TaxTMI 
TaxTMI 
2018 (4) TMI 48
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....-company purchased raw rubber scrap which is used as the raw materials from the local dealers within the State of Tripura on making payment of due tax [VAT] within the State of Tripura. After the first sale of its finished products on 02.04.2009, due tax of Rs. 1,06,200/- [CST] was paid by the challan dated 31.03.2009 those were sold outside the State within the meaning of the interstate sale but no Input Tax Credit as explained under Section 10 of the TVAT Act was claimed when they filed return. Thereafter, on 22.04.2009 the petitioner-company filed a revised return before the Superintendent of Taxes, Charge-III, Government of Tripura, Agartala, the respondent No. 3 herein, for the month of February, 2009 showing adjustment of Input Tax Credit against the CST payable by them along with an application for making refund of the CST of Rs. 1,06,200/- as paid by the petitioner-company. According to them, that was paid by mistake inasmuch as the same was not chargeable against the petitioner-company. Having scrutinized the said return [for the month of February, 2009], the respondent No. 3 had observed by his order No. TIN-1603127406/6533-35 dated 17.06.2009, Annexure-I to the writ peti....
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.... Act. Section 10(3) makes it absolutely clear that input tax credit is permissible only in respect of sales or resales made within the State of Tripura. Section 10(6) is couched in negative language and is in the nature of an exception or a proviso to sub-section 10(1). We have to read section 10(6) along with section 10(1) and when both of these parts of the section are read harmoniously, then even if a person is entitled to benefit of input tax credit under section 10(1) but is excluded under section 10(6), he would not be entitled to get the benefit of input tax credit. Clause (ix) of section 10(6) provides that input tax credit will not be available in respect of transfer of stock, other than by way of sale outside the State of Tripura. This by no stretch of imagination can be interpreted to mean that under Clause (ix) of sub-section (6), such benefit has been given in respect of inter-State sales. Such an interpretation would defeat the very purpose of the legislation. When the language of the legislation is clear, we cannot do violence to the language and misinterpret it in such a manner that the purport and intention of the legislature is defeated by such interpretation to t....
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....ds transferred on stock transfer or consignment basis for purpose of availing the Input Tax Credit has no reasonable nexus with the object sought to be achieved and hence, the said provisions of TVAT Act are ultravires being violative of Article 14 of the Constitution of India. 3. In this background, the petitioner-company has challenged the validity of Sections 10(3)(a) and 10(3)(b) of the TVAT Act being ultravires the constitution. The petitioner-company has emphatically stated that except the State of Tripura, all other states have allowed the Input Tax Credit on the sales made in course of inter-state trade and commerce under their respective statutes. The petitioner-company has provided the relevant provisions of those statutes in a tabular form, Annexure-IV to the writ petition, which is extracted hereunder: Sl. NO. Name of State VAT Act provision on Input Tax Credit in brief 1 Andra Pradesh AP VAT 2005 Act vide Sec. 8(a) stated that there will be Zero rated sales for the purpose of act and eligible for Input Tax Credit for Sale of taxable goods in the course of inter-state trade and commerce falling within the scope of Section 3 of the Central Sales Tax Act, 1956 ....
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..... 17 Nagaland Nagaland Value Added Tax Act, 2004. Sec 17(4) (d) provides input Tax credit for interstate sale as per model Act. 18 Odisha Orissa Act Sec 18 : Interstate sales are zero rated sale. Sec 20(3) (c) provides Input Tax Credit 19 Punjab Punjab VAT Act Sec 13(1) provides that input tax credit will be available for interstate sale. 20 Rajasthan Rajasthan VAT Act Section 18(1)(b) provides input Tax credit for interstate sale and commerce as per Model Act 21 Sikkim Sikkim VAT Act Sec 21 (1)(D) provides input Tax Credit for intestate sale. 22 Tamilnadu Adopted Model Act with slight modification. Sec 19(2)(v) of Tamilnadu Value Added Tax Act, 2006 Act provides Input Tax Credit for Sale in course of Interstate Trade and Commerce 23 Uttarakhand Adopted Model Act with slight modification. Sec 6(3)(b) provides Input Tax Credit for Sale in course of Interstate Trade and Commerce 24 UP Adopted Model Act with slight modification. Sec 13(1) provides Input Tax Credit for Sale in course of Interstate Trade and Commerce in Sr. No. 1 of attached Table of this section. 25 West Bengal WB VAT Act, 2003 Sec 22(4)(b) provides Input Tax Credit for Sale in course of Inte....
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.... (a) Input tax credit on capital goods except those mentioned in negative list in Schedule IV shall be adjusted against tax payable by a dealer over a period not exceeding three years. Provided that in case of closure of business before the period specified above, no further input tax credit shall be allowed and input tax credit carried forward, if any, shall be forfeited. (b) In respect of exporting dealers, input tax credit may be spread over a period less than 3 years as may be prescribed. (c) Input tax credit is to be given only after commencement of sale of taxable goods 'and purchase of taxable goods as mentioned in schedule VIII.' (d) In respect of inputs used in taxable goods sent on stock/consignment transfer, tax paid in excess of 4% or the prevailing rate of C.S.T. on such inputs is to be credited. (e) Tax paid in excess of 4% on petroleum products used as fuel (other than petrol, Aviation Turbine Fuel and diesel and other fuels when used as fuel in production of taxable goods or captive power is to be entitled for input credit. However, no input tax credit will be given if petroleum product is used as fuel in motor vehicle. (f) Input tax credit shall be a....
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....m in the State of Tripura. (6) No input tax credit under sub-section (1) shall be claimed or be allowed to a registered dealer- (i) in respect of any taxable goods under this Act purchased by him from another registered dealer for resale but give; away by way of free sample or gift; (ii) who has been permitted by the Commissioner for composition of tax at a percentage of the turnover of sales in lieu of VAT as provided under section 15; (iii) in respect of capital goods of traders in the initial year i.e. the input tax credit on capital goods would be confined to manufacturers; (iv) in respect of goods brought from outside the State against the tax paid in other States; (v) in respect of stock of goods remaining unsold at the time of closure of business; (vi) in respect of goods purchased on payment of tax, if such goods are not sold because of any theft, destruction or damage for any reason; (vii) where the tax invoice is- (a) not available with the dealer, or (b) there is evidence that the same has not been issued by the selling dealer from whom the goods are purported to have been purchased; (viii) in respect of goods purchased from a dealer whose certificate of regis....
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....t Tax Credit. Clause 9 of the sub-section (6) provides that no input credit shall be claimed in respect of raw materials used in manufacture or processing of goods where the finished products are dispatched other than by way of sales. However, proviso to the said clause (xi), Input Tax Credit may be allowed in respect of transaction falling under item/clause (ix)* under sub-Section 6 of Section 10 of the TVAT Act, on the tax paid in excess of 4% on the raw materials used directly in the manufacture of the finished products. 7. According to the petitioner-company, a reading of sub-section 10(1) and Clause (ix) of Section 10(6) of TVAT Act provides that the purpose of the said provisions are that the State should at least get tax on the goods purchased in the State of Tripura at the applicable rate of CST even if the said goods are sent on stock/consignment transfer after purchasing the same in the State of Tripura. That is the reason why it has been provided that in case of inputs used in taxable goods sent on stock/consignment transfer the tax paid in excess of 4% or the existing rate of CST, such input is to be credited. The rate of tax under TVAT Act on rubber including latex is....
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....goods are sent outside the State of Tripura by way of stock/consignment transfer, the provision to that extent is restriction on the free movement of goods in the interstate trade and commerce. Such restriction as imposed by Section 10(3)(a) and Section 10(3)(b) of the TVAT Act directly impedes the free movement of goods from one state to another in course of the inter-state trade and commerce. Such restriction, according to the petitioner-company, is contrary to Article 301 of the Constitution of India and such restriction is designed to ensure that goods are not sent to outside the State by way of interstate sale. It is the duty of the legislature to indicate the reasonableness of such classification made under a statute. The legislature must indicate why a particular person or a group of person is treated differently. The reasons for such classification must have a nexus with the object sought to be achieved. Such reasons are to be indicated in the legislation itself. The legislature can delegate the power to the executive giving guidelines. According to the petitioner-company, the legislature must indicate why such distinction is made. In the present case, the dealer sending th....
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....013 Rs.1,27,81,949/- 6 2013-2014 Rs.73,52,929/- Total Demand for the above assessment years Rs.6,52,04,502/- 10. The Assessing Authority while passing the assessment order dated 16.06.2015 has denied the input tax credit as per Section 10 of the TVAT Act. The respondents in their reply have admitted this fragment of fact contending that the assessment orders are in conformity with the provisions of TVAT Act. It has been further asserted that in view of the extant provisions of law as stated, the petitioner-company is not entitled to Input Tax Credit. That is the reason their challenge before the revisional authorities under Sections 70 & 72 of the TVAT Act had fallen through. In Para-9 of the reply, the respondents have stated the basis of their decision which according to this court is the sum and substance of the reply of the respondents. For that reason, Para-9 of the reply is reproduced in its entirety. "9. That with regard to the statements made in paragraphs 12 and 13 of the petition, the deponent begs to state that the contention raised by the petitioner has already been judicially tested and settled holding that input tax credit is not available to the dealer effect....
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....roduce copy of the Special Leave Petition (C) filed before the Hon'ble Supreme Court of India as well as orders passed therein and orders passed by the Hon'ble High Court of Tripura against which SLP was filed at the time of hearing of the present petition." 11. The respondents have further asserted that under no circumstances, the respondents put any restriction on the free movement of goods in the interstate trade and commerce and hence, there cannot be any question of violating Article 301 of the Constitution of India in any manner. According to the respondents, availability and non-availability of benefit of Input Tax Credit is not an imposition of tax and neither is regulatory or directory. Section 10(3)(a) and Section 10(3)(b) of the TVAT Act do not impede flow of inter-state trade and commerce. The nonavailability of benefit of Input Tax Credit on interstate sale does not in any manner affect and impact on the free flow of trade and commerce to constitute contrary to what has been provided in Article 301. According to them, there is no arbitrary discrimination in conferring the benefit of Input Tax Credit. The transaction of stock transfer made outside the State of ....
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....f Mr. B.C. Das, learned Advocate General whom we asked to address as the vires of the statute is under challenge. 14. Mr. Gulati, learned senior counsel appearing for the petitioner-company has at the beginning clearly stated that by the impugned order the assessing authority has refused to allow the Input Tax Credit to the petitioner-company for the input tax paid by it on purchase of raw materials to manufacture ISNR which was the subject-matter of the interstate sale carried out by the petitioner-company. Such denial is based on the provisions of Section 10(3)(a) and Section 10(3)(b) of the TVAT Act. The petitioner-company was not allowed an adjustment of their Input Tax Credit with the payable CST which they were required to deposit for the month of February, 2009. Being aggrieved by the order of the assessing authority, the appeal and thereafter, the first revision were filed before the statutory authorities and finally, revision under Section 72 of the TVAT Act was filed in this court by the petitioner-company. But the said revision was dismissed by adopting the interpretation as provided in M/S. Abhisar Buildwell Private Limited vs. State of Tripura, reported in (2014) 75 V....
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....tion for judicial review. Vires of Section 10(3)(a) and Section 10(3)(b) of TVAT Act was neither raised nor considered in those proceedings. It is well settled that a judgment is only an authority for what it decided but not what logically would have followed therefrom. To buttress such contention, Mr. Gulati, learned senior counsel has referred a decision of the apex court in Union of India and others vs. Dhanwanti Devi, reported in (1996) 6 SCC 44, where it has been held as under: "9. Before adverting to and considering whither solatium and interest would be payable under the Act, at the outset, we will dispose of the objection raised by Shri Vaidyanathan that Hari Kishan Khosla's case 1993 Supp (2) SCC 149 is not a binding precedent nor does it operate as ratio decidendi to be followed as a precedent and per se per incuriam. It is not everything said by a Judge who giving judgment that constitutes a precedent. The only thing in a Judge's decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. According to the well settled theory of precedents, every decisi....
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....ntelligent technique in the use of precedents. It would, therefore, be necessary to see whether Hari Kishan Khosla's case: 1993 Supp (2) SCC 149 would form a binding precedent. Therein, admittedly the question that had arisen and was decided by the Bench of three Judges was whether solatium and interest are payable to an owner whose land was acquired under the provisions of the Central Act? On consideration of the facts, the relevant provisions in the Central Act and the previous precedents bearing on the topic, the Court had held that solatium and interest are not a part of compensation. It is a facet of the principle in the statute. The Central Act omitted to provide for payment of solatium and interest since preceding the acquisition the property was under requisition during which period compensation was paid to the owner. The position obtained and enjoyed by the Government during the period of requisition continued after acquisition. The same principle was applied without further elaboration on entitlement to payment of interest of an owner. It is true that the decisions relied on by Shri Vaidyanathan on the principle of payment of interest as part of compensation in respec....
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....ld by the Punjab and Haryana High Court but on appeal, the apex court set aside that judgment holding that the petitioner, Nand Kishore, was not bared to challenge. Rule 5.32(b) of the Punjab Civil Service Rule was challenge in the context of the order of compulsory retirement, in exercise of that rule. The apex court in Nand Kishore (supra) had occasion to observe as under: "18. Bearing the above principles in mind what at best was said by the State of Punjab was that failure to raise the constitutionality of Rule 5.32 in the writ petition preferred by the appellant would imply, on the principle of 'might and ought', that the opportunity of controverting the matter had been lost and that it should on the principles of constructive res judicata be taken that the matter had been actually raised and adversely decided. But in Forward Construction Co. v. Prabhat Mandal (Regd.) : (1986) 1 SCC 100, this Court has taken the view that where a matter has been constructive in issue it cannot be said to have been actually heard and decided. It could only be deemed to have been heard and decided. 19. It would then have to be seen the twin play of the notion of deemed constitutionalit....
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....uld be within the ambit of the emphasised words in Mathura Prasad case: (1970) 1 SCC 613." [Emphasis added] 18. In this regard, another decision of the apex court in MRF Limited vs. Manohar Parrikar and others, reported in (2010) 11 SCC 374 has been pressed for the petitioner. There the apex court restated the same view. In MRF Limited (supra) an objection was raised that the notification which was questioned have been under challenge could have not been allowed to be so challenged on the ground of constructive res judicata as the similar issue was raised in the previous round of litigation and therefore, the challenge to the aforesaid two notifications might and ought to have been raised in the previous round. As there was no specific challenge in the previous round of litigation to the vires of the notifications dated 15.05.1996 and 31.03.1998 and there was no occasion for the High Court to address itself on such challenge which have been raised in the subsequent writ petition, the apex had repelled such plea of res judicata by observing as under: "32. There was no challenge whatsoever to the Notifications dated 15th May, 1996 and 01.08.1996 and the declaration now sought in t....
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....as facing financial crunch and that the said benefit had been introduced as a policy of the State Government and when it was realized by the State that it was facing financial difficulties in extending the benefit of rebate it decided to withdraw the same which has been upheld by the High Court in the earlier batch of writ proceedings. 35. The High Court therefore has concluded that it cannot now be said that State Government cannot take a stand that the notifications impugned were issued without following the mandatory provisions of Rules of Business or that they were not notifications issued by the State Government in the eye of law. The High Court has also observed, that if the State had no occasion to address itself on the legality of these notifications, it is not estopped either from raising a challenge or supporting the challenge at an appropriate time. It is also held by the High Court that as the first respondent herein was not a party to the earlier batch of writ petitions before the High Court and as his application for hearing his petition with that batch of petitions was withdrawn, he is not estopped from continuing with his challenge against the Notifications dated 1....
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.... and a full hearing in the presence of both the parties, then it would replace the judgment of the lower court. Thus, constituting the judgment of the superior court the only final judgment to be executed in accordance with law by the court below. The merger is essentially of the operative part of the order and the principle of merger of the order of the subordinate court with the order of the superior court cannot be applied when there is no order made by the superior court on merits and the controversy between the parties has not been looked into by the superior court. 39. The issue of merger has no bearing in the facts and circumstances of the present petitions, since, the issue that was decided by the High Court in the earlier batch of writ petitions and the issue that was raised and considered in the subsequent public interest litigation is entirely different. Secondly, in our view, the principles of res judicata are also not attracted since the issue raised and considered in the subsequent public interest litigation had not been raised and considered in the earlier round of litigation. It would be worthwhile to recall the observations made by this Court in the case of Madhvi....
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....ched by the High Court, on the aforesaid issue are in accordance with law and in accordance with the principles laid down by this Court. Therefore, we agree with the conclusion reached by the High Court." [Emphasis added] 19. The issue of vires of Section 10(3)(a) and Section 10(3)(b) of the TVAT Act was never raised in M/S. Abhisar Buildwell Private Limited (supra) but Mr. Gulai, learned senior counsel has fairly placed before this Court that in the special leave petition preferred by M/S. Abhisar Buildwell Private Limited the ground of violation of Article 301 of the Constitution of India was taken since the apex court dismissed the SLP in limine on 28.08.2015 there was no occasion to raise that ground and neither was an issue of vires raised by M/S. Abhisar Buildwell Private Limited nor was the same considered by any court. Thus, the jurisprudential objection in this regard as raised by the State shall fall through inasmuch as the legal principle of res judicata and constructive res judicata cannot be applied in the facts of the present case. 20. In respect of the question No. II as formulated above, which is fundamentally structured on infringement of Article 14 of the Const....
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....s and stock-transfer outside the state, the benefit of Input Tax Credit are available. Mr. Gulati, learned senior counsel has conceded to such interpretation given by learned Advocate General. Further Mr. Gulati, learned senior counsel has submitted that it is clear that the State Government grants the benefit of Input Tax Credit in two situations viz. (i) where goods are transferred out of state by way of exports and (ii) where their stock is transferred outside the State of Tripura to other states. In both the categories of transactions, the State Government does not earn any revenue by means of tax as it is disabled by virtue of Article 286 of the Constitution of India levying tax on transactions which are not sales such as stock-transfers and in case of exports made outside the country. Mr. Gulati, learned senior counsel has emphatically contended that without any intelligible basis and in exercise of sheer arbitrariness, the State Government by virtue of Section 10(3)(a) and Section 10(3)(b) of the TVAT Act has picked up those dealers who undertake their inter-state sale i.e. make sales of interstate character commencing from the State of Tripura, for denying the benefit of In....
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....f transaction for the purpose of taxation while leaving out certain other types of transaction from the net of taxation. This absolute power available with the State Government is however subject to certain well defined restrictions. Repeatedly, the apex court has held that tax laws are subject to the rigours of Article 14 of the Constitution of India. While the State Government has the power to classify, such classification must bear a nexus with the object sought to be achieved. If no basis is indicated by the State Government for such a classification or the classification is based on no intelligible differentia, the provision would be struck down as arbitrary. Further, assuming that the classification is based on some intelligible differentia, however, it has no nexus with the object sought to be achieved. In that event, also the provisions would violate the Article 14 of the Constitution of India. The apex court has held on numerous occasions that even though there is presumption in favour of the constitutionality but when a petition is able to show ex-facie that the differentia or classification does not advance the cause of object sought to be achieved, the burden would be o....
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....pe of sale it is undertaking. In the case of a stock-transfer, it is provided that the Input Tax Credit beyond the CST rate i.e. 2% would be allowed. This is done as and when a stock-transfer is made and no tax is payable. But in the interstate sale the state at least garners the CST for its own use. It is strange enough that where the state gets money by way of CST from the dealers who undertake interstate sale, the benefit of Input Tax Credit is denied. There cannot be any reason to do so. Mr. Gulati, learned senior counsel having referred to Annexure-4 where a list of the States/UTs has been provided to show that none of those States/UTs denies Input Tax Credit to a dealer who makes intestate sale. According to Mr. Gulati, learned senior counsel, Tripura perhaps the only state where such denial of Input Tax Credit prevails. Mr. Gulati, learned senior counsel however has acceded that the state has the power to frame its own taxation laws but such laws has to be made in consonance to the provisions of Article 14 of the Constitution of India. In Ayurveda Pharmacy and another vs. State of Tamil Nadu, reported in (1989) 2 SCC 285, the apex court while dealing with a challenge to diff....
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.... Toilet Preparations (Excise Duty) Act, which was a Central Act. The Court held that the three preparations were medicinal preparations, and observed that the mere circumstance that they contained a high percentage of alcohol and could be used as ordinary alcoholic beverages could not justify their being treated differently from other medicinal preparations. The Court said : (SCR pp. 975-76): "So if these preparations are medicinal preparations but are also capable of being used as ordinary alcoholic beverages, they will fall under the (Central) Act and will be liable to duty under item No. of the Schedule at the rate of Rs. 17.50 per gallon of the strength of London proof spirit. On a consideration of the material that has been placed before us, therefore, the only conclusion to which we can come is that these preparations are medicinal preparations according to the standard Ayurvedic text-books referred to already, though they are also capable of being used as ordinary alcoholic beverages. They cannot however be taxed under the various Excise Acts in force in the concerned States in view of their being medicinal preparations which are governed by the Act.? We are of opinion tha....
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.... or the State Government to select different rates of tax for different categories, where the commodities belonged to the same class or category, it was necessary that there must be a rational basis of discrimination between one commodity and another for the purpose of imposing tax. Accordingly, the High Court went on to hold that merely because of different composition of NPK, discrimination could not have been made against NPK 23:23:0 and hence ordered the appellants not to realise tax on the sale of NPK 23:23:0 from the respondent for the period from 10.04.1995 to 31.03.1996. 13. From a perusal of the notifications in question, it is evident that other fertilizers of the NPK category i.e. N.P.K. 12:32:16; N.P.K. 15:15:15; N.P.K. 20:20:0; N.P.K. 14:35:14 are included in the exemption list, whereas it is a matter of fact that N.P.K. 23:23:0 fertilizer is also a fertilizer of the same category, but it is omitted from the list. According to the notification dated 02.11.1994, the intention of the State was not to tax the sale of 'potassium phosphatic fertilizers' but when we go into enquiry of nomenclature of these chemical compounds, we find that the NPK 23:23:0 is a 'n....
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....sion of this Court. However, this same law must not be repugnant to the Article 14 of the Constitution, i.e., it must not violate the right to equality of the people of India, and if such repugnancy prevails then, it shall stand void up to the level of such repugnancy under Article 13(2) of the Constitution of India. Therefore, every law has to pass through the test of constitutionality, which is nothing but a formal name of the test of rationality. We understand that whenever there is to be made any type of law for the purpose of levying taxes on a particular commodity or exempting some other commodity from taxation, a sought of classification is to be made. Certainly, this classification cannot be a product of a blind approach by the administrative authorities on which the responsibility of delegated legislations is vested by the constitution. In a nutshell, the notifications issued by the Trade Tax Department of the State of U.P., dated 10.04.1995 and 15.05.1995 lack the sense of reasonability because it is not able to strike a rational balance of classification between the items of the same category. As a result of this, NPK 23:23:0 is not given exemption from taxation where as....
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....e provisions of the Act, grant of exemption from payment of the said duty to particular class of persons or products etc. is entirely within the discretion of the Government. This discretion rests on various factors which are to be considered by the Government as these are policy decisions. In the present case, however, the issue is not of granting or not granting the exemption. When the exemption is granted to a particular class of persons, then the benefit thereof is to be extended to all similarly situated person. The notification has to apply to the entire class and the Government cannot create sub-classification thereby excluding one sub-category, even when both the sub-categories are of same genus. If that is done, it would be considered as violating the equality clause enshrined in Article 14 of the Constitution. Therefore, judicial review of such notifications is permissible in order to undertake the scrutiny as to whether the notification results in invidious discrimination between two persons though they belong to the same class. In Aashirwad Films v. Union of India and Others : (2007) 6 SCC 624, this aspect has been articulated in the following manner: 9. The State undo....
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....re not by nature, attainment or circumstances in the same position. It would mean that the State has the power to classify persons for legitimate purposes. The legislature is competent to exercise its discretion and make classification. Thus, every classification is in some degree likely to produce some inequality but mere production of inequality is not enough. Article 14 would be treated as violated only when equal protection is denied even when the two persons belong to same class/category. Therefore, the person challenging the act of the State as violative of Article 14 has to show that there is no reasonable basis for the differentiation between the two classes created by the State. Article 14 prohibits class legislation and not reasonable classification. 14. What follows from the above is that in order to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differential which distinguishes persons or things that are grouped together from others left out of the group and (ii) that, that differential must have a rational relation to the object sought to be achieved by the statute in....
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....cording to its own classification are of 'A' class can be allowed to remain while other structures situated in close vicinity and being used for same purposes (residential or commercial) should be demolished. At the cost of repetition, it may be stated here that no material was placed before us to show the basis of classification of the existing structures on the land proposed to be acquired. This assumes importance in view of the specific contention raised on behalf of the appellants that they have pucca structures with R.C. roofing, Mozaic flooring etc. No attempt was also made from the side of the State Government to place any architectural plan of different types of structures proposed to be constructed on the land notified for acquisition in support of its contention that the structures which exist on the lands of the appellants could not be amalgamated into the plan. 15. The question, therefore, that arises is as to whether the two categories, one mentioned in Notification No. 386/86-CE dated 20.08.1986, which is given the benefit and removal of the second category, which was initially granted same benefit vide Notification No. 102/87-CE dated 27.03.1987, is discrimi....
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....r the same Heading and the custom duty is leviable as per the Act which has been paid. Therefore, the impugned Notification giving exemption only to those persons who paid a particular amount of duty, namely Rs. 1,400/- per LDT, would not mean that such persons belong to a different category and would be entitled to exemption and not other persons like the respondent herein who paid the duty on the same goods under the same Act but on the formula which he opted and which is permissible, which rate of duty comes to Rs. 1,035/- per LDT. 17. It is also important to bear in mind that the appellants have not supported the withdrawal of exemption by any cogent explanation. The High Court has noted, and rightly so, that Ground C was taken by the respondent in the writ petition specifically urging that no rational policy is mentioned for creating two different classes and no reply to this was given by the appellants even in the counter affidavit filed to the said petition. On the other hand, the specific case made out by the respondent was that the purpose behind Notification No. 146/86-CE dated 01.03.1986 and Notification No. 386/86-CE dated 20.08.1986 was to treat the ships imported on ....
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....f the people of India, and if such repugnancy prevails then, it shall stand void up to the level of such repugnancy under Article 13(2) of the Constitution of India. Therefore, every law has to pass through the test of constitutionality, which is nothing but a formal name of the test of rationality. We understand that whenever there is to be made any type of law for the purpose of levying taxes on a particular commodity or exempting some other commodity from taxation, a sought of classification is to be made. Certainly, this classification cannot be a product of blind approach by the administrative authorities on which the responsibility of delegated legislations is vested by the Constitution. In a nutshell, the notifications issued by the Trade Tax Department of the State of U.P., dated 10.04.1995 and 15.05.1995 lack the sense of reasonability because it is not able to strike a rational balance of classification between the items of the same category. As a result of this, NPK 23:23:0 is not given exemption from taxation whereas all other NPK fertilisers of the same category like that of NPK 20:20:0 are provided with the exemption from taxation. 16. The reasonableness of this clas....
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....cribed therein. Mr. Goswami in this connection has drawn my attention to the piece of legislation prior to the enactment of the Act. Under the previous Act the Government was empowered to notify the authority or persons who were to deduct tax at source. Pursuant to the provisions of the earlier legislation, notification had been issued by the Government. As per the said notification two categories of persons were required to deduct tax at source viz the Government and Government companies. But the present legislation has also include 'the public companies'. Now the 'public companies' are also under obligation to deduct tax at source and deposit it to the Government in the manner prescribed therein. Referring to this piece of legislation, Mr. Goswami submits that the present petitioners have challenged the inclusion of the 'public companies' on the ground that there was no reasonable classification. Object of deduction of tax at source has clearly been mentioned in the statutes. This object is to avoid evasion of tax. The Government and the Government companies are required to deduct tax. Mr. Goswami, however, has not made any submission as to whether the obl....
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...., this Court may also quash the impugned assessment orders and demand notices therefrom. Mr. Gulati, learned senior counsel has however has submitted that the petitioner-company shall not insist on the challenge based on the Article 301 of the Constitution of India inasmuch as TVAT Act has got the Presidential Assent on 30.03.2005. 25. Mr. Todi, learned senior counsel appearing for the respondents at the beginning has submitted that TVAT Act was passed by Tripura Legislative Assembly and assented by the President of India on 02.04.2005 whereas the CST Act was passed by the Parliament. CST Act makes a distinction between sale and stock transfers of goods [which are not sale as per provision contained in Sections 6 & 6(A) of the CST Act]. In terms of Section 6 of the CST Act all sales effected by a dealer in the course of interstate trade and commerce are attracted by CST Act and the dealer is liable to pay CST. But on the movement of goods, one State to another which is occasioned by reason of transfer of such goods to his agent or principal not by reason of sale, the dealer is not liable to pay tax. TVAT Act has made distinction between the sales made in the course of interstate t....
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....ntended and then to twist or bend the language of the statute to make it accord with the presumed intention of the legislature." [Emphasis added] 26. Mr. Todi, learned senior counsel has specifically stated that the petitioner-company has failed to explain how the dealer effecting inter-state sale is similarly situated or at par with the dealer who transfers goods on stock transfer, otherwise than the sale. The petitioner-company cannot be stated to be similarly situated or in the same class of their position is substantively same. When stock transfer and inter-state sale are all together on different in character, violation of Article 14 of the Constitution of India does not arise as there is no issue of discrimination amongst the equals. In order to claim discrimination under Article 14 of the Constitution of India two groups or persons shall be similarly circumstanced. In that premise only, it can be claimed that the equals have been treated unequally or that there has been violation of Article 14 of the Constitution of India. 27. In this context, Mr. Todi, learned senior counsel has referred a decision of the apex Court in Pathumma And Others Vs. State of Kerala And Others, ....
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....asmuch as the fact-situation is entirely different. In East India Tobacco Company etc. vs. State of Andhra Pradesh, reported in AIR 1962 SC 1733, according to Mr. Todi, learned senior counsel, one question arose before the Constitution Bench of the apex court for determination is that - is the impugned act repugnant to Article 14 for the reason that it singles out Virginia Tobacco from taxation? The point for consideration was whether there is in fact a real distinction between Virginia Tobacco and other tobacco viz. the country tobacco called 'Nattu Tobacco'. If there is, then the act is valid, if not it must be held to be unconstitutional. It has been held that Virginia Tobacco has features which distinguish it from country tobacco and can be treated as a class in itself. It is, therefore, be within the power of the state to impose a tax on the sales of Virginia tobacco, exempting the country tobacco. To repel the charge of discrimination in taxing only Virginia Tobacco, not the country tobacco, it has been held sufficient merely to show that there are differences between two varieties but it was required to show further that the differential has reasonable relation to th....
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....and the imposition of a heavier tax upon oil than upon other property. The equal protection clause does not prohibit the levy of a tax on ores which is not imposed upon similar interests in quarries, forests and other forms or wasting asset, nor even the imposition of a tax upon antracite that is no levied upon bituminous coal. A statute providing for the assessment of one type of intangible at its actual value while other intangibles are assessed at their face value does not deny equal protection even when both are subject to the same rate of tax. The decisions of the Supreme Court in this field have permitted a State legislature to exercise an extremely wide discretion in classifying property for tax purposes so long as it refrained from it clear and hostile discrimination against particular persons or classes.? 7. A decision near to the present case on the facts is C. Heisler v. Thomas Colliery Company : (1922) 260 U.S. 245: 67 Law Ed. 237. There the question was whether a law imposing a tax on Anthracite coal and not upon bituminous coal was unconstitutional as violating the equal protection of laws guaranteed by the 14th Amendment to the Federal Constitution. In upholding the....
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....d Steel Company Ltd. (supra), it has been observed as under: "13. Equal protection guaranteed under Article 14 of the Constitution only speaks of equal protection amongst the persons and class of persons of the same category. Thus, what Article 14 of the Constitution prohibits is unequal treatment to the persons similarly situated meaning thereby that the traders of a particular State cannot be and should not be discriminated. The words occurring in Article 14 of the Constitution 'within the territory of India' in this context may not be narrowly construed as it does not mean that there should be only one and uniform law, rule, order or by-laws throughout all the States comprised within the Union Territory while enacting the taxing laws. 14. If the taxing statues have been enacted in accordance with the legislative competence and relevant entry made in the State List of the Seventh Schedule to the Constitution by different States and on a similar matter when taxes are imposed under two different sets of law in different States discrimination envisaged under Article 14 of the Constitution has no application in the matter of taxation laws. In this regard it is needless to s....
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....their validity.' He has submitted that if the said clause is set aside that may disentitle the other dealers from Input Tax Credit but that would not entitle the petitioner-company to claim Input Tax Credit in that event and in that respect, his assessment order could not be quashed. In sum and substance, even if the statutory provisions as challenged are struck down, the petitioner-company will not be entitled to any relief as his assessment cannot be quashed on that ground. In such a case, deciding the constitutional validity is purely an academic exercise and hence, the court should be reluctant to decide constitutional validity. In support of his contention, Mr. Das, learned Advocate General has referred a decision in State of Bihar vs. Rai Bahadur Hurdut Roy Moti Lall Jute Mills And Another, reported in AIR 1960 SC 378, where the apex court has recorded as under: "7. On behalf of the appellant Mr. Lal Narain Sinha has contended that the High Court was in error in holding that the proviso to S. 14A violates either Art. 20(1) or Art. 31(2) of the Constitution. He has addressed us at length in support of his case that neither of the two articles is violated by the impugned p....
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....ar vs. Rai Bahadur Hurdut Roy Moti Lall Jute Mills and another : AIR 1960 SC 378 wherein this Court observed:- 'In cases, where the vires of the statutory provisions are challenged on constitutional grounds, it is essential that the material facts should first be clarified and ascertained with a view to determine whether the impugned statutory provisions are attracted; if they are, the constitutional challenge to their validity must be examined and decided. If, however, the facts admitted or proved do not attract the impugned provisions there is no occasion to decide the issue about the vires of the said provisions. Any decision on the said question would in such a case be purely academic. Courts are and should be reluctant to decide constitutional points merely as matters of academic importance.' 8. It is not disputed before us by the respondents that in the aforesaid Writ Petitions preferred by the Kudli Sringeri Maha Samsthanam, the issues involved related only to the amendments to Mysore Act 18 of 1955 which dealt with religious and charitable Inams and not with Mysore Act 1 of 1955 which dealt with abolition of personal Inams. There was, therefore, really no justific....
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....n the person who challenges its vires. Unless it becomes clear beyond reasonable doubt that the legislation in question transgresses the limits laid down by the organic law of the Constitution it must be allowed to stand as the true expression of the national will - Shell Company of Australia v. Federal Commissioner of Taxation : 1931 AC 275 (Privy Council). The aforesaid principle, however, is subject to one exception that if a citizen is able to establish that the legislation has invaded its fundamental rights then the State must justify that the law is saved. It is also a cardinal rule of construction that if one construction being given statute will become ultra vires the powers of the legislature whereas on another construction which may be open, the statute remains effective and operative then the Court will prefer the latter, on the ground that the legislature is presumed not to have intended an excess of jurisdiction. In Sanjeev Coke Manufacturing Company v. M/s. Bharat Coking Coal Limited : (1983) 1 SCC 147, the Constitution Bench speaking through Chinnappa Reddy, J. had observed, in the context of interpretation of the provisions of Coking Coal Mines (Nationalisation) Act....
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....n. While examining the constitutional validity of the special Courts Bill on the anvil of Article 14 of the Constitution, after an exhaustive review of all the decisions bearing on the question, in : (1979) 1 SCC 380 : (AIR 1979 SC 478), it was held as follows:- "(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 formula. Therefore, classification need not be constituted by an exact or scientific exclusion or inclusion of persons or things. The Courts should not insist on delusive exactness or apply doctrinaire tests for determining the validity of classification in any given case. Classification is justified if it is not palpably arbitrary. (4) The principle underlying the guarantee of Article 14 is not that the same rules of law should be applicable to all persons within the Indian territory or that the same remedies should be made available to them irrespective of differences of circumstances. It only means that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabilities imposed. Equal laws would have to be applied to all in the s....
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....hich do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The Court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey vs. Doud : 354 US 457 where Frankfurter, J. said in his intimitable style: In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The Courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events - self-limitation can be seen to be the path to judicial wisdom an....
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....upon him who attacks it to show that there has been a clear transgression of the constitutional principles; (c) that it must be presumed that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds; (d) that the legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest; (e) that in order to sustain the presumption of constitutionality the Court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation.' 13. In the case of Superintendent and Remembrancer of Legal Affairs, West Bengal v. Girish Kumar Navalakha, (1975) 4 SCC 754 :, this Court held: The preamble provides the key to the general purposes of the Act. That purpose is the regulation of certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion in the economic and financial interest of India....
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....ture should be allowed some play in the joints because it has to deal with complex problems. Regarding the latitude that the State enjoyed in respect of the taxation, Mr. Das, learned Advocate General has relied on East India Tobacco Company (supra) where the apex court has also observed as under: "4. It is not in dispute that taxation laws must also pass the test of Art. 14. That has been laid down recently by this Court in Kunnathat Thathunni Moopil Nair v. State of Kerala : AIR 1961 SC 552. 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 selecting the persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons on objects and not others. It is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification that it would be violative of Art, 14. The following statement of the law in Willis on 'Constitutional Law' page 587, would correctly represent the position with reference to taxing statutes under our Constitution:- "A State does not have to ta....
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....law it is for the person who assails a legislation as discriminatory to establish that it is not based on a valid classification and it is well settled that this burden is all the heavier when the legislation under attack is a taxing statute. In taxation even more than in other fields? it was observed by the Supreme Court of United States in Madden v. Kentucky, (1940) 309 U.S., 83, : 84 Law Ed. 590 "Legislatures possess the greatest freeform in classification. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might, support it." How wide the powers of the Legislature are in classifying objects for purposes of taxation will be seen from the following resume of the law given by Rottschaefer, in his 'Constitutional Law' p. 668:- The federal Supreme Court has seldom held invalid any classification made in connection with the levying of property taxes. It has sustained the levy of a heavier burden of taxation upon motor vehicles using the public highways than that levied upon other forms of property, and the imposition of a heavier tax upon oil than upon other property. The equal protection clause does not prohibit the levy....
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.... intelligible and the operation of the provisions of the Act is rightly confined to persons in possession of black money." [From Para-17 of the above judgment] ............................... "The legislature had obviously only two alternatives: either to allow the black money to remain idle and unproductive or to induce those in possession of it to bring it out in the open for being utilised for productive purposes. The first alternative would have left no choice to the government but to resort to deficit financing or to impose a heavy dose of taxation. The former would have resulted in inflationary pressures affecting the vulnerable sections of the society while the latter would have increased the burden on the honest tax payer and perhaps led to greater tax evasion. The legislature therefore decided to adopt the second alternative of coaxing persons in possession of black money to disclose it and make it available to the government for augmenting its resources for productive purposes and with that end in view enacted the Act providing for issue of special bearer bonds." [From Para-18 of the above judgment] ............................ "It would be outside the province of t....
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....itution does not require equal treatment to those transactions. Hence, there is no discrimination, to say least of hostile discrimination, as asserted by the petitioner-company. In order to nourish his submission, Mr. Das, learned Advocate General has relied on a few decision of the apex court which are referred hereunder. In Twyford Tea Co. Ltd. and another vs. The State of Kerala and another, reported in AIR 1970 SC 1133, the apex court has enumerated the law as under: "15. We may now state the principles on which the present case must be decided. These principles have been stated earlier but are often ignored when the question of the application of Article 14 arises. One principle on which our Courts (as indeed the Supreme Court in the United States) have always acted, is nowhere better stated than by Willis in his 'Constitutional Law' page 587. This is how he put it: 'A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably.... The Supreme Court has been practical and has permitted a very wide latitude in classification for taxation....
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.... it makes and the miles per gallon it delivers. An Ambassador taxi and a Fiat taxi give different out-turns in terms of money and mileage. Cinemas pay the same show fee. We do not take a doctrinaire view of equality. The Legislature has obviously thought of equalising the tax through a method which is inherent in the tax scheme. Nothing has been said to show that there is inequality much less 'hostile treatment'. All that is said is that the State must demonstrate equality. That is not the approach. At this rate nothing can ever be proved to be equal to another. 17. There is no basis even for counting one tree as equal to another. Even in a thirty years' settlement, the picture may change the very next year for some reason but the tax as laid continues. Siwai income is brought to land revenue on the basis of number of trees but not on the basis of the produce. This is worked out on an average income per tree and not on the basis of the yield of any particular tree or trees. 18. What is meant by the power to classify without unreasonably discriminating between persons similarly situated, has been stated in several other cases of this Court. The same applies when the le....
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....stitutional standard by which the sufficiency of the differentia which form a valid basis for classification may be measured, has been repeatedly stated by the courts. If it rests of a difference which bears a fair and just relation to the object for which it is proposed, it is constitutional. To put it differently, the means must have nexus with the ends. Even so, a large latitude is allowed to the State for classification upon a reasonable basis and what is reasonable is a question of practical details and a variety of factors which the Court will be reluctant and perhaps ill-equipped to investigate. In this imperfect world perfection even in grouping is an ambition hardly ever accomplished. In this context, we have to remember the relationship between the legislative and judicial departments of Government in the determination of the validity of classification. Of course, in the last analysis courts possess the power to pronounce on the constitutionality of the acts of the other branches whether a classification is based upon substantial differences or is arbitrary, fanciful and consequently illegal. At the same time, the question of classification is primarily for legislative ju....
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.... situations, matters of common knowledge and practical problems and guided by considerations of policy must be given a free hand to divide classes to whom to tax or not to tax, to whom to exempt or not to exempt and to whom to give incentives and lay down the rates of taxation, benefits or concessions. In the field of taxation if the test of Article 14 is satisfied by generality of provisions the Courts would not substitute judicial wisdom for the legislative wisdom. 13. In the case at hand it will be seen that at the point of time when the impugned provision was enacted, that is in the year 1992, there existed two classes of cinema owners : one, those who were receiving grant-in-aid under some incentive scheme enunciated by the State Government; and two, such cinema owners as were not receiving such grant-in-aid. It will be seen that the grant-in-aid schemes promulgated by the State Government were temporary schemes having a life span of three to five years which extended incentive depending on the population of the place where the cinema house was situated. It can be said, as was the plea raised before the High Court and also submitted by the learned Standing counsel for the Sta....
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....fixation of Rs. 2.50 or Rs. 5 as a ceiling on fee for admission was not beneficial to them and they would stand to benefit by opting out from the incentive scheme and availing the benefit of recovering charges for maintenance conferred by the 1992 amendment were always and at any time free to do so." 39. On appreciation of the rival contentions as projected by the learned counsel appearing for the parties as well as by the learned Advocate General, we are in agreement with the statement made by Mr. Das, learned Advocate General that if the Sections 10(3)(a) and 10(3)(b) of the TVAT Act dealing with Input Tax Credit are struck down that would disentitle the other dealers as well from getting Input Tax Credit. That Apart, that action will also not benefit the petitioner-company in getting the Input Tax Credit. The error of drafting as pointed by Mr. Gulati, learned senior counsel appearing for the petitioner-company in respect of reference made in the proviso below Section 10(6) of the TVAT Act that in respect of transaction falling under item (ix) Input Tax Credit on the tax paid in excess of 4% on the raw materials used directly in the manufacture of the finished products, we are ....
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....ract. Therefore, the legislative intent has to be gathered from the statutory provisions alone. The definition of Input Tax Credit as provided above has been adopted without any change as provided in the model statute for Value Added Sales Tax, 1998 [prepared by the National Institute of Public Finance and Policy, New Delhi]. The challenge is based on unreasonable and arbitrary classification. No doubt, the state has widest latitude where the measures of economic and fiscal regulations are concerned. There is no dispute on this principle of law but such law must not be repugnant to Article 14 of the Constitution. Every law has to pass through the test of constitutionality which is nothing but a formal name of the test of rationality. The reasonableness of the classification must be examined on the basis of the object of the taxing statute. In Ayurveda Pharmacy (supra) the apex court held that 'two items' of the same category cannot be discriminated and where such distinction is made between items falling in the same category it should be done on a reasonable basis, in order to save such a classification being contravention of Article 14 of the Constitution of India. Accordi....
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.... petition. Even in that proceeding the vires or constitutionality of those provisions could not have been challenged for jurisdictional limit. 41. Mr. Todi, learned senior counsel appearing for the respondents has strenuously submitted that sale in the course of interstate trade or commerce falls within a well defined class in terms of various provisions of CST Act, 1956. In this regard, Section 3 of the CST Act may be referred. Section 3 provides that 'a sale or purchase of goods shall be deemed to take place in the course of interstate trade or commerce, if the sale or purchase (a) occasions the movement of goods from one state to another; (b) is effected by a transfer of documents of title to the goods during their movement from one state to another.' Two explanations appended below Section 3 of the CST Act provides further that (1) where goods are delivered to a carrier or bailee for transmission, the movement of the goods shall, for the purposes of clause (b) be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee and (2) where the movement of the goods commences and terminates in the same state i....
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....tuate or equally circumstanced. There should be no discrimination between one person and another if as regards the subject matter of the legislation their position is substantially the same. Pathumma (supra) has provided the key words to weigh the intelligible differentia in respect of formation of class, are 'the subject matter of legislation'. The classification is, therefore, required to be tested having regard to the subject matter of the legislation not in any other respect. Even if the mode of transaction is different, this by itself would not be sufficient to infer that the transaction since dissimilar cannot claim similar privileges to be conferred. Within the province of Section 10 of TVAT Act whereby the benefit of Input Tax Credit is provided, the formation of class for purpose of excluding the sale in the course of interstate trade or commerce has to be tested. According to the petitioner-company, such formation is unintelligible having regard to the object as declared and sought to be achieved. From plain reading of the provisions, it transpires that for purpose of encouraging industrialization, setting up of manufacturing units based on raw materials produced ....
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....w declared as discriminatory. But for the reason that if the challenged provisions are struck down the entire scheme of granting Input Tax Credit would cave in, in lieu of striking down those provisions we would prefer to read down those provisions declaring that the Input Tax Credit shall be entitled to sale in the course of interstate trade or commerce, when we are alive of the decision of the apex court in DTC vs. Mazdoor Congress, reported in 1991 Supp. (1) SCC 600, where it has been expressed that: "255. It is thus clear that the doctrine of reading down or of recasting the statute can be applied in limited situations. It is essentially used, firstly, for saving a statue from being struck down on account of its unconstitutionality. It is an extension of the principle that when two interpretations are possible-one rendering it constitutional and the other making it unconstitutional, the former should be preferred. The unconstitutionality may spring from either the incompetence of the legislature to enact the statute or from its violation of any of the provisions of the Constitution. The second situation which summons its aid is where the provisions of the statute are vague and....