TaxTMI 
TaxTMI 
2006 (9) TMI 279
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....ioner has also prayed for a writ of mandamus/prohibition restraining the respondents from realising any tax from the petitioner treating the petitioner as manufacturer under section 2(ee) of the U.P. Trade Tax Act, 1948 in respect of the goods purchased from the agriculturists grown by them on their own land. Heard learned counsel for the parties. The petitioners are dealers registered with the respondent-authorities under the U.P. Trade Tax Act, 1948 and Central Sales Tax Act, 1956 as alleged in paragraph 3 of the writ petition. The petitioners are doing the business of commission agents to effect the commission business of horticulture produce of agriculturist. It is alleged that earlier no tax was ever imposed on the petitioners under the U.P. Trade Tax Act. The petitioners being commission agents were selling timber grown by the agriculturists and they were exempt from any tax. Such timber was taxable only at the point of sale by the forest department, various corporations, private forest owners, manufacturers and importers. Subsequently on account of the amendment of section 2(ee) of the U.P. Trade Tax Act, 1948 with effect from December 1, 1998 even though the petiti....
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....ended by the direction dated August 27, 2001, annexure 3 to the writ petition and the directions dated May 23, 2002 and July 25, 2002 vide annexures 5 and 6 and up to September 15, 2002. It is alleged in paragraph 12 of the writ petition that it is only on November 30, 2002 that the Principal Secretary, U.P. Government sent a letter to the Commissioner Trade Tax, U.P., in which it was mentioned for the first time that in view of the provision of section 2(ee) of the U.P. Trade Tax Act there is liability for payment of tax on the purchaser who has purchased timber from the agriculturist and hence there is no justification for stay of the recovery of tax. True copy of the letter dated November 30, 2002 is annexure 7 to the writ petition. In paragraph 13 of the writ petition it is alleged that the assessing authority of petitioner No. 1 has passed several orders under section 9(2) of the Central Sales Tax Act fixing tax liability against the petitioner No. 1, which were challenged before the appellate authority where they are still pending. As regards proceedings under the U.P. Trade Tax Act in respect of petitioner No. 1 the assessing authority (respondent No. 2) has passed an ....
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....commission and sells the same after charging commission to the extent of 1 to 3 per cent to registered dealers. It is alleged that the impugned imposition will lead to the closure of the petitioner's business. A counter-affidavit has been filed by the learned Standing Counsel and we have perused the same. It may be mentioned that the circular dated December 13, 2001, annexation 1 to the writ petition has merely implemented clause (ii) of section 2(ee) of the Act which came into force on December 1, 1998. In paragraph 3(c)(iii) of the counter-affidavit it is alleged that the object of making the amendment in section 2(ee) has been stated as follows: "Bahut se bade vypari aise kathit nirmata vyapari, jinko adhiniyam ke untergat kar dayta nahin hoti hai, se khareed dikhakar bikri karte hein. Aur kar na dete hein, kyonki nirmata vyapari ko kar deyta tabhi hoti hai, jab unki bikri ekkar nirdharan varsh mein ek lakh se adhik hoti hai. Karapavanchan rokne va rajasav hit mein aise vyaparion ko nirmata ki paribhasha main shamil kiye jane hetu dhara-2/ee/mein sanshodhan kiya ja raha hai." A perusal of the above object shows that the purpose of making the amendment to section 2....
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....tification dated November 23, 1998 the dealers of timber have been notified to be manufacturers. In view of this the petitioner being a manufacturer becomes liable to pay trade tax. In paragraph 14 of the counter-affidavit it is stated that the provisions of section 2(ee) have introduced a legal fiction in the definition of "manufacturer". Timber is a taxable commodity under the U.P. Trade Tax Act and the petitioner is a manufacturer under section 2(c) and is hence liable to pay tax. Section 2(c) defines "dealer" as follows: "'Dealer' means any person who carries on in U.P. (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods directly or indirectly, for cash or deferred payment or for commission, remuneration or other valuable consideration and includes- (i) . . . (ii) a factor, broker, arhti, commission agent, del credere agent or any other merchantile agent, by whatever name called and whether of the same description as here-in-before mentioned or not, who carries on the business of buying, selling, supplying or distributing goods belonging to any principal, whether disclosed or not. (iii) to (vi) . . . Provided th....
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.... the purpose of depreciation. In our opinion the State Legislature has power under entry 54, List II of the Seventh Schedule to the Constitution to make the impugned amendment under the U.P. Trade Tax Act. A bare perusal of the provisions of section 2(ee), section 3-A and section 3-AAAA makes it absolutely clear that the scheme of the Act was to levy trade tax once on the transaction of sale/purchase of goods. Undisputedly timber sold by the petitioner had not suffered tax at any stage. However, in our opinion the State Legislature can certainly make the impugned amendment so that the transaction becomes taxable. In our opinion there is no constitutional invalidity in the impugned amendment, and no illegality in the impugned circular or order. The decision of the Supreme Court in Hotel Balaji v. State of Andhra Pradesh [1993] 88 STC 98; [1993] UPTC 318 is applicable to the facts of this case. Although tax laws are also subject to article 14 of the Constitution vide Income-tax Officer v. N. Takin Roy Rymbai [1976] 103 ITR 82 (SC); AIR 1976 SC 670 , a larger discretion in classification is given to the Legislature in tax matters than in other matters vide Anant Mills Co. Ltd....
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....choice of the persons vide Chittoor Motor Transport Co. (P.) Ltd. v. ITO [1966] 59 ITR 238 (SC); AIR 1966 SC 570. The classification of companies into domestic and foreign companies is valid vide Amalgamated Tea Estate Co. v. State of Kerala [1975] UPTC 89 (SC). So also is the classification between Virginia tobacco and country tobacco vide East India Tobacco Company v. State of Andhra Pradesh [1962] 13 STC 529 (SC); AIR 1962 SC 1733 and a classification between big manufacturers and small ones vide British India Corporation Ltd. v. Collector of Central Excise AIR 1963 SC 104. A classification of traders or shopkeepers selling gold ornaments forgiving the benefit of exemption from sales tax into those who themselves work and produce the ornaments and those who are commission agents is valid vide Eprichinna Krishna Moorthy v. State of Orissa AIR 1964 SC 1581. Classification of tobacco into luxury and non-luxury categories is valid vide East India Tobacco Company v. State of Andhra Pradesh [1962] 13 STC 529 (SC); AIR 1962 SC 1733. An under-inclusive provision in the Foreign Exchange Regulation Act was declared valid in Superintendent and Remembrancer of Legal Affairs v. Girish ....
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....diciary with the utmost humility and self-restraint. . . . . In Lochner v. New York [1905] 198 US 45, Mr. Justice Holmes, the celebrated Judge of the U.S. Supreme Court in his classic dissenting judgment pleaded for judicial tolerance of State Legislative action even when the court may disapprove of the State Policy. Similarly, in his dissenting judgement in Griswold v. Connecticut 381 U.S. 479, Mr. Justice Hugo Black warned that 'unbounded judicial creativity would make this court a day-to-day Constitutional Convention'. Justice Frankfurter has pointed out that great Judges have constantly admonished their brethren of the need for discipline in observing their limitations (See Frankfurter's 'Some Reflections on the Reading of Statutes'). In our opinion the State should not be hampered by the court, particularly in tax and social regulatory measures unless they are clearly unconstitutional. All legislation (such as the kind we are examining), is essentially ad hoc and experimental. Since social problems nowadays are extremely complicated, this inevitably entails special treatment for distinct social phenomena. If legislation is to deal with realities it must address itself....
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.... dismissed. Civil Appeal No. 3019 of 2004 with Civil Appeal Nos. 202 of 2005, 3020 and 3021 of 2004 and 4232 and 4233 of 2006. Civil appeal No. 3019 of 2004 is from the judgment and order dated January 6, 2004, of the Allahabad High Court in C.M.W.P. No. 730 of 2003 (printed supra). Dhruv Agarwal, Praveen Kumar and Prashant Kumar, Advocate for the appellants. Dr. R.G. Padia, Senior Advocate (S.W.A. Qadri, Rajeev Deubey and Kumlendra Misra, Advocates, with him) for the respondents. JUDGMENT The judgment of the court was delivered by ARIJIT PASAYAT J.-Leave granted in S.L.P. (C) Nos. 5645 of 2005 and 5646 of 2005. These appeals involve identical questions and, therefore, are taken up for disposal together. In each of the appeals challenge is to legality of the judgment rendered by a division Bench of the Allahabad High Court holding that the appellant/each of the appellants, as the case may be, was liable to pay tax as "manufacturer" under section 2(ee) of the Uttar Pradesh Trade Tax Act, 1948 (in short, "the Act"). It was also held that the circular dated Decem-ber 13, 2000, issued by the Commissioner of Trade Tax, was valid in law. The background fac....
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....ection 3-AAAA deals with transaction regarding certain services. They read as follows: "2(e-1) 'manufacture' means producing, making, mining, collecting, extracting, altering, ornamenting, finishing, or otherwise processing, treating or adapting any goods; but does not include such manufactures or manufacturing processes as may be prescribed; 2(ee) 'manufacturer' in relation to any goods means the dealer who makes the first sale of such goods in the State after their manufacture and includes,- (i) a dealer who sells bicycles in completely knocked down form; (ii) a dealer who makes purchases from any other dealer not liable to tax on his sale under the Act other than sales exempted under sections 4, 4-A and 4-AAA." (underlined(1) for emphasis) Section 3-AAAA. Liability to tax on purchase of goods in certain circumstances.-Subject to the provisions of section 3, every dealer who purchases any goods liable to tax under this Act, (a) from any registered dealer in circumstances in which no tax is payable by such registered dealer, shall be liable to pay tax on the purchase price of such goods at the same rate at which, but for such circumstances, tax would have been payab....
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....ues which are really not relevant. It took note of paragraph 3(c)(iii) of the counter-affidavit filed by the respondent before the High Court which reads as follows: "Many of the big dealers, sells after showing the purchase from such alleged manufacturer-dealers who are not liable to pay tax under the Act and do not pay tax because the manufacturer-dealer liable to pay tax, only if, its sales exceeds Rs. 1 lakh in any assessment year. To prevent the evasion of tax and in the interest of the Revenue, these dealers have been brought by bringing in amending section 2(ee) so as to include such within the definition of 'manufacturer'." According to the High Court, the object of enacting the amendment to section 2(ee) was to prevent evasion of tax. Even if the aforesaid object is in any way relevant for the purpose of the present dispute, the object appears to be to levy tax on manufacturer-dealer and/or manufacturer-dealer who did not pay tax as his turnover did not exceed Rs. 1 lakh in any assessment year. It was, therefore, necessary to be established that the seller was a manufacturer-dealer. The Commissioner's circular could not have created a liability by drawing an infer....