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of <h1>Court upholds constitutionality of Act XIV of 1955, dismisses fraud allegations, and clarifies 'first purchase' term.</h1> The Court upheld the constitutional validity of Act XIV of 1955, finding it not in violation of Article 14 or Article 286(1)(b) of the Constitution. The ... - Issues Involved:1. Constitutional validity of Act XIV of 1955 under Article 14 of the Constitution of India.2. Conflict with Article 286(1)(b) of the Constitution of India.3. Allegation of fraud on power by the State Legislature.4. Vagueness of the term 'first purchase' in item (viii).Issue-wise Detailed Analysis:1. Constitutional Validity of Act XIV of 1955 under Article 14 of the Constitution of India:The main contention was that item (viii) of Act XIV of 1955, which imposes a tax on Virginia tobacco, is discriminatory and violates the doctrine of equal protection of laws under Article 14. The doctrine of equal protection of laws does not forbid reasonable classification for legislative purposes. For a classification to be valid, it must be based on an intelligible differentia and must have a rational relation to the object sought to be achieved by the statute. The Court referred to various precedents, including Budhan Chowdhry v. State of Bihar, to reaffirm that reasonable classification is permissible if it is based on pertinent differences and serves a legitimate purpose. The Court found that Virginia tobacco and Nattu tobacco differ in several aspects, including the process of growing, curing, grading, market facilities, and the class of consumers. These differences provided a reasonable basis for the State to classify them for taxation purposes. The Court concluded that the classification was not arbitrary and had a rational basis related to the objective of raising revenue. Thus, the amendment was held to be constitutionally valid.2. Conflict with Article 286(1)(b) of the Constitution of India:Article 286(1)(b) prohibits the imposition of a tax on the sale or purchase of goods in the course of import or export. The petitioners argued that their purchase of Virginia tobacco was for fulfilling export orders and hence should be exempt. However, the Court referred to the Supreme Court's decision in State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory, which clarified that a purchase for export is only preparatory and not an act done 'in the course of' export. The Court reiterated that purchases made for the purpose of export do not qualify for exemption under Article 286(1)(b). Therefore, the imposition of tax on the purchase of Virginia tobacco was not in conflict with Article 286(1)(b).3. Allegation of Fraud on Power by the State Legislature:The petitioners contended that the Act, although purporting to tax purchases within the State, indirectly burdened export trade, constituting a fraud on power. The Court dismissed this argument, stating that the Legislature did not impose any tax on exports directly or by necessary implication. The tax was levied on completed purchases within the State, which fall within the legislative competence of the State. The Court held that there was no fraud on power as the tax was within the legislative ambit and did not violate any constitutional provisions.4. Vagueness of the Term 'First Purchase' in Item (viii):The petitioners argued that the term 'first purchase' was vague and could not form a basis for taxation. The Court examined the relevant provisions, including the definition of 'dealer' and the charging section, and found that there was no ambiguity. Item (viii) clearly specified the rate of tax, the person to be taxed, the point at which the tax is imposed, and the transaction to which it applies. The Court concluded that the term 'first purchase' was sufficiently clear and did not render the provision vague.Conclusion:The applications were dismissed with costs, and the Court upheld the constitutional validity of Act XIV of 1955, finding no violation of Article 14 or Article 286(1)(b) of the Constitution. The allegations of fraud on power and vagueness were also rejected.
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