(1.) TIMBER , tobacco and liquor have been subjected to discriminatory and oppressive taxation this is the chorus of the petitioners in this batch of writ petitions. A serious contention so urged, challenging the very constitutionality of a taxing statute, needs careful consideration.
(2.) THE petitioners have one thing in common : They have been the victims of an amendment to the IT Act, 1961, brought about by the Finance Act, 1988, which has introduced ss. 44AC and 206C to the IT Act, 1961. Their contentions are substantially common : The impost of the tax is inflexibly fixed under this provision. The income assessed depends not on the actuality of the situation ; it is fixed at a percentage of the purchase price of the commodities, be it an alcoholic beverage of the kind described or beedi leaves or timber bid at auctions held by the State from out of its forest reserves. The tax is really not on income, but on the purchase price ; the tax really partakes of the character of a sales tax ; sales tax cannot be levied, assessed or collected by the Union ; that is a field open only to the State ; that is the effect of Art. 246(3) of the Constitution r/w entry 54 of List II of the VIIth Schedule dealing with tax on sale and entry 8 dealing with intoxicating liquors. The tax is levied on an artificial assumption, and is, therefore, not linked with a tax on real income. It is quite possible that any of the ventures may culminate in a calamitous end and a massive loss. How could then the Legislature alter the actual and factual situation, create a fiction, name it as income and levy the tax ? query the petitioners.
(3.) YET another area in which the constitutionality is assailed, is the alleged discriminatory character of the tax. They contend : In the modern world, many are the articles of daily use and which are dealt with daily. Some are essential. Some are non-essential. Some are even luxury items ; some enticingly good though with latent health hazards. Why pick up three among these articles and subject them to this harsh and hard treatment, by a very unbearable burden in the form of tax ? There is no rationale involved and no good effect achieved by such an adventurous venture on the part of a prime Parliament--is the additional contention. Violation of Art. 14 will imperil the life and sustenance of an enactment, a tax enactment included. Strike down the enactment if it still shows signs of life is the prayer of the petitioners.