Voluntary compounding scheme for arrack dealers upheld as constitutional challenge failed in writ proceedings

Voluntary compounding under the Kerala General Sales Tax Act for arrack retail dealers was upheld, because trade in intoxicants is subject to strong State regulation and carries no absolute fundamental right under Articles 14 or 19(1)(g). Dealers who elected the prescribed compounding scheme could not later repudiate the tax arrangement in writ proceedings after taking its benefits. The challenge based on Article 14 failed because no arbitrary or unreasonable classification was shown, and the burden of proving discrimination was not discharged. A Minister's Assembly statement did not create enforceable rights or override the statute.

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Issues: Whether the amended compounding provisions and the revised tax incidence on arrack retail dealers under the Kerala General Sales Tax Act, 1963 were unconstitutional as violating Articles 14 and 19(1)(g) of the Constitution of India, and whether dealers who had opted for compounding could later challenge the levy in writ proceedings.

Analysis: The amended scheme allowed arrack retailers to elect compounding of tax at a prescribed percentage of rental instead of being assessed under the normal turnover-based mechanism. The Court held that trade in intoxicants is not protected by an absolute fundamental right and that the State may regulate or impose terms on such trade. The option to compound was voluntary, and the benefits of compounding, including avoidance of regular assessment formalities and payment in instalments, meant that dealers who exercised the option could not later repudiate the arrangement. The Court further held that the challenge under Article 14 failed because the classification was not shown to be arbitrary or unreasonable, and the burden of establishing discrimination had not been discharged. The Minister's statement in the Assembly did not create enforceable rights or override the statute.

Conclusion: The amended tax scheme and the compounding option were upheld, and the constitutional challenge failed.

Final Conclusion: The writ appeals were dismissed, and the judgment under challenge was left undisturbed.

Ratio Decidendi: Where a dealer voluntarily elects a statutory compounding scheme for a regulated intoxicant trade, the resulting tax liability and contractual consequences cannot ordinarily be impeached in writ jurisdiction absent proof of arbitrariness or unconstitutional discrimination.

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