AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (12) TMI 909
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....Act") as being unconstitutional and invalid. It is also further prayed to direct the respondent Nos.1 and 2 to refund the amount of tax paid by the petitioners for illegal reduction of tax credit to the extent of 2% on the taxable turnover of purchases within the State for which tax credit is admissible in respect of the goods sold/resold in the course of interstate trade and the commerce or the goods used as input including raw material in the manufacture of goods which are sold in the course of interstate trade and commerce. For the sake of convenience the facts as stated in the Special Civil Application No.17439/2011 are considered and the said Special Civil Application No.17439/2011 is treated as a lead matter. [3.0] That the petitioners are engaged in the activity of manufacturing and trading of iron and steel goods specified in Entry 43 of ScheduleII of the VAT Act as well as goods of special importance declared under Section 14 of the Central Sales Tax Act, 1956 (hereinafter referred to as "CST Act"). [3.1] It is the case on behalf of the petitioners that they are registered dealers under the provisions of the VAT Act and are holding certificate of registration granted u....
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....thin the State for which tax credit is admissible, in case the goods are sold/resold in the course of interstate trade and commerce has been denied. Hence, the respective petitioners have preferred the present Special Civil Applications for the aforesaid reliefs. [4.0] Shri Mihir Joshi, learned Senior Advocate, Shri Percy Kavina, learned Senior Advocate and Shri Uchit Sheth, learned adovocates have appeared on behalf of respective petitioners. Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the petitioners has vehemently submitted that section 11(6) of the VAT Act gives the Government power to classify class of goods or dealers and not class of transactions and therefore, the impugned notification which creates class of transactions is ultra vires the VAT Act. It is submitted that in exercise of power conferred by section 11(6) of the VAT Act, the State Government can either specify the goods or it can specify class of dealers. It is submitted that however as per Entry No.2 of the impugned notifications, input tax credit is to be curtailed by 2% if the goods are sold in the course of interState trade and commerce or if they are used as input including raw materia....
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....e Government that the guidance to the power conferred by section 11(6) of the VAT Act is to be derived from the overall scheme and other provisions of the VAT Act and therefore, it cannot be said that the discretionary power given by section 11(6) of the VAT Act is unbridled and excessive is accepted even then the impugned notifications are not in furtherance of the scheme of the VAT Act. It is submitted that the VAT Act envisages payment of tax on value addition at every stage of sales of goods. It is submitted that preamble of the VAT Act states that it is an Act to consolidate and amend the laws relating to the levy and collection of tax on "value added basis" in respect of sale or purchases of goods in the State of Gujarat. It is submitted that therefore while section 7 of the VAT Act authorizes levy of tax on turnover of sales of a dealer under the VAT Act, section 11 of the VAT Act grants input tax credit of the tax paid on purchases made from within the State subject to the restrictions contained therein. It is submitted that section 13 of the VAT Act stipulates that the net amount of value added tax payable for a period shall be determined after adjustment of tax credit in ....
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....ion exempting a particular cinema house from the provisions of that Act and in the said decision the Hon'ble Supreme Court confirmed the observation of the High Court to the effect that any order passed by the Government under Section 13 of that Act could be subject to judicial review by the Courts for finding out whether (a) it was discriminatory so as to offend Article 14 of the Constitution of India; (b) the order was made on grounds which were germane or relevant to the policy and purpose of the Act and (c) it was not otherwise malafide. [4.7] It is submitted that the issuance of impugned notifications under Section 11(6) of the VAT Act merely on the ground that the State Government is yet to receive compensation from the Central Government does not bear any nexus with the scheme of the VAT Act nor does it advance the policy and purpose of the VAT Act, which is to levy tax on value added basis. [4.8] It is submitted that assuming without admitting that section 11(6) of the Act is a valid piece of legislation, even then the impugned notifications are in defiance of the scheme of the VAT Act. Therefore, they are arbitrary, discriminatory and violative of Article 14 of the Const....
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....and an integral part of the value added tax scheme, such power given to the executive by section 11(6) of the VAT Act has to be used reasonably and in genuine circumstances. [4.13] It is submitted that the power cannot be misused to the extent of wiping off the right of tax credit altogether to the extent of 2% in the case of interState sale transactions and that too only because the State Government is purportedly yet to receive compensation from the Central Government. It is submitted that therefore this is a flagrant abuse of power which is contemplated in the statute only to provide for exceptions to the right of the input tax credit on case to case basis if the situation and public interest so demands. It is submitted that therefore the impugned notifications are manifestly arbitrary and therefore violative of Article 14 of the Constitution of India. [4.14] It is further submitted by learned Counsel appearing on behalf of the respective petitioners that the reduction of input tax credit by the impugned notification affects free flow of interState trade and commerce and therefore, it violates Article 301 of the Constitution of India. It is submitted that Article 301 of the Co....
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....y require reduction of input tax credit even in respect of goods declared to be of special importance under Section 14 of the CST Act violate Article 286 of the Constitution of India. It is submitted that Article 286(3)(a) of the Constitution of India authorizes Parliament of India to declare goods as of special importance and to impose restrictions and conditions in regard to the power of the States for levy, rates and other incidence of tax on such goods. It is submitted that thus the Parliament has been given authority to impose restrictions on the powers of the State Government to impose tax on sales or purchases of declared goods taking place within the State. It is submitted that pursuant to the powers conferred by the Constitution of India, Parliament has in section 2(c) of the Central Act defined declared goods as those goods which are declared under Section 14 of the Central Act as goods of special importance in interState trade and commerce. It is submitted that restrictions of the State in imposing tax on sales or purchases of declared goods are stated in section 15 of the Central Act. It is submitted that on considering section 15 of the Central Act it imposes restricti....
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....amilnadu General Sales Tax Act, 1959. Cotton yarn so purchased was resold in the course of interState trade and commerce. On the interState sales tax was paid under the Central Act. The dealer claimed refund of the tax paid on purchases. The same was denied as at the relevant time section 15(b) of the Central Act provided for giving refund instead of reimbursement as it stands now and therefore the interpretation of the lower authorities including the Madras High Court was that the refund can be given only to the dealers who had paid the tax. The High Court held that the dealer had purchased by paying tax to the vendor and therefore it was held that it was not entitled to refund of tax paid on local purchases. The Hon'ble Supreme Court did not accept the view so held by Madras High Court. According to the Hon'ble Supreme Court refund can be given not only to the dealer who had actually deposited the tax to the State but it could not also be to a dealer making interState sale because the price charged from such dealer by the seller would normally take into account the sale tax paid by it. While taking this decision, the Hon'ble Supreme Court also relied upon the subsequent amendment....
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....rse of interState trade and commerce are clearly contrary to section 15(b) of the Central Act and hence, violative of Article 286(3) of the Constitution of India. Making above submissions and relying upon above decisions it is requested to quash and set aside the impugned notifications as well as to declare section 11(6) of the VAT Act unconstitutional. [5.0] All these petitions are opposed by Shri Kamal Trivedi, learned Advocate General appearing with Shri Jaimin Gandhi, learned AGP appearing on behalf of the respondent State. [5.1] It is submitted that section 11 of the VAT Act deals with "tax credit". It is submitted that as per section 11(1) of the VAT Act, the benefit of tax credit is available to a purchasing dealer in a State on his purchase of taxable goods, which are intended for the purposes specified under Section 11(3) of the VAT Act. It is submitted that in view of section 11(6) of the VAT Act, tax credit so granted can be given a gobye as a whole or can be proportionately reduced with reference to any goods or class of dealers which may be specified in a notification issued in exercise of powers conferred under section 11(6) of the VAT Act, whereas section 11(5) of....
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....ation of power to examine and is not violative of Articles 14 and 19(1)(f) of the Constitution of India on the ground that that power of exemption granted is uncontrolled and unguided. It is submitted that what is required to be appreciated is that when a subordinate legislation came to be constitutionally upheld, similar arguments can never succeed against plenary legislation, which is involved in the present case. [5.6] It is further submitted by Shri Trivedi, learned AG that similar provisions are found in Rule 57A of the Central Excise Rules framed under the Central Excise Act, 1944, popularly known as MODVAT Scheme whereunder, Central Government may by issuing notification specify, for the purpose of allowing credit of any duty of excise etc. as may be specified in the said notification paid on the goods used in or in relation to the manufacture of final product therefrom and for utilizing the credit so allowed towards payment of duty excise leviable on the final product. It is submitted that in the case of Asian Paints India Ltd. v. Union of India reported in 2008 (227) ELT 192, the Madras High Court while dealing with the challenge against the validity of the Rule 57A as we....
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....such sale from the State to a destination outside the State, is governed by the Central Sales Tax Act, 1956. It is submitted that in the instant case the State Government has acted exclusively within the domain of provisions of section 11 of the VAT Act and therefore, has acted constitutionally without violating any of the other provisions. [5.9] Now, so far as the contention on behalf of the petitioners that the reduction of input tax credit by the impugned notifications affects free flow and interState trade and commerce and therefore, it is violative of Article 301 of the Constitution of India is concerned, it is submitted by Shri Trivedi, learned AG that the said plea is not sustainable in law, more particularly, when the rate of the central sales tax fixed by the Central Government has not been touched by the State Government at all. [5.10] It is submitted that even the plea of the petitioners that industries in the State of Gujarat are placed on an unequal position visavis the other industries and the traders outside the State of Gujarat, is also not sustainable in law. It is submitted that in the case of State of Madras v. N.K. Nataraja reported in AIR 1969(8) SC 147 (Para....
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....es - whom to tax or not to tax, whom to exempt or not to exempt and whom to give incentives and lay down the rates of taxation, benefits or concessions. It is submitted that in the field of taxation if the test of Article 14 is satisfied by generality of the provisions the courts would not substitute judicial wisdom for legislative wisdom. [5.15] Shri Trivedi, learned AG has also relied upon the decision of the Hon'ble Supreme Court in the case of Sangam Spinners Limited v. Union of India and Ors. reported in (2011)11 SCC 408 in support of his submissions that input tax credit is subject to the provisions under Section 11 of the VAT Act and more particularly section 11(6) of the VAT Act confers powers upon the State Government to give a gobye as a whole the tax credit was granted or can be partially reduced with reference to any goods or class of dealers which may be specified in a notification issued in exercise of powers conferred under Section 11(6) of the VAT Act and therefore, as such it cannot be said that there is absolutely a vested right in favour of the petitioners to get the tax credit. [5.16] Shri Trivedi, learned AG appearing on behalf of the State has further submit....
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....eceipt of the compensation from the central government. Making above submissions and relying upon above decisions, it is requested to dismiss the present special civil applications and to hold that section 11(6) of the VAT Act is neither unconstitutional nor it suffers from vice of excessive delegation and also to hold and declare that the impugned notifications are also not unconstitutional and/or ultra vires to section 11 of the VAT Act. [6.0] In the reply to the submissions made by the learned Advocate General appearing on behalf of the State, it is submitted that as such the delegatee cannot pick and choose in a manner so as to frustrate the policy of the parent statute even if the VAT Act is a taxing statute. It is submitted that the argument of the State Government is that since the VAT Act is a taxing legislation, the Government, while acting as a delegatee under Section 11(6) of the VAT Act, has greater flexibility to pick and choose without violating Article 14 of the Constitution of India. It is submitted that it may generally be true that in a taxing statute the Government as a delegatee can exercise greater flexibility with regard to fixation of rates of tax, grant of....
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....ubmitted that therefore the reduction of input tax credit cannot be put at par with withdrawal of an exemption as is sought to be portrayed by the Government. It is submitted that reduction of input tax credit and that too by delegated legislation requires a much stricter judicial scrutiny on the touch stone of the Article 14 of the Constitution of India. It is submitted that the impugned notifications not being in furtherance of the purpose of policy of the VAT Act are therefore arbitrary and it failed to satisfy the requirement of Article 14 of the Constitution of India. [6.3] Now, so far as the reliance placed upon column No.2 of the Table in the impugned notifications which reads as "description of goods" and the argument on behalf of the Government that the impugned notifications is qua goods and not qua transactions and therefore it is within the scope of section 11(6) of the VAT Act. It is submitted by the learned Counsel appearing on behalf of the respective petitioners that the entire notifications needs to be viewed in its entirety. It is submitted that column No.2 of the notification cannot be read in isolation but it has to be read along with column 4. It is submitted ....
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....ds which are sold in the course of interState trade and commerce. That with respect to the entries/goods mentioned tax credit is reduced to the extent of 2% is reduced with respect to all the goods excluding the goods specified in Schedule II of the VAT Act, in entries at Sr.Nos.13, 24, 48(i) viz. Isabgul, Jeera, Valyari, Methi, Suva, Ajma, Asaliya, Kalingada seeds, Khas khas, Dhana, Dhana dal, pepper at Sr. Nos.54 and 76. [7.1] It is the case on behalf of the petitioners that section 11(6) of the VAT Act is unconstitutional and invalid as it gives unbridled power to the executive to specify any goods or class of dealers that shall not be entitled to tax credit as a whole or partial tax credit. It is also the contention on behalf of the petitioners that section 11(6) of the VAT Act is ultra vires to section 11(1) to 11(5) of the VAT Act as the tax credit provided under Section 11(1) to 11(5) cannot be permitted to be taken away under Section 11(6) of the VAT Act more particularly when without any guidelines / guidance and therefore, the same is violative of Article 14 of the Constitution of India. [7.2] While considering the challenge to section 11(6) of the VAT Act, first of all....
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....t of tax calculated at the rate of four per cent. on the turnover of purchases- (i) of taxable goods consigned or dispatched for branch transfer or to his agent outside the State, or (ii) of goods taxable which are used as raw materials in the manufacture, or in the packing of goods which are dispatched outside the State in the course of branch transfer or consignment or to his agent outside the State. [(iii) of fuels used for the manufacture of goods.] Provided that where the rate of tax of the taxable goods consigned or dispatched by a dealer for branch transfer or to his agent outside the State is less than four per cent., then the amount of tax credit in respect of such dealer shall be reduced by the amount of tax calculated at the rate of tax set out in the Schedule on such goods on the '[taxable turnover of purchases within the State]. (4) The tax credit shall not be claimed by the purchasing dealer until the tax period in which he receives from a registered dealer from whom he has purchased taxable goods, a tax invoice (in original) Containing Particulars as may be prescribed under Subsection (1) of Section 60 evidencing the amount of tax. (5) Notwithstanding anything ....
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....urchased during the period when the permission granted under clause (a) of subsection (1) of section 14 has remained valid under clause (b) of that subsection;] (o) where original invoice does not contain the details of tax charged separately by the selling dealer from whom purchasing dealer has purchased the goods; (p) where original tax invoice is not available with purchasing dealer or there is evidence that the same has not been issued by the selling dealer from whom the goods are purported to have been purchased; [(I)] Notwithstanding anything contained in clause (a) or (b) in this subsection and subject to conditions as may be prescribed, a registered dealer shall be allowed to claim tax credit in respect of purchase tax paid by him under subsection (1) or (2) of section 9. [(II)] Notwithstanding anything contained in clause (d) or (dd) in this subsection and subject to conditions as may be prescribed, a registered dealer shall be allowed to claim tax credit for the taxable goods held in stock on the date of registration which are purchased after 1st April, 2008 and during the period of one year ending on the date of registration. [(III)] Notwithstanding anything contain....
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....or partly for purposes other than those specified under the said subsection or are used fully or partly in the circumstances described in subsection (5), the tax credit, if availed of, shall be reduced on account of such use, from the tax credit being claimed for the tax period during which such use has taken place; and such reduction shall be done in the manner as may be prescribed. [(b)Where the capital goods referred to in subclause (vii) of clause (a) of subsection (3) are not used continuously for a full period of five years in the State, the amount of tax credit shall be reduced proportionately having regard to the period falling short of the period of five years. (9) The registered dealer may claim the amount of net tax credit, which shall be determined in the manner as may be prescribed. (10) Where any purchaser, being a registered dealer, has been issued with a credit note or debit note in terms of section 61 or if he returns or rejects goods purchased, as a consequence of which the tax credit availed by him in any period in respect of which the purchase of goods relates, becomes either short or excess, he shall compensate such short or excess by adjusting the amount of....
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....ubsection (5) of section 11 provides the circumstances under which notwithstanding anything contained in the Act, the tax credit shall not be allowed for the purchases. Subsection (6) of section 11 permits and/or enables the State Government, by notification in Official Gazette, specify any goods or the class of dealers that shall not be entitled to whole or partial tax credit. Therefore, considering section 11 of the VAT Act as a whole, the tax credit provided under Section 11(1)(a) to a purchasing dealer is conditional one and subject to subsection (2) to subsection (12) of section 11 inclusive of subsections (3) to (6) of section 11. Therefore, as such it would be for the State Government to specify any goods or the class of dealers that shall be entitled to whole or partial tax credit, by the notification in the Official Gazette. Therefore, it is for the State Government to specify the goods or the class of dealers that shall not be entitled to whole or partial tax credit and it can be said to be the policy decision of the State Government to specify any goods or the class of dealers that shall not be entitled to whole or partial tax credit and the same shall be within the excl....
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....nconstitutional and/or ultra vires to Article 14 of the Constitution of India. Considering section 11 of the VAT Act as a whole and the intention of the legislature to give tax credit subject to subsection (2) to subsection (12) of section 11, therefore, it cannot be said that section 11(6) of the VAT Act suffers from the vice of excessive delegation and is arbitrary and/or violative of Article 14 of the Constitution of India. [7.3] In the case of M/s. Jalyan Udyog and Anr. (Supra), the Hon'ble Supreme Court had an occasion to consider section 25 of the Customs Act i.e. power to grant exemption from duty which confers power upon the Central Government, by notification in the Official Gazette to exempt generally either absolutely or subject to such conditions as may be specified in the notification, goods of any specific description from the whole or any part of the duty of customs leviable thereon and when the exemption notification issued in exercise of powers under Section 25(1) of the Customs Act came to be challenged, in paras 21 to 23, the Hon'ble Supreme Court has observed and held as under: "21. The above analysis of subsection (1) shows inter alia that an exemption grante....
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....rly shows that the power of exemption can be used even for altering the relevant date prescribed by Section 15. It is this very position which has been clarified by subsection (3) introduced in the year 1983. In our opinion, subsection (3) does not provide anything new. It merely elucidates and makes express what is implicit in subsections (1) and (2). Subsection (3) says that a notification under subsection (1) or (2) may provide "for the levy of a duty on such goods at a rate expressed in a form or method different from the form or method in which the statutory duty is leviable". It further says that "any exemption granted in relation to any goods in the manner provided in this subsection shall have effect subject to the condition that the duty of customs chargeable on such goods shall in no case exceed the statutory duty". The explanation to subsection (3)explains the words "form or method" occurring in the subsection. It says that the form or method in relation to the rate or duty of customs means the basis of duty viz., valuation, weight, number, length, area, volume or other measure with reference to which duty is leviable. 23. We are equally unable to agree that a legal fic....
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....er provisions of the statute. The question of exemption or relaxation exhypothesi indicates the existence of some provisions in the statute in respect of which exemption or relaxation is intended for some obvious purpose. 56. There is no manner of doubt that for bringing harmonious construction, reading down a provision in the statute, is an accepted principle and such exercise has been made by this Court in a number of decisions, reference to which has already been made. But we do not think that in the facts and circumstances of the case, and the purpose sought to be achieved by R. 39, such reading down is necessary so as to limit the application of Rule 39 only for varying some terms and conditions of a lease. If the State Government has an authority to follow a particular policy in the matter of quarrying of granite and it can change the provisions in the Mineral Concession Rules from time to time either by incorporating a particular rule or amending the same according to its perception of the exigencies, it will not be correct to hold that in each and every occasion when such perception requires a change in the matter of policy of quarrying a minor mineral in the State, partic....
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....e ground of Article 14. Unless otherwise established, the Court must presume that the said amendment was found by the Central Government to be necessary for giving effect to its policy (underlying the notification) on the basis of the working of the said Notification and that such an amendment was found necessary to prevent persons from taking unfair advantage of the concession. In fact, in this case, the explanatory note appended to amending Notification says so in so many words. If necessary, the Court could have called upon the Central Government to establish the reasons behind the amendment. (It did not think it fit to do so). It is equally necessary to bear in mind, as pointed out repeatedly by this Court, that in economic and taxation sphere, a large latitude should be allowed to be Legislature. The Courts should bear in mind the following observations made by a Constitution Bench of this Court in R. K. Garg v. Union of India: (SCC pp. 69091, para 8) "Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person ....
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....r relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses, Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must, therefore, adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or possibilities of abuse come to light the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues." 11. The same principle should hold good in the matter of Exemption Notifications as well, for the said power is part and parcel of the enactment and is supposed to be employed to further the objects of enactmentsubject,....
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.... necessary for public purposes, without sacrificing the legitimate interests of persons and groups, who deserve special treatment at the hands of the State for reasons, which the State may determine, entitling them to be placed in a special class. The Directive principles of the Constitution contained in Part IV lay down the policies and objectives to be achieved, for promoting the welfare of the people. In the context of the present controversy the following words of Art. 43 are particularly apposite: "- - - - - and in particular, the State shall endeavour to promote cottage industries on an individual or cooperative basis in rural areas." It has rightly been pointed out in the affidavit filed on behalf of the respondents 14 that the exemption, granted by the impugned notifications is meant primarily for the protection of petty producers of cotton fabrics not owning more than four power looms from unreasonable competition by big producers, like the petitioner Company. The State has therefore, made a valid classification between goods produced in big establishments and similar goods produced by small powerloom weavers in the mofussil who are usually ignorant, illiterate and poor ....
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....r S.25(1) of the Act, it was implicit in it that it could be rescinded or modified at any time if the public interest so demands and secondly it is not permissible to postpone the compulsions of "public interest" till after 31st March 1981 if the Government is satisfied as to the change in the circumstances before that date. Since, the Government in the instant case was satisfied that the very public interest which had demanded a total exemption from payment of customs duty now demanded that the exemption should be withdrawn it was free to act in the manner it did. It would bear a notice that though Notification 66/79 was initially valid only up to 3131979 but that date was extended in "public interest", we see no reason why it could not be curtailed in public interest. Individual interest must yield in favour of societal interest." [7.8] In the case of M/s. East India Tobacco Co. v. State of Andhra Pradesh reported in AIR 1962 SC 1733, the Hon'ble Supreme Court has observed that though the taxation law must also pass the test of Article 14, but in deciding whether a taxation law is discriminatory or not, it is necessary to bear in mind that the State has a wide discretion in sele....
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....of any assistance to the petitioners considering the facts and circumstances of the case, more particularly scheme of input tax credit under Section 11 of the VAT Act. [7.12] Now, so far as the contention on behalf of the petitioners that the input tax credit once validly availed by the dealers under Section 11 of the VAT Act becomes a statutory right and cannot be wished away as being merely a concession which cannot be withdrawn at the whim of the executive is concerned, the same has no substance. It is required to be noted that as such it is not a case of once the input tax credit availed and thereafter taken away by the executives. As observed hereinabove, the input tax credit itself is subject to sections 11(2) to 11(12) of the VAT Act. For the reasons stated above, it cannot be said that section 11(6) of the VAT Act is unconstitutional on the ground of excessive delegation of powers and/or violative of Article 14 of the Constitution of India. [8.0] Now, so far as the challenge to the impugned notification/s is concerned, it is required to be noted that as such section 11(6) of the VAT Act can be said to be an independent provision, which authorizes and/or permits the State....
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....onal validity of the amendments to section 8 of the M.P. General Sales Tax Act on the ground that the same are violative of Articles 14, 286(3), 301 and 304 of the Constitution of India while upholding the constitutional validity of the amendment to section 8 of the M.P. General Sales Tax Act, the Hon'ble Supreme Court in paras 12, 14, 16 to 20 has observed and held as under: "12. So far as the challenge under Article 14 is concerned, the submissions made in support thereof were that by the impugned amendments tendu leaves were discriminated against hostilely as compared with other raw materials in that the rate of tax on the sales and purchases of tendu leaves was made much higher than the rate of tax on the sales and purchases of other raw materials, not only within the State of Madhya Pradesh but also as compared with the rate of tax in the neighbouring Sates, and that there was no reasonable basis for making a distinction between tendu leaves and other raw materials inasmuch as the only use to which tendu leaves were put was as a raw material in the manufacture of bidis. As pointed out by Lord Greene delivering the opinion of the Judicial Committee of the Privy Council in Moha....
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....e legislative field of the State Legislatures, subject to the provisions of Entry 92A in the Union List. It is unnecessary to dilate upon this subject for all that is required to be done is to quote the following passage from the judgment of this Court in Khazajan Chand v. State of Jammu and Kashmir (1984) 2 SCR 858 (at pages 8734): (AIR 1984 SC 762 at p. 769) : "Our Constitution is federal in its structure and a salient feature of a federal polity is distribution of legislative and administrative powers between the federated unit and the federating units, that is, between the federal Government and the State Governments. Thus, matters in respect of which our Constitutionmakers felt that there should be uniformity of law throughout the country have been placed by them in the Union List (List I in the Seventh Schedule to the Constitution) conferring exclusive power upon Parliament to make laws with respect thereto, while matters which they felt were of local concern and may require laws to be made having regard to the particular needs and peculiar problems of each State have been assigned to the State Legislatures by placing them in List II of the Seventh Schedule, that is, the Sta....
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....vy the tax at one or more points in such series of sales or purchases. Legislations of all States in this respect are not uniform. some States having adopted a singlepoint levy, others a twopoint levy, and yet others a multipoint levy. 14. Arguments such as those advanced before us have been consistently rejected by this Court. We need give only four instances. In T. G. Venkataraman v. State of Madras, (1969) 2 SCC 299 : (AIR 1970 SC 508) it notification issued under the Madras General Sales Tax Act, 1959, which imposed tax on sales of cane jaggery and exempted sales of palm jaggery, was challenged on the ground that it violated Article 14 because it was discriminatory and opposed to equal treatment under Article 14. This challenge was repelled by the Court holding that cane jaggery and palm jaggery were commercially different commodities. In Jaipur Hosiery Mills (P) Ltd., Jaipur v. State of Rajasthan (1971) 1 SCR 386: (AIR 1971 SC 1330) a notification issued under the Rajasthan Sales Tax Act, 1950, which exempted from tax the sale of any garment the value of which did not exceed four rupees but excluded "hosiery products and hats of all kinds" from this exemption, was challenged ....
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....ection 8(2) of the Jammu and Kashmir General Sales Tax Act, 1962, on the ground that it was violative of Article 14 as it hostilely discriminated against dealers in the State of Jammu and Kashmir as compared with dealers in other States in the matter of the rate at which interest was payable when default was made in payment of tax by the prescribed time was negatived by this Court. 16.In support of the challenge under Article 14, it was further contended that without amending the definition of "raw material" given in clause (1) of section 2 of the M.P. Sales Tax Act, a different rate of tax cannot be levied upon tendu leaves. Section 8 was amended both by the 1968 Act and the 1971 Act but the definition of "raw material" was not amended and it continued to remain the same.We are unable to understand what difference this makes. By section 8 tendu leaves are expressly excluded from the concessional rate of tax in respect of other raw materials. Clause (1) of section 2 defines the term "raw material".This cannot, however, prevent the State from taxing different classes of raw materials at different rates. If this contention of the Appellants was to be accepted, it would lead to the a....
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.... which are goods of special importance in interState trade and commerce and not tendu leaves. Tendu leaves cannot by any stretch of imagination be equated with bidis or tobacco just as cigarette paper used for rolling cigarettes cannot be equated by any stretch of imagination with cigarettes or tobacco. This being the position, it is wholly unnecessary to consider the other arguments advanced in support of this challenge. 19. The challenge to the impugned amendments under Articles 301 and 304 of the Constitution was that by taxing tendu leaves at a higher rate than in the neighbouring States, the cost of bidis manufactured in the State of Madhya Pradesh increased considerably and thus it impeded *the freedom of trade and commerce throughout the territory of India. Article 301 provides as follows : "301. Freedom of trade, commerce and intercourse.Subject to the other provisions of this Part, trade, commerce and intercourse throughout. the territory of India shall be free." Under clause (b) of Article 304 of the Constitution, the Legislature of a State may. by law impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may ....
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....wn the entire tax exemption which is granted to all rerolled steel products sold in the State of Andhra Pradesh and manufactured out of tax paid raw material purchased in the State of Andhra Pradesh. The decision of the Hon'ble Supreme Court in the case of Manickam and Company (Supra) and Mallick Hashim and Co. (Supra) relied upon by the learned Counsel appearing on behalf of the petitioners are concerned, the same shall not be applicable with respect to the impugned notifications and the reduction of input tax credit to the extent of 2% if the goods sold out of Gujarat. [8.4] Even the reliance placed upon the decision of the Hon'ble Supreme Court in the case of State of U.P. and Ors. v. Jayprakash Associates Ltd. in Civil Appeal No.3026 of 2004 relied upon by Shri Mihir Joshi, learned Counsel appearing on behalf of some of the petitioners in support of his submission that the impugned notifications are in violation of Article 304(1) of the Constitution of India is concerned, it is required to be noted that in the case before the Hon'ble Supreme Court it was found that grant of rebate tax by the State Government discriminates between imported goods and the goods manufactured in th....
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....ely affected due to this reduction in tax revenue and consequent uncertainity so created relating to the tax revenue. In this context, to ensure adequate funds for the Development Programmes of the State, I propose the following: As per the provisions of the VAT Act, a registered dealer is entitled to tax credit of the tax paid on local purchases when he sells goods. Present provisions allow tax credit of the tax paid on local purchases while making interstate sales. Similarly, tax credit of raw material is allowed when taxable manufactured goods are sold interstate. Thus, the tax credit is allowed on goods purchased from within the State at the applicable rate when goods are sold interstate. I propose to reduce tax credit to the extent of 2% on purchases of goods made from within the State and used in interstate sales. This proposal will be implemented with effect from 1/7/2010 and will be considered by the State Government in case the Central Government decides to compensate for the losses of the Central Sales Tax (CST) revenue for the year 20102011. This proposal will not result in any additional tax burden on the people of the State." From the aforesaid it appears that the i....