Territorial tax classification and pre-existing sales tax law upheld; Article 286(3) and equal protection challenge failed.

Article 286(3) was construed to apply only to State sales tax laws made after Parliament declared the goods to be essential for the life of the community, so a pre-existing Hyderabad sales tax law was not invalidated for want of later Presidential assent. Territorial classification was recognised as a permissible basis for taxation, so the levy on coarse and medium cotton cloth did not offend Article 14. A writ petition under Article 226 was considered maintainable to challenge constitutional validity where ordinary taxing authorities could not finally decide that issue.

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Issues: (i) Whether Article 286(3) of the Constitution invalidated a State sales tax law enacted before Parliament declared the commodity to be essential for the life of the community, in the absence of subsequent Presidential assent. (ii) Whether the levy of sales tax on coarse and medium cotton cloth under the Hyderabad General Sales Tax Act offended Article 14 of the Constitution. (iii) Whether a writ petition under Article 226 was maintainable to challenge the constitutional validity of the levy.

Issue (i): Whether Article 286(3) of the Constitution invalidated a State sales tax law enacted before Parliament declared the commodity to be essential for the life of the community, in the absence of subsequent Presidential assent.

Analysis: Article 286(3) was construed as operating on laws made after Parliament had declared the goods to be essential for the life of the community. The phrase used in the clause was treated as indicating a sequence in time, and not as extending to laws already in force before the parliamentary declaration. Support was taken from the structure of Article 286, from the general rule that doubts should be resolved in favour of sustaining legislation, and from Section 3 of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952, which expressly referred to laws made after the commencement of that Act.

Conclusion: Article 286(3) did not invalidate the pre-existing Hyderabad sales tax law, and the levy remained valid against the assessee.

Issue (ii): Whether the levy of sales tax on coarse and medium cotton cloth under the Hyderabad General Sales Tax Act offended Article 14 of the Constitution.

Analysis: The levy was upheld on the footing that territorial classification is a recognised and permissible basis of classification for taxation. A tax otherwise constitutionally valid does not become invalid merely because it applies only within a particular area. The challenge based on equal protection therefore failed.

Conclusion: The levy did not violate Article 14 and was not unconstitutional on the ground of discrimination.

Issue (iii): Whether a writ petition under Article 226 of the Constitution was maintainable to challenge the constitutional validity of the levy.

Analysis: The ordinary taxing authorities could not finally determine constitutional questions, and a suit or departmental appeal was not treated as an equally efficacious remedy for that purpose. The writ jurisdiction was therefore considered available for such a challenge.

Conclusion: The writ remedy was maintainable, but the challenge on merits failed.

Final Conclusion: The constitutional objections to the levy were rejected, and the applications were dismissed because the tax was held to have been validly imposed.

Ratio Decidendi: Article 286(3) applies only to State laws made after Parliament has declared the goods essential for the life of the community, and a constitutionally valid territorial classification does not offend Article 14.

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