AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2002 (11) TMI 751
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....ants are small-scale industrial units engaged in the manufacture and sale of various products. They are also registered dealers under the Act. 3.. The Government of Kerala, in exercise of the powers vested under section 10 of the Act, issued Notification S.R.O. No. 1728 of 1993 making a reduction in the rate of tax payable under the Act on certain goods and by persons or units specified in the various Reported in [2002] 128 STC 42 (Chethana Pharmaceuticals v. Assistant Commissioner of Commercial Taxes) Schedules to the notification. This notification has been subjected to various amendments by extending concessional rates of tax to different class of persons or units on sale of their products. One such notification was S.R.O. No. 429 of 1995 by which a new itemitem 8 was, inter alia, added in Schedule IV stating that "small-scale industrial units whose total turnover does not exceed Rs. 50 lakhs" need pay only 4 per cent tax on the sale of goods manufactured by them within the State. This notification was to be effective from April 1, 1995. Another Notification S.R.O. No. 585 of 1996 dated July 29, 1996 was issued again amending Notification S.R.O. No. 1728 of 1993 whereby an expl....
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....hs. There is yet another prayer for direction to the respondents not to assess, demand or recover sales tax from the appellants on the products manufactured and sold by them at a rate more than 4 per cent up to a turnover of Rs. 50 lakhs till March 31, 1999 and also to revise the assessment orders already passed applying 4 per cent tax. The learned single Judge very elaborately considered the various contentions raised by the learned counsel for the appellants and held that the validity of a notification issued under section 10 of the Act cannot be tested on the basis of practical difficulties and observed thus: ".........In this case, in order to avail of the benefit of concessional rate no condition is imposed by the Government to SSI units which can be divided into two classes; one with turnover below rupees fifty lakhs and the other with turnover above rupees fifty lakhs. The Government is absolutely right in making such a classification which is based on reasonable basis between small and large industries. While the benefit of concessional rate is available to relatively small industries, the same is denied to SSI units with large turnover (above rupees fifty lakhs). Howev....
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....ich only confers a benefit on them at least for one year. Therefore I see no ground to invalidate the explanation to the notification." According to the counsel for the appellants the learned Single Judge was satisfied about the practical difficulties experienced by the appellants and therefore the notification should have been invalidated. Further, the limit of Rs. 50 lakhs fixed for availing the benefit of concessional rate in the notification, according to the counsel is arbitrary, unreasonable and violative of article 14 of the Constitution. Having regard to the object of the notification, viz., to uplift the SSI units, according to the counsel, the benefit should have been extended to all small-scale industrial units without any limit. 8.. As observed by the learned single Judge the notification is very clear. The benefit of concessional rate of tax is made available only to such of the small-scale industrial units whose total turnover of a year does not exceed Rs. 50 lakhs. However, for the first year of crossing the limit of Rs. 50 lakhs the Government thought that the benefit should not be denied, for it may not have been in the contemplation of the units that their turno....
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....urden of tax heavier in proportion to the increase in turnover would be reasonable. This was on the principle that the little man, by reason of inferior capacity to pay, should bear a lighter load of taxes relatively as well as absolutely, than is borne by the big one. It was further observed as follows: "As we said, a large dealer occupies a position of economic superiority by reason of his volume of business and to make the tax heavier on him, both absolutely and relatively, is not arbitrary discrimination, but an attempt to proportion the payment to capacity to pay and thus arrive in the end at a more genuine equality. The capacity of a dealer, in particular circumstances, to pay tax is not an irrelevant factor in fixing the rate of tax and one index of capacity is the quantum of turnover. The argument that while a dealer beyond certain limit is obliged to pay higher tax, when others bear a less tax, and it is consequently discriminatory, really misses the point, namely, that the former kind of dealers are in a position of economic superiority by reason of their volume of business and form a class by themselves. They cannot be treated as on a par with comparatively small deal....
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....x on cooked food including beverages not falling in any entry in the Fifth Schedule in bar attached hotels or restaurants and/or hotels above the grade of two stars and also amending entry 57 brought in by the Kerala Finance Act, 1988 which further provided that cooked food including beverages not falling under entry 76A of the First Schedule sold or served in bar attached hotels and/or restaurants the turnover in respect of which is Rs. 20 lakhs and above and bar attached hotels and/or restaurants. In other words, after the said amendment hotels and restaurants with turnover of Rs. 20 lakhs and above and bar attached hotels are made liable to pay sales tax on cooked food including beverages. The Supreme Court after referring to its earlier decisions observed thus: "Thus, it is clear that the test applicable for striking down a taxing provision on this ground is one of 'palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience'; and the courts should not interfere with the legislative wisdom of making the classification unless the classification is found to be invalid by this test." The Supreme Court further obser....
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.... not exceed Rs. 50 lakhs in a year. In this context it is relevant to note that small-scale industrial units registered with the industries department after April 1, 1979 are granted exemption from payment of sales tax on the turnover of goods manufactured and sold by them for a period of 5 years initially as per S.R.O. No. 968 of 1980 and later for a period of 7 years as per S.R.O. No. 1729 of 1993. Of course the exemption is limited to 90 per cent of the cumulative investment in plant and machinery and on production of an eligibility certificate obtained from the authority specified in the said notifications. It must be noted that Notifications S.R.O. No. 1728 of 1993 and S.R.O. No. 1729 of 1993 were issued on the same date, i.e., on November 3, 1993 and the concessional rate of tax granted as per S.R.O. No. 1728 of 1993 was originally not extended to small-scale industrial units covered by S.R.O. No. 1729 of 1993. This is for the obvious reason that the small-scale industrial units have already been granted exemption from payment of sales tax for a period of 7 years under S.R.O. No. 1729 of 1993. This was for the purpose of encouraging small-scale industrial units to set up new ....