BIOLOGICAL E LTD Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) This petition is filed by a manufacturer of pharmaceutical preparations. A notification was issued by the first respondent as under :

(2.) This notification is attacked by the petitioner on the ground that it makes an invidious discrimination between the dealer and manufacturer or his agent who is also dealer for the purpose of levy of tax arising under section 6B of the Karnataka Sales Tax Act (hereinafter referred to as "the Act"). The petitioner contended that, on a somewhat similar question on an earlier occasion this Court examined the matter in Writ Petition Nos. 5361 to 5363 of 1992 and connected matters [Dey's Medical Stores (Manufacturing) Limited v. Assistant Commissioner of Commercial Taxes]. In that case, a distinction was sought to be made between the manufactures or wholesale dealers. That distinction was found to be artificial and this Court struck down the Explanation by which such distinction was sought to be made to take out the exemption granted in the notification in question therein. On behalf of the petitioners it is contended that some sophistication is added by the Government in the matter of grant of exemption once again to bring the manufactures who are also otherwise dealers into the net of taxation arising under section 6B of the Act. The learned counsel for the petitioner urged that, any notification issued under the Act granting exemption must pass the muster of article 14 of the Constitution. It is certainly open to the State to make classification of commodities, persons who have to pay the taxes in the matter of taxation for grant of exemption accordingly. But, in such cases where a distinction is sought to be made between two classes of dealers, unless the object sought to be achieved is relatable thereto, the notification becomes bad. It is submitted that, in the present case, there cannot be any distinction between the dealers and manufacturers who are also dealers and the distinction sought to be maintained by the Government is artificial and not real and therefore, notification is liable to be quashed.

(3.) The learned Government Pleader who appears for the respondents submitted that, under section 8A of the Act, it is open to the Government to grant exemption either in relation to the persons who are liable to pay tax or in relation to commodities or the stage at which the tax could be collected or the rates at which the tax could be collected. If we bear this aspect in mind and as long as that provision is valid, it would not be open to this Court to question the wisdom of the State in making a classification between dealers ordinarily and dealers who are manufacturers. The learned Government Pleader further submitted that, the object is to see that turnover tax is recovered at the stage of sale by the manufacturer (or his agent) and to see that such burdens are reduced at further stages.