Skip to content


P.T. Abdussamad and ors. Vs. the State of Kerala and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case NumberO.P. Nos. 5565 of 1974 and 272, 563, 759, 777, 783, 788, 797, 800, 803, 809, 811, 814, 829, 831, 833
Judge
Reported in[1977]39STC399(Ker)
AppellantP.T. Abdussamad and ors.
RespondentThe State of Kerala and ors.
Appellant Advocate Hyder Ali Khan and; K. Mohamed Naha, Advs.
Respondent AdvocateThe Government Pleader
DispositionPetition dismissed
Cases ReferredIn State of Tamil Nadu v. Sitalakshmi Mills Ltd.
Excerpt:
.....be bad as a tax on sales is neither regulatory nor compensatory' in any way has unsettled the rule that 'restrictions, freedom from which is guaranteed by article 301, would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade' atiabari tea co. i would only like to quote one passage from the decision of the supreme court in krishnari's case a. in view of what is stated above, these original petitions fail and i dismiss the same......sales tax'. shah, j., in that case took the view that tax under the central sales tax act on inter-state sales, is in its essence a tax which encumbers movement of trade or commerce (para 10 at 155; page 386 of 22 s.t.c.), but bachawat, j., in his separate judgment said that tax under the central sales tax act on inter-state trade does not stand on a different footing from tax on intra-state sales and that normally a law imposing a tax on intra-state sales does not offend article 301 (para 29 at 161 ; page 395 of 22 s.t.c.). it is with reference to this case that the observations relied on by mr. naha were made by mathew, j., in krishnan's case a.i.r. 1975 s.c. 583, mentioned above. the rule stated in nataraja mudaliar's case a.i.r. 1969 s.c. 147 at 156 that, every imposition of tax does.....
Judgment:

George Vadakkel, J.

1. Inclusion of tapioca in the First Schedule to the Kerala General Sales Tax Act, 1963, by the Kerala General Sales Tax (Third Amendment) Act, 1974, was upheld by me as constitutional and competent in another batch of petitions, O.P. No. 237 of 1975 and connected cases P.V. Brothers Starch Industrials v. State of Kerala, page 397 supra. The learned counsel for the petitioners in these petitions contend that the amendment bringing in tapioca in the First Schedule aforesaid is hit by Article 301 of the Constitution. It is also submitted that entry No. 72 in the First Schedule relating to tapioca is discriminatory and violative of Article 14 of the Constitution. On that basis it is argued that these petitions which were filed prior to the Presidential Order dated 27th June, 1975, will have to remain suspended without being decided.

2. In Makhan Singh v. State of Punjab A.I.R. 1964 S.C. 381, the Supreme Court pointed out:

(9) Article 359, on the other hand, does not purport expressly to suspend any of the fundamental rights. It authorises the President to issue an order declaring that the right to move any court for the enforcement of such of the rights in Part III as may be mentioned in the order and all proceedings in any court for the enforcement of the rights so mentioned shall remain suspended for the period during which proclamation is in force or for such shorter period as may be specified in the order. What the Presidential Order purports to do by virtue of the power conferred on the President by Article 359(1) is to bar the remedy of the citizens to move any court for the enforcement of the specified rights. The rights are not expressly suspended, but the citizen is deprived of his right to move any court for their enforcement. That is one important distinction between the provisions of Article 358 and Article 359(1) and said:

(13) Since the object of Article 359(1) is to suspend the rights of the citizens to move any court, the consequence of the Presidential Order may be that any proceeding which may be pending at the date of the Order remains suspended during the time that the Order is in operation and may be revived when the said Order ceases to be operative ; and fresh proceedings cannot be taken by a citizen after the Order has been issued, because the Order takes away the right to move any court and during the operation of the Order, the said right cannot be exercised by instituting a fresh proceeding contrary to the Order. If a fresh proceeding falling within the mischief of Article 359(1) and the Presidential Order issued under it is instituted after the Order has been issued, it will have to be dismissed as being incompetent. In other words, Article 359(1) and the Presidential Order issued under it may constitute a sort of moratorium or a blanket ban against the institution or continuance of any legal action subject to two important conditions. The first condition relates to the character of the legal action and requires that the said action must seek to obtain a relief on the ground that the claimant's fundamental rights specified in the Presidential Order have been contravened and the second condition relates to the period during which this ban is to operate. The ban operates either for the period of the Proclamation or for such shorter period as may be specified in the Order.

3. The proceedings which will have to remain suspended are those proceedings which are pending in courts at the time of the Presidential Order, 'for the enforcement of the rights so mentioned' (mentioned in the Order). It was also stated in that decision that what matters is not so much the form which the proceeding has taken, or the words in which the relief is claimed as the substance of the matter. As stated by the Supreme Court 'the action must seek to obtain a relief on the ground', that is to say, for the reason, 'that the claimant's fundamental rights have been contravened'. Where, therefore, there is no contravention of the fundamental rights mentioned in the Order and, therefore, no question of 'enforcement' of that right by the court arises, in short, where the court is not in substance called upon to extend its assistance for the enforcement of a fundamental right mentioned in the Order and contravened by the respondents, I do not think that the proceedings require to be suspended, so as to be capable of being revived after the Presidential Order ceases to be operative. Petitioners will have therefore to show, at least prima facie, that their right under Article 14 has been contravened and that they are in substance seeking to enforce that right, before I suspend the proceedings.

4. It was argued that the proviso to entry No. 72 is violative of Article 14 of the Constitution. Under the proviso a dealer shall not be liable to pay tax under the Act if his turnover of the purchase of tapioca within the State is less than Rs. 35,000 and such tapioca is sold for domestic consumption anil for use as food material. As pointed out by M.S. Menon, C.J., in Catholic Bank of India Ltd. v. Jacob 1967 K.L.T. 416 (F.B.):

The proposition that there should be no discrimination either in the privileges conferred by a statute or in the liabilities imposed by it is not a proposition that is absolute in its application. Societies are unequal in their basic structure and normal manifestations and a reasonable classification, therefore, is not only permitted but is essential for the achievement of the equality that is desired and the progress that is necessary. All that can be said is that the classification effected should not be arbitrary in character and that it should be based upon differences pertaining to the subject and the purpose of the enactment concerned.

The legislation in question is a taxing statute. In Khyerbari Tea Co. v. State of Assam A.I.R. 1964 S.C. 925, it is said :

It would be idle to contend that a State must tax everything in order to tax something. In tax matters, 'the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably. The Supreme Court of the United States of America has been practical and has permitted a very wide latitude in classification for taxation': Willis on 'Constitutional Law' p. 587. This approach has been approved by this court in the case of East India Tobacco Co. v. State of Andhra Pradesh [1963] 1 S.C.R. 404 at 409.

Therefore it would be futile to contend that every dealer should be taxed under entry No. 72 and that the proviso exempting dealers whose turnover of the purchase of tapioca is less than Rs. 35,000, provided they sell the tapioca for domestic consumption and for use as food material is hit by Article 14. The classification, on the face of it, is reasonable in so far as those who are exempted are small-scale traders in tapioca who sell it locally as food materials.

5. I do not think that the decision of the Supreme Court in G.K. Krishnan v. State of Tamil Nadu A.I.R. 1975 S.C. 583 at 589-590, or the discussion contained in paragraph 27 thereof on which Mr. Naha, the learned counsel for some of the petitioners very much relied, viz., 'that a tax on intra-State sale, if it involves movement from one part of the State to another part of the same State, would encumber the movement part of it and is a restriction on the freedom of trade and commerce' and that, therefore, 'it would mean that imposition of sales tax by a State on intra-State sale, at any rate, when the sale involves movement of goods will be restriction of trade and commerce' for which reason 'unless the law imposing it has received the previous sanction of the President, the law would be bad as a tax on sales is neither regulatory nor compensatory' in any way has unsettled the rule that 'restrictions, freedom from which is guaranteed by Article 301, would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade' : Atiabari Tea Co. Ltd. v. State of Assam A.I.R. 1961 S.C. 232 at 254, para 51. In Andhra Sugars Ltd. v. State of Andhra Pradesh A.I.R. 1968 S.C. 599, the Supreme Court held that 'normally, a tax on sale of goods does not directly impede the free movement or transport of goods'. And in State of Madras v. Nataraja Mudaliar A.I.R. 1969 S.C. 147 at 156, that court said that 'the flow of trade does not. necessarily depend upon the rates of sales tax'. Shah, J., in that case took the view that tax under the Central Sales Tax Act on inter-State sales, is in its essence a tax which encumbers movement of trade or commerce (para 10 at 155; page 386 of 22 S.T.C.), but Bachawat, J., in his separate judgment said that tax under the Central Sales Tax Act on inter-State trade does not stand on a different footing from tax on intra-State sales and that normally a law imposing a tax on intra-State sales does not offend Article 301 (para 29 at 161 ; page 395 of 22 S.T.C.). It is with reference to this case that the observations relied on by Mr. Naha were made by Mathew, J., in Krishnan's case A.I.R. 1975 S.C. 583, mentioned above. The rule stated in Nataraja Mudaliar's case A.I.R. 1969 S.C. 147 at 156 that, every imposition of tax does not directly and immediately restrict or hamper the free flow of trade was again reiterated by the Supreme Court in T.G. Venkataraman v. State of Madras A.I.R. 1970 S.C. 508, with reference to imposition of tax on sale of cane jaggery under the Madras General Sales Tax Act, 1959. In State of Tamil Nadu v. Sitalakshmi Mills Ltd. [1974] 33 S.T.C. 200 (S.C), Mathew, J., on behalf of the court approvingly referred Atiabari Tea Co.'s case A.I.R. 1961 S.C. 232 at 254, para 51 and said that 'normally, a tax on sale of goods does not directly interfere with the free flow or movement of trade'. And in Krishnan's case A.I.R. 1975 S.C. 583 relied on by Mr. Naha, Mathew, J., said :

For a tax to become a prohibited tax, it has to be a direct tax, the effect of which is to hinder the movement part of the trade.

6. The petitioners have no case that the imposition of the tax in question in any manner restricts the movement of tapioca directly within the State or across the State boundaries. In this connection it was argued that the real object of the tax is to prevent export of tapioca from the State, since tax has to be paid by all dealers who do not sell tapioca locally for consumption as food material and that, therefore, it is a colourable exercise of power to tax. I have overruled this contention in the earlier batch of cases. I would only like to quote one passage from the decision of the Supreme Court in Krishnari's case A.I.R. 1975 S.C. 583 relied on by the learned counsel for the petitioners. That passage is as follows :

As the State Legislature was competent to pass the Act and as the Government is authorised under Section 4 to levy the tax, the question of the motive with which the tax was imposed is immaterial. To put it differently, there can be no plea of a colourable exercise of power to tax if the Government had power to impose the tax and the fact that the imposition of the tax was for the purpose of eliminating competition would not detract from its validity. If an authority has power to impose a tax, the fact that it gave a wrong reason for exercising the power would not derogate from the validity of the tax. Therefore, there is no substance in the first contention.

7. No other point was raised in these cases. In view of what is stated above, these original petitions fail and I dismiss the same. In the circumstances of the case there will be no order as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //