Court affirms taxation validity, contract obligations binding. Writ petition dismissed.

The court upheld the validity of the taxation provisions challenged by the appellants, emphasizing the reasonableness of the compounding option and the binding nature of contractual obligations. The court dismissed the writ appeals, stating that challenging contractual obligations through a writ petition was inappropriate, as the appellants had a concluded contract upon exercising the compounding option. The judgment of the learned single Judge was affirmed, concluding that the taxation scheme was constitutional and the appellants were obligated to adhere to their contractual commitments.

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Issues involved: Challenge to amendment of subsections (14) and (17) of section 7 of the Kerala General Sales Tax Act, 1963 and section 5(1)(v) read with item (1) of the Fifth Schedule as arbitrary, oppressive, confiscatory, and unreasonable.

Summary:

1. Background and Appellants' Contentions: The appellants, successful bidders at Abkari auctions, challenged the tax liability under the new Abkari policy. Arrack taxation involves two points: first sale by a dealer liable to tax and last sale in the State. Sub-section (14) of section 7 allowed dealers to pay tax at a compounded rate. The new policy allowed contractors to import rectified spirit, changing the tax liability to 62.5% on retail sales.

2. Constitutional Rights and Taxation: The appellants claimed the levy violated their fundamental rights under article 19(1)(g) of the Constitution. However, the court held that there is no fundamental right to trade in intoxicants. The compounding provision was found to be in accordance with the option of the dealers/contractors, and the challenge lacked merit.

3. Legislative Assurances and Taxation: The appellants argued that a statement by the Finance Minister regarding tax rates was not honored, causing financial burden. The court clarified that such statements are policy declarations and do not bind the Legislature. The taxing power is fundamental, and Ministerial statements cannot circumvent statutory provisions.

4. Compounded Tax Rate and Obligations: Appellants opted for compounding tax at 20%, later altered to 40%. They benefited from installment payments and reduced scrutiny. The court found the compounding provision reasonable as it was optional and relieved dealers of assessment procedures.

5. Discrimination and Constitutional Validity: Appellants claimed discrimination between local and outside State purchasers. The court held that the classification was not arbitrary and burdened the appellants to prove otherwise. The presumption of constitutionality was upheld.

6. Conclusion: The court dismissed the writ appeals, stating that the appellants had a concluded contract upon exercising the compounding option. Challenging contractual obligations via writ petition was deemed inappropriate. The judgment of the learned single Judge was upheld.

In conclusion, the court found the taxation provisions to be valid, the compounding option reasonable, and the appellants bound by their contractual obligations.

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