AI Drafter 
TaxTMI 
TaxTMI 
2015 (5) TMI 138
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....A, Mr S T S Moorthy, Government Advocate, Mr. S Muthuraj W. P. Nos. 22072, 23427, 23428 of 2012, 217, 2064, 2065, 3095 to 3097, 5680, 9799 to 9803, 10338 of 2013, 100 to 105, 130 to 135, 745, 1112, 1113, 1403 to 1405, 1418, 1933, 2883, 2968, 5718, 5896, 10626 to 10630, 10891, 17190, 18968 to 19011, 22151 22230 to 22249, 25767 to 25769, 26681, 27025, 27780 to 27782, 30312 to 30314, 33424, 33425, 34507 to 34509, 25043 to 25062 of 2014, 245, 1194, 1584, 1936, 2061 and 4082 of 2015, W.P.(MD). Nos.10887, 10888, 11473 to 11476, 11480, 11481, 12131, 12717, 12943, 12945, 13006, 13010, 13152, 13245, 13273, 13381, 13416, 13436, 13455, 13605, 13749, 13863, 13868, 13956, 13968 to 13973, 14039, 14061 to 14069, 14073 to 14079, 14559 to 14563, 14681, 14706, 14752, 14756, 14793, 14968, 14969, 16353, 16877, 16878, of 2012, 984, 996, 1652, 1653, 5493, 7198, 19633 of 2013 21361, 21362, of 2014 & M.P.Nos.1 to 1 of 2013 1, 1 , 1 of 2015 ORDER The Hon'ble The Chief Justice And M. M. Sundresh,J. The constitutionality of the Amendment Act No.25 of 2012 Entry 2 of Second Schedule and Explanation No.1 of the Tamil Nadu Value Added Tax Act, 2006, (hereinafter referred to as ''the Act&....
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.... the Tamil Nadu Value Added Tax Act, 2006 (Tamil Nadu Act 32 of 2006) to amend the First, Second and Fourth Schedules to the Act.'' 4. The following is the tax that is being levied under the impugned provision: Sl.No. Description of the Goods Proposed point of levy Proposed rate of tax 1. Alcoholic liquors of all kinds for human consumption which are purchased/procured/bought from outside the State other than foreign liquors falling under item 3 At the point of second sale in the State 14.5 per cent 2. Alcoholic liquors of all kinds for human consumption, other than liquors falling under items and 3 At the point of third sale in the State 14.5 per cent 5. The working mechanism as per the impugned amendment is provided hereunder for better appreciation: ''Price Structure Per case (12 Bottles - 9 litres) (Per Bottle 750ml.) (Golden Grape Ordinary Brandy) Distilleries to TASMAC Rs. Basic Price - 416.86 Excise duty (@102.93 x 9 litres x 75%)- 694.78 = 1111.64 Sales Tax @ 58% = 644.75 Selling price of distilleries (or)) Purchase price of TASMAC) - 1756.39 TASMAC to Public (or) Clubs (FL2 Licence), Ho....
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....ent Paper Mills, ((2003) 10 SCC 421); 4. J.K.Industries Limited Vs. Union of India, ((2007) 13 SCC 673) .'' Submissions of respondents:- 9. Learned Special Government Pleader appearing for the respondents submitted that the petitioners, being the FL 2 and FL 3 licensees, form a different and separate category. Article 19(1)(g) is not available to the petitioners while trading in liquor. The petitioners, having purchased the liquor from TASMAC, cannot equate themselves on par with it. The sale by TASMAC to the petitioners is a second sale, whereas the sale by the petitioners to their customers is a third one. The classification based upon economic consideration is perfectly valid. The petitioners were already given adequate benefits on the sale effected by TASMAC. They have made considerable value additions before making sale to their customers. The fact that they are selling at a higher price is not in dispute. The customers of the TASMAC and the customers of the petitioners are totally different. The impugned amendment has been introduced to augment more revenue to carry out welfare measures. The petitioners having availed a set-off at the second point of sale can....
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....ersons which carries on such business; (ii) a casual trader; (iii) a factor, a broker, a commission agent or arhati, a del credere agent or an auctioneer, or any other mercantile agent by whatever name called, and whether of the same description as hereinbefore or not, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal, or through whom the goods are brought, sold, supplied or distributed; (iv) every local branch of a firm or company situated outside the State; (v) a person engaged in the business of transfer otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable consideration; (vi) a person engaged in the business of transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (vii) a person engaged in the business of delivery of goods on hire purchase or any system of payment by installments; (viii) a person engaged in the business of transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. (ix....
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....ers. 12. Coming to Section 3, it is a charging provision, which deals with ''levy of taxes on sale of goods''. Now, we are primarily concerned with Section 3(5). Section 3(5) empowers the Second Schedule qua the tax payable on the sale or purchase of goods specified therein. This is at the point and at the rate specified therein. A perusal of the Second Schedule would show that certain specified goods found place in the White Paper are found thereunder. The Second Schedule also provides for appropriate point and the rate. Thus, Section 3(5) charges the Second Schedule with adequate ammunition. 13. Under Section 80, the 1st respondent has been conferred with power to make rules. While Section 80(1) deals with general power, Section 80(2) deals with the matters over which it can be exercised. What is important is that Section 80 is meant to give effect to the substantive provisions of the Act by framing rules. 14. Coming to Section 86, it empowers the 1st respondent to amend the Schedules. Under Section 86(1), the respondent by a notification can alter, add or cancel any of the Schedules. This provision deals with the amendment of the Schedules alone. The spe....
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....n pollution control area by publication of notification in the official gazette. Non-framing of Rules does not curtail the power of the State Government to declare any area as air pollution control area by means of a notification published in the official gazette. The part of the provision "in such manner as may be prescribed" would spring into operation only after such manner is prescribed by framing the rules under Section 54 (2)(k) of the Act. This view as indicated earlier, is amply supported by the decision of this Court referred to above in the case of T. Cagee (AIR 1961 SC 276) which is a decision by a Constitution Bench of this Court. It has been followed in a subsequent decision of this Court reported in Surinder Singh vs. Central Government & Ors (1986 (4) SCC 667). The Central Government had not framed rules in respect of disposal of property forming part of the compensation pool as contemplated under the provisions of the relevant Act. It was claimed by one of the parties that the authority constituted under the Act had no jurisdiction to dispose of urban agricultural property by auction sale in absence of Rules. The contention was repelled with the following observatio....
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....ein it was held as under: ''66. The Statement of Objects and Reasons appended to the Bill is not admissible as an aid to the construction of the Act to be passed, but it can be used for limited purpose for ascertaining the conditions which prevailed at that time which necessitated the making of the law, and the extent and urgency of the evil, which it sought to remedy. The Statement of Objects and Reasons may be relevant to find out what is the objective of any given statute passed by the legislature. It may provide for the reasons which induced the legislature to enact the statute. "For the purpose of deciphering the objects and purport of the Act, the court can look to the Statement of Objects and Reasons thereof". (Vide: Kavalappara Kottarathil Kochuni @ Moopil Nayar v. The States of Madras and Kerala & Ors., (AIR 1960 SC 1080); and Tata Power Company Ltd. v. Reliance Energy Ltd. & Ors.,((2009) 16 SCC 659). 67. In A. Manjula Bhashini & Ors. ((2009) 8 SCC 431), this Court held as under: "The proposition which can be culled out from the aforementioned judgments is that although the Statement of Objects and Reasons contained in the Bill leading to enactment of the ....
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..... 23. In Narmada Bachao Andolan v. Union of India, AIR 2000 SC 3751 , (2000) 10 SCC 664 = LNIND 2000 SC 1361 it has been held thus: ''It is now well-settled that the courts, in the exercise of their jurisdiction, will not transgress into the field of policy decision. Whether to have an infrastructural project or not and what is the type of project to be undertaken and how it has to be executed, are part of policy making process and the Courts are ill equipped to adjudicate on a policy decision so undertaken. The Court, no doubt, has a duty to see that in the undertaking of a decision, no law is violated and people's fundamental rights are not transgressed upon except to the extent permissible under the Constitution.'' 24. In this context, it is fruitful to refer to the authority in Rusom Cavasiee Cooper v. Union of India, (1970) 1 SCC 248 wherein it has been expressed thus: ''It is again not for this Court to consider the relative merits of the different political theories or economic policies. ..... This Court has the power to strike down a law on the ground of want of authority, but the Court will not sit in appeal over the policy of the Pa....
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....009) 7 SCC 561) and State of Kerala v. Peoples Union for Civil Liberties ((2009) 8 SCC 46). 28. From the aforesaid pronouncement of law, it is clear as noon day that it is not within the domain of the courts to embark upon an enquiry as to whether a particular public policy is wise and acceptable or whether a better policy could be evolved. The court can only interfere if the policy framed is absolutely capricious or not informed by reasons or totally arbitrary and founded ipse dixit offending the basic requirement of Article 14 of the Constitution. In certain matters, as often said, there can be opinions and opinions but the Court is not expected to sit as an appellate authority as an opinion.'' Judicial Review:- 18. There is always a presumption in favour of the constitutionality of an enactment with the onus to prove it otherwise on the person who laid a challenge. There can only be two challenges to the constitutionality. One is qua the legislative competence and another being contrary to Part III of the Constitution. The settled position has once again been reiterated in the following manner in the decision of Division Bench of this Court in Anti Corruption Mo....
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....nstitution of India, on the first blush, appeared to be attractive over the possibilities of how the provision may be used, but once the touchstone of constitutional validity in terms of the aforesaid principle is applied, it is difficult to accept the contention of the learned counsel for the petitioner. 41. The legislative wisdom cannot be gone into or sat in judgment over and thus, even what is perceived to be an erroneous legislation cannot be quashed unless it fails to satisfy the dual test of intelligible classification and rationality.'' Article 14:- 19. When a challenge is made to an enactment on the ground of Article 14 being violated, it must be demonstrated that there is an element of negation of equality. A mere discrimination per se cannot be termed as arbitrary, as a classification is meant for providing benefits to a group of persons. A differentiation must distinguish a group of persons or things identified as such from the things left out. While dealing with the classification, an accurate one is not possible. Revenue and economic considerations in taxing statute are permissible classifications. An objective must be a just one. It is a sine qua non....
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....hi v. Union of India, ((1978) 1 SCC 248). 51. In Sharma Transport v. Govt. of A.P. ((2002) 2 SCC 188), this Court defined arbitrariness observing that a party has to satisfy that the action was not reasonable and was manifestly arbitrary. The expression ''arbitrarily'' means, act done in an unreasonable manner, as fixed or done capriciously or at pleasure without adequate determining principle, not founded in the nature of things, non-rational, not done or acting according to reason or judgment, depending on the will alone. 52. In Bombay Dyeing & Mfg. Co. Ltd., (3) v. Bombay Environmental Action Group, ((2006) 3 SCC 434), this Court held that: (SCC p. 511, para 205) ''205. Arbitrariness on the part of the legislature so as to make the legislation violative of Article 14 of the Constitution should ordinarily be manifest arbitrariness.'' 53. In Bidhannagar (Salt Lake) Welfare Assn. v. Central Valuation Board, ((2007) 6 SCC 668) and Grand Kakatiya Sheraton Hotel and Towers Employees and Workers Union v. Srinivasa Resorts Ltd. ((2009) 5 SCC 342), this Court held that a law cannot be declared ultra vires on the ground of hardship but can be do....
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.... the other citizens. He cannot claim equal right to carry on the business against the State when the State reserves to itself the exclusive right to carry on such trade or business. When the State neither prohibits nor monopolises the said business, the citizens cannot be discriminated against while granting licences to carry on such business. But the said equal right cannot be elevated to the status of a fundamental right. 57. It is no answer against complete or partial prohibition of the production, possession, sale and consumption etc. of potable liquor to contend that the prohibition where it was introduced earlier and where it is in operation at present, has failed. The failure of measures permitted by law does not detract from the power of the State to introduce such measures and implement them as best as they can. ....... 60. We may now summarise the law on the subject as culled from the aforesaid decisions. (a) The rights protected by Article 19(1) are not absolute but qualified. The qualifications are stated in clauses (2) to (6) of Article 19. The fundamental rights guaranteed in Article 19(1)(a) to (g) are, therefore, to be read along with the said qualificat....
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....e TASMAC is the sole authority for selling Indian made liquor to the petitioners. It is not a club or hotel having FL 2 and FL 3 licence. On the contrary, the petitioners buy the liquor from the TASMAC. Insofar as sale of foreign liquor is concerned, it stands on a different footing in which 58% of tax is levied on sale. The illustration given earlier would show that the petitioners are the beneficiaries of the earlier sale. They cannot expect the said benefit to be extended to the third point as well. TASMAC has involved in only second sale as against the petitioners third sale. The petitioners made considerable profit by the escalation of sale price. The classification of the customers of TASMAC and the petitioners are different. The petitioners are making considerable value additions to their sales in favour of their customers. The authority of the TASMAG to deal with the liquor within the State is not in dispute. Therefore, having purchased liquor from the TASMAC, the petitioners cannot seek party. Admittedly, TASMAC is an instrumentality of the State. The profit earned by the TASMAC goes to the coffers of the State meant to be used for welfare measures. The fact that the petit....