Article 14 scrutiny defeats discriminatory tax classification for branded coconut oil

Branded coconut oil could not be subjected to a higher tax rate than other edible oils unless the State demonstrated an intelligible differentia with a rational nexus to the statute's object. The claimed basis was that branded coconut oil was mainly used as hair oil, but no supporting material, facts, or figures were produced to substantiate that premise. A mere departmental opinion or policy assumption was insufficient to justify the differential fiscal treatment. The Karnataka HC therefore held that the classification under entry No. 17-A failed the Article 14 test and was unconstitutional and discriminatory.

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Issues: Whether entry No. 17-A in Part "C" of the Second Schedule to the Karnataka Sales Tax Act, 1957, introduced by Act No. 5 of 2001, was unconstitutional as discriminatory and violative of Article 14 of the Constitution of India.

Analysis: The impugned amendment singled out branded coconut oil for higher tax while other edible oils continued to be taxed at a lower rate under a different entry. A fiscal classification is permissible only if it rests on an intelligible differentia having a rational nexus with the object of the law. The asserted basis for the classification was that branded coconut oil was predominantly used as hair oil rather than as an edible oil. However, the State did not place any supporting material, facts, or figures before the Court to substantiate that factual premise. A mere departmental opinion or policy assumption could not sustain a differential tax burden when the legislative distinction was challenged on the ground of discrimination.

Conclusion: The classification failed the test of Article 14 and the amendment introducing entry No. 17-A was held unconstitutional and discriminatory.

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