M/S. Steelworth Ltd. v. State of Assam

J.C. SHAH and J. R.MuDHOLKAR, JJ.)

Saki Tax-Provincial legialation imposing Un; in certain circu111.!lancea-Oonstitutional validity-Amendment-Effect-- Assam Sales T1J11: Act, 1947 (Act, XVII of 1947), as amended by Assam Sale8 T1J11: (Amendment Act, 1960) (Act, XIII of 1960) s. 15 (1) (b) (i) (b) and (c)-Oonstitution of India, Arts. 14, 19 (l)(f).

The petitioner carried on business of manufacturing, selling and supplying iron and steel materials in the State of Assam. Before the Assam Sales Tax Amendment Act of 1960, it held a registration certificate under which all its purchases for use in manufacture or production of goods taxable under the Act were exempted from Sales Tax, but after the amendment it became liable to pay tax on those goods. It was contended that by omission of sub-cl. (b), discrimination was introduced by differentiating between materials bought for articles to be supplied against a contract and articles produced and sold by the petitioner and that this was not a reasonable classification

590 SUPREME OOURT REPORTS [1962) SUPP.

"'' hued on any intelligible differentia and therefore, the amend-

ment by Act XIII of 1960, was violative of Aris. 14 and 19(1) Jl(AIW-llt (f) of the Constitution.

.,.,...,,,,.,, l.U'. ..

v • Held, that the object of the amending Act was to raiJe

revenue for the State. It was for the legislature to decide aa to what articles it should tax and what articlci it should not i.x and if it dccidrd to Impose the tax on certain articles it thought necessary, that was a question of policy into which the courts cannot enter and in such circumstances per ll there is no discrimination. Besides, the provision against diJCri-mination waa not on articles but on pcrst>ns and the petitioner failed to show how the imposition of this tax was an unreas-onable restricti<>n on the right to carry on trade.

ORIGINAL Junrsn1CTION Writ Petition No. 184 of 1961.

Petition under Art. 32 of the Constitution of India for enforcement of Fundamental Rights.

C. B. Agancala, R. L. AgaTUXJ/a and P. C. Agarwala, for the petitioner.

Naunit Lal, for the respondents.

1962. January Hi. The Judgment of tho Court was delivered by x.., .1. KAPUR J.-This is a petition under Art. 32 of

the Constitution challenging the legality of the amendment introduced in s. 15 of the Assam Se.Jes Tax Act, 1947 (Act XVII of 1947), by s. 2 of the ABBam Sales T .. x (Amendment) Act, 1960 (Act XIII of 1960), by which sub-s. (b) of item (i) of sub-cl. (b) of cl. ( l) was deleted and thereby sales of goods to a registered dealer intended for use in production of goods for sale became liable to sales tax.

The appt·llant Company is a limited company carrying on in the 8tate of Assam its busin088 of manufacturing, selling and supplying iron and steel materials. It held a Registration Certificate under the A88am Sa.lee Tax Act, as it was before the amendment of 1960. Under that Act all its purehe.ses for use in manufacture or production of goods taxable undf'lr the Act were exempt from sales tax but after the amendment of the Act there was a deletion in the Registration Cert.ificate of certain goods, e.g., 1962 cast iron, iron plates, steel ha.rs and galvanised wire .Ill/,, SlulwM'th which were used by the petitioner in the manufacture Lta. of its finished products which were also taxable in v. Biiiie of Ass,,,.. the State. Consequently it has become liable to pay tax on those goods purchased for use in the manu-facture of goods and the cost of production has thereby gone up.

Three points were raised by the petitioner :- (I) that the amendment introduced by Act XIII of 1960 is violative of Art. 14 because it discriminates between manufacturers who supply goods according to orders received and others who manufacture goods on their own account and sell them;

(2) that the restriction imposed by the Amend-ing 4ct is excessive and violative of Art. 19 (I )(f) ;

and

(3) that the refusal to a.mend the Registration Certificate by not reinstating the articles mentioned above affects th9 rights of the petitioner Company under Art. 19( I)( f).

For the purpose of deciding these questions it is necessary to refer to the scheme of the Assam Sales Tax Act, l!J47 (Act XVII of 1917); Bys. 2(2)(a)(b) of that Act 'Contract' is defined as :

"2. In this Act, unless there is anything repugnant in the subject or context,-

(2) "contract'' means any agreement for carrying out for cash or deferred payment or other valuable consideration,-

(a) the preparation, contructlon, fitting· out, improvement or repair of any moveable property or of any b'uilding, road, bridge or other immoveable property, or

592 SUPREME OOURT REPORTS [1962] SUPP.

JIU (b) the insta 0 llation or repair of any 11/s . • Yt.1-U. machinery affixed to a building or other

Lid. immoveable property."

v.

B•r. q/ ..tss- . Sec_tion 9 o~ th~t Act provides for compulsory

·-J. regJBtrat1on. Sect1011 1 :l providtlll that a dealer

registered under s. 9 shall be ~ranted a certificate of registration which shall specify the class or clasees of goods in which the said dealer carries on business and such other particulars M may be prescribed. Section 15(1 l( b)(il( b) an<l ( c) deals with exemptions. It reads:- " 15 The net turnover shall be determined by deducting from dealer's gr088 turnover during any given period- ( I) his turnovl·r during that period on. (a) •..

(b) sale to a registered dealer of- (i) goods specified in the purchasing dealer's certificate of registration as being intended by him for- . .. ( a) •.• (b) use in manufacture or production of any gooos, the sale of which is taxable under this Act, (c) use in the execution of any contract." Sub-clause (b) hRB now been omitted by the amen· ding Act above referred to as a result of which from tho gross turnover of a dealer goods specified in tho certificate of registration as being intended by him for u<e in manufacture or production of any goods for rnle has now been omitted.

The argument raised was that by the omission of sub-cl. (b) discrimination was intended as between materials which were to be used for manufacture of goods and to be sold on their own account by the petitioner Company and materials which wero purchased for uso in the execution of any contra.ct, It was also contended that the object of the amend- , lHJ ment of the Sales Tax Act waa to prevent evasion of 111 /•. si..i rtA Sales Tax by manufacturing goods and sending them Lio out of the State and therefore that object could have Stllk of .4.r-been achie\·ed by taxing only those material which were so intended. The amending Act is really K•pur J. & part of the General Sales Tax Act of the State of Assam the object of which is to raise revenue in the State. It is for the Legislature to decide as to what articles it should tax and what articles it should not tax and if it decided to tax certain articles in order to effectuate its policy it is difficult to see how that would introduce discrimination. But it was argued that discrimination is introduced by differentiating between materials bought for articles to be 1mpplied against a contract and articles produced and sold by the petitioner and that this was not a reasonable classification nor was there any intelligible differentia in this classification. In our opinion this argument is without force. The Legislature, having chosen the articles on which it thinks necessary to impose a tax, h9.s decided to impoae the tax and it is difficult to see how it can be said that the goods supplied against a contract and goods manufactured and sold by the petitioner are similarly situated.

Besides the provision against discrimination is not on articles but on persons.

It has not been shown how the imposition of this t.ax is an unreasonable restriction on the rights of the petitioner to carry on trade, but it was sub-mitted that by this means the petitioner will not be able to compete with the manufacturers outside tJ1~. State of Assam. Assuming that thia is so, it is clear that goods which are purchased are put to different uses and if the legislature thinks that ~ertain classes of goods should pay the tax and not others that is a question of policy into which the courts cannot enter. We can only say that in rnch circumstanees, 11er se there is no ·discrimination.

There is no force in the second contention either.

594 SUPREME OOURT REPORTS (1962] SUPP.

1H2 In view of our decision on these two points M/,. S-th the third point, that is, the refuse.I of the Sales Tax

Lid. •• Officer to amend t.he registration certificate will Bt"' x..., o/ ;1.,.., have no force.

J. In the re8Ult thiB petition fails and is dismi88ed

and the rule is dillche.rged. The petitioner will pay the costs of the respondent.

P e.tition diamisaed.

SOUTHERN ROADWAYS PRIVATE LTD.

v.

UNION OF INDIA AND ANOTHE1t

(B. P. S1x1u. C.J., J. L. KAPua, M. HrnAYATULLAH, J.C. SHAH and J. R. MunnoLKAR, JJ.) lnwme Ta:r-Detelopmtftt Rtbak-DiaallouJanu on offiu appliances and tmnaport V<liic/u I/ di«:rimi11atory-J....,,,...taz Act, 1922 (11 of 1922) aR amtndtd by tM. Ta:raliott U.wa (Amendment) Act (28 o/ 1960, a. 10(2) (ri-b) -4 prolli.to. The as~ company owned a fleet of bmes and carried on the business of transport. The income-tax offiett dis-allowed development rebate on the transport vehicles owned by the company as provided by the second proviso to s. 10(2) (vi-b) of the Income-tax Act. The company challenged the section on the ground that the said provbo offends Art. 14 In that it discriminates between machinery which is ofrICe appli-anc.,. or road transport vehicl.,. and other kinds of machinery. lleld, that there is nothing in the Constitution which prevents the Legislature from choo.ing the objects of taxation from amonll"t vaiious classes of machinery for purpose of giving development rebate.

OIUGINAL JuruenrCTION: Petition No. 143 of 1961.

Petition under Art. 32 or the Constitution of India for the enforcement of Fundamental rights. S. Sunminathan and R. GopaJakri.,hnan, for the petitioner.

K. N. Rajagopaki Sastri and P. D. Menon, for the respondentAI.