TaxTMI 
TaxTMI 
2025 (2) TMI 1998
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.... For mining, petitioner purchases High Speed Diesel (for brevity 'HSD') in course of interstate trade or commerce. Under erstwhile section 8(3)(b) of CST, petitioner was entitled to purchase HSD at reduced rates on furnishing of Form "C". 3. The grievance is that after amendment of section 8(3)(b) of CST, the goods used in telecommunication, mining or generation/distribution of electrical power cannot be purchased at reduced rate against Form "C". 4. Learned counsel for the petitioner contended that the exclusion of mining from Section 8(3)(b) of the CST is discriminatory, arbitrary and in violation of Article 14 of the Constitution of India. Submission is that the statute has been amended to overcome the decision in the case of Carpo Power Limited vs. State of Haryana and Ors. reported in (2018) 53 GSTR 24, against which the SLP was dismissed. It is argued that the working of the petitioner shall be adversely affected being not entitled to purchase HSD on the reduced rates. The argument is fortified by stating that Input Tax Credit ('ITC') cannot be claimed of the full rate of tax paid under the CST on purchase of HSD. Reliance is placed upon decisions of the Supreme Court i....
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....ealer for purpose referred to in sub-section 3. As per sub-section 3 of section 8 of CST, goods specified in the registration certificate of the purchasing dealer and purchased for use as stipulated in Section 8(3)(b) are liable to be taxed on reduced rate, upon furnishing Form 'C'. 10. The grievance raised in the petition is that after the amendment by Finance Act, 2021, the petitioner shall not be entitled to purchase HSD at reduced rate on furnishing of Form "C" as 'mining, telecommunication network and generation & distribution of power' no longer finds mention in section 8(3)(b) of the CST. 11. The Supreme Court in case of State of M.P. versus Rakesh Kohli & Ors. reported in (2012) 6 SCC 312 summarized the principles enunciated for testing constitutional validity of taxation provisions i.e. (i) presumption is in favour of constitutionality of the statute; (ii) the onus is on the person challenging the vires to establish violation of constitutional provisions or infringement of fundamental rights; (iii) policy decisions are to be left to the legislature and courts should exercise self-restrain in interfering; (iv) in fiscal statutes, legislature has larger discretion in m....
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....uld be given greater latitude. It would be useful to refer to a couple of judgments on the above proposition. 28. In the case of R.K. Garg etc. vs. Union of India and others, (1981) 4 SCC 675, the Constitution Bench was judging the constitutionality of economic legislation wherein challenge was to the validity of the provisions of Special Bearer Bonds (Immunities and Exemption Act, 1981) on the grounds of discrimination and violation of Article 14. P.N. Bhagwati J., speaking for himself, Chief Justice Chandrachud, A.C. Gupta, S. Murtaza Fazal Ali and A.N. Sen, J.J., observed in paragraph 7 regarding the presumption in favour of constitutionality of the statute and that the burden is on the person who attacks it, to establish that there has been clear transgression of the constitutional principles. In paragraph 8, it was laid down that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. The views of Justice Frankfurter in the case of Morey vs. Doud, 354 US 457 (1957) was relied upon. The same is reproduced hereunder: "In the utilities, tax and economic regulation cases....
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....ck and choose one commodity for taxation and that is not open to attack under Article 14, the same result must follow when the State picks out one category of goods and subjects it to taxation." 14.2. In Ganga Sugar Corporation vs. State of UP reported in 1980 (1) SCC 223, the Supreme Court held:- "42. Even so, taxing statutes have enjoyed more judicial indulgence. This Court has uniformly held that classification for taxation and the application of Article 14, in that context, must be viewed liberally, not meticulously." 14.3. In Hiralal Rattanlal Etc. vs State Of U.P. And Anr. Etc. [(1973) 1 SCC 216] dealing with challenge to separate classification of unprocessed and unsplit pulses from processed and split pulses for taxation purpose, the classification was held to be reasonable and not violative of Article 14 of the Constitution of India. The relevant paras are:- ""15. In Jagannath vs. Union of India (AIR 1962 SC 148) a question arose for decision whether it was open to the legislature to impose separate excise duty on tobacco leaf as well as on broken leaf of tobacco. This Court overruled the contention that such a levy was invalid. It held that it was ....
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....er and unless the classification made can be termed to be palpably arbitrary, it must be left to the legislative wisdom to choose the yardstick for classification, in the background of the fiscal policy of the State to promote economic equality as well." 15. The decisions cited below are to the effect that the difference in classification if is capable of being understood rationally, for object to be achieved and there is no special treatment to one of similarly situated class, the classification is not violative of Constitution of India. 15.1. In Anant Mills Ltd. Vs. State of Gujarat reported in (1975) 2 SCC 175. The Supreme Court held:- "25. It is well-established that Article 14 forbids class legislation but does not forbid classification. Permissible classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and the differentia must have a rational relation to the object sought to be achieved by the statute in question. In permissible classification mathematical nicety and perfect equality are not required. Similarity, not identity of treatment, is enough. If the....
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....l taxation so long as the inequality is not based upon arbitrary classification. Taxation will not be discriminatory if, within the sphere of its operation, it affects alike all persons similarly situated. It, however, does not prohibit special legislation, or legislation that is limited either in the objects to which it is directed, or by the territory within which it is to operate. In the words of Cooley: It merely requires that all persons subjected to such legislation shall be treated alike, under like circumstances and conditions, both in the privileges conferred and in the liabilities imposed. The rule of equality requires no more than that the same means and methods be applied impartially to all the constituents of each class, so that the law shall operate equally and uniformly upon all persons in similar circumstances. Nor does this requirement preclude the classification of property, trades, profession and events for taxation- subjecting one kind to one rate of taxation, and another to a different rate. "The rule of equality of taxation is not intended to prevent a State from adjusting its system of taxation in all proper and reasonable ways. It may, if it chooses, exempt ....
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....class of industry permitting purchase of input at reduced rate of tax. This Court cannot sit over the wisdom of the Legislature to exclude mining from use of Form "C", and this decision is to be left on experts to decide that for what purpose and how long CST operates in the GST regime. To bring home the challenge to amendment on the grounds of discrimination and arbitrariness, the onus is on petitioner. No case is made out that the industries excluded by the amendment of section 8(3)(b) are identically placed to dealers to whom benefit of use of 'C' form is still continuing. For discrimination there has to be similarity and hence the amendment cannot be held to be discriminatory. The classification is done on basis of nature of industries, there is reasonable basis to do so and is within the ambit of discretion to legislate. 17. The argument that the amendment has been brought to overrule the judgment in Carpo Power Limited (supra) may not be able to detain us for long. The principles of removal of vice by an amendment to overcome the judicial pronouncement need not be dilated as the issue in Carpo (supra) was entirely different i.e:- "whether after the amendment of th....
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.... It would be appropriate to quote a para from decision of the Supreme Court in NHPC Ltd. vs. State of Himachal Pradesh (supra):- "11. What follows from the aforesaid judicial precedent is, a legislature cannot directly set aside a judicial decision. However, when a competent legislature retrospectively removes the substratum or foundation of a judgment to make the decision ineffective, the same is a valid legislative exercise provided it does not transgress on any other constitutional limitation. Such a legislative device which removes the vice in the previous legislation which has been declared unconstitutional is not considered to be an encroachment on judicial power but an instance of abrogation recognised under the Constitution of India. The decisions referred to above, manifestly show that it is open to the legislature to alter the law retrospectively, provided the alteration is made in such a manner that it would no more be possible for the Court to arrive at the same verdict. In other words, the very premise of the earlier judgment should be removed, thereby resulting in a fundamental change of the circumstances upon which it was founded." 26. It was held that ju....