K SUBRAMANIA PILLAI Vs. STATE OF MADRAS

JUDGEMENT

(1.) IN this batch of writ petitions the main question canvassed is whether the exigence of sales tax on sales of cane jaggery in contradistinction to the exemption from tax granted to the sales of palm jaggery within the State of Madras is violative of Article 14 of the Constitution of INdia and whether the legislative or executive machineries adopted by the State in imposing the levy and granting the exemption is legal. The petitioners are dealers in cane jaggery. As the affidavits in support of the issue of the process under Article 226 of the Constitution are many and varied in this batch, it was agreed that the facts in W.P. No. 369 of 1968 may be noticed and be taken as the pattern for adjudgment of the merits and the legal problems arising thereunder.

(2.) THE petitioner, a registered dealer who is dealing in cane jaggery, complains of hostile discrimination by reason of the notification of the Government in G.O. 2261 dated 30th December, 1967, whereby the tax payable on all sales of palm jaggery was executively exempted. Tracing the history of the law regarding the imposition of sales tax on jaggery, it is stated that under the Madras General Sales Tax Act, 1959, under item 5 of the Third Schedule to that Act, jaggery and gur were exempt from taxation. This exemption was in force from April, 1959, till December, 1967. On 1st January, 1968, the Government of Madras, in exercise of their powers under section 59(1) of the Act, amended the Third Schedule, and in particular, the above entry thereto by withdrawing both jaggery and gur from the exemption which the commodities were enjoying. This became law as Act 2 of 1968 when the Legislature approved the notification initially issued by the Government. On the same day, but in exercise of their powers under section 17(1) of the Act, the State of Madras passed the impugned G.O. referred to above granting exemption in respect of the tax payable on all sales of palm jaggery. Such an executive exemption granted by the respondent in exercise of their powers under the Act is the subject-matter of the complaint and attack. According to the petitioner, the imposition and the adoption of the incidence of tax and the consequential tax liability in the case of sales of cane jaggery in juxtaposition to the withdrawal of such incidence and tax on sales of palm jaggery is discriminatory in scope and therefore offends Article 14. THE case is that consequent upon the general benefit by reason of the legislative exemption enjoyed by both cane jaggery and palm jaggery prior to 1968, the tax payable on inter-State sales of both the commodities, namely, cane jaggery and palm jaggery, was also exempt by virtue of section 8(3-A) of the Central Sales Tax Act, 1956. But as a result of the invidious distinction which has resulted from the legislative imposition and executive exemption referred to above, the petitioner's case is that the impugned G.O. operates as a restriction on the freedom of trade guaranteed by Part XIII of the Constitution of India, and in particular inter-State trade in so far as cane jaggery is concerned. THE petitioner would also say that the withdrawal of the exemption on cane jaggery which is the ultimate impact of the impugned G.O. and Act 2 of 1968 without the prior assent of the President of India is violative of Article 304(b) of the Constitution. One other limb of the contention of the petitioner is that the power conferred on the State by section 59 of the Act to amend the Schedules without proper guidance is arbitrary and illegal. Even so, the delegation to the executive in this behalf is also impugned. At the instance of this Court and as no particulars were provided by the petitioner to substantiate his case of discrimination, a supplemental affidavit was filed furnishing such details. THE particulars furnished by the petitioner, in the main, show that the price level of came jaggery and palm jaggery is the same and therefore the resultant addition of sales tax to cane jaggery alone is ex facie obnoxious and by itself is suggestive of hostile discrimination. In other respects the particulars furnished disclose that there has been a fall in the trade ever since the imposition of sales tax on cane jaggery and the petitioner has also expressed his difficulty in adopting the statutory process in inter-State trade while effecting sales of cane jaggery for that purpose.THE Government while supporting their action maintain that what was done either under section 59 of the Act or under section 17 thereto is well within their powers and also maintain that the impugned notification is quite legal, valid and well within their jurisdiction. THEy would state that in accordance with the exigencies of the policy of the Government and regard being had to the resources of the State, certain goods are brought within the net of taxation and certain other commodities are relieved from such incidence and its burden. Such matters are purely within the field of administration and certainly within the competent ambit of both the Madras Legislature and the State Executive and no question therefore of any excessive delegation of powers under section 59 of the Act would even arise. Further, the notification having become law with effect from 1st January, 1968, with the passing of Act 2 of 1968, it is quite out of place to consider whether the delegation to the executive is excessive or not, excepting it be for academic purposes. Alternatively, it is contended that the exercise of the powers conferred on the Government under section 59 of the Act, particularly in the instant cases, is a matter within their discretion, competence and depending upon the contingencies prevalent during the particular period and as such the power has been validly and reasonably exercised. It is also said that the withdrawal of exemption with reference to cane jaggery is a matter which is once again a subject which could be competently disposed of by the State Government having regard to the surrounding circumstances, economic policies and such others, and the contention of the petitioner to the contrary is unsustainable. THE respondent denies that cane jaggery has been discriminated against and says that the executive exemption granted to the sales of palm jaggery in exercise of their powers under section 17 of the Act is yet again valid and sustainable. Regarding the objection that Act 2 of 1968, as also the executive exemption granted under section 17 of the Act, suffers from the infirmity of the absence of sanction by the President of India under Article 304(b), the respondent's case is that a non-discriminatory tax on the sale of goods of the nature in question does not directly or indirectly impede inter-State movement or transport of goods and does not therefore affect the freedom guaranteed under Article 301 of the Constitution of India. It is also contended that no sanction of the President of India is necessary for the enactment of the sales tax law, as It relates to non-discriminatory and regulatory taxes and as the power of the State Legislature to levy such taxes under the provisions of the Constitution is now derived from Article 246(5) read with item No. 54 of List II in the Seventh Schedule to the Constitution of India.Touching upon the policy of the Government and the broad base on which both the executive exemption and the legislative impositions were thought of and ultimately effectuated, the respondent states that manufacture of palm jaggery which is a class by itself and totally different from cane jaggery, and which is marketed through co-operative societies, is essentially a cottage in dusty which does not stand any comparison with the manufacture and production of cane jaggery. THE palm gur industry comes within the purview of the Khadi and Village Board and is a source of employment of ex-teddy-tappers who are poor. It is said that the ex-toddy-tappers are employed not for collecting teddy from the palmyrah trees, but for collecting neera or pardeneer and such juice collected by them in the traditional manner is converted into jaggery in their own dwelling places which mostly consist of huts. Palmyrah jaggery or palm jaggery being a seasonal product these teddy-tappers who are essentially the persons who are engaged in this trade are having such seasonal employment only. Such being the nature of the palm gur industry, the respondent, in order to safeguard the interests of the poor toddy-tappers and to encourage this cottage industry, has taken out of the pale of taxation the sales of palm jaggery. This is by virtue of the policy of the Government and particularly to safeguard the interests of a class of the community who were thrown out of employment years ago due to the introduction of prohibition. THE respondent has furnished statistics to show the reasons which prompted the Government to grant exemption in favour of palm jaggery. It is stated but not referred, that the utilisation of palm jaggery as an edible product by indigenous manufacture is still in its embryonic stage and the trade in the product is lagging far behind that of cane jaggery trade. As a fillip to the development of palm gur industry, it is stated that the Government has exempted a premier company in the State which is purchasing palmyrah jaggery and converting it into sugar in its factories, from payment of any excise duty. THE respondent's case therefore is that as levy of an additional burden by way of sales tax over the sales of such an indigenous product manufactured in an old and traditional style would not only adept the industry but also those who are engaged in its production, the levy of sales tax on such a product was deliberately avoided and the executive exemption granted under section 17 of the Act. Commenting on the particulars furnished by the writ petitioner, the respondent would State that the fall in the mullet or trade cannot be attributed to the grant of the exemption from sales tax to palm jaggery. What ever may be the reason for the fall in his business, it cannot be said that it is due to the impugned G.O. According to the respondent, the demand for cane jaggery has fallen one to various other reasons including its quality and the fall in the purchasing capacity of such gur by other States like Rajasthan, Utter Pradesh and Orissa. It is suggested that cane jaggery is always cheaper in comparison to palm jaggery and the question of preference of palm jaggery would not therefore arise even after the exemption of sales tax on sales of cane jaggery. By way of illustration the respondent urges that the total production of palm gur in the entire State itself is only Rs. 4 crores whereas the turnover of one of the petitioners in the group is about Rs. 70 lakhs and there are about 200 petitioners in this batch and this by itself is prominently indicative of the fact that the palm gur industry deserves all encouragement including the exemption from sales tax.After tracing the manner, method and mode in which both cane jaggery and palm jaggery were being dealt with by the Madras General Sales Tax Act, 1959, Mr. V. K. Thiruvenkatachari referred to the exemptions from tax granted to cane jaggery and palm jaggery from time to time and in varied proportions. His attack, however, is that such power though available, remains in the statute without any guide lines to the executive, such that there is ample scope for such a power being exercised arbitrarily and nakedly. THE impugned notification effectively curbs the trade of the petitioners. He referred to Dr. Lokanathan's Report in Support of his argument that there should be no discrimination between the two commodities. His case is that section 59 as long as it is unguided, any notification thereunder issued is ineffective in the eye of law and even so any legislation passed subsequent to and pursuant to the same. Particularly he would say that when the two commodities were enjoying the privilege and benefit of exemption for a considerable length of time, it is bad enough to withdraw the exemption without any justifiable reason to disturb the earlier pattern of taxation and it is indeed worse if one amongst the two of such commodities is granted an exemption by an executive fiat. He referred to Automobile Transport Ltd. v. State of Rajasthan Freightlines etc., Ltd. v. State of N.S.W. Westminster Bank, Ltd. v. Beverley B. C. and Shri Ram Krishna Dalmia v. Shri Justice S. R. Tendolkar and Others THE corner-stone of his argument is that the impact of Act 2 of 1968 read with the impugned G.O. resulted in discriminating cane jaggery from palm jaggery which are similar in nanny respects and such a discrimination violates Article 14 of the Constitution of India. Besides, the procedure adopted by the State has made inroads into the cane jaggery trade resulting in the imposition of unreasonable restrictions.According to Mr. M. K. Nambiar appearing for some of the petitioners, jaggery in all forms was treated alike and at all material times exempt from sales tax and there is no conceivable reason why in 1968, there should be any departure from the established practice. When the Legislature accepted Dr. Lokanathan's Report in 1959, it virtually conceded the existence of discrimination as between the products and excluded jaggery from taxation. THE circumstances which existed in 1959 do exist even today and no nexus has been established between the amendment made or the executive exemption granted through the impugned G.O. and the objects of the Act. THE substance and effect of the notification initially issued under section 59 of the Act followed up by Act 2 of 1968 and the executive exemption granted to palm jaggery under section 17 of the Act, tantamount to removal of the legislative exemption originally enjoyed by the two commodities in the arena of executive exemption and later confirm the exemption to one only of the two commodities, resulting in hostile discrimination. He also relied upon the circumstance that the imposition of sales tax on cane jaggery is an additional burden imposed without authority. For several years both were exempt and treated alike. But by Act 2 of 1968 read with the impugned G.O. there is an open differential treatment, which is not permitted. Besides the urged that inter-State trade and commerce in relation to come jaggery is affected and the imposition being unreasonable, the law as well as the G.O. should fail since it offends Articles 301 and 304 of the Constitution of India. THE attempt of the Government to justify their stand by improving the material in the counter-affidavit at different points of time is very much commented upon. He proceeds to say that sales tax being not regulatory or compensatory in scope should accord to the usual norms attendant upon it. What was originally a legislative exemption was taken away by executive action under section 59(1) of the Act. This is followed up by the further hat of the executive under section 17 whereby one product alone has been picked and chosen to have the benefit of exemption.

(3.) THE slogan of fall in cant jaggery trade is but reflective of the mind of a competitor in trade, besides being self-serving. We are not prepared, on a close scrutiny of such details furnished, to hold that the impugned G.O. has such an impact on cane jaggery which has resulted in hostile discrimination. As the Supreme Court said in K. T. Moopil Nair v. State of Kerala "If the Legislature has classified persons or properties in different categories which are subjected to different rates of taxation with reference to income or property, such a classification would not be open to the attack of inequality on the ground that the total burden resulting from such a classification is unequal. Similarly, different kinds of property may be subjected to different rates of taxation, but so long as there is a rational basis for the classification, Article 14 will not be in the way of such classification resulting in unequal burdens on different classes of properties. But if the same class of property similarly situated is subjected to an incidence of taxation, which results in inequality, the law may be struck down as creating an inequality amongst holders of the same kind of property."