TaxTMI 
TaxTMI 
2009 (7) TMI 1152
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.... the learned counsel has challenged the levy of sales tax on fabrics imported from outside India on the following two grounds: (1) It is firstly submitted that under section 5(2) of the BST Act, it is open to the State Government to relax or omit any conditions or exception specified in Schedule "A". It however, cannot add anything to an entry in Schedule "A" considering the specific power conferred on the State Government as a delegate of Legislature under section 5(2) of the BST Act. (2) It is next submitted that between October 1, 1995 to April 30, 1998, the petitioner and other sellers of fabrics in the State of Maharashtra were all exempted from payment of sales tax. However, with effect from May 1, 1998, exemption is only provided to fabrics manufactured or produced in India. The petitioner, who earlier belonged to the same homogeneous class of sellers of fabrics in the State of Maharashtra, has thus been discriminated. The classification between the sellers of products manufactured or produced in India and sellers of fabrics imported from outside India is unreasonable having no nexus with the object which is to grant exemption from sales tax for the benefit of the cons....
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....d in India. In other words, goods imported into India from another country will have to pay sales tax on fabrics sold in the State of Maharashtra. The petitioners have relied on the Budget speech of the Finance Minister while introducing the Finance Bill, 1998, inter alia, giving the reasons for levy of sales tax on imported fabrics. It reads as under: "87. Under an agreement between the Union Government and the State Governments, the Union Government levies an additional duty of excise on sugar, textile and tobacco manufactured or produced in India. The proceeds of the duty are distributed amongst the States. On their part, the State Government do not levy any tax on sales of these commodities. However, the additional duty of excise is not levied on sugar, textile and tobacco imported from abroad. The State Government do not get any share from the countervailing duty of customs which is levied by the Union Government on the import of such commodities. But, even imported sugar, textile and tobacco are exempted from sales tax. Such a state of affairs is clearly not equitable. I, therefore, propose to levy tax at the rate of four per cent on sugar, textile and tobacco import....
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....fabrics imported by the petitioners would give rise to discriminatory consequences on account of the fact that unregistered dealers in case of out of Maharashtra sales will have to pay Central sales tax at the rate of eight per cent and/or that imposing of sales tax on imported fabrics under entry 9 of Schedule "B" of the BST Act for effecting of imposing restrictions on the petitioner's fundamental rights as alleged. Affidavit has also been filed on behalf of respondent No. 3 by R.K. Bansal, Assistant Commissioner of Customs (9G.VII). His challenge is to the exercise of powers by delegate under section 5(2) of the BST Act. We really do not deal with the contents of the said affidavit. Considering the above, we now first deal with the submission on behalf of the petitioners. For that purpose, we may gainfully reproduce section 5 of the BST Act. It reads as under: "Section 5. Sales and purchases of certain goods free from all taxes.- (1) Notwithstanding anything in this Act, but subject to the conditions or exceptions (if any) set out against each of the goods specified in column 3 of Schedule A, no tax shall be payable on the sales or purchases of any goods specifie....
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....of section 5(2) which was within the power of the delegate, it is not possible to accept the contention. That action of the State Government as a delegate of the Legislature pursuant to the powers conferred on it under section 5(2) is not ultra vires and/or arbitrary. The first contention must therefore be rejected. We may now consider the second contention based on discrimination. The law on the subject and some tests may be spelled out from the judgment of the Supreme Court in Shashikant Laxman Kale v. Union of India [1990] 185 ITR 104; [1990] 4 SCC 366, which quoted from the judgment In re: The Special Courts Bill, 1978 [1979] 2 SCR 476: (page 110 of ITR) "(2) The State, in the exercise of its Governmental power, has of necessity to make laws operating differently on different groups or classes of persons within its territory to attain particular ends in giving effect to its policies, and it must possess for that purpose large powers of distinguishing and classifying persons or things to be subjected to such laws. (3) The Constitutional command to the State to afford equal protection of its laws sets a goal not attainable by the invention and application of a precise fo....
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....lation, provided such classification is not arbitrary in the sense abovementioned. ... (11) Classification necessarily implies the making of a distinction or discrimination between persons classified and those who are not members of that class. It is the essence of a classification that upon the class are cast duties and burdens different from those resting upon the general public. Indeed, the very idea of classification is that of inequality, so that it goes without saying that the mere fact of inequality in no manner determines the matter of constitutionality." Have the petitioners discharged the initial burden on them to prove that the classification is unreasonable and/or has no nexus with the object sought to be achieved? Have the petitioners produced cogent material to show that the petitioners and others similarly situated have been subjected for discriminatory treatment and/or hostile treatment? (See Ram Krishna Dalmia v. Shri Justice S.R. Tendolkar AIR 1958 SC 538). The preamble of the BST Act itself sets out that the Sales Tax Act is a law relating to levy of tax on sale or purchase of certain goods in the State of Bombay (Maharashtra). In other words, ....
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....tification dated May 1, 1998 from sales tax. Statement of objects and reasons clause to the Speech of the Finance Minister of the State of Maharashtra while introducing the Finance Bill, 1998 gives a clear indication why imported goods are subject to sales tax. The Union Government levied additional duty of excise on sugar, textile, and tobacco manufactured or produced in India which provides or is distributed amongst the States pursuant to the agreement with the Union Government and the State Government. On their part, the State Government did not levy or tax on consumption of these commodities. However, additional duty of excise is not levied on sugar, textile and tobacco imported from abroad. The State Government did not get a share if the countervailing duty of customs which was levied by the Union of India on the import of such commodities. In terms of the existing notification imported sugar, textile and tobacco are exempt from sales tax and therefore, it was proposed to levy tax at the rate of four per cent. The law is now well-settled that the Finance Minister's speech can be used as an aid to construction of a provision. See K.P. Varghese v. Income-tax Officer, Erna....
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....al Duties of Excise (Goods of Special Importance) Act, 1957. Similarly, under the provisions of the Customs Act and the Customs Tariff Act additional excise is also payable by the importer when he imports goods for home consumption. It is submitted that it was not open to the State to treat one homogeneous class into two different classes based on sale of goods depending whether they were imported from other States of India or from foreign State. Reliance placed on article 304, in our opinion is not really relevant. Under article 301 of the Constitution, trade, commerce and intercourse throughout India shall be free. Article 302 confers a power on Parliament to impose restrictions on the trade, commerce and intercourse between one State and another or within any part of the territory of India as may be required in public interest. This really would be of no assistance. Article 303 is in the nature of restrictions on the exercise of power by a competent Legislature or the State to make any law giving or authorising the giving of any preference to one State over another and the like. Article 304, as we have seen, is only in the nature of making a law by the said Legislature to impose....