannot express any grievance on the ground of hardship and inconvenience. 60. With respect to the competency of the legislature, the learned Additional Advocate General relied upon the judgment of the Hon'ble Supreme Court in Surinder Singh case [(1986) 4 SCC 667] to contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Act and Rules. Therefore, a cumulative reading of these provisions with sections 15 and 30 of the TNVAT Act would result that such conditions are also applicable to Special Economic Zones and in the absence of specific exemption, the provisions are applicable. 63. It is further submitted by the learned Additional Advocate General that the Developer leases the land to the Co-Developer who inturn sub-leases the same to the residents. Contending that whether all the operations of the Developer are authorized, whether the activities of construction of residential houses are within the processing area, whether he is entitled to such exemption, whether the activities of the Co-Developer are authorized and whether they are also entitled to such exemption and whether the co-developer is authorised to lease out the property and whether such lessees are to be treated as workers or third party, when the ownership actually passes to the residents and whether there is a difference in stock, are all factual aspects and have to be put forth only before the Appellate Authority. It is also contended that the assessing officer has passed a reasoned order considering the objections of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NT PROVISIONS UNDER VARIOUS STATUTES 68. We have heard the learned counsel for the parties at length and also perused the materials available on record. For the proper appreciation, it is necessary to refer to the relevant provisions. 69. Constitution of India. "Article 14. Equality before law -The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth." "Article 19. Protection of certain rights regarding freedom of speech, etc. (1) All citizens shall have the right ..... (g) to practise any profession, or to carry on any occupation, trade or business ............... (6) Nothing in sub clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub clause, and, in particular, nothing in the said sub clause shall affect the operation of any existing law in so far as it relates to, or prevent the State from makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorising the giving of, any preference or making, or authorising the making of, any discrimination if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India." "Article 304- Restrictions on trade, commerce and intercourse 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 intercourse with or within that State as may be required in the public interest: Provided that no Bill or amendment for the purposes of clause shall be introduced or moved in the Legislature of a State without the previous sanction of the President" 70. Central Sales Tax Act, 1956. "Section 8. Rates of tax on sales in the course of inter-State trade or commerce:-(1) Every dealer, who in the course of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler to whom the goods are sold containing the prescribed particulars in a prescribed Form obtained from the prescribed authority. [***] Provided that the declaration [***] is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit. (5) Notwithstanding anything contained in this section, the State Government may, [on the fulfillment of the requirements laid down in sub- section (4) by the dealer] if it is satisfied that it is necessary so to do in the public interest, by Notification in the Official Gazette, and subject to such conditions as may be specified therein, direct- (a) that no tax under this Act shall be payable to any dealer having his place of business in the State in respect of the sale by him, in the course of inter-State trade or commerce, to a registered dealer 1[***] from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) [***] a may be mentioned in the Notification; (b) that in respect of all sales of goods or sales of such classes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer liable to pay tax under the Act shall keep and maintain separately a true and correct account in any one of the languages mentioned in the Eighth Schedule to the Constitution of India or in English, showing the goods sold and bought by him and the value thereof, in respect of the transactions under the Act. He shall maintain an account showing the dayto-day purchases, sales, delivers and stocks of each kind of goods. (2) Every such dealer shall in respect of each transaction under the Act prepare in duplicate a voucher showing the date of transaction, the name of the seller and purchaser, the sale price, quantity and description of goods, and issue the original thereof to the buyer. The voucher shall also specify the mode of dispatch, and delivery of goods with appropriate details. (3) The voucher of each kind shall be serially numbered separately. (3-A) Every principal, who claims exemption on the sale of goods on consignment account through agents outside the State, shall maintain the following records, namely: - (a) a register showing the name and full address of the agent to whom goods were consigned together with description of the goods so despatched for sale, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (3) Any officer not lower in rank than an a Deputy Commercial Tax Officer may enter any premises at all reasonable times for the purpose of searching for any books, accounts or documents referred to in sub-rule (2) above and kept or suspected to be kept in such premises and seize such books of accounts or documents, as may be necessary. The officer seizing the books, accounts or documents shall grant a receipt for the same and shall retain the same until and for so long as may be necessary for the purpose of the Act." "Rule 11. Whoever commits a breach of the following rules, namely 4,5,8,9 and 10 and whoever in contravention of Rule 7 prevents or obstructs, inspection or entry, search or seizure of any books or documents by any officers specified in the rule, shall, on conviction, be punishable with fine which may extend to five hundred rupees and where the offence is a continuing one with a daily fine which may extend to fifty rupees for every day during which the offence continues." 72. Tamil Nadu Value Added Tax Act, 2006. "Section 2.-Definitions. (27) ''manufacture'' with its grammatical variations and cognate expressions means producing, making, extracting, alterin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred payment or other valuable consideration, whether or not in the course of business, shall be deemed to be a sale for the purposes of this Act. Explanation III.- Every transfer of property in goods including goods as unclaimed or confiscated or unserviceable or scrap surplus, old, obsolete or discarded materials or waste products, by the persons or bodies referred to in Explanation III in clause (15) of section 2 for cash or for deferred payment or for any other valuable consideration whether or not in the course of business, shall be deemed to be a sale for the purposes of this Act. Explanation IV.- The transfer of property involved in the purchase, sale, supply or distribution of goods through a factor, broker, commission agent or arhati, del credere agent or an auctioneer or any other mercantile agent, by whatever name called, whether for cash or for deferred payment or other valuable consideration, shall be deemed to be a purchase or sale, as the case may be, by such factor, broker, commission agent, arhati, del credere agent, auctioneer or any other mercantile agent, by whatever name called, for the purposes of this Act. Explanation V.-(a) The sale or purchase of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) "turnover'' means the aggregate amount for which goods are bought or sold, or delivered or supplied or otherwise disposed of in any of the ways referred to in clause (33), by a dealer either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person of agricultural or horticultural produce, other than tea and rubber (natural rubber latex and all varieties and grades of raw rubber) grown within the State by himself or on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover. Explanation I.- "Agricultural or horticultural produce" shall not include such produce as has been subjected to any physical, chemical or other process for being made fit for consumption, save mere cleaning, grading, sorting or dying; Explanation II.- Subject to such conditions and restrictions, if any, as may be prescribed in this behalf- (i) the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of the works executed (2) Any dealer, who executes works contract, may apply to the assessing authority along with the first monthly return for the financial year or in the first monthly return after the commencement of the works contract, his option to pay the tax under sub-section (1) and shall pay the tax during the year in the monthly installments and for this purpose, he shall furnish such return within such period and in such manner as may be prescribed. (3) The option exercised under sub-section (1) shall be final for that financial year. (4) A dealer, exercising option under sub-section (1) shall, so long as the option remains in force, not be required to maintain accounts of his business under this Act or the rules made there under except the records in original of the works contract, extent of their execution and payments received or receivable in relation to such works contract, executed or under execution. (5) The dealer, who pays tax under this section, shall not 1[collect any amount by way of tax or purporting to be by way of tax and shall not] be entitled to input tax credit on the goods purchased by him. Explanation.- For the purpose of this section "c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of export." "Section 27. Assessment of escaped turnover and wrong availment of input tax credit- (1) (a) Where, for any reason, the whole or any part of the turnover of business of a dealer has escaped assessment to tax, the assessing authority may, subject to the provisions of sub-section (3), at any time within a period of 1[six years from the date of assessment], determine to the best of its judgment the turnover which has escaped assessment and assess the tax payable on such turnover after making such enquiry as it may consider necessary. (b) Where, for any reason, the whole or any part of the turnover of business of a dealer has been assessed at a rate lower than the rate at which it is assessable, the assessing authority may, at any time within a period of 2[six years from the date of assessment], reassess the tax due after making such enquiry as it may consider necessary. (2) Where, for any reason, the input tax credit has been availed wrongly or where any dealer produces false bills, vouchers, declaration certificate or any other documents with a view to support his claim of input tax credit or refund, the assessing authority shall, at any time, within a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) In computing the period of limitation for assessment or re-assessment under this section, the time during which any appeal or other proceeding in respect of any other assessment or reassessment is pending before the High Court or the Supreme Court involving a question of law having a direct bearing on the assessment or re-assessment in question, shall be excluded. (8) In computing the period of limitation for assessment or re-assessment under this section, the time during which any appeal or proceeding in respect of any assessment or re-assessment of the same or part of the turnover made under any other enactment was pending before any appellate or revisional authority or the High Court or the Supreme Court shall be excluded. * These words were substituted in Sub-section (4) of Section 27 as per Gazette No 217 Act No 13 of 2015, dated 14.10.2015. 2. These words were substituted by Section 6 of the Amendment Act 2012, effective from 19th June 2012, as per GO.NO.82 for the words 'five years from the date of order of assessment by the assessing authority." "Section 28. Assessment of turnover not disclosed under compounding provisions.-- (1) Where for any reason, any part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under sub- section (1)." 73. The Tamil Nadu Value Added Tax Rules, 2007. "Rule 7. Filing of Returns. (1) ...... (e). Every registered dealer who opts to pay tax under section 6 or section 8 shall file a return for each month in Form L on or before 20th of the succeeding month to the assessing authority along with proof of payment of tax. After amendment in 2016, the Rule reads as follows. (1) (a) Every registered dealer liable to pay tax under the Act other than the dealers who opted to pay tax under sub-section (4) of section 3, section 6, section 6-A or section 8 of the Act, including an agent of a non-resident dealer and casual trader, shall file a return for each month in electronic Form I, on or before 20th of the succeeding month, to the assessing authority in whose jurisdiction his principal place of business or head of office is situated. Such return shall be accompanied by proof of electronic payment of tax. (b) The option exercised under sub-section (4) of section 3 of the Act shall be final for the financial year and such option shall be exercised in electronic Form K-1 within thirty days from the date of commencement of the business in case of new busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 6. All other Contracts 30 (e) all amounts, including the tax collected from the customer, refunded to the customer or adjusted towards any amount payable by the customer, in respect of unexecuted portion of works contract based on the corrections on account of measurements or check measurements, subject to the conditions that- (i) the turnover was included in the return and tax paid; and (ii) the amount including the tax collected from the customer is refunded or adjusted, within a period of six months from the due date for filing of the return in which the said amount was included and tax paid." 74. Central Special Economic Zone Act, 2005. "Section 2(g) "Developer" means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (10) of section 3 and includes an Authority and a Co-Developer; (j) "entrepreneur" means a person who has been granted a letter of approval by the Development Commissioner under sub-section (9) of section 15;" "Section 26. Exemptions, drawbacks and concessions to every Developer and entrepreneur.-(1) Subject to the provisions of sub-section (2), every Developer and the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve or retrospective effect and not by the State by enacting the impugned law. We do not agree with the same. The authority of the State to enact any law on any of the entries in State List/List II is derived from Article 246 (3) and the authority to enact any law on the entries in List III/Concurrent List is traceable to Article 246 (2). Prior to the 101st Amendment to the Constitution, the authority of the State to legislate on taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I was traceable to Entry 54 of List II. 77. The authority to legislate carries with it the authority to amend, repeal or omit any provision. The theory of Doctrine of Implied authority is applicable. Insofar as the contention regarding Section 15 and Section 30, the same is fallacious. It is not to be forgotten that the TNVAT Act, 2006 is the parent Act by which powers have been delegated to the government to grant exemption. By such delegation under Sections 15 and 30, the powers of the state are not ousted. Such powers are granted for administrative convenience and do not take away the power of the legislature to bring in amendments, for which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or exercise power in respect of certain matters, subject to rules, the exercise of power conferred by the statute does not depend on the existence of rules unless the statute expressly provides for the same. In other words framing of the rules is not condition precedent to the exercise of the power expressly and unconditionally conferred by the statute. The expression "subject to the rules" only means, in accordance with the rules, if any. If rules are framed, the powers so conferred on authority could be exercised in accordance with these rules. But if no rules are framed there is no void and the authority is not precluded from exercising the power conferred by the statute. In T. Cajee v. U. Jormanik Siem [AIR 1961 SC 276 : (1961) 1 SCR 750] the Supreme Court reversed the order of the High Court whereby the order of District Council removing Siem, was quashed by the High Court on the ground that the District Council had not framed any rules for the exercise of its powers as contemplated by para 3(1)(g) of 6th Schedule to the Constitution. The High Court had taken the view that until a law as contemplated by para 3(1)(g) was made there could be no question of exercise of power of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to him. Section 16 confers power on the Central Government to take measures which it may consider necessary for the custody, management and disposal of the compensation pool property. The Central Government had therefore ample powers to take steps for disposal of pool property by auction-sale and for that purpose it had authority to issue administrative directions. Section 40(2)(j) provides for framing of rules prescribing procedure for the transfer of property out of the compensation pool and the adjustment of the value of the property so transferred against the amount of compensation. Neither Sections 8, 16, 20 nor Section 40 lay down that payment of compensation by sale of the pool property to a displaced person shall not be done unless rules are framed. These provisions confer power on the Central Government and the authorities constituted under the Act power to pay compensation to displaced persons by sale, or allotment of pool property to them in accordance with rules, if any. Framing of rules regulating the mode or manner of disposal of urban agricultural property by sale to a displaced person is not a condition precedent for the exercise of power by the authorities conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself.Orders are not like old wine becoming better as they grow older." 81. Per contra, the State has relied upon the following judgments to contend that not only the affidavit, but also the court is empowered to look into any materials cull out the object or the purpose for which a provision was introduced and the same are as under. 82. K.K. Kochunni v. State of Madras [1959 Supp (2) SCR 316 : AIR 1959 SC 725]: "12....We are not unmindful of the fact that the view that this Court is bound to entertain a petition under Article 32 and to decide the same on merits may encourage litigants to file many petitions under Article 32 instead of proceeding by way of a suit. But that consideration cannot, by itself, be a cogent reason for denyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference could not be made to any extraneous evidence and that the basis of classification must appear on the face of the notification itself and that this Court should not go into disputed questions of fact. This Court overruled that objection and held that there could be no objection to the matters brought to the notice of the Court by the affidavit of the Principal Secretary being taken into consideration in order to ascertain whether there was any valid basis for treating the petitioners and their companies as a class by themselves. As we have already said, it is possible very often to decide questions of fact on affidavits. If the petition and the affidavits in support thereof are not convincing and the court is not satisfied that the petitioner has established his fundamental right or any breach thereof, the Court may dismiss the petition on the ground that the petitioner has not discharged the onus that lay on him. The court may, in some appropriate cases, be inclined to give an opportunity to the parties to establish their respective cases by filing further affidavits or by issuing a commission or even by setting the application down for trial on evidence, as has often been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elfmedication had no deleterious effect on the health of the community; on the contrary it is likely to affect the well-being of the people, in the context of effective household and domestic remedies based on local herbs popularly known to them in rural areas. Self-medication has its permission (?) limits even in America and Canada where unlicensed itinerant vendors serve the people effectively". For the petitioners in all the petitions Mr Munshi raised four points: (1) Advertisement is a vehicle by means of which freedom of speech guaranteed under Article 19(1)(a) is exercised and the restrictions which are imposed by the Act are such that they are not covered by clause (2) of Article 19; (2) That Act, the Rules made thereunder and the Schedule in the Rules impose arbitrary and excessive restrictions on the rights guaranteed to the petitioners by Article 19(1)(f) and (g); (3) Section 3 of the Act surrenders unguided and uncanalised power to the executive to add to the diseases enumerated in Section 3; (4) Power of confiscation under Section 8 of the Act is violative of the rights under Articles 21 and 31 of the Constitution. 8. Therefore, when the constitutionality of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, it is not permissible to use these aids, yet it is permissible to look into the historical facts and surrounding circumstances for ascertaining the evil sought to be remedied. The distinction between the purpose or object of the legislation and the legislative intention, indicated earlier, is significant in this exercise to emphasise the availability of larger material to the court for reliance when determining the purpose or object of the legislation as distinguished from the meaning of the enacted provision. 25. The counter-affidavit filed on behalf of respondent 1 disclosing the reasons which led to the insertion of clause (10-C) in Section 10 of the Act confining the benefit granted thereby only to employees of the public sector indicates that the purposes of the legislation include reduction in the existing gap between the lower compensation package in public sector and the higher compensation package of the counterpart in private sector in addition to preventing misuse of the benefit in private sector which is not subject to the control of administration by government like that in the public sector. It is evident from the material produced before us that the compensatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxing statute is to raise revenue to defray the expenditure of the Government. The following observations are relevant, which would show, how tax is used as a tool to achieve other objectives: 88. Sri Srinivasa theatre v. Government of Tamil Nadu [(1992) 2 SCC]: "11. The instrument of taxation is not merely a means to raise revenue in India; it is, and ought to be, a means to reduce inequalities. You don't tax a poor man. You tax the rich and the richer one gets, proportionately greater burden he has to bear. Indeed, a few years ago, the Income Tax Act taxed 94p out of every rupee earned by an individual over and above Rupees one lakh. The Estate Duty Act, no doubt since repealed, Wealth Tax Act and Gift Tax Act are all measures in the same direction. It is for this reason that while applying the doctrine of classification - developed mainly with reference to and under the concept of "equal protection of laws" - Parliament is allowed more freedom of choice in the matter of taxation visa-vis other laws. If this be the situation in the case of direct taxes, it should be more so in the case of indirect taxes, since in the case of such taxes the real incidence is upon some othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nter affidavits, has contended that the purpose was to curb the tax diversion by many dealers, who either purchased goods from other State dealers or by import thereby depriving the State of its tax, which is remitted if the goods are purchased in this State. It is also submitted that the condition creates a level playing field by placing the dealers, who purchase goods locally and are engaged in works contract and the dealers, who purchase goods from other State on par and that, such tax diversion also diminished the local sale resulting in not only a loss of revenue to small dealers, but also to the State. 91. This court finds force in the said contention. It is not out of place to mention here that even without the counter affidavit, it is evident from the scheme of Section 8(1) of the CST Act read in conjunction with Section 6 of the TNVAT Act, 2006, that the State tends to lose revenue. Section 8 of the CST Act permits the dealers, who effect interstate purchase, to avail concession in rate of tax. Though it is not mandatory, every dealer registered under the State and Central Acts, is aware that a concession is available when an interstate purchase of goods takes place upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and reasons of the Tamil Nadu Act relating to Entry Tax on Motor Vehicles is as follows:- "In order to curb the evasion of sales tax on the sale of motor vehicles which are purchased outside the State and brought into this State, the Government have decided to levy tax on entry of motor vehicles into local areas of this State either for use or sale therein which is liable for registration in the State under the Motor Vehicles Act, 1988 (Central Act LIX of 1988). It has also been decided not to levy the tax in respect of vehicles registered in the Union Territory or in other States fifteen months prior to registration in the State and necessary provision has been provided for. In the case of dealers, entry tax shall be leviable on the entry of motor vehicles and the tax paid by them shall be adjusted with the tax payable by them under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act No. 1 of 1959)." 94. The above object was considered by a Division Bench of the Madras High Court in the matter of V. Krishnamurthy v. State of T.N. [2019 SCC OnLine Mad 8523] wherein while upholding the legality of levy of Entry Tax on Motor Vehicles on imported vehicles, the Division B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iably relied upon the judgment of the Division Bench of Andhra Pradesh in Maruthi Constructions case to contend that similar restriction imposed in the erstwhile Andhra Pradesh General Sales Tax Act was held to be violative of Article 14 and was hence struck down. They also contended that when a pari materia provision is struck down, it is incumbent upon this Court to similarly strike down the provision impugned in the present case. It is appropriate to refer to the relevant paragraphs in Maruthi Constructions case (supra): "41. But, the question still remains whether such a provision is violative of Article 14 of the Constitution of India on the ground that from out of the same class of dealers who are taxable under Section 5F of the APGST Act, some are allowed an option for a specified mode of assessment provided under Section 5G and others are debarred from availing that option on the ground that they utilised goods procured from out of the State of Andhra Pradesh. 42. Learned Counsel for the petitioner argued that though such subclassification of the dealers who otherwise form single class for the purpose of Section 5F is not totally prohibited, the burden that such subclas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt statutes in pari materia though made at different times, or even expired, and not referring to each other, they shall be taken and construed together, as one system and as explanatory of each other'. *** The application of this rule of construction has the merit of avoiding any apparent contradiction between a series of statutes dealing with the same subject; it allows the use of an earlier statute to throw light on the meaning of a phrase used in a later statute in the same context; it permits the raising of a presumption, in the absence of any context indicating a contrary intention, that the same meaning attaches to the same words in a later statute as in an earlier statute if the words are used in similar connection in the two statutes; and it enables the use of a later statute as parliamentary exposition of the meaning of ambiguous expressions in an earlier statute." 98. Before we proceed further with regard to the findings in Maruthi Constructions case, it is pertinent here to refer to the judgment of the Apex Court in State of Kerala v. Builders Assn. of India [(1997) 2 SCC 183], Mycon Construction Ltd. v. State of Karnataka [(2003) 9 SCC 583 : 2002 SCC OnLine SC 581 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transfer of which to the works contract was effected without any processing or manufacture;" (Proviso omitted as not relevant for the purpose of this case.) 4. Sub-section (7-B) provides that the tax under clause (iv) of sub-section (1) of Section 5 and under sub-sections (7) and (7-A) of this section shall be deducted from the payment made by the awarder at every time including advance payment and remit it to the Government within seven days in the prescribed manner. Sub-section (11) requires every contractor who opts for payment of tax in accordance with sub-section (7) or sub-section (7-A) of Section 7 to "file the returns showing all the contracts he has undertaken along with certificates from the awarders, showing the whole amount of contract and the details of tax deducted and remitted to Government". The sub-section further says that if the particulars so furnished are found to be correct and complete, the assessing authority may summarily make an assessment on that basis. Sub-section (12) provides that "after the close of the year or at the completion of the works contract and on receipt of final statement of accounts and return, if the tax on purchases is found to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a contractor who had not opted to this alternate method of taxation cannot complain against the said sub-sections, for he is in no way affected by them. Nor can the contractor who has opted to the said alternate method of taxation, complain. Having voluntarily, and with the full knowledge of the features of the alternate method of taxation, opted to be governed by it, a contractor cannot be heard to question the validity of the relevant subsections or the rules. Sub-sections (8), (11) and (12) of Section 7 are incidental and ancillary to sub-sections (7) and (7-A) and cannot equally be faulted. Secondly, it is true that the goods transferred in the course of execution of the works contract may be chargeable at different rates under different Schedules appended to the Kerala Act; it may also be that some of them may be "declared goods", the levy of tax upon which is subject to certain restrictions specified in Sections 14 and 15 of the Central Sales Tax Act; it may also be that sale of some of the goods may also be subject to Central sales tax. It must yet be remembered that the method of taxation introduced by sub-sections (7) and (7-A) is in the nature of composition of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislature, as has been held in R.K. Garg v. Union of India [(1981) 4 SCC 675 : 1982 SCC (Tax) 30] : (SCC pp. 690-91, para 8) "... laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J. that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. *** The court must always remember that 'legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to law. Now, coming to sub-rule (2), it is equally applicable to all the contractors whether they are governed by Section 5(1)(iv) or by sub-section (7) or (7-A) of Section 7. What the subrule says is that wherever payment is made by the awarder to the contractor, "the awarder shall withhold an amount equal to the tax due" and remit the same to the assessing authority. It is evident that sub-rule (2) does not provide for deduction of tax at source like the one provided by Section 194-C of the Income Tax Act, 1961. Sub-rule (2) merely says that where tax is due from a contractor, the awarder shall withhold an amount equal to the tax due while making payment to the contractor. In the case of a contractor who has not opted for the alternate method of taxation and is governed by Section 5(1)(iv), this sub-rule means that where tax is due from him according to law and the awarder is apprised of the said fact, the awarder comes under an obligation to deduct the amount equal to the tax due and remit it to the assessing authority. It needs to be emphasised that the sub-rule speaks of "tax due". Of course, so far as the contractor who has opted for the alternate method of taxation unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved or receivable by him in respect of such works contract executed by him in that year in the State', shall be deemed to have been substituted with effect from the first day of April, 1988; (b) for the words, brackets and figure, 'at the rates specified in the corresponding entries in column (4) of the said Schedule', the words, 'at the rate of four per cent', shall be substituted;" [Ed.: Considering this amendment by S. 8(13)(iii) of Karnataka Act 7 of 1997 [see 106 STC at p. 50] amended clause (i) of sub-section (6) may possibly read to the effect: "(6)(i) Notwithstanding anything contained in Section 5-B, but subject to such conditions and in such circumstances as may be prescribed, the Assessing Authority of the area may, if a dealer liable to tax under Section 5-B so elects, accept in lieu of the amount of tax payable by him during the year under this Act, by way of composition an amount on the total consideration for the works contracts received or receivable by him in respect of such works contract executed by him in that year in the State in respect of works contract specified in column (2) of the Sixth Schedule at the rate of four per cent."] 9. The constitutional v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a ((1997) 2 SCC 183 and contended that the question was no longer res integra and the validity of sub-section 6 of Section 17 as amended must be upheld. As to the retrospective operation of the amended provision, it was submitted that the legislature had competence not only to enact a law prospectively, but also retrospectively, subject to its being consistent with the constitutional provisions. It was submitted that the rights of the petitioners guaranteed under Article 14 and 19 were not breached at all. In fact the legislature always intended to levy tax on total consideration of works contract so far as assessment under the scheme of composition was concerned, and for this he relied upon the Budget speech of the Finance Minister wherein a reference was made to the levy at an average rate of 2% on the total turnover in lieu of all taxes payable under the Act. The legislative intent was not truly reflected in the amendment effected in the Act which gave rise to some controversy on the subject. To clarify and to give effect to the legislative intent, a circular was issued by the Commissioner but the same was quashed by the High Court. In these circumstances the State was left with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of Section 7 is optional. The subsections expressly provide that the method of taxation provided thereunder is applicable only to a contractor who elects to be governed by the said alternate method of taxation. There is no compulsion upon any contractor to opt for the method of taxation provided by sub-section (7) or sub-section (7A). It is wholly within the choice and pleasure of the contractor. If he thinks it is beneficial for him to so opt, he will opt; otherwise, he will be governed by the normal method of taxation provided by Section 5(1)(iv). Sub-section (8) provides that the option to come under sub-section (7) or (7-A) has to be exercised by the contractor 'either by an express provision in the agreement for the contract or by an application to the assessing authority to permit him to pay the tax in accordance with any of the said sub-sections'. In these circumstances, it is evident that a contractor who had not opted to this alternate method of taxation cannot complain against the said sub-sections, for he is in no way affected by them. Nor can the contractor who has opted to the said alternate method of taxation, complain. Having voluntarily, and with the full knowledg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned sub-sections for ascertaining the tax payable under Section 5(1)(iv) of the Act cannot be said to be beyond the legislative competence of the State or violative of clause (29-A) of Article 366 either. The Constitution does not preclude the legislature from evolving such alternate, simplified and hassle-free method of assessment of tax payable, making it optional for the assessee. The object of sub-sections (7) and (7-A) is the same as that of Section 5(1)(iv); it is only that they follow a different route to arrive at the same destination." 16. We are of the considered view that principles laid down by this Court in the aforesaid decision squarely apply to the facts of this case having regard to the similarity of the provisions in the two Acts. We therefore find ourselves in complete agreement with the High Court and hold that subsection (6) of Section 17 of the Karnataka Sales Tax Act is constitutionally valid and the challenge on the ground of lack of legislative competence of the State Legislature must be repelled. 17. Learned counsel then submitted that even while evolving a simplified method for assessment of tax, such as the scheme of composition in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rection. The appellants are therefore not prejudiced in any manner whatsoever. 18. Lastly, counsel submitted that while considering the question of retrospectivity, the High Court has passed its judgment on an erroneous assumption of facts, namely that the assessments so far made were on the basis of total consideration. The learned counsel submitted that this was not factually correct. We have perused the judgment and we find that though the submission of the counsel for the State to this effect was noticed, the judgment of the High Court is not based on this assumption. The judgment of the High Court would not have been different even if the fact was otherwise. 19. Mr S.S. Javali, learned Senior Advocate appearing for the appellants in Civil Appeals Nos. 7575-77 of 1999 submitted that the appellants had opted under the composition scheme and enjoyed the benefit for almost 9 years. It would be unreasonable to relegate them to the same position that they occupied before they exercised the option for assessment under the composition scheme. He submits that considerations of equity must persuade this Court to pass an appropriate direction so that the assessments made on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As already noticed, the relevant assessment year in question is 2002-2003 (ending on 31-3-2003) and the assessee if it elected to compound the tax for this year, it was required to submit the application as provided under Rule 8-B(1) of the Rules. The amended provisions of sub-section (7) of Section 17 were given effect to from 1-4-2002. In view of the restriction imposed under the amended provision, the assessing authority could not have permitted the appellant Company to elect to pay the tax under Section 17(6) of the Act, since admittedly the appellant received the goods by way of stock transfers from outside the State for the purpose of using such goods in the execution of works contract. Therefore, the first question of law raised by the appellant has been rightly answered against the assessee. 17. The language used in sub-section (7) of Section 17 is very clear. It is to the effect that if a dealer purchases or receives goods from outside the State for execution of works contract within the State it is not entitled to the benefit of composition in terms of sub-section (6) of Section 17 and undisputedly, the appellant has received the goods by way of stock transfer. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed with respect to Article 14 of the Constitution. We are unable to accede our concurrence to the decision in Maruthi Construction's case as the orders were passed without considering the ratio laid down by the Apex Court in Builders Association's case rendered in respect of Kerala General Sales Tax Act and followed in Mycon Construction's case, wherein the challenge to the compounding provision under the Karnataka Act was challenged and negated holding that the compounding scheme introduced is only an option and that therefore cannot be put to challenge. In Mycon Construction's case, the challenge to retrospectivity was also turned down. Though the ratio laid down in Builders Association's case was with reference to the composition scheme, yet, the fact that there is no compulsion for any dealer to come under the scheme, was not considered. Further, the judgments relating to derivation of the object of the provisions have not been considered. Therefore, the judgment in Maruti Construction's case is per incuriam. 106. That apart, in the said judgment, the Andhra Pradesh High Court did not consider the object of such provision, but struck down the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opt different modes of assessment. A taxing statute may contravene Article 14 of the Constitution if it seeks to impose on the same class of property, persons, transactions or occupations similarly situate; incidence of taxation, which leads to obvious inequality. A taxing statute is not, therefore, exposed to attack on the ground of discrimination merely because different rates of taxation are prescribed for different categories of persons, transactions, occupations or objects. 15. It is for the legislature to determine the objects on which tax shall be levied, and the rates thereof. The Courts will not strike down an Act as denying the equal protection of laws merely because other objects could have been, but are not, taxed by the legislature: Raja Jagannath Baksh Singh v. State of Uttar Pradesh [(1963) 1 SCR 220]. The same rule has been accepted by the Courts in America." 108. R.K. Garg v. Union of India [(1981) 4 SCC 675 : 1982 SCC (Tax) 30]: "7. Now while considering the constitutional validity of a statute said to be violative of Article 14, it is necessary to bear in mind certain well established principles which have been evolved by the courts as rules of guidance in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on can be seen to be the path to judicial wisdom and institutional prestige and stability." The Court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry"; "that exact wisdom and nice adaption of remedy are not always possible" and that "judgment is largely a prophecy based on meagre and uninterpreted experience". Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Roig Refining Company [94 L Ed 381 : 338 US 604 (1950)] be converted into tribunals for relief from such crudities and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "does not speak of general order of exemption as the power to grant exemption is related to a class of dealers or goods and that too subject to restrictions and conditions as may be prescribed. So there could be no general order of exemption and hence the need for specific order in favour of the petitioner is quite obvious". On this interpretation the High Court held that the appellant has to first establish that he had set up an industry in the State which conforms to the intent of 1971 order and thereafter ask for an exemption and that on being satisfied the government will have to make an order of exemption under Section 5 of the General Sales Tax Act. We are unable to agree with this reasoning of the learned Judges on the interpretation of Section 5 of the General Sales Tax Act. We are of the view that the High Court was in error in thinking that the exemption order should be specific in favour of the appellant. The exemption as can be seen from the provisions of Section 5 of the General Sales Tax Act could be in respect of any class of dealers or any goods or class or description of goods. There could be an exemption to an individual also but the power of exemption is not rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate to secure a social order for the promotion of welfare of the people.- (1) The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life. (2) The State shall, in particular, strive to minimise the inequalities in income, and endeavour to eliminate inequalities, in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations"." 111. Gannon Dunkerley and Co. v. State of Rajasthan [(1993) 1 SCC 364 at page 397]: "50. A question has been raised whether it is permissible for the State Legislature to levy tax on deemed sales falling within the ambit of Article 366(29-A)(b) by prescribing a uniform rate of tax for all goods involved in the execution of a works contract even though different rates of tax are prescribed for sale of such goods. The learned counsel for the contractors have urged that it would not be permissible to impose two different rates of tax in respect of sale of the same article, one rate when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o impose a tax on such a transfer (deemed sale) which constitutes a sale in the course of inter-State trade or commerce or a sale outside the State or a sale in the course of import or export. (2) The provisions of Sections 3, 4 and 5 and Sections 14 and 15 of the Central Sales Tax Act, 1956 are applicable to a transfer of property in goods involved in the execution of a works contract covered by Article 366(29-A)(b). (3) While defining the expression 'sale' in the sales tax legislation it is open to the State Legislature to fix the situs of a deemed sale resulting from a transfer falling within the ambit of Article 366(29-A)(b) but it is not permissible for the State Legislature to define the expression 'sale' in a way as to bring within the ambit of the taxing power a sale in the course of inter-State trade or commerce, or a sale outside the State or a sale in the course of import and export. (4) The tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract falling within the ambit of Article 366(29-A)(b) is leviable on the goods involved in the execution of a works contract and the value of the goods which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Equipments and Anodes Manufacturing Co. Ltd. v. Union of India [1993 SCC OnLine Mad 467 : (1994) 207 ITR 566 at page 573]: "8. We may now make a brief reference to the decisions relied on by learned counsel for the respondents. In N. Takin Roy Rymbai's case, [1976] 103 ITR 82 (SC), the constitutional validity as well as classification for purpose of exemption from tax between the income of a member of a Scheduled Tribe accruing or arising from any source in a specified area and income of such a person from a source outside such area, came to be considered. In that connection, the Supreme Court pointed out that there is a wide discretion in the matter of classification for taxation purposes and there is freedom to select and classify goods, properties, which should be subjected to tax and which should not be and so long as that classification is made within that wide and flexible range and does not transgress the principles of the doctrine of equality, such classification is not vulnerable on the ground of discrimination merely because it taxes or exempts from tax some incomes or objects and not others. The Supreme Court further laid down that a mere fact that a tax falls more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for quick realisation of the stamp duty. Hence it is well within the power of the State Legislature vide Entry 63 of List II read with Entry 44 of List III of the Seventh Schedule to the Constitution. 19. It is well settled that stamp duty is a tax, and hardship is not relevant in construing taxing statutes which are to be construed strictly. As often said, there is no equity in a tax vide CIT v. V.MR.P. Firm Muar [AIR 1965 SC 1216] . If the words used in a taxing statute are clear, one cannot try to find out the intention and the object of the statute. Hence the High Court fell in error in trying to go by the supposed object and intendment of the Stamp Act, and by seeking to find out the hardship which will be caused to a party by the impugned amendment of 1998. 21. It has been held by a Constitution Bench of this Court in ITO v. T.S. Devinatha Nadar [AIR 1968 SC 623] (vide AIR paras 23 to 28) that where the language of a taxing provision is plain, the court cannot concern itself with the intention of the legislature. Hence, in our opinion the High Court erred in its approach of trying to find out the intention of the legislature in enacting the impugned amendment to the Stam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defer to the wisdom of the legislature unless it enacts a law about which there can be no manner of doubt about its unconstitutionality. 59. In the light of the above observations, the impugned amendment is clearly constitutional. The amendment was obviously made to plug a loophole in the Stamp Act so as to prevent evasion of stamp duty, and for quick collection of the duty. There are other statutes e.g. the Income Tax Act in which there are provisions for deduction at source, advance tax, etc. which aim at quick collection of tax, and the constitutional validity of these provisions have always been upheld. 67. Hence if two views are possible, one making the provision in the statute constitutional, and the other making it unconstitutional, the former should be preferred vide Kedar Nath Singh v. State of Bihar [AIR 1962 SC 955]. Also, if it is necessary to uphold the constitutionality of a statute to construe its general words narrowly or widely, the court should do so vide G.P. Singh's Principles of Statutory Interpretation, 9th Edn., 2004, p. 497. Thus the word "property" in the Hindu Women's Right to Property Act, 1937 was construed by the Federal Court in Hindu Wome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stability.' The court must always remember that 'legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry'; 'that exact wisdom and nice adaptation of remedy are not always possible' and that 'judgment is largely a prophecy based on meagre and uninterpreted experience'. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secy. Of Agriculture v. Central Roig Refining Co.[94 L Ed 381 : 338 US 604 (1949)] , be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. We have recently held in Govt. of A.P. v. P. Laxmi Devi [(2008) 4 SCC 720 : JT (2008) 2 SC 639], that the court should exercise judicial restraint while judging the constitutional validity of statutes. In our opinion, the same principle also applies when judging the constitutional validity of delegated legislation and here also there should be judicial restraint. There is a presumption in favour of the constitutionality of statutes as well as delegated legislation, and it is only when there is a clear violation of a constitutional provision (or of the parent statute, in the case of delegated legislation) beyond reasonable doubt that the court should declare it to be unconstitutional." 116. From the above judgments, the following principles can be discerned: 1. States can evolve different mechanisms to calculate the turnover involved in the works contract for the purpose of taxation. The States are empowered to fix a uniform rate for various goods involved in the execution of the works contract. 2. The legislature in fiscal matters, enjoys a greater latitude and must be permitted to experiment. The presumption is always in favour of the constitutionality of a provision and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tness of the tax or enter upon the realm of legislative policy. 8. There is a wide discretion in the matter of classification for taxation purposes and there is freedom to select and classify goods / properties, which should be subjected to tax and which should not be. As long as that classification does not transgress the principles of the doctrine of equality, such classification is not vulnerable on the ground of discrimination merely because it taxes or exempts from tax some incomes or objects and not others. A mere fact that a tax falls more heavily on some in the same category, by itself, is no ground to render the law invalid. 9. Every legislation is an experiment in achieving certain desired ends and trial and error method is inherent in every such experiment, laws relating to economic activities should be viewed with greater latitude than laws touching civil rights, that the constitutionality of a judgment must be presumed and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. The courts must always remember that economic mechanisms are complex, sensitive and directed towards practical problems. Eco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red from outside the state, the works contractor would stand disqualified, and thus, it is "excessive and disproportionate and suffers from manifest arbitrariness". Adding further, it was submitted that the impugned amendment is irrational inasmuch as it denies the benefit, even if the entire works contract was executed by using goods procured within the state. However, if for the purpose of trading a works contractor procures material from outside the state even then the works contractor would stand disqualified. It was contended that the classification is unreasonable, disproportionate, manifestly arbitrary not only because of the discrimination but also for the reason that it seeks to give a retrospective effect, thereby the provision affects their right to carry on any occupation, trade or business and hence, falls foul of Article 19 (1) (g). 119. The following judgments are relied upon by the counsels for the petitioners to buttress their contention that the impugned provision is arbitrary, discriminative and unreasonable. 120. Harbilas Raj Bansal vs. State of Punjab and another [(1996) 1 Supreme Court Cases 1]: "13. The provisions of the Act, prior to the amendment, were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature. Thus, in Sural Mall Mohta & Co. vs. A.V. Visvanatha Sastri (AIR 1954 SC 545) this Court struck down Section 5 (4) of the Taxation on Income (Investigation Commission) Act, 1947 on the ground that the procedure prescribed was substantially more prejudicial and more drastic to the assessee than the procedure contained in the Income Tax Act, 1922. Section 5 (4) of the aforesaid Act was thus struck down as a piece of discriminatory legislation offending against the provisions of Article 14 of the Constitution of India. 21. The object sought to be achieved by the third proviso to Section 254 (2-A) of the Income Tax Act is without doubt the speedy disposal of appeals before the Appellate Tribunal in cases in which a stay has been granted in favour of the assessee. But such object cannot itself be discriminatory or arbitrary, as has been felicitously held in Nagpur Development Trust vs. Vithal Rao (1973) 1 SCC 500, as follows: (SCC p.506, para 26: SCR p.47) '26. It is now well settled that the State can make a reasonable classification for the purpose of legislation. It is equally well settled that the classification in order to be reasonable must satisfy two tests; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts bring to the notice of this court the existence of any legally tenable purpose that could be achieved by the impugned provision. 44. In the circumstances, we are of the opinion that the impugned provision is violative of Article 14 of the Constitution of India and is therefore required to be declared unconstitutional." 124. We have already held that the above judgment is not applicable as it is in per incuriam. The earlier judgments of the Apex Court on the object of the composition scheme were not considered. Further, there is no discussion on the provisions of the Act and no attempt was made by the court to discern the object and the only reason given was that no counter affidavit was filed by the State specifying the legitimate purpose of such enactment. In the present case, counter has been filed giving reasons, which have been accepted by us. 125. Jain Exports Private Limited v. Union of India [1991 AIR 1721 SC] (Article 14): "2. The State Chemicals and Pharmaceuticals Corporation imported caustic soda under the import licence, duty on caustic soda was payable at the rate of 92%. The Central Government granted exemption to the importer under Section 25(2) of the Act p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry discretionary power is not necessarily discriminatory. According to the Constitutional Law of India, by H.M. Seervai, 4th Edn., p. 546, equality is not violated by mere conferment of discretionary power. It is violated by arbitrary exercise by those on whom it is conferred. This is the theory of "guided power". This theory is based on the assumption that in the event of arbitrary exercise by those on whom the power is conferred, would be corrected by the courts. This is the basic principle behind the enabling provisions which are incorporated in Articles 16(4-A) and 16(4-B). Enabling provisions are permissive in nature. They are enacted to balance equality with positive discrimination. The constitutional law is the law of evolving concepts. Some of them are generic, others have to be identified and valued. The enabling provisions deal with the concept, which has to be identified and valued as in the case of access vis-à-vis efficiency which depends on the fact situation only and not abstract principle of equality in Article 14 as spelt out in detail in Articles 15 and 16. Equality before the law, guaranteed by the first part of Article 14, is a negative concept while the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the incidence of tax falls. Hence, we are constrained to hold that the charging provision under Section 4-I, insofar as it fails to prescribe the taxable event and where the incidence fall, fails in its purport and in the absence of an explicit charge laid in clear terms, the Section cannot be enforced. Even otherwise, the discrimination in the classification and the arbitrary character of the rate of tax levy therein are violative of Article 14 of the Constitution of India. Entry 62 List II of VII Schedule to the Constitution of India provides for levy of tax on entertainment as a concept, which is a general term and not a legal term. Hence, being a subject of pleasurable occupation of the senses, which occupies the attention of the viewer agreeably, with common content of entertainment in cable TV and DTH service, we do not find any rationality in differentiating the self-same taxable event to a differential tax treatment; consequently, we uphold the contention of the petitioners that the classification and differential treatment in the tax structure is offensive of Article 14 of the Constitution. Hence, even though we have held that by reason of the imperfections pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along been treated in the same manner as the income of other salaried officers. We not know under what circumstances the notifications dated 5-6-1890 and 21-3-1922, referred to earlier, came to be issued. But they are insufficient to prove a well established legislative practice. At the time those notifications were issued the power of the legislature to grant or withhold any exemption from tax was not subject to any constitutional limitation. Hence the validity of the impugned provisions cannot be tested from what our legislatures or governments did or omitted to do before the Constitution came into force. If that should be considered as a true test then Article 13(1) would become otiose and most, if not all, of our constitutional guarantees would lose their content. Shri Setalvad, learned counsel for the respondent is justified in his comment that classification based on past legislative practice and history does not mean that because in the past the legislature was enacting arbitrary laws it could do so now. 14. It was the contention of the learned Solicitor-General that exemption from income tax was given to members of certain scheduled tribes due to their economic and social ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccept the contention that the words mentioned above are not severable, from the rest of the provision in which they appear. They are easily severable. Taking into consideration the reasons which persuaded the legislature to grant the exemption in question we have no doubt that it would have granted that exemption even if it was aware of the fact that it was beyond its competence to exclude the government servants from the exemption in question." In this case, exemption was given to members of schedule tribes who were not government servants. The Apex Court did not find any difference between a government servant and a private employee and hence, holding that there was no rational difference, struck down the provision imposing such limitation. 130. Ayurveda Pharmacy v. State of T.N. [(1989) 2 SCC 285 : 1989 SCC (Tax) 273 at page 288]: "6. We think that the appeals are entitled to succeed. Item 95 mentions the rate of 7 per cent (now 8 per cent) as the tax to be levied at the point of first sale in the State. Item 135 provides a rate of 30 per cent in respect of Arishtams and Asavas at the point of first sale. We see no reason why Arishtams and Asavas should be treated differentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parations but are also capable of being used as ordinary alcoholic beverages, they will fall under the (Central) Act and will be liable to duty under Item 1 of the Schedule at the rate of Rs 17.50 per gallon of the strength of London proof spirit. On a consideration of the material that has been placed before us, therefore, the only conclusion to which we can come is that these preparations are medicinal preparations according to the standard Ayurvedic text books referred to already, though they are also capable of being used as ordinary alcoholic beverages.... They cannot however be taxed under the various Excise Acts in force in the States concerned in view of their being medicinal preparations which are governed by the Act." We are of opinion that similar considerations should apply to the appeals before us. The two preparations, Arishtams and Asavas, 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. On this gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their friends and/or relatives located outside the country. It is the petitioner's case that the oxygen concentrator was shipped to him by his nephew who is located in New York, United States of America. ....... 47. One cannot quibble with the submissions made hereinabove on behalf of the State, as these are substance, in the nature of principles enunciated, time and again by the Courts. The exceptions to these principles have already been alluded to. To reiterate very briefly, a taxing statute can be tested on the anvil of Article 14, inter alia, on the ground that the justification for classification proffered by the State is artificial and unreasonable. [See N. Venugopala Ravi Varma Rajah v. Union of India, (1969) 1 SCC 681] 48. Having found so, in our view, a declaratory relief can be accorded, to the effect, that imposition of IGST on oxygen concentrators, imported as gifts, i.e., free of cost, for personal use, is violative of Article 14 of the Constitution on the ground that an artificial, unfair and unreasonable distinction has been drawn between persons, who are similarly circumstanced as the petitioner and those who import oxygen concentrators through a canalizi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rections were given to float State-wise tenders. The impugned G.O.Ms. No. 57 does not also contain any reason to come to the conclusion that zone-wise tenders will be more beneficial to the Government than State-wise tenders, as compared to G.O.Ms. No. 264 especially when G.O.Ms. No. 264 was confirmed by the Division Bench of this Court, vide judgment dated 25.04.2014 in W.A. Nos. 574 and 776 of 2013 accepting the stand and reasoning put forth by the Government and the same was also affirmed by the Supreme Court vide order dated 13.04.2015 in SLP No. 6375 of 2015. Further, the impugned G.O.Ms. No. 57 has been issued within a short span of time i.e., within six working days and there is no nexus corresponding to the object sought to be achieved and the decision to introduce Zonal level tender and the exclusion of egg suppliers from participation cannot be termed to be fair, just and legally valid. That apart, the qualifying conditions for deciding the eligible tenderers and other stipulations mentioned in the consequential tender notification dated 20.08.2018 issued pursuant to G.O.Ms. No. 57, are neither supportive of the alleged reasoning i.e., benefiting poultry farmers, nor have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and violating Articles 14, 19(1) (g), 301, 304 and 305 of the Constitution. The case cannot come to the aid of the petitioners as it is not a fiscal matter and that the difference sought to be made between egg manufacturer and supplier was rejected. 133. Star Television News Ltd. v. Union of India [2009 SCC OnLine Bom 2162 : (2009) 317 ITR 66 : (2009) 225 CTR 140]: "26. In our opinion, the choice of March 31, 2008, as the cut-off date is not supported by any rational reasons. From the statistics of the Income-tax Department itself it is indisputable that the cut-off date of March 31, 2008, for disposal of all applications filed prior to June 1, 2007, were known to be illusory, whimsical, capricious and so wide off the reasonable mark as to make it palpably arbitrary. The arbitrariness of the choice of March 31, 2008, as the cut-off date is even more apparent when it is noticed that the Settlement Commission is not being wound up, but on the contrary even after the amendments made by the 2007 Act came into effect on June 1, 2007, the Act permits the filing of fresh applications before the Settlement Commission-a clear recognition by Parliament that the assumptions made by the Wan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fixation of date was capricious and/or whimsical. The Legislature having statistics before it of the inability of the machinery created by it to dispose of the applications, nevertheless chose to fix the date which was unrealistic and incapable of being adhered to by the machinery created by it. In our opinion, this would be an arbitrary exercise of power and consequently would attract the mandate of article 14 of the Constitution of India if it is read as mandatory. 44. Considering the discussion and findings, the fixing of cut-off date under section 245D(4A)(1), the abatement under section 245HA(1)(iv), making available the confidential information under section 245HA(3) of the Act, as inserted by the 2007 Act, would be clearly ultra vires the Constitution and are liable to be struck down as null and void ab initio. It is, however, open to this court instead of striking down the impugned provision in its entirety to read down such provision in such a manner so as to set at naught the unconstitutional portion. 47. In Arun Kumar v. Union of India, [2006] 286 ITR 89 (SC) the hon'ble Supreme Court had to consider the validity of rule 3 of the Income-tax Rules as amended in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, read in such a harmonious manner, would mean that the Settlement Commission must fulfil its mandatory statutory duty in disposing of such applications as are referred to in section 245D(4A)(i) by the date specified therein except where prevented from doing so due to any reason attributable on the part of the applicant, and that an application in respect of which the Settlement Commission has been prevented from fulfilling the aforesaid mandatory statutory duty due to any reasons attributable on the part of the applicant shall abate on the specified date under section 245HA(1)(iv). In this manner both section 245D(4A)(i) and section 245HA(1)(iv) will have applicability, meaning and effect. We may also clarify that the expression "reasons attributable" should be reasonably construed. While so dealing, the Settlement Commission shall also to consider whether in the petition before this court the petitioner had averred that the proceedings were delayed not on account of any reason attributable to him, and whether the State had denied the same. If there be no denial then to consider that circumstances in favour of the petitioner. From the above discussion having arrived at a concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier. This recourse has been taken in order to avoid holding the provisions as unconstitutional. Having so read, we would have to read Section 245-HA(1)(iv) to mean that in the event the application could not be disposed of for any reasons attributable on the part of the applicant who has made an application under Section 245-C. Consequently only such proceedings would abate under Section 245-HA(1)(iv). Considering the above, the Settlement Commission has to consider whether the proceedings had been delayed on account of any reasons attributable on the part of the applicant. If it comes to the conclusion that it was not so, then to proceed with the application as if not abated. Respondent 1 if desirous of early disposal of the pending applications, to consider the appointment of more Benches of the Settlement Commission, more so at the Benches where there is heavy pendency like Delhi and Mumbai." 135. Union of India v. N.S. Rathnam [(2015) 10 SCC 681 : 2015 SCC OnLine SC 666]: "13. It is, thus, beyond any pale of doubt that the justiciability of particular notification can be tested on the touchstone of Article 14 of the Constitution. Article 14, which is treated as basic fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and 3 to 6 and the State Government had not accepted such recommendations only on the ground that the constructions made by the appellants were of 'B' or 'C' class and could not be easily amalgamated into the developed colony which was proposed to be built. There is no averment in the pleadings of the respondents stating the basis of classification of structures as 'A', 'B' and 'C' class, nor is it stated how the amalgamation of all 'A' class structures was feasible and possible while those of 'B' and 'C' class structures was not possible. It is not the case of the State Government and also not argued before us that there is no policy decision of the Government for excluding the lands having structures thereon from acquisition under the Act. Indeed, as noted earlier, in these cases the State Government has accepted the request of some landowners for exclusion of their properties on this very ground. It remains to be seen whether the purported classification of existing structures into 'A', 'B' and 'C' class is a reasonable classification having an intelligible differentia and a rational basis germane to the purpose. If the State Government fails to support its action on the touc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtantly, there is a rider operating on this wide power to tax and even discriminate in taxation that the classification thus chosen must be reasonable. The extent of reasonability of any taxation statute lies in its efficiency to achieve the object sought to be achieved by the statute. Thus, the classification must bear a nexus with the object sought to be achieved. (See Moopil Nairv. State of Kerala [AIR 1961 SC 552] , East India Tobacco Co. v. State of A.P. [AIR 1962 SC 1733] , N. Venugopala Ravi Varma Rajah v. Union of India [(1969) 1 SCC 681] , Director of Inspection Investigation v. A.B. Shanthi [(2002) 6 SCC 259] and Associated Cement Companies Ltd. v. State of A.P. [(2006) 1 SCC 597] )" (emphasis in original) ..... 18. We are conscious of the principle that the difference which will warrant a reasonable classification need not be great. However, it has to be shown that the difference is real and substantial and there must be some just and reasonable relation to the object of legislation or notification. Classification having regard to microscopic differences is not good. To borrow the phrase from the judgment in Roop Chand Adlakha v. DDA [1989 Supp (1) SCC 116 : 1989 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the decision of this Court in Hindustan Steels Ltd., Rourkela v.A.K. Roy[(1969) 3 SCC 513 : AIR 1970 SC 1401 : (1970) 3 SCR 343 : (1970) 1 LLJ 228] where this Court after quashing the order of reinstatement proceeded to examine whether the party should be left to pursue further remedy. Other alternative was to remand the matter that being a case of an industrial dispute to the Tribunal. It is possible that on such a remand, this Court further observed, that the Tribunal may pass an appropriate order but that would mean prolonging the dispute which would hardly be fair to or conducive to the interest of the parties. This Court in such circumstances proceeded to make an appropriate order by awarding compensation. We may adopt the same approach. Keeping in view the nature of misconduct, gravity of charge and no consequential loss, a penalty of withholding his increments with future effect will meet the ends of justice. Accordingly, two increments with future effect of the appellant be withheld and he must be paid 50 percent of the arrears from the date of termination till the date of reinstatement." 137. Ranjit Thakur v. Union of India [(1987) 4 SCC 611 : 1988 SCC (L&S) 1]: "Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n judicial review." 138. On the contrary, it has been submitted by the learned Additional Advocate General that there is a reasonable nexus between the object and the classification of the works contracts, which evident from the scheme of the CST Act and the counter filed by the State illustrates the object to be achieved by the State by imposing such condition. It was also submitted that since the classification is reasonable, satisfies the twin test and hence it cannot be termed as discriminative or arbitrary. The State has relied upon the following judgments to defend the legislation on being non-violative of Article 14 and to emphasize the principles to be considered. 139. R.K. Garg v. Union of India [(1981) 4 SCC 675 : 1982 SCC (Tax) 30]: "6. That takes us to the principal question arising in the writ petitions namely, whether the provisions of the Act are violative of Article 14 of the Constitution. The true scope and ambit of Article 14 has been the subject-matter of discussion in numerous decisions of this Court and the propositions applicable to cases arising under that Article have been repeated so many times during the last thirty years that they now sound platitudin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pass the test of permissible classification under Article 14 is that the classification must not be "arbitrary, artificial or evasive" but must be based on some real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the legislature. The question to which we must therefore address ourselves is whether the classification made by the Act in the present case satisfies the aforesaid test or it is arbitrary and irrational and hence violative of the equal protection clause in Article 14. ...... 17. We may now proceed to consider the constitutional validity of the Act in the light of the above discussion as regards the scope and effect of its various provisions. It is obvious that the Act makes a classification between holders of black money and the rest and provides for issue of Special Bearer Bonds with a view to inducing persons belonging to the former class to invest their unaccounted money in purchase of Special Bearer Bonds, so that such money which is today lying idle outside the regular economy of the country is canalised into productive purposes. The object of the Act being to unearth black money for being utilised for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Act is rational and intelligible and the operation of the provisions of the Act is rightly confined to persons in possession of black money. 18. It was then contended that the Act is unconstitutional as it offends against morality by according to dishonest assessees who have evaded payment of tax, immunities and exemptions which are denied to honest tax payers. Those who have broken the law and deprived the State of its legitimate dues are given benefits and concessions placing them at an advantage over those who have observed the law and paid the taxes due from them and this, according to the petitioners, is clearly immoral and unwarranted by the Constitution. We do not think this contention can be sustained. It is necessary to remember that we are concerned here only with the constitutional validity of the Act and not with its morality. Of course, when we say this we do not wish to suggest that morality can in no case have relevance to the constitutional validity of a legislation. There may be cases where the provisions of a statute may be so reeking with immorality that the legislation can be readily condemned as arbitrary or irrational and hence violative of Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x evaders in possession of black money. The legislature had obviously only two alternatives: either to allow the black money to remain idle and unproductive or to induce those in possession of it to bring it out in the open for being utilised for productive purposes. The first alternative would have left no choice to the Government but to resort to deficit financing or to impose a heavy dose of taxation. The former would have resulted in inflationary pressures affecting the vulnerable sections of the society while the latter would have increased the burden on the honest taxpayer and perhaps led to greater tax evasion. The legislature therefore decided to adopt the second alternative of coaxing persons in possession of black money to disclose it and make it available to the Government for augmenting its resources for productive purposes and with that end in view, enacted the Act providing for issue of Special Bearer Bonds. It may be pointed out that the idea of issuing Special Bearer Bonds for the purpose of unearthing black money was not a brainwave which originated for the first time in the mind of the legislature in the year 1981. The suggestion for issue of Special Bearer Bonds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d serve the purpose in view or not. There are so many imponderables that would enter into the determination that it would be wise for the Court not to hazard an opinion where even economists may differ. The Court must while examining the constitutional validity of a legislation of this kind, "be resilient, not rigid, forward looking, not static, liberal, not verbal" and the Court must always bear in mind the constitutional proposition enunciated by the Supreme Court of the United States in Munn v. Illinois [94 US 13] , namely, "that courts do not substitute their social and economic beliefs for the judgment of legislative bodies". The Court must defer to legislative judgment in matters relating to social and economic policies and must not interfere, unless the exercise of legislative judgment appears to be palpably arbitrary. The Court should constantly remind itself of what the Supreme Court of the United States said in Metropolis Theater Company v. City of Chicago [57 L Ed 730 : 228 US 61 (1912)] : "The problems of government are practical ones and may justify, if they do not require, rough accommodations, illogical it may be, and unscientific. But even such criticism should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 424-25, para 72) "(2). The State, in the exercise of its governmental power, has of necessity to make laws operating differently on different groups or classes of persons within its territory to attain particular ends in giving effect to its policies, and it must possess for that purpose large powers of distinguishing and classifying persons or things to be subjected to such laws. (3). The constitutional command to the State to afford equal protection of its laws sets a goal not attainable by the invention and application of a precise formula. Therefore, classification need not be constituted by an exact or scientific exclusion or inclusion of persons or things. The courts should not insist on delusive exactness or apply doctrinaire tests for determining the validity of classification in any given case. Classification is justified if it is not palpably arbitrary. (4). The principle underlying the guarantee of Article 14 is not that the same rules of law should be applicable to all persons within the Indian territory or that the same remedies should be made available to them irrespective of differences of circumstances. It only means that all persons similarly circumstanced s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in a taxing statute is much greater; and in order to tax something it is not necessary to tax everything. These basic postulates have to be borne in mind while determining the constitutional validity of a taxing provision challenged on the ground of discrimination. 10. The scope for permissible classification in a taxing statute was once again considered in a recent decision of this Court in P.H. Ashwathanarayana Setty v. State of Karnataka [1989 Supp 1 SCC 696] . After a review of earlier decisions, it was stated therein as under: (SCC p. 723, para 79) "It is for the State to decide what economic and social policy it should pursue and what discriminations advance those social and economic policies. In view of the inherent complexity of these fiscal adjustments, 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." (emphasis supplied) 11. In Federation of Hotel and Restaurant Association of India v. Union of India [(1989) 3 SCC 634 : (1989) 178 ITR 97] it was said as under: (SCC p. 659, paras 47 and 48) "...The test could only be one o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 [(1963) 1 SCR 404 : AIR 1962 SC 1733 : (1962) 13 STC 529] ; Vivian Joseph Ferriera v. Municipal Corporation of Greater Bombay [(1972) 1 SCC 70] ; Jaipur Hosiery Mills v. State of Rajasthan [(1970) 2 SCC 26] ." (emphasis supplied) ............. 34. In Hindustan Paper Corporation Ltd. v. Government of Kerala [(1986) 3 SCC 398] a provision granting exemption to government companies and cooperative societies alone for selling forest produce at less than selling price fixed under the Kerala Forest Produce (Fixation of Selling Price) Act, 1978 was held to be constitutionally valid and not violative of Articles 14 and 19(1)(g) of the Constitution of India. It was held that the government or public sector undertakings formed a distinct class. In this conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld to contravene Article 14 if it purports to impose on the same class of property similarly situated an incidence of taxation which leads to obvious inequality. There is no doubt that it is for the legislature to decide on what objects to levy what rate of tax and it is not for the courts to consider whether some other objects should have been taxed or whether a different rate should have been prescribed for the tax. It is also true that the legislature is competent to classify persons or properties into different categories and tax them differently, and if the classification thus made is rational, the taxing statute cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects. But, if in its operation, any taxing statute is found to contravene Article 14, it would be open to courts to strike it down as denying to the citizens the equality before the law guaranteed by Article 14. 19. Let us now turn to the merits of the argument that Section 5(1) contravenes Articles 14 and 19(1)(f). It is urged that since discretion has been left to the State Government to prescribe the multiple without any guidance, the prescrip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies belonging to the described class upon which it is imposed, namely, the companies who are closely-held companies. It cannot be said to be discriminatory. Equal protection cannot be said to be denied by the statute which operates alike on all persons and property similarly situated or by proceedings for the assessment and collection of taxes which follows the course usually pursued in the State. 15. A taxation Act will only be struck down as violative of article 14 of the Constitution of India if there is no reasonable basis behind the classification made by it, or if the same class of property, similarly situated, is subjected to unequal taxation. Taxation will not be discriminatory if, within the sphere of its operation, it affects alike all persons similarly situated. It merely requires that all persons subjected to such legislation shall be treated alike, under like circumstances and conditions, both in the privileges conferred and in the liabilities imposed. (Reliance is placed on Spences Hotel Pvt Ltd. v. State of West Bengal, (1991) 2 SCC 154). The Legislature has jurisdiction and authority to classify property, trade, profession and events for imposition of tax equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft out of the class. But this alone is not sufficient. Differentia must have a rational nexus with the object sought to be achieved by the law. The State, in the exercise of its governmental power, has, of necessity, to make laws operating differently in relation to different groups or classes of persons to attain certain ends and must, therefore, possess the power to distinguish and classify persons or things. It is also recognised that no precise or set formulae or doctrinaire tests or precise scientific principles of exclusion or inclusion are to be applied. The test could only be one of palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience. 48. Classifications based on differences in the value of articles or the economic superiority of the persons of incidence are well-recognised. A reasonable classification is one which includes all who are similarly situated and none who are not. In order to ascertain whether persons are similarly placed, one must look beyond the classification and to the purposes of the law." 144. Kamatchi Lamination (P) Ltd. v. State of Tamil Nadu [1994 SCC OnLine Mad 761 : (1994) 95 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the principles, as evolved by the Supreme Court as stated above, cannot at all be stated to be suffering the vice of arbitrariness, as contemplated under article 14 of the Constitution. Before parting with these cases, I will be failing in my duty if I do not place on record, a word of appreciation as to the valuable assistance rendered by all learned counsel appearing for the petitioners-assessees and learned Additional Government Pleader (Taxes). Mr. C. Natarajan spear-headed the attack in an admirable way, in his own, inimitable style, with clarity and precision, ably assisted, in such an arduous task, by learned counsel M/s. K.M. Vijayan, P. Abboy and R.L. Ramani, among others in particular. Mr. V. Ramachandran, learned Senior Counsel also did his part well in making revelling and intrinsic submissions, on the tangle posed. Mrs. Chitra Venkataraman, learned Additional Government Pleader (Taxes) in her own style made incisive and crisp submissions, in the process of repelling those submissions emerging from the host of learned counsel appearing for the respective petitioners-assessees, befitting the occasion, without causing, in the least, any sort of difficulty for the court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to say that Article 14 provides no further constitutional protection to personal liberty than what is afforded by Article 21. Notwithstanding that its wide general language is greatly qualified in its practical application by a due recognition of the State's necessarily wide powers of legislative classification, Article 14 remains an important bulwark against discriminatory procedural laws. 8. In the present case, the affidavit filed on behalf of the respondent State by one of its responsible officers states facts and figures relating to an increasing number of incidents of looting, robbery, dacoity, nose-cutting and murder by marauding gangs of dacoits in certain areas of the State, and these details support the claim that "the security of the State and public peace were jeopardised and that it became impossible to deal with the offences that were committed in different places in separate courts of law expeditiously". The statement concludes by pointing out that the areas specified in the notification were the "main zones of the activities of the dacoits as mentioned above". The impugned Ordinance having thus been passed to combat the increasing tempo of certain types of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istinguishing the offences grouped together from other offences and that that differentia must have a reasonable relation to the object of the Act as recited in the preamble. A classification on a basis which does not distinguish one offence from another offence or which has no relation to the object of the Act will be wholly arbitrary and may well be hit by the principles laid down by the Supreme Court of the United States in Jack Skinner v. Oklahoma [216 US 535 : L. Ed. 1655]. On the other hand, as I observed in the West Bengal case, it is easy to visualise a situation when certain offences, by reason of the frequency of their perpetration or other attending circumstances, may legitimately call for a special treatment in order to check the commission of such offences. Are we not familiar with gruesome crimes of murder, arson, loot and rape committed on a large scale during communal riots in particular localities and are they not really different from a case of a stray murder, arson, loot or rape in another district which may not be affected by any communal upheaval? Does not the existence of the gangs of dacoits and the concomitant crimes committed on a large scale as mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of the Ordinance, for the State Government is in a better position to judge the needs and exigencies of the State and the court will not lightly interfere with the decision of the State Government. If at any time, however, the State Government classifies offences arbitrarily and not on any reasonable basis having a relation to the object of the Act, its action will be either an abuse of its power if it is purposeful, or in excess of its powers even if it is done in good faith and in either case the resulting discrimination will encounter the challenge of the Constitution and the Court will strike down, not the law which is good, but the abuse or misuse or the unconstitutional administration of the law creating or resulting in unconstitutional discrimination. In this case, however, the facts stated in the affidavit filed on behalf of the State make it abundantly clear that the situation in certain parts of the State was sufficient to add a particularly sinister quality to certain specified offences committed within those parts and the State Government legitimately grouped them together in the notification. The criticism that the State Government included certain offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f judicial restraint. 8. Often times the courts hold that under-inclusion does not deny the equal protection of laws under Article 14. In strict theory, this involves an abandonment of the principle that classification must include all who are similarly situated with respect to the purpose. This under-inclusion is often explained by saying that the legislature is free to remedy parts of a mischief or to recognize degrees of evil and strike at the harm where it thinks it most acute. 9. The courts have recognised the very real difficulties under which legislatures operate - difficulties arising out of both the nature of the legislative process and of the society which legislation attempts perennially to re-shape - and they have refused to strike down indiscriminately all legislation embodying classificatory inequality here under consideration. Mr Justice Holmes, in urging tolerance of under-inclusive classifications, stated that such legislation should not be disturbed by the court unless it can clearly see that there is no fair reason for the law which would not require with equal force its extension to those whom it leaves untouched. See Missouri K. and T. Rly. v. May [(1903) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e imposition of a tax but also as authorising an enactment which prevents the tax imposed being evaded. If it were not to be so read, then the admitted power to tax a person on his own income might often be made infructuous by ingenious contrivances." This decision holds that the said entry can sustain a law made to prevent the evasion of tax. 7. The constitutional validity of the said provision was next questioned on the ground that it violated the doctrine of equality before the law enshrined in Article 14 of the Constitution. Under Article 14, "The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India". But decisions of this Court permitted classification if there was reasonable basis for the differentiation. It was held that what Article 14 prohibited was class legislation and not reasonable classification for the purpose of legislation. Two conditions were laid down for passing the test of permissible classification, namely, (i) the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and (ii) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases of partnership between husband, wife and/or minor children, whether genuine or not, and partnerships between others. In demarcating a group, the net was cast a little wider, but it was necessary, as any further subclassification as genuine and non-genuine partnerships might defeat the purpose of the Act. "14. Learned counsel for the petitioner argued that the restrictions are not reasonable for the following reasons: (1) the husband is made to pay tax on the income which his wife derived from the business, that is, a tax is levied on one person on the income of another; (2) such an imposition not only prevents a husband from taking his wife as a partner in his business but also prevents a wife who has got a business of her own, from taking her husband as a partner in the business; (3) the husband has to pay tax at a rate higher than that he would have to pay if the income of the wife was not added to his income; (4) the same situation is created inter se between a parent and his minor children vis-à-vis their joint business. Learned counsel, therefore, contended that the provisions prevented the honest pooling of resources of the members of a family so intim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. But it may not necessarily be so in a case where the income of the former is not appreciable; even if it is appreciable, he can debit a part of the excess payment to his wife and children. In short, the firm, though registered, would be treated as a distinct unit of assessment, with the difference that, unlike in the case of a registered firm, the entire income of the unit is added to the personal income of the father or the husband, as the case may be. This mode of taxation may be a little hard on a husband or a father in the case of genuine partnership with wife or minor children, but that is offset, to a large extent, by the beneficient results that flow therefrom to the public, namely, the prevention of evasion of income tax, and also by the fact that, by and large, the additional payment of tax made on the income of the wife or the minor children will ultimately be borne by them in the final accounting between them. In these circumstances, we cannot say that the provisions of Section 16(3) of the Act impose an unreasonable restriction on the fundamental rights of the petitioner under Article 19(1)(f) and (g) of the Constitution." In this case, the challenge to classificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutions of local self-governance and also not in State Legislatures and Parliament. So also all the States i.e. other than Haryana have not enacted similar laws, and therefore, it appears that people aspiring to participate in Panchayati Raj governance in the State of Haryana have been singled out and meted out hostile discrimination. The submission has been stated only to be rejected. Under the constitutional scheme there is a well-defined distribution of legislative powers contained in Part XI of the Constitution. Parliament and every State Legislature has power to make laws with respect to any of the matters which fall within its field of legislation under Article 246 read with the Seventh Schedule of the Constitution. A legislation by one of the States cannot be held to be discriminatory or suffering from the vice of hostile discrimination as against its citizens simply because Parliament or the legislatures of other States have not chosen to enact similar laws. Such a submission, if accepted, would be violative of the autonomy given to the Centre and the States within their respective fields under the constitutional scheme. 13. Similarly, legislations referable to different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the challenge under Articles 14 and 19 (1) (g). 150. Chiranjit Lal Chowdhuri v. Union of India [1950 SCR 869 : AIR 1951 SC 41 : (1951) 21 Comp Cas 33]: "8. The only serious point, which in my opinion, arises in the case is whether Article 14 of the Constitution is in any way infringed by the impugned Act. This article corresponds to the equal protection clause of the Fourteenth Amendment of the Constitution of the United States of America, which declares that "no State shall deny to any person within its jurisdiction the equal protection of the laws". Professor Willis dealing with this clause sums up the law as prevailing in the United States in regard to it in these words: "Meaning and effect of the guaranty.- The guaranty of the equal protection of the laws means the protection of equal laws. It forbids class legislation, but does not forbid classification which rests upon reasonable grounds of distinction. It does not prohibit legislation, which is limited either in the objects to which it is directed or by the territory within which it is to operate. 'It merely requires that all persons subjected to such legislation shall be treated alike under like circumstances and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption is always in favour of the constitutionality of an enactment, and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. A clear enunciation of this latter doctrine is to be found in Middleton v. Texas Power and Light Company [248 US 152, 157] in which the relevant passage runs as follows: "It must be presumed that a legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based upon adequate grounds." 20. Article 14 of the Constitution, as already stated, lays down an important fundamental right, which should be closely and vigilantly guarded, but, in construing it, we should not adopt a doctrinaire approach which might choke all beneficial legislation. 64. Article 14 of the Constitution, it may be noted, corresponds to the equal protection clause in the Fourteenth Amendment of the American Constitution which declares that "no State shall deny to any person within its jurisdiction the equal protection of the laws". We have been referred in course of the arguments on this point by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to which the classification is made; and classification made without any substantial basis should be regarded as invalid [Southern Railway Company v. Greene, 216 US 400, 412.] ." 151. East India Tobacco Co. v. State of A.P. [(1963) 1 SCR 404 : AIR 1962 SC 1733 : (1962) 13 STC 529]: "3. On the arguments addressed to us, two questions arise for our determination: (1) Is the impugned Act repugnant to Article 14 for the reason that it singles out Virginia tobacco for taxation? (2) Is the impugned legislation in contravention of Article 286(1)(b) as imposing a tax on sales in the course of export? (1) On the first question the contention of the appellants may be thus stated. All laws must satisfy the requirements of Article 14. Taxation laws are no exception to it. In imposing a tax on the sale of Virginia tobacco and not on other kinds of tobacco the impugned Act is on the face of it discriminatory. It is therefore obnoxious to Article 14 and is void. 5. It is argued for the appellants that to repel the charge of discrimination in taxing only Virginia tobacco, and not the country tobacco, it is not sufficient merely to show that there are differences between the two vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of tax. The decision of the Supreme Court in this field have permitted a State legislature to exercise an extremely wide discretion in classifying property for tax purposes so long as it refrained from clear and hostile discrimination against particular persons or classes." 7. A decision near to the present case on the facts is C. Heisler v. Thomas Colliery Company [260 U.S. 245 : 67 L.Ed. 237]. There the question was whether a law imposing a tax on Anthracite coal and not upon bituminous coal was unconstitutional as violating the equal protection of laws guaranteed by the 14th Amendment to the Federal Constitution. In upholding the validity of the law, Justice Makenna observed as follows: "The fact of competition may be accepted. Both coals, being compositions of carbon are of course capable of combustion and may be used as fuels but under different conditions and manifestations and the difference determines a choice between them a fuels. By disregarding that difference and the greater ones which exist and by dwelling on competition alone, it is easy to erect an argument of strength against the taxation of one and not of the other. But this may not be done. The differences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the challenge to the impugned provision on the basis of economic equality of employees in both sectors is non-existent. Once the stage is reached where the differentiation is rightly made between a public sector company and a private sector company and that too essentially on the ground of economic viability of the public sector company and other relevant circumstances, the argument based on equality does not survive. This is independent of the disparity in the compensation package of employees in the private sector and the public sector. The argument of discrimination is based on initial equality between the two classes alleging bifurcation thereafter between those who stood integrated earlier as one class. This basic assumption being fallacious, the question of any hostile discrimination by granting the benefit only to a few in the same class denying the same to those left out does not arise. 38. Once the impugned provision contained in the newly inserted clause (10-C) of Section 10 of the Income Tax Act, 1961 is viewed in the above perspective keeping in mind the true object of the provision, there is no foundation for the argument that it is either discriminatory or arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 82] relied on by us. Moreover, ITO v. N. Takin Roy Rymbai [(1976) 1 SCC 916 : 1976 SCC (Tax) 143 : (1976) 103 ITR 82] which also related to a provision in Section 10 of Income Tax Act, 1961 itself says as under: (SCC pp. 923-24, paras 29 and 35) "Classification for purposes of taxation or for exempting from tax with reference to the source of the income is integral to the fundamental scheme of the Income Tax Act. Indeed, the entire warp and woof of the 1961 Act has been woven on this pattern. ...Suffice it to say that classification of sources of income is integral to the basic scheme of the 1961 Act. It is nobody's case that the entire scheme of the Act is irrational and violative of Article 14 of the Constitution. Such an extravagant contention has not been canvassed before us. Thus the classification made by the aforesaid sub-clause (a) for purposes of exemption is not unreal or unknown. It conforms to a well-recognised pattern. It is based on intelligible differentia. The object of this differentiation between income accruing or received from a source in the specified areas and the income accuring or received from a source outside such areas is to benefit not only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied. 17. To some extent, the grievance of the petitioner may be justified in this behalf in the plea that when there is a need to get these funds even for the benefit of handicapped persons, that will not be given to such a person only because of the reason that the assured who is a parent/guardian is still alive. This would happen even when the entire premium towards the said policy has been paid. The policy does not have maturity claim. Thus, after making the entire premium for number of years i.e. during the duration of the policy, the amount would still remain with the LIC. That may be so. However, the purpose behind such a policy is altogether different. As noted from the provisions of Section 80-DD as well as from the explanatory memorandum of the Finance Bill, 1998, by which this provision was added, the purpose is to secure the future of the persons suffering from disability, namely, after the death of the parent/guardian. The presumption is that during his/her lifetime, the parent/guardian would take care of his/her handicapped child. 18. Further, such a benefit of deduction from income for the purposes of tax is admissible subject to the conditions mentioned in Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1968) 2 SCR 165 : AIR 1968 SC 658], the Constitution Bench of the Hon'ble Supreme Court held as under : (AIR p. 660, para 8) "8. It is not in dispute that taxation laws must also pass the test of Article 14. That has been laid down by this Court in Kunnathat Thatehunni Moopil Nair v. State of Kerala [Kunnathat Thatehunni Moopil Nair v. State of Kerala, AIR 1961 SC 552]. But as observed by this Court in East India Tobacco Co. v. State of A.P. [East India Tobacco Co. v. State of A.P., AIR 1962 SC 1733], in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others; it is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of Article 14. It is well settled that a State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld to the larger interests of the community or the country as indeed every noble cause claims its martyr." 156. Sakhawant Ali v. State of Orissa [(1955) 1 SCR 1004 : AIR 1955 SC 166]: "9. The contention that the disqualification prescribed in Section 16(1)(ix) violates the fundamental rights of the appellant under Article 14 and Article 19(1)(g) is equally untenable. Article 14 forbids class legislation but does not forbid reasonable classification for the purposes of legislation. That classification however cannot be arbitrary but must rest upon some real and substantial distinction bearing a reasonable and just relation to the things in respect of which the classification is made. In other words, the classification must have a reasonable relation to the object or the purpose sought to be achieved by the impugned legislation. The classification here is of the legal practitioners who are employed on payment on behalf of the municipality or act against the municipality and those legal practitioners are disqualified from standing as candidates for election. The object or purpose to be achieved is the purity of public life, which object would certainly be thwarted if there arose a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guaranteed by Article 14 of the Constitution. 11. The right of the appellant to practice the profession of law guaranteed by Article 19(1)(g) cannot be said to have been violated, because in laying down the disqualification in Section 16(1)(ix) of the Act the Legislature does not prevent him from practising his profession of law but it only lays down that if he wants to stand as a candidate for election he shall not either be employed as a paid legal practitioner on behalf of the municipality or act as a legal practitioner against the municipality. There is no fundamental right in any person to stand as a candidate for election to the municipality. The only fundamental right which is guaranteed is that of practising any profession or carrying on any occupation, trade or business. There is no violation of the latter right in prescribing the disqualification of the type enacted in Section 16(1)(ix) of the Act. If he wants to stand as a candidate for election, it is but proper that he should divest himself of his paid brief on behalf of the municipality or the brief against the municipality in which event there will be certainly no bar to his candidature. Even if it be taken as a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing that is discriminatory is obviously arbitrary, but an arbitrary action need not be discriminative. Similarly, when the classification is found to be reasonable, just because it puts another class at a different pedestal or disadvantageous position would not be a ground to treat it either as arbitrary or warranting interference. Likewise, in evaluating a taxing statute juxtaposing it to the constitutional safeguards and guarantees, the legislature will have more latitude and the presumption of constitutionality of the statute is the norm. All attempts must be made to validate a statute rather than to strike it down. The concept of disproportionality or equity is unknown to taxing law, as a tax is levied in exercise of its sovereign power. The State is empowered to choose its object, subject, persons, goods and the rate of tax. Even if the object is not manifestly declared, it will not affect the authority of the State to legislate as because the primary object of any economic enactment is to raise the revenue, of-course, without or to bridge the inequalities. 160. Now, moving to the facts of these cases, it is the contention of the assessees that all works contractors form a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y discussed and held, while deciding the object of the amendment in preceding paragraphs of this order, when goods are purchased locally, the rate of tax as per the schedule is remitted to the State. But when goods brought in from an other-state dealer or by import, no tax on such transaction is remitted to the State. Therefore, there is a recurring fiscal loss to the State, which has been prevented by bringing in the amendment. Though it is permissible for dealers to plan their tax, it is equally within the right of the State to curb the evasion of tax by taking appropriate steps. They are the policy decisions of the government. Such steps cannot be called as arbitrary as it is in larger public interest. Hence, the dealers, who purchase goods locally and who bring in goods by interstate purchase from other state or by import, are not equals, despite being works contractors. They are different species of the same genus. The classification is based on intelligible differentia and the same is not unreasonable. 161. On nexus between the classification and the object. The object behind the enactment is to curb the tax evasion by trade diversion. Another object that has been propounded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a modern economy, as a destination-based tax. But there can be no gainsaying the fact that fiscal legislation around the world, India being no exception, makes complex balances founded upon socio-economic complexities and diversities which permeate each society. The form which a GST legislation in a unitary State may take will vary considerably from its avatar in a nation such as India where a dual system of GST law operates within the context of a federal structure. The ideal of a GST framework which Article 279-A(6) embodies has to be progressively realised. The doctrines which have been emphasised by the counsel during the course of the arguments furnish the underlying rationale for the enactment of the law but cannot furnish either a valid basis for judicial review of the legislation or make out a ground for invalidating a validly enacted law unless it infringes constitutional parameters. While adopting the constitutional framework of a GST regime, Parliament in the exercise of its constituent power has had to make and draw balances to accommodate the interests of the States. Taxes on alcohol for human consumption and stamp duties provide a significant part of the revenues of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpulsion to sell at below value prices; and (vi) Stoppage of work. These examples are indicators that the class, comprising of registered persons with unutilised ITC, covers a bundle of species as opposed to one unique or homogeneous specie. Once we recognize this, it is necessary to allow the legislature the latitude to distinguish between credits arising out of the input goods stream and input service stream. 99. We must be cognizant of the fact that no constitutional right is being asserted to claim a refund, as there cannot be. Refund is a matter of a statutory prescription. Parliament was within its legislative authority in determining whether refunds should be allowed of unutilised ITC tracing its origin both to input goods and input services or, as it has legislated, input goods alone. By its clear stipulation that a refund would be admissible only where the unutilised ITC has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, Parliament has confined the refund in the manner which we have described above. While recognising an entitlement to refund, it is open to the legislature to define the circumstances in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible and does not have a reasonable nexus to the object sought to be achieved. There is an evident difference in the rates at which goods and services are taxed but, according to the submission, this is not a provision for revenue harvesting. Finally, on this limb of submission, it has been urged that the wide latitude which is available with the legislature in the case of fiscal legislation is only where a revenue harvesting measure is involved. The twin test of reasonableness and the nexus with the object sought to be achieved must be demonstrated. The nexus (a) must be based on the object of the legislation alone; and (b) indicate a discernible principle which emanates from the classification. With the clarification on inputs by the Ministry of Finance, it is urged that no discernible principle emerges. 103. The counsel for the assessees also argued that before the High Courts of Gujarat and Madras, the Union Government did not urge that outflow of finance was the reason to exclude refunds on input services and it is not open to the Court to conjure up a reason. In support of the above submissions on constitutional validity, which have been urged by Mr Sujit Ghosh, learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to notice that the power of taxation is generally regarded as an essential attribute of sovereignty and constitutional provisions relating to the power of taxation are regarded not as grant of power but as limitation upon the power which would otherwise be practically without limit." 105.2. The same principle has been reiterated in Federation of Hotel & Restaurant Assn. of India v. Union of India [Federation of Hotel & Restaurant Assn. of India v. Union of India, (1989) 3 SCC 634] , where M.N. Venkatachaliah, J. (as the learned Chief Justice then was), speaking for the Constitution Bench held : (SCC pp. 658-59, paras 46-47) "46. It is now well settled that though taxing laws are not outside Article 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc. for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment what is looked into is not its phraseology, but the real effect of its provisions. A legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or split pulses and unprocessed or unsplit pulses is a reasonable classification. It is based on the use to which those goods can be put. Hence, in our opinion, the impugned classification is not violative of Article 14." 105.4. More recently in Union of India v. Nitdip Textile Processors (P) Ltd. [Union of India v. Nitdip Textile Processors (P) Ltd., (2012) 1 SCC 226], a two-Judge Bench observed : (SCC p. 255, para 67) "67. It has been laid down in a large number of decisions of this Court that a taxation statute, for the reasons of functional expediency and even otherwise, can pick and choose to tax some. A power to classify being extremely broad and based on diverse considerations of executive pragmatism, the judicature cannot rush in where even the legislature warily treads. All these operational restraints on judicial power must weigh more emphatically where the subject is taxation. Discrimination resulting from fortuitous circumstances arising out of particular situations, in which some of the taxpayers find themselves, is not hit by Article 14 if the legislation, as such, is of general application and does not single them out for harsh treatment. Advantages or disadvant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange of scientific, commercial and economic conditions and ways of life new species of property, both tangible and intangible gaining enormous values have come into existence and new means of reaching and subjecting the same to contribute towards public finance are being developed, perfected and put into practical operation by the legislatures and courts of this country, of course within constitutional limitations." 109. The Court held that the principle of equality does not preclude the classification of property, trade, profession and events for taxation - subjecting one kind to one rate of taxation and another to a different rate. The State may exempt certain classes of property from any taxation at all and impose different specific taxes upon different species which it seeks to regulate. The Court held : (Spences Hotel case [Spences Hotel (P) Ltd. v. State of W.B., (1991) 2 SCC 154] , SCC p. 171, para 27) "27. 'Perfect equality in taxation has been said time and again, to be impossible and unattainable. Approximation to it is all that can be had. Under any system of taxation, however, wisely and carefully framed, a disproportionate share of the public burdens would be throw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son why courts are averse to entering the area of policy matters on fiscal issues. We are therefore unable to accept the challenge to the constitutional validity of Section 54(3). ........... 135. While we are alive to the anomalies of the formula, an anomaly per se cannot result in the invalidation of a fiscal rule which has been framed in exercise of the power of delegated legislation. In R.K. Garg [R.K. Garg v. Union of India, (1981) 4 SCC 675 : 1982 SCC (Tax) 30] , P.N. Bhagwati, J. (as the learned Chief Justice then was) speaking for the Constitution Bench underscored the importance of the rationale for viewing laws relating to economic activities with greater latitude than laws touching civil rights. The Court held : (SCC pp. 690-91, para 8) "8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. It has been said by no less a person than Holmes, J., that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or straitjacket formula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues." (emphasis supplied) 141. The Court after reviewing the judicial precedents on this point observed : (Arun Kumar case [Arun Kumar v. Union of India, (2007) 1 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the practical effect of the formula might result in certain inequities. The reading down of the formula as proposed by Mr Natarjan and Mr Sridharan by prescribing an order of utilisation would take this Court down the path of recrafting the formula and walk into the shoes of the executive or the legislature, which is impermissible. Accordingly, we shall refrain from replacing the wisdom of the legislature or its delegate with our own in such a case. However, given the anomalies pointed out by the assessees, we strongly urge the GST Council to reconsider the formula and take a policy decision regarding the same." In the above case, the Apex Court confirmed the leverage available to the legislature while dealing with fiscal statutes to enact law or to bring in amendments to protect its interest and also refused to read down the provision. The Apex Court held that the dealers though engage in supply of goods and/or services may avail Input Tax Credit, cannot be classified as belonging to a homogenous class and that the State was entitled to treat the dealers who avail ITC on goods as distinct from dealers who avail ITC on services as they are different species. The ratio laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each of such guarantee and imposes an unreasonable restriction violating Articles 303 and 304 (a) of the Constitution. It was further submitted that since the amendment is discriminatory in nature, not only does it offend Article 301, but also the failure to get the previous sanction from the President as contemplated under proviso to Article 304 (b) vitiates the amendment. On the other hand, it has been contended on the side of the State that the amendment does not offend any part of Part XIII of the Constitution as by the amendment, no tax either discriminatory or non-discriminatory on goods is levied and there is no restriction impeding the movement of goods into the State. Both sides have relied upon certain paragraphs of the judgment in Jindal Stainless Limited and another v. State of Haryana and others [(2017) 12 Supreme Court Cases 1] and other judgments, to drive home their point. 167. Before proceeding to consider the judgments relied on either side, it is necessary to discuss the guarantees, safeguards, limitations and permissions granted under this Part of the Constitution, which read thus. 168. As per Article 301, the trade, commerce and intercourse shall be free thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... President is not necessary. A discrimination occurs, when the goods manufactured or sold within the State are not taxed, but the goods imported into the State are taxed. Similarly, discrimination occurs, when the rate of tax on goods imported from other State is higher than the goods manufactured or sold within the state. Similarly, when the goods are not available within the State, there cannot be any discrimination. When there is no discrimination in the rate of taxes on goods, such law would not offend Article 301 or 304 (a). However, once it is found that there is a restriction in freedom of trade, commerce or intercourse, then the previous sanction of the President is essential. Therefore, it is always necessary to identify whether there is a restriction or impediment to the freedom of movement of goods or not, which has to be evaluated with regard to the facts of each case. So also, once it is found that the tax on goods is discriminatory, such law would fall foul of Articles 14, 301 and 304 (a) and even a President's previous sanction will not cure the defect. At this juncture it is appropriate to extract the relevant portion of the judgment in Jindal Stainless Limited (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no such element of intentional bias favouring the locally produced goods as against those from outside, it may have to go further and see whether the differentiation would be supported by valid reasons. In the words of Fazl Ali, J. discrimination without reason would be unconstitutional whereas discrimination with reason may be legally acceptable. In Video Electronic case [Video Electronics (P) Ltd. v. State of Punjab, (1990) 3 SCC 87 : 1990 SCC (Tax) 327], this Court noted that the differentiation made was supported by reasons. This Court held that if economic unity of India is one of the constitutional aspirations and if attaining and maintaining such unity is a constitutional goal, such unity and objectives can be achieved only if all parts of the country develop equally. There is, if we may say so, with respect considerable merit in that line of reasoning. A State which is economically and industrially backward on account of several factors must have the opportunity and the freedom to pursue and achieve development in a measure equal to other and more fortunate regions of the country which have for historical reasons, developed faster and thereby acquired an edge over its less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR pp. 594-95, para 7) "7. ... Though a law ex facie appears to treat all that fall within a class alike, if in effect it operates unevenly on persons or property similarly situated, it may be said that the law offends the equality clause. It will then be the duty of the court to scrutinise the effect of the law carefully to ascertain its real impact on the persons or property similarly situated. Conversely, a law may treat persons who appear to be similarly situate differently; but on investigation they may be found not to be similarly situate. To state it differently, it is not the phraseology of a statute that governs the situation but the effect of the law that is decisive. If there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment. Taxation law is not an exception to this doctrine vide Purshottam Govindji Halai v. B.M. Desai [Purshottam Govindji Halai v. B.M. Desai, AIR 1956 SC 20 : 1956 Cri LJ 129] , and Kunnathat Thatehunni Moopil Nair v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvations do create practical difficulties of insurmountable proportions. Hence these deserve to be treated as obiter or interpreted in the light of the entire passage, to mean such taxes which impose an impediment to the free flow of trade, commerce and intercourse by creating discriminatory tariff wall/trade barrier (emphasis supplied). For Part XIII there can be no real impediment through tax unless the so-called wall or barrier is one of hostile discrimination between local goods and outside goods. 253. I will now deal with the purport and scope of the word "discrimination" used in Article 304(a) by making some general observations. Article 304(a) should be interpreted keeping in mind the balanced development of the country, which is an important part of economic integration. To achieve the economic unity of the country, allowing trade and commerce without imposing taxes is not the only solution but it can also be achieved by bringing in overall prosperity. Part XIII of the Constitution permits some forms of differentiation, for example, to encourage a backward region or to create a level playing field for parts of the country that may not have reached the desired level of eco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... protected which may not be "in the interests of the general public" but specific to a smaller region. Such an interpretation is supported by the manner in which the word "discrimination" has been interpreted by the three-Judge Bench of this Court in Video Electronics [Video Electronics (P) Ltd. v. State of Punjab, (1990) 3 SCC 87: 1990 SCC (Tax) 327]. Thus it can be said that the common thread in Part XIII is the achievement of economic unity and parity which does not altogether preclude differentiation for justifiable and rational reasons wherever necessary. The heart and soul of Part XIII is to dissolve hostile discrimination within the territory of India. 262. Discrimination is a relative concept; in order to discriminate a reference point is required. Article 304(a) rather than being an enabling provision to allow the State to impose tax, is a restricting provision, which prevents such levy of tax on goods as would result in discrimination between goods imported from other States and similar goods manufactured or produced within the State. The object is to prevent discrimination against imported goods by imposing tax on such goods at a rate higher than that borne by local go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s accepted it would mean, for instance, that even a legislative enactment prescribing the minimum wages to industrial employees may fall under Part XIII because in an economic sense an additional wage bill may indirectly affect trade or commerce. We are, therefore, satisfied that in determining the limits of the width and amplitude of the freedom guaranteed by Article 301 a rational and workable test to apply would be : Does the impugned restriction operate directly or immediately on trade or its movement?" (SCR pp. 860-61) (emphasis supplied) The majority based its opinion on the reasoning that any legislation whether taxing or otherwise which imposed any restrictions that had the effect of directly offending the movement or transport of goods would attract the provisions of Article 301 and its validity could be sustained only if it satisfied Article 302 or Article 304(b) of the Constitution. 396. The chargeable event in the case of entry tax is entry of goods into a local area. By its very nature, entry tax does not contemplate impost on indigenous goods. Goods imported into a local area from another State are subjected to entry tax but goods entering into a local area from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislation separately from taxing heads. In the Union List taxing entries are contained from Entries 82 to 92C. The residual entry, Entry 97 deals with matters not enumerated in the State or Concurrent Lists, including any tax not mentioned in either of those Lists. In the State List taxes are comprised in Entries 46 to 62. Fees are dealt with under separate heads : in Entry 96 of List I, Entry 66 of List II and Entry 47 of List III. G. Schedule VII List II Entry 52 to the Constitution 1060. The legislative field under the State List Entry 52 is "taxes on the entry of goods into a local area for consumption, use or sale therein". Entry 52 itself demonstrates that there are inherent limitations as regards the nature and character of the levy. In order to have a levy of tax to come within the purview of Entry 52, such levy has to satisfy three conditions: (i) The levy under the State entry must be "on the entry of goods" which constitutes the taxable events. (ii) The levy in question must be in respect of "into a local area". The local area has been defined as "an area administered by local body like a municipality, a district board, a local board, a Union board, a panchaya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n movement of goods, trade and commerce is inhibited by Article 301 and such State legislation can be saved under Article 304. Whether a particular entry tax legislation is valid and does not contravene Part XIII of the Constitution, can be decided only after looking into the nature, content and extent of legislation and its impact on trade, commerce and intercourse. 1071. The restriction thus is an act to limit, confine and restrain. The "restriction", in Part XIII has been used in the context of restriction to freedom of trade, commerce and intercourse. The laws, which restrict or limit such right are called restrictions. 1074. Now, we proceed to examine Part XIII of the Constitution insofar as it expressly refers to various acts, actions which are treated to be restrictions on freedom of trade and commerce. Articles 302 to 306 contain provisions, by which restriction can be put on the freedom of trade and commerce. Some restrictions have been expressly mentioned in the said articles. Article 303 provides for "restrictions on the legislative powers of the Union and of the States with regard to the trade and commerce". As per Article 303 clause (1) following are treated to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax, it has to be a direct tax, the effect of which is to hinder the movement part of the trade. If the tax is compensatory or regulatory, it cannot operate as a restriction on the freedom of trade or commerce. *** 27. A discriminatory tax against outside goods is not a tax simpliciter but is a barrier to trade and commerce." (emphasis in original) 1083. It is, however, relevant to note that the issue as to whether the restriction contained in any taxing statute impedes the freedom of trade and commerce is a question which will vary from case to case. The nature of restriction and the magnitude of the restriction are all relevant factors to determine whether trade is impeded or not. It is well settled that provisions in a statute which is regulatory in nature which facilitates the trade have not been treated as restriction impeding the freedom of trade and commerce. Traffic regulations, registration of motor vehicles for plying in the State, collection of toll have not been treated to be restriction in freedom of trade and commerce. 1084. The above discussion makes it clear that what has been expressly prohibited in Articles 302 to 306 are all restrictions in the freedom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCR 491] still holds good. 1107. It is an accepted proposition that one of the characteristics of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. The taxes imposed by the legislature, apart from being a source of revenue is also expended for various public welfare measures and when its object is in no way connected with the public interest or public welfare it loses its character of taxation, becomes a levy which is unconstitutional. 1142. For enabling a State to make a law under Article 304(a) following two preconditions which are independent of each other have to be satisfied: (i) It may impose on goods imported from other States or the Union Territory any tax to which similar goods manufactured or produced in that State are subject. (ii) So, however, as not to discriminate between goods so imported and goods so manufactured and produced. 1144. A law made by the State Legislature exercising the power under clause (a) in Article 304, which does not impose any restriction on the freedom of trade, commerce and intercourse need not comply with Article 304(b), however, a law even though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 170. In Jindal Stainless Ltd case, the Constitutional Bench of the Apex Court was dealing with a reference related to the levy of Entry Tax on goods by various States which falls under Entry 52 of List II. In the process, the Apex Court answered the referendum holding that taxes simpliciter are not within the ambit of PART XIII, a non-discriminatory tax without any restriction will neither require the previous sanction of the President nor offend any part of Part XIII of the Constitution. It was also held that "the direct and immediate effect test" would be applicable to trace the restriction to freedom of trade, commerce and intercourse, any discrimination in the rate of tax on goods would vitiate the law as ultra vires Article 304 (a), which cannot be cured even with the previous sanction of the President. The State is at liberty to levy tax on goods, when similar goods are not available in the state. If there is no restriction, the proviso to Article 304 (b) is inapplicable and in other cases, sanction is mandatory. 171. In addition to Jindal Stainless case, the following judgments were relied upon by the counsel for the petitioners: 172. Firm A.T.B. Mehtab Majid and Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d lest it eat up the main provision. So far as the present case is concerned, it does not fall within the limited exception aforesaid; it falls within the ratio of A.T.B. Mehtab Majid [1963 Supp (2) SCR 435 : AIR 1963 SC 928] and the other cases following it. It must be held that by exempting unconditionally the edible oil produced within the State of Jammu and Kashmir altogether from sales tax, even if it is for a period of ten years, while subjecting the edible oil produced in other States to sales tax at eight per cent, the State of Jammu and Kashmir has brought about discrimination by taxation prohibited by Article 304(a) of the Constitution." In this case, the Apex Court has followed the judgment in A.T.B Mehtab Majid case. Therefore, this judgment also, on levy of higher rate of tax on goods, will not come to the aid of the petitioners. In fact, in this case, the Apex Court has clearly held that the prohibition in Article cannot be stretched to matters beyond taxation. 174. Anand Commercial Agencies v. CTO [AIR 1998 SC 113:(1998) 1 SCC 101 at page 110]: "28. Clause (a) of Entry 24 of the First Schedule to the Andhra Pradesh General Sales Tax Act is declared violative of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l case [(1969) 2 SCR 544, 557 : AIR 1970 SC 1742]. In the instant writ petition, in the State of U.P. those producers or manufacturers who do not come within the ambit of notifications, have to pay tax on their goods at the general rate described and there is no differentiation or discrimination qua the imported goods. The question naturally arises whether the power to grant exemption to specified class of manufacturers for a limited period on certain conditions as provided by Section 4-A of the U.P. Sales Tax Act is violative of Article 304(a). It was contended by the petitioners that Part XIII of the Constitution was envisaged for preserving the unity of India as an economic unit and, hence, it guarantees free flow of trade and commerce throughout India including between State and State and as such Article 304(a), even though an exception to Article 301, yet applies where an exemption is granted by one State to a special class of manufacturers for a limited period on certain conditions. It was so submitted that either a State should grant exemption to all goods irrespective of the fact that the goods are locally manufactured or imported from other States, else it would be violati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deal with the fields of legislation, and these should be construed widely, liberally and harmoniously. And these entries have been construed to include ancillary or incidental power. Power to grant exemption is inherent in all taxing legislations. Economic unity is a desired goal, economic equilibrium and prosperity is also the goal. Development on parity is one of the commitments of the Constitution. Directive principles enshrined in Articles 38 and 39 must be harmonised with economic unity as well as economic development of developed and under developed areas. In that light on Article 14 of the Constitution, it is necessary that the prohibitions in Article 301 and the scope of Article 304(a) and (b) should be understood and construed. Constitution is a living organism and the latent meaning of the expressions used can be given effect to only if a particular situation arises. It is not that with changing times the meaning changes but changing times illustrate and illuminate the meaning of the expressions used. The connotation of the expressions used takes its shape and colour in evolving dynamic situations. A backward State or a disturbed State cannot with parity engage in compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment does not restrict the freedom of trade, commerce or intercourse in any manner as because it neither prohibits import of goods into the state nor does it impose any additional tax on the goods brought in when compared with the tax on locally manufactured goods nor is there any mandatory condition that the goods must be purchased only from dealers within the state. The levy of tax by itself cannot be termed as a restriction to the freedom guaranteed under Article 301. Further, as held by the Apex Court in Builders' Association Case, Mycon Construction case and Indian Diary Case (Supra), the scheme itself is only applicable by voluntary exercise of the option. At the cost of repetition, in Indian Diary case, the Apex Court rejected the appeal filed by the assessee who wanted to avail the benefit of the scheme despite bringing in goods from another state. The amendment itself has been brought about to bring in a level playing field and to curb trade diversion. We have already held that the classification is reasonable and that there is no discrimination. The State is well within its powers to impose such a condition, which is based on some rational and with nexus to the obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw that the restrictions or impediments which directly and immediately impede or hamper the free flow of trade, commerce and intercourse fall within the prohibition imposed by Article 301 and subject to the other provisions of the Constitution they may be regarded as void. (ii) It must be regarded as settled law that a tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. .... (v) An Act which is merely enacted for the purpose of imposing tax which is to be collected and to be retained by the State does not amount to a law giving or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, merely because varying rates of tax prevail in different States. (vi) The flow of trade does not necessarily depend upon the rates of sales tax, it depends upon a variety of factors, such as the source of supply, place of consumption, existence of trade channels, the rates of freight, trading facilities, availability of efficient transport and other facilities for carrying on trade. It is where differentiation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence to any special benefit to be conferred on the payer of the tax. This is expressed by saying that the levy of tax is for the purposes of general revenue, which when collected forms part of the public revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the taxpayer and the public authority [See Findlay Shirras on Science of Public Finance, Vol. I, p. 203] . Another feature of the taxation is that as it is a part of the common burden, the quantum of imposition upon the taxpayer depends generally upon his capacity to pay." Thus, the prohibition in Article 304 is applicable only when there is a discrimination in the rate of tax on goods and it cannot be extended beyond the taxation. Section 6 only offers an option and a simple method to arrive at the same. Therefore, rejecting the contentions of the assessees, we hold that the condition does not offend Part XIII of the constitution. XVI. CHALLENGE TO THE INVOCATION OF SECTION 27 181. It has been contended by Mr.N.Sriprakash that once a dealer has filed his return under Section 6 and remitted the taxes, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as in the present context, the petitioners have agreed to compound rate by paying the tax in terms of section 7C of the TNGST Act and also filed the returns in form A1. In such a case, the question of revising the compounding order does not arise especially when a dealer is exercising option in payment of tax at compounded rate and the petitioner was also made to pay tax at four per cent on the entire contract value. 10. Section 16 of the TNGST Act is not intended to withdraw the said option exercised by the petitioner-dealer. 11. In the light of the above and in view of the judgment of the Supreme Court in Devendran & Company case, [1996] 103 STC 95, the writ petition will stand allowed. The impugned order dated July 13, 2007, will stand set aside. No costs. Connected miscellaneous petition is closed." 183. South India Corporation Ltd. v. Commercial Tax Officer [2001 SCC OnLine Mad 1150 : (2001) 124 STC 654]: "13. The Act does not anywhere provide that the total value of the works contract in respect of which a dealer has exercised the option to pay the prescribed percentage towards tax instead of paying in accordance with section 3-B, shall be deemed to be either the tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where option has been exercised under section 7-C." 184. Per contra, the State has relied upon the following judgments to contend that Section 27 can be invoked. 185. Meenakshi v. State of Tamil Nadu [1976 SCC OnLine Mad 443 : (1977) 40 STC 201]: "7. Clause (b) of sub-section (1) of section 16 relates to a case where the turnover of a dealer has been originally assessed at a rate lower than the rate at which it should be assessed and it is not relevant for the purpose of this case. Sub-section (2) of section 16 of the Act enables the assessing authority, while he reassesses under sub-section (1) of that section, to levy a penalty. It is under the provision of section 16 that action was taken in the case of the respective petitioners. The nature of the action taken can now be indicated in the form of a tabular statement, as has been done by the Tribunal itself in its order, and it is as follows: T.C. No. M.T.A. No. Year of Assessment Turnover originally determined Turnover assessed under section 16 Turnover actually added to the original assessment (escaped turnover) Penalty levied and sustained now under dispute 26/72 146/71 1968-69 56,806.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption given under section 3(1). In that context the turnover, which would be added to the turnover of the assessee, would be only the total turnover and not taxable turnover for the purpose of finding out whether the case fell within the limit prescribed in section 3(1) or not. There is also another ground for holding that the expression "turnover" in section 16 is not confined only to "taxable turnover". We have extracted section 7 already and it uses the expression "total turnover" only. Out of the total turnover contemplated by section 7 no part of it may be taxable turnover or the entirety may constitute taxable turnover. The section does not take note of the portion of the total turnover which constitutes taxable turnover, when it prescribes the lump sum rate of tax payable in respect of different slabs. As we have pointed out already, in the case of an assessee paying tax under section 7, he might not have any taxable turnover at all. From this point of view, the concept of taxable turnover and the payment of tax at a particular percentage of the said taxable turnover is foreign to the scope of section 7. All that section 7 says is, once an assessee, having regard to the qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the expiry of the year to which the tax relates, determine to the best of its judgment the turnover which has escaped assessment and reassess the tax payable on the total turnover (including the turnover already assessed under section 7)- (i) in case where such total turnover is not more than one lakh of rupees in accordance with the provisions contained in sub-section (1) of section 7; and (ii) in other cases where the total turnover is more than one lakh of rupees in accordance with the other provisions contained in this Act. (2) Before making the reassessment under sub-section (1), the assessing authority may make such enquiry as it may consider necessary and give the dealer concerned a reasonable opportunity to show cause against such reassessment. (3) The amount of tax already paid by the dealer concerned in pursuance of the permission to compound under section 7 shall be adjusted towards the amount of tax due as the result of reassessment under subsection (1). (4) The provisions of sub-sections (2) to (4) of section 16 shall, as far as may be, apply to reassessment under sub-section (1) as they apply to the reassessment of escaped turnover under sub-section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of the Madras High Court was deciding whether the value of the works contract was to be included for the purpose of calculating Additional Sales Tax which was leviable on taxable turnover. The said judgment is not applicable as this is not a case relating to levy of additional sales tax and as Section 27 uses the word "turnover" and not "taxable turnover". The facts and the point of dispute are completely different. Rather, the judgment relied upon by the Learned Additional Advocate General in S.Meenakshi v. State of Tamil Nadu case will be squarely applicable. Section 27 (1) (a) of the TNVAT Act, 2006 deals with escaped turnover. The word "turnover" means, the aggregate amount for which goods are bought or sold, or delivered or supplied or otherwise disposed of in any of the ways referred to in clause (33), by a dealer either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration. Section 2 (33) defines "sale" which also includes deemed sale or transfer of property in goods. It is also necessary to note the difference in the language used by the legislature while framing Section 5, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. However, when it comes under Section 6, the rate of tax payable is either 2 % or 4 % irrespective of the value of the goods. When a dealer, though ineligible to file a return under Section 6, but files such a return and pays tax at a lower rate, he ought to calculate the taxable turnover out of the total turnover and pay taxes at rates specified in the First schedule, then section 27 (1) (b) is applicable. In such cases, it is not a part of the turnover that is to be reassessed at a higher rate, the return filed under Section 6 is to be rejected and the entire taxable turnover becomes assessable as per Section 5. 189. Further, as per the provisions of the TNVAT Act, more particularly Section 10, a dealer is liable to pay tax on the transfer of property in goods, purchases from dealers in the other State. It is relevant at this point to refer to the other judgments relied upon by the Learned Additional Advocate General. 190. State of Kerala v. Unitech Machines Ltd. [2009 SCC OnLine Ker 6740: (2010) 32 VST 80]: "5. The Government Pleader contended that the work awarded to the respondent by the oil companies in Kerala did not provide for any interState sale of goods. Further, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt within Kerala and from outside Kerala as well. In fact, all the materials so purchased were brought to the site and it is the respondent, who incorporated the same to form the fire fighting equipment on the site of the awarders. Therefore, the concept of inter-State sale does not apply to the facts of the two works executed by the respondent referred to above. The respondent's argument that the turnover of works contract should be assessed only for the value of the materials purchased or made in Kerala after excluding the value of the goods brought from outside Kerala because there is no provision in the KGST Act pertaining to works contract to exclude so much of the value of the goods from the turnover of the works contract, merely because such goods were brought from outside Kerala or from outside the country. We also notice that what weighed with the Tribunal to exclude the value of the goods brought from outside the State from the turnover on works contract is that the respondent is essentially based in Delhi. We do not think the base of the contractor has any relevance for deciding whether turnover on part of the works contract representing the value of goods brought fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to another. A contractor bringing materials from outside the State, stocking it in their godown and later appropriating it to the work cannot claim that sale in the execution of works contract is an inter-State sale from outside the State. Admittedly petitioner has not billed the goods to the awarder in Kerala to claim the transaction as inter-State sale. On the other hand, the petitioner brought the goods to Kerala, stocked it in their godown at their own risk and later appropriated it in the works contract. We are of the view that transfer of property in goods admittedly took place in Kerala when the goods are appropriated to the contract that is by laying pipe in the location identified by the awarder. Until then the goods were retained by the petitioner at their risk in their godown. A trader making inter-State purchase or bringing goods on stock transfer and selling the same later becomes liable for payment of tax under the K.G.S.T. Act on sale of such goods. The position is not different so far as contractors are concerned, who bring goods from outside the State either as stock transfer or as inter-State purchase, stock it in their godown and later use it in the execution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, it matters not where from the goods have been brought by the contractor/dealer and used in execution of a works contract. Section 2(p) read with 2(m) of the Works Contract Act, 1989 only provides the mechanism of determining the value of the goods which have been purchased outside the State and used in a works contract in the State. By doing so, the Legislature has not taxed the sale transaction which has taken place outside the State, but has only provided a mechanism as to how the value of the goods, the property in which it is transferred by the contractor/dealer in execution of works contract, is to be determined. This definition is introduced to obviate any dispute in ascertaining the price of the goods which form the total turnover of the contractor/dealer." 193. It was also contended on the side of the assessees that in case of a dealer exercising his option under Section 6, it is not necessary for him to maintain any accounts and therefore, there is no scope for revision of assessment. We are not in agreement with such contention. A dealer opting to file his return under Section 6, is liable to maintain records only relating to his works contract as contemplated under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s apply, no ambiguity about the class or description of goods and the transactions of sale which are exempt from tax. It has been duly authenticated in terms of Section 45 of the Constitution of Jammu and Kashmir. It is well settled that if power to do an act or pass an order can be traced to an enabling statutory provision, then even if that provision is not specifically referred to, the act or order shall be deemed to have been done or made under the enabling provision." 195. A construction which goes against the scheme of the Act and which defeats the very purpose of the provisions must be avoided. No doubt, in tax matters, if the subject cannot be brought within the four corners of law, it is not possible to tax him. But, once the provisions are clearly available, a harmonious construction would serve the purpose. If the view of the petitioner is accepted, it would create a situation that even an incomplete or an incorrect return or a return by an ineligible person has to be accepted and assessed without any scope for revision. That, according to us, is neither contemplated under the Act nor the object of the provisions. Hence, the contention that a dealer's return under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on from payment of taxes on purchases of the goods from local registered dealers in the State of Tamil Nadu. Further, the construction of residential houses is not an authorized activity. In the instant case, the lands are leased out by the Developer to the petitioners who are co-developers, who in turn after constructing the houses, sub-leased the same to third parties. According to the Learned Additional Advocate General, the factual disputes like stock difference, whether the activity is authorised, the question where the construction is put up, the person is in a processing area, whether the sub-lease is made out to a worker, the duration of the sub-lease and the scope and effect of allotment of building are to be agitated only before the Appellate authority and sought the dismissal of the writ petition. 199. We have considered the rival contentions. The SEZ Act has been enacted to provide for establishment, development and management of the Special Economic Zone for promotion of experts and for matters connected therewith. Section 2(f) of the SEZ Act defines a "Co-developer" which means a person, who or a State Government which, has been granted by the Central Government, a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed purpose". The exemption is not available when a sale is effected to a dealer in Domestic Tariff Area. In this case, there is a factual finding by the authority that the goods were not exported. The exemption granted on 30/12/2006 in this case is only with respect to sale of any goods for the purpose of setting up, operation, maintenance, manufacture, trading, production, processing, assembling, repairing, reconditioning, re-engineering, packaging or use as packing materials or packing accessories in an unit located as special economic zone or for development, operation and maintenance of special economic zone by the developer. Similarly, whether all the conditions imposed under Section 12 or under the letter dated 12/06/2006 are satisfied, are all factual matters. It is also not out of place to mention here that it has to be factually verified as to whether the constructed residential units are in fact leased out to the workers, the effect of such lease and whether the activities carried out by the petitioners are authorized. The above exercise also involves verification of the terms of agreement between the parties. 201. Insofar as Section 8 (6) of the CST Act is concerned, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otor Co. Ltd. v. State of T.N. [(2019) 13 SCC 403 : 2018 SCC OnLine SC 1944], in which it was held as under: "28. While entertaining Question 2, namely, whether the impugned provisions are violative of Articles 14, 19(1)(g) and 301 of the Constitution, the High Court pointed out that on this aspect, argument of the assessees was that the words "rate applicable" employed in Section 8(2) of the CST Act have to necessarily take into account the effective rate after considering the deductions made under Section 3(3) of the TNVAT Act. It was argued that Section 19(5)(c) of the Tnvat Act, which denied ITC on purchase of goods sold or used in the manufacture of other goods and falls within Section 8(2) of the CST is per se discriminatory. The High Court took note of the scheme of the TNVAT Act and found that though Section 3(2) stipulated many taxable transactions, only few such transactions are carved out to give benefit of ITC. After discussing certain judgments of this Court and other High Courts, the High Court has observed that the legal position was that right to claim ITC is not a vested right or an indefeasible right. It is a benefit conferred under the Act in certain contingenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it shall be deemed to be the dealer for the purposes of the Tnvat Act. At the same time, the Tnvat Act does not require registration by the State Government inasmuch as Section 38 which deals with registration of dealers explicitly provides, under sub-section (8) thereof, that this provision shall not apply to any State Government or Central Government. A conjoint reading of the aforesaid two provisions would show that when a sale is made to the State of Karnataka, it is made to a dealer but that dealer is under no obligation to get itself registered under the Tnvat Act. Because of this exemption, no State Government does that and since it is not a registered dealer, it would not be in a position to issue any Form C. But for that, the genuineness of sales made to a State Government cannot be doubted. This situation puts those dealers who are making sales to the State Government in disadvantageous position, even when it is clear that there is no possibility of tax evasion as there cannot be any such apprehension in case of sales to the State Government. We may point out here that benefit of ITC is given whenever sale is made to a dealer outside the State of Tamil Nadu and the said d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia [(2020) 14 SCC 785 : 2019 SCC OnLine SC 925]: "28. We find no merit in this submission. In a taxing statute, a plea based on equity or/and hardship is not legally sustainable. The constitutional validity of any provision and especially taxing provision cannot be struck down on such reasoning. 30. We are afraid, we cannot accept this submission for more than one reason. First, as held above, in tax matter, neither any equity nor hardship has any role to play while deciding the rights of any taxpayer qua the Revenue; second, once the action is held in accordance with law and especially in tax matters, the question of invoking powers under Article 142 of the Constitution does not arise; and third, the appellant's donors were admittedly allowed to claim deduction of the amount paid by them to the appellant under Section 35-AC during the two Financial Years 20152016 and 2016-2017. It is for all these reasons, the matter must rest there." 207. Indian Oil Corpn. Ltd. v. State of Bihar [(2018) 1 SCC 242 : 2017 SCC OnLine SC 1321]: "23. Shri Datar then referred to State of Bihar v. Bihar Chamber of Commerce[State of Bihar v. Bihar Chamber of Commerce, (1996) 9 SCC 136] for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC 624] , State of U.P. v. Deepak Fertilizers & Petrochemical Corpn. Ltd.[State of U.P. v. Deepak Fertilizers & Petrochemical Corpn. Ltd., (2007) 10 SCC 342] and Union of India v. N.S. Rathnam and Sons [Union of India v. N.S. Rathnam and Sons, (2015) 10 SCC 681]. Each of these judgments concerned taxation rates that were ex facie arbitrary and/or discriminatory, in that the very same tax was levied at different rates without any rational justification for the same and were, thus, struck down as being arbitrary and/or discriminatory. None of these judgments would have any application to the facts of the present case, in which it is clear that the plea of discrimination is qua a set-off of one tax against a separate and independent tax imposed. This fact circumstance would be sufficient to distinguish the said judgments from the facts of the present case. 28. Since we have found that the plea of discrimination must fail on the aforesaid grounds, no question of reading down the provisions would then arise." 208. It is clear from the above judgments that there is no equity or hardship in tax matters. Once provision is held to be valid, the same cannot be read down to confer some ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Year 1982-83, the appellant therein claimed set-off of a certain amount in terms of Rule 41-E for the quantum of iron and steel purchased which was converted into iron and steel scrap. The claim was allowed. Subsequently, Maharashtra Act 9 of 1989 was enacted and by Sections 26 and 27, the benefit of Rule 41-E was denied altogether for the period 1-7-1981 to 313-1988 where the manufactured goods falling under Schedule B were in the nature of waste goods/scrap goods/by products. The validity of such retrospective amendment to Rule 41-E was unsuccessfully challenged before the High Court. The High Court took the view [Telco Ltd. v. State of Maharashtra, 1997 SCC OnLine Bom 290 : (1998) 3 Mah LJ 747] that the impugned amendment of Rule 41-E was clarificatory to remove the doubts in interpretation. However, by the Bombay Sales Tax (Amendment) Rules, 1992 Rule 41-E was amended. That amendment removed the exclusionary clause of goods manufactured out of waste or scrap goods or products and restored the position as it stood prior to 1981. The appellant's appeal and another connected appeal were heard simultaneously. 16. The appellant assessee in Tata Motors Ltd. case [Tata Motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pectively for a limited period is not forthcoming. It is no doubt true that the State has enormous powers in the matter of legislation and in enacting fiscal laws. Great leverage is allowed in the matter of taxation laws because several fiscal adjustments have to be made by the Government depending upon the needs of the Revenue and the economic circumstances prevailing in the State. Even so an action taken by the State cannot be so irrational and so arbitrary so as to introduce one set of rules for one period and another set of rules for another period by amending the laws in such a manner as to withdraw the benefit that had been given earlier resulting in higher burdens so far as the assessee is concerned, without any reason. Retrospective withdrawal of the benefit of set-off only for a particular period should be justified on some tangible and rational ground, when challenged on the ground of unconstitutionality. Unfortunately, the State could not succeed in doing so..... 18. The entire gamut of retrospective operation of fiscal statutes was revisited by this Court in a Constitution Bench judgment in CIT v. Vatika Township (P) Ltd.[CIT v. Vatika Township (P) Ltd., (2015) 1 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only."" (emphasis in original) 19. When we keep in mind the aforesaid parameters laid down by this Court in testing the validity of retrospective operation of fiscal laws, we find that the amendment in question fails to meet these tests. The High Court has primarily gone by the fact that there was no unforeseen or unforeseeable financial burden imposed for the past period. That is not correct. Moreover, as can be seen, sub-section (20) of Section 19 is altogether new provision introduced for determining the input tax in a specified situation i.e. where goods are sold at a lesser price than the purchase price of goods. The manner of calculation of ITC was entirely different before this amendment. In the example, which has been given by us in the earlier part of the judgment, "dealer" was entitled to ITC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case. Under sub-section (1) of Section 21 of the Act before its amendment, the assessing authority may, after issuing notice to the dealer and making such inquiry as it may consider necessary, assess or reassess the dealer according to law. Subsection (2) provided that except as otherwise provided in this section, no order for any assessment year shall be made after the expiry of 4 years from the end of such year. However, after the amendment, a proviso was added to sub-section (2) under which the Commissioner of Sales Tax authorises the assessing authority to make assessment or reassessment before the expiration of 8 years from the end of such year notwithstanding that such assessment or reassessment may involve a change of opinion. The proviso came into force w.e.f. 19-2-1991. We do not think that sub-section (2) and the proviso added to it leave anyone in doubt that as on the date when the proviso came into force, the Commissioner of Sales Tax could authorise making of assessment or reassessment before the expiration of 8 years from the end of that particular assessment year. It is immaterial if a period for assessment or reassessment under sub-section (2) of Section 21 before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing authority in pursuance thereof." 212. MRF Ltd. v. CST [(2006) 8 SCC 702 : 2006 SCC OnLine SC 986]: "27. The provisions of the Act or notification are always prospective in operation unless the express language renders it otherwise making it effective with retrospective effect. This Court in S.L. Srinivasa Jute Twine Mills (P) Ltd. v. Union of India[(2006) 2 SCC 740 : 2006 SCC (L&S) 440] has held that it is a settled principle of interpretation that: (SCC p. 747, para 18) "... retrospective operation is not taken to be intended unless that intention is manifested by express words or necessary implication, there is a subordinate rule to the effect that a statute or a section in it is not to be construed so as to have larger retrospective operation than its language renders necessary." 213. Upon consideration of the above judgments, it is evident that the legislature is empowered to bring in legislation with retrospective effect. Such intention must be spelt out by express words or by necessary implication. Retrospective effect can be given only to substantive provision either expressly or by necessary implication. Though with regard to procedural laws, the presumption is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value added tax came into force on 01.01.2007, three months before the end of the assessment year 2006-07. When the Act was introduced, the condition that the persons who wanted to come under the composition scheme, should neither effect interstate purchases or imports was not there. Therefore, the dealers filed their returns during the VAT period for 2006-07 under section 6. As per Section 6 (3), the option once exercised is final for that year. With regard to the assessment year 2007-08, the amendment was introduced in June 2007. As per Section 6 (2), the dealer has to exercise his option along with the first monthly return for the financial year or in the first monthly return after the commencement of the works contract. When they had exercised their option as per the then existing provision, they can neither be blamed nor can their returns be termed as incorrect or incomplete or that the turnover has escaped or lower rate of tax has been paid. The right that had accrued to them becomes a vested right. Therefore, we are of the view that the amendment shall not be applicable insofar as the dealers, who had exercised their option in the financial year 2006-07. Insofar as the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notes the genus with different species. The dealers purchasing goods from local dealers form a distinct category/species from dealers who purchase goods from local as well as other state dealers or dealers who import goods to be used in the works contract. There is a rationale behind such classification for the purpose of Section 6. In fiscal or taxing enactments, it is not necessary that every enactment should be backed by objects and reasons. What is relevant is the competence of the State and whether such enactment offends any constitutional rights, which in the instant cases, are held to be negative. The object and the reason adduced in the counter, which in the opinion of this court, can be discerned even without such counter as because, whenever, a purchase takes place in the course of intertrade or commerce falling under Section 8(1) of the CST Act, the rate of tax payable is at a concessional rate upon satisfaction of the requirement under Section 8(4), which is much lower than the rate of tax prescribed for the purchase of goods from a local dealer. The State obviously is at loss of revenue at the point of purchase, added together the option to pay tax at compounded rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Constitution. Accordingly, all the writ petitions challenging the vires of Section 6 of TNVAT Act, 2006, fail and are hence, dismissed. g. Insofar as the challenge to the retrospective effect given to the amendment as being violative of Article 19 (1) (g) of the Constitution, the same is rejected as because it is within the authority of the State to bring in such amendments in fiscal statutes by clearly prescribing the date from which it must be given effect. The hardship that is caused to individuals seldom matters as validity of any fiscal enactment ought to be tested on the basis of generality of its operation and not on the basis of few individual cases. However, by the time amendment was introduced, the assessment year 200607 was over. Hence, it will not apply to the assessment year 2006-07. With respect to the assessment year 2007-08, the retrospective operation will not affect the dealers, who had already exercised the option prior to the date of amendment for that year and would be applicable only to those dealers who had not exercised the option by that date. h. Insofar as reading down the provision to permit the assessees to exclude the turnover relating to int ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
