Reasonable tax classification upheld for liquor sales where consideration included excise duty; constitutional challenge failed.

The legislature was competent to enhance sales tax and classify liquors for taxation, provided the classification was reasonable; the amended item 26 was therefore upheld because it created no hostile discrimination and granted only a concessional rate where the sale consideration already included excise duty payable under the excise law. The provision did not itself include excise duty in turnover or compel a result contrary to the principle that excise duty paid directly by buyers is outside turnover. The challenge of colourable exercise of power also failed, as the amendment merely conferred a benefit on dealers in such liquor.

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Issues: Whether the amendment to item 26 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957, which prescribed a higher rate of sales tax for liquors other than country liquor but retained a lower rate where the consideration included excise duty payable under the Andhra Pradesh Excise Act, 1968, was unconstitutional as denying equality before law or as a colourable exercise of legislative power.

Analysis: The power to enhance the rate of tax and to classify goods for taxation was held to be well within the legislature's competence, provided the classification was reasonable. The amended provision did not create a hostile discrimination. It divided liquors other than country liquor into two categories and granted a concessional rate where the consideration already included excise duty payable under the excise law, thereby giving relief to dealers in such liquor. The amendment also did not itself include excise duty in the turnover or compel any result contrary to the principle that excise duty paid directly by buyers does not form part of turnover. The challenge based on a colourable indirect device likewise failed, because the provision merely conferred a benefit where excise duty had been paid and included in the sale consideration.

Conclusion: The amendment was upheld as a valid and reasonable classification, and the writ challenge to it failed.

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