K A SUDEENDRA NAIR Vs. STATE OF KERALA

JUDGEMENT

(1.) K. A. Nayar, J. had declined to interfere in a similar case, O.P. No. 9935 of 1988. The challenge is one of discrimination against manufacturers of wire-cut bricks like the petitioners. I shall just point out as to how counsel for the petitioner developed his arguments. A notification, Ext. P1, was issued on 19th November 1973 by the Government of Kerala under S.10 of the Kerala General Sales Tax Act, 1963 (the Act) exempting the purchase of firewood and clay by manufacturers of tiles for use in the manufacture of tiles within the State from the levy of tax under S.5A of the Act. Another notification. Ext. P-3, was issued on 31st March 1979 by which the purchase of firewood and clay by manufacturers of country bricks for use in their manufacture of country bricks by manual labour was exempted from payment of tax, provided the turnover of the manufacture did not exceed Rs. 20,000 in a year. Another notification, Ext. P-2, was issued on the same day 31st March 1979 exempting country bricks sold by manufacturers of country bricks whose total turnover did not exceed Rs. 20,000 a year from levy of Tax. Petitioners' grievance is that manufacturers of country bricks with turnover of less than Rs. 20,000 in a year have been given the benefit of exemption from payment of tax on the sale of their products as also on the purchase of firewood and clay, for use in the manufacture, but no such exemption is given to manufacturers of wire-cut bricks. This is discriminatory and violative of Art.14 of the Constitution. The same argument was raised before K.A. Nayar, J. without success in O.P. No. 9935 of 1983. But in deference to the arguments addressed at length by counsel for the petitioners, I shall deal with the point afresh.

(2.) Counsel for the petitioners referred to the decisions of the Supreme Court in Mahanl Moti Das and others v. S.P. Sahi and others AIR 1959 SC 942 , Anarit Mills Co. Ltd. and others v. The State of Gujarat and others AIR 1975 SC 1234 and Ayurveda Pharmacy and another v. State of Tamil Nadu AIR 1989 SC 1230 . In the first of these cases the Supreme Court seated that while Art.14 forbids class legislation, it does not forbid reasonable classification for the purpose of legislation, and in order to pass the test of permissible classification, two conditions must be fulfilled, namely (1) that 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 (2) that the differentia must have a rational relation to the object sought to be achieved by the statute. This was reiterated in the second case of Anant Mills AIR 1975 SC 1234. The third case referred to was one in which the distinction made in Tamil Nadu between Arishtams and Asavams on one side and medicinal preparations on the other for the purpose of sales tax was struck down as violative of Art.14 of the Constitution. The Supreme Court held that Arishtams and Asavams are medicinal preparations, and even though they have a high alcohol content, so long as they continue to be identified as medicinal preparations, they must be treated for the purpose of the Sales Tax Law, in like manner as medicinal preparations generally, including those containing a lower percentage of alcohol. Thus the levy of higher rate of sales tax on these two ayurvedic medicinal preparations on the ground that they contained a high percentage of alcohol was held discriminatory.

(3.) The law is settled that classification by itself is not bad provided it has a reasonable basis. The State is entitled to classify the objects even for the purpose of the law of taxation, provided a reasonable basis is discernible for the classification effected by them. As was observed by the Supreme Court in Khandige Sham Bhai v. Agricultural Income Tax Officer AIR 1963 SC 591 if there is equality and uniformity within each group, into which the classification is made, the law will not be condemned as discriminative. Taxation law is not an exception to this doctrine. In view of the inherent complexity of fiscal adjustment of diverse elements, " the Constitution permits a larger discretion to the Legislature in the matter of classification for the purpose of taxation so long as it adheres to the fundamental principles underlying the said doctrine. So long as those within the net of taxation can be legitimately classified together indicating an intelligible differentia vis-a-vis those left out and the classification so made bears a rational nexus with the object sought to be achieved the classification is permissible and is not violative of Art.14 of the Constitution.