Retrospective sales tax on tobacco products upheld, with classification, trade freedom, double taxation, and purchase-point liability challenges rejected.

Retrospective sales tax on cigars, cheroots, bidis, snuff, chewing tobacco and country tobacco was held within the State's legislative competence, since retrospective taxation is permissible absent constitutional prohibition. The levy was also found not to violate Article 19(1)(g), as taxation is not unconstitutional merely because it burdens trade unless it becomes prohibitive or an unreasonable restraint. The tobacco classification was sustained under Article 14 because taxation allows wide classification and no hostile discrimination was shown. The Act was further read as avoiding impermissible double taxation, and section 3(2-B) was construed to fasten purchase-point liability on the first purchaser, not to suffer from uncertainty.

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Issues: (i) whether the retrospective levy of sales tax on cigars, cheroots, bidies, snuff, chewing tobacco and country tobacco was beyond legislative power; (ii) whether the retrospective levy offended Article 19(1)(g) of the Constitution of India; (iii) whether the classification created by the amendment violated Article 14 of the Constitution of India; (iv) whether the levy amounted to double taxation or taxation at two points contrary to the scheme of the Act; and (v) whether the purchase-point levy under section 3(2-B) was invalid for want of specification of the person liable to pay.

Issue (i): whether the retrospective levy of sales tax on cigars, cheroots, bidies, snuff, chewing tobacco and country tobacco was beyond legislative power.

Analysis: Articles 245 and 246 of the Constitution of India, read with Entry 54 of List II of the Seventh Schedule to the Constitution of India, confer plenary legislative power on the State to enact a sales tax law, including a law with retrospective operation, subject only to constitutional limitations. Retrospectivity by itself is not unconstitutional. The liability imposed by the taxing provision fell on the dealer on his turnover, and not merely on a collecting agent.

Conclusion: The retrospective levy was within legislative competence and was valid.

Issue (ii): whether the retrospective levy offended Article 19(1)(g) of the Constitution of India.

Analysis: Taxation, even if burdensome, does not by itself amount to an unconstitutional restriction on trade. A levy can be struck down only if its pith and substance shows that it is prohibitive or imposes an unreasonable restriction on the freedom to carry on business. No material was placed to show that the tax, alone or with other levies, compelled the petitioners to discontinue their trade or produced a constitutionally prohibited restraint.

Conclusion: The levy did not violate Article 19(1)(g) of the Constitution of India.

Issue (iii): whether the classification created by the amendment violated Article 14 of the Constitution of India.

Analysis: In taxation matters, the State enjoys a wide latitude in classification, and the burden lies on the challenger to show that the classification is arbitrary and unrelated to the object sought to be achieved. The amendment aimed at bringing all varieties of manufactured tobacco within the tax net, and the retrospective removal of the turnover threshold was adopted to prevent the revenue loss caused by the earlier exemption limit. The petitioners failed to establish any factual foundation showing hostile discrimination.

Conclusion: The classification was reasonable and did not offend Article 14 of the Constitution of India.

Issue (iv): whether the levy amounted to double taxation or taxation at two points contrary to the scheme of the Act.

Analysis: Double taxation, in the strict sense, means repeated taxation of the same subject under the same head. The fact that a commodity is subject to more than one statutory levy does not make the tax double taxation. Country tobacco as raw material and cigars, cheroots or other manufactured tobacco products are not the same commodity, and the manufacture changes the character of the goods. The scheme of the Act therefore did not produce impermissible double taxation.

Conclusion: The challenge on the ground of double taxation failed.

Issue (v): whether the purchase-point levy under section 3(2-B) was invalid for want of specification of the person liable to pay.

Analysis: Taxing statutes must be construed by ordinary rules of interpretation, giving effect to the legislative scheme and context. Although section 3(2-B) expressly fixes the point of levy rather than naming the payer, the words used, especially "first purchase in the State," clearly indicate that the purchaser at that point is intended to be taxed. The provision could not sensibly refer to the agriculturist producer as a dealer, and the context showed that the legislature meant to fasten the tax on the first purchaser.

Conclusion: Section 3(2-B) validly imposed the tax on the first purchaser and was not void for uncertainty.

Final Conclusion: The amended sales tax provisions were upheld in full, and the writ petitions were dismissed with costs.

Ratio Decidendi: A taxing statute may operate retrospectively if the legislature is competent to enact it and the Constitution imposes no specific bar; in construing a taxing provision, the court must read the language in context to give effect to the legislative scheme, and a reasonable classification in taxation will be sustained unless clear hostile discrimination is proved.

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