1978 (3) TMI 191 - HC - VAT and Sales Tax

Andhra Pradesh High Court Upholds Liquor Sales Tax Amendment

McDowell & Co. Limited Versus The Secretary to Government, Revenue (Commercial Taxes) Department, Hyderabad and Another

The High Court of Andhra Pradesh upheld the constitutionality of an ordinance amending the Andhra Pradesh General Sales Tax Act, 1957, specifically ... - Issues:Challenge to the constitutionality of an ordinance amending the Andhra Pradesh General Sales Tax Act, 1957 regarding item 26 of the First Schedule.Detailed Analysis:The judgment delivered by the High Court of Andhra Pradesh pertains to a writ petition challenging the constitutionality of an ordinance, Ordinance No. 2 of 1978, which amended certain provisions of the Andhra Pradesh General Sales Tax Act, 1957, specifically focusing on the amendment to item 26 of the First Schedule. The petitioner contended that the amendment, which introduced a differential rate of tax on liquors other than country liquor, was unconstitutional as it violated the principle of equality before the law.The key contention raised by the petitioner was that the new amendment created a classification based on irrelevant differentials unrelated to the imposition of sales tax, thus challenging its validity. However, the court held that the legislature has the unquestionable power to enhance tax rates and make reasonable classifications for levying taxes on goods or commodities. In this case, the ordinance sought to classify liquors based on whether the consideration for sale or purchase included excise duties payable under the Andhra Pradesh Excise Act, 1968.The court analyzed the classification introduced by the ordinance, noting that liquors falling under the category where excise duty was included in the consideration were subject to a lower tax rate, while all other liquors were taxed at a higher rate. The classification was deemed reasonable and intended to provide relief to dealers who had already paid excise duty. The court emphasized that the classification was not arbitrary but rather a justifiable and beneficial measure for certain dealers.Furthermore, the petitioner argued that including excise duty in the price of liquor contradicted a Supreme Court decision. However, the court clarified that the amendment did not include excise duty in the turnover but merely provided for a reduced tax rate if excise duty was part of the consideration for sale or purchase. The court rejected the contention that the amendment indirectly introduced a forbidden system or constituted a colorable exercise of power, emphasizing that the benefits to dealers from paying reduced tax after excise duty payment were legitimate.Ultimately, the court dismissed the writ petition challenging the ordinance, stating that there was no merit in the arguments presented. Additionally, the court rejected the request for a certificate to appeal to the Supreme Court, emphasizing the lack of substance in the petition. The stay petition associated with the writ petition was also dismissed in light of the main petition's dismissal, concluding the legal proceedings on the matter.