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As in manifest, article 304 is an excep tion to article 30 1 of the Constitution. Ratio |
The need or taking resort to exception will arise only if the tax impugned is hit by articles 301 and 303 of the Constitution. Ratio |
If it is not then article 304 of the Constitution will not come into picture at all. Ratio |
See the observations in Nataraja Mudaliar 's case (supra) at pp.843 6 of the report. Ratio |
It has to be borne in mind that there may be differentiations based on consid eration of natural or business factors which are more or less in force in different localities. Ratio |
A State might be allowed to impose a higher rate of tax on a commodity either when it is not consumed at all within the State or if it is felt that the burden falling on consumers within the State, will be more than that and large benefit is derived by the revenue. Ratio |
The imposition of rates of sales tax is influenced by various political, economic and social factors. Ratio |
Preva lence of differential rate of tax on sales of the same commodity cannot be regarded in isolation as determinative of the object to discriminate between one State and another. Ratio |
Under the Constitution originally flamed revenue from sales tax was reserved for the States. Ratio |
In V. Guruviah Naidu & Sons.vs State of Tamil Nadu & Anr. PRE |
The object is to prevent discrimination against imported goods by imposing tax on such goods at a rate higher than that borne by local goods since the difference between the two rates would constitute a tariff wall or fiscal barrier and thus impede the free flow of inter State trade and commerce. Ratio |
The ques tion as to when the 'levy of tax would consti tute discrimination would depend upon a varie ty of factors including the rate of tax and the item of goods in respect of the sale of which it is levied. Ratio |
The scheme of items 7(a) and 7(b) of the Second Schedule to the State Act is that in case of raw hides and skins which are purchased locally in the State, the levy of tax would be at the rate of 3 per cent at the point of last purchase in the State. Ratio |
When those locally purchased raw hides and skins are tanned and are sold locally as dressed hides and skins, no levy would be made on such sales as those hides and skins have already been subjected to local tax at the rate of 3 per cent when they were purchased in raw form. Ratio |
As against that, in the case of hides and skins which have been imported from other States in raw form and are thereafter tanned and then sold inside the State as dressed hides and skins, the levy of tax is at the rate of 1 1/2 per cent at the point of first sale in the State of the dressed hides and skins. Ratio |
This levy cannot be considered to be discriminatory as it takes into account the higher price of dressed hides and skins com pared to the price of raw hides and skins. Ratio |
It also further takes note of the fact that no tax under the State Act has been paid in respect of those hides and skins. Ratio |
The Legisla ture, it seems, calculated the price of hides and skins in dressed condition to be double the price of such hides and skins in raw state. Ratio |
To obviate and prevent any discrimina tion of differential treatment in the matter of levy of tax, the Legislature therefore prescribed a rate of tax for sale of dressed hides and skins which was half of that levied under item 7(a) in respect of raw hides and skins. Ratio |
" The object is to prevent discrimination against the imported goods by imposing tax on such goods at a rate higher than that borne by local goods. Ratio |
The question as to when the levy of tax would constitute discrimination would depend upon a variety of factors including the rate of tax and the item of goods in respect of the sale on which it is levied. Ratio |
Every differentiation is not discrimination. Ratio |
The word 'discrimination ' is not used in article 14 but is used in articles 16, 303 & 304(a). Ratio |
When used in article 304(a), it involves an element of inten tional and purposeful differentiation thereby creating economic barrier and involves an element of an unfavorable bias. Ratio |
Discrimination implies an unfair classification. Ratio |
Reference may be made to the observations of this Court in Kathi Raning Rawat vs The State Of Saurashtra, ; where Chief Justice Shastri at p. 442 of the report reiterated that all legislative differentiation is not necessarily discriminatory. Ratio |
The whole doctrine of classification is based on this and on the well known fact that the circumstances covering one set of provisions or objects may not necessarily be the same as these covering another set of provisions and objects so that the question of unequal treatment does not arise as between the provisions cov... |
Where the general rate applicable to the goods locally made and on those imported from other States is the same nothing more normally and generally is to be shown by the State to dispel the argument of discrimination under article 304(a), even though the resultant tax amount on imported goods may be different. Ratio |
Here, reference may be made to Ratan Lal 's case (supra). Ratio |
In the instant writ petition, in the State of U.P. those producers or manufacturers who do not come within the ambit of notifications, have to pay tax on their goods at the general rate described and there is no differentiation or discrimination qua the imported goods. Ratio |
The question naturally arises whether the power to grant exemption to specified class of manufacturers for a limited period on certain conditions as provided by section 4A of the U.P. Sales Tax Act is violative of article 304(a). Ratio |
It was contended by the petitioners that Part XIII of the Constitu tion was envisaged for preserving the unity of India as an economic unit and, hence, it guarantees free flow of trade and commerce throughout India including between State and State and as such article 304(a), even though an exception to article 301, ye... |
It was so submitted that either a State should grant exemption to all goods irrespec tive of the fact that the goods are locally manufactured or imported from other States, else it would be violative of article 304 and 304(a). ARG |
It was submitted by the respondents that this is not the correct position. ARG |
This argument ignores the basic feature of the Constitution and also the fact that the concept of economic unity may not necessa 751 rily be the same as it was at the time of Constitution making for establishing new industries so as to be economically de veloped. Ratio |
It was also submitted that if all the parts of India i.e. to say all the States are economically strong or developed then only can economic unity as a whole be assured and strengthened. ARG |
Hence, the concept of economic unity is ever changing with very wide horizons and cannot and should not be imprisoned in a strait jacket of the concept and notion as advocated by the petitioner. Ratio |
Economic unity of India is one of the constitutional aspirations of India and safeguarding the attainment and maintenance of that unity are objectives of the Indian Constitution. Ratio |
It would be wrong, however, to assume that India as a whole is already an economic unit. Ratio |
Economic unity can only be achieved if all parts of whole of Union of India develop equally, economi cally. Ratio |
Indeed, in the affidavits of opposition various grounds have been indicated on behalf of the respondents suggesting the need for incentives and exemptions, and these were suggested to be absolutely necessary for economic viability and survival for these industries in these States. Ratio |
These were based on cogent and intelligible reasons of economic encouragement and growth. Ratio |
There was a rationale in these which is discernible. Ratio |
The power to grant exemption is always inherent in all taxing Statutes. Ratio |
If the suggestions/submissions as advanced by the petitioners are accepted, it was averted, and in our opinion rightly, that it will destroy completely or make nugatory the plenary powers of the States. Ratio |
If the exemption is based on natural and business factors and does not involve any intentional bias, the impugned notifications to grant exemption for limited period on certain specific conditions cannot be held to be bad. Ratio |
Judged by that yardstick, the present notifica tions cannot be held to be violative of the constitutional provisions. Ratio |
An examination of article 304(a) would reveal that what is being prohibited by this article which is really an exception to article 30 1 will not apply if article 301 does not apply. Ratio |
In the instant case the general rate applicable to locally made goods is the same as that on imported goods. Ratio |
Even supposing without admitting that sales tax is covered by article 301 as a tax directly and immediately hampering the free flow of trade, it does not follow that it falls within the exemption of article 304 and it would be hit by article 301. Ratio |
Still the general rate of tax which is to be compared under article 304(a) is at par and the same qua the locally made goods and the imported goods. Ratio |
752 Concept of economic barrier must be adopted in a dynamic sense with changing conditions. Ratio |
What constitutes an economic barrier at one point of time often cease to be so at another point of time. Ratio |
It will be wrong to denude the people of the State of the right to grant exemptions which flow from the plenary powers of legislative heads in list II of the 7th Schedule of the Constitution. Ratio |
In a federal polity, all the States having powers to grant exemption to specified class for limited period, such granting of exemption cannot be held to be contrary to the concept of economic unity. Ratio |
When all the States have such provisions to exempt or reduce rates the question of economic war between the States inter se or economic disintegration of the country as such does not arise. Ratio |
It is not open to any party to say that this should be done and this should not be done by either one way or the other. Ratio |
It cannot be disputed that it is open to the States to realise tax and thereafter remit the same or pay back to the local manufacturers in the shape of subsidies and that would neither discriminate nor be hit by article 304(a) of the Constitution. Ratio |
In this case and as in all constitutional adjudications the substance of the matter has to be looked into to find out whether there is any discrimination in violation of the constitutional mandate. Ratio |
Exercise of power under article 304(a) can be effective only if the tax or duty on goods imported from other States and the tax or duty imposed on similar goods manufactured or produced in that State is such that there is no discrimination. PRE |
Hidayatullah, J. as the learned Chief Justice then was, observed, at p. 883 of the report, that article 304(a) imposes no ban but lifts the ban imposed by articles 30 1 & 303 subject to one condition. Ratio |
That article is enabling and prospective. Ratio |
Counsel for the respondents drew out attention to articles 38 & 39 of the Constitution. Ratio |
The striving for the attainment of the objects enshrined in these Articles is enjoined. Ratio |
For achieving these objects the States have neces sarily to develop themselves economically so as to 753 secure economic unity and to minimise the inequalities and imbalances between State and State and region and region. Ratio |
If the power to grant exemption has been conferred for achiev ing these objects on all, it is not possible to assail these as violative of article 304 as the latter article has to be interpreted in conjunction with others and not in isolation could validly classify new units producing edible oil as distinct and separat... |
It is true that the afore said observations were made in the context different from article 304(a) but basically the concept of equality embodied in articles 304(a) & 16 are the same. Ratio |
article 14 enjoins upon the State to treat every person equal before the law while article 304(a) enjoins upon the State not to discriminate with respect to imposition of tax on imported goods and the locally made goods. Ratio |
vs State of Andhra Pradesh & Ors., (supra); Weston Electronics vs State of Gujarat, (supra) and West Bengal Hosiery Assn. Ratio |
& Ors. Ratio |
vs State of Bihar & Anr. Ratio |
, ; wherein it has been reiterated that difference in rate of sales tax is hit by articles 301 & 304 but the said conclusions were arrived at in the context of a controversy not in the present form and the question of exemption as such did not arise in these cases, as explained later. Ratio |
These cases were not at all concerned with granting of exemption to a special class for a limited period on specific conditions of main taining the general rate of tax on the goods manufactured by all those producers in the State who do not fall within the exempted category at par with the rate applicable to import ed ... |
Hence, it was not necessary in those decisions to consider the problem in its present aspect. Ratio |
If, however, the said power is exercised in a colourable manner intentionally or purposely to create unfavorable bias by prescribing a general lower rate on locally manufactured goods either in the shape of general exemption to locally manufactured goods or in the shape of lower rate of tax, such an exercise of power c... |
That is not the situation in the instant cases. Ratio |
The aforesaid decisions, therefore, are not authorities for the general proposition that while, main taining the general rate at par, special rates for certain industries for a limited period could not be prescribed by the States. Ratio |
754 There was another subsidiary question in these matters as to whether the legislation in the shape of notification is law within the meaning of article 304 of the Constitution. Ratio |
In The State of U.P. & Ors.vs Babu Ram Upad hya, [196] 12 SCR 679 at 702 this Court relied on a passage from Maxwell "On the Interpretation of Statutes" and held that a rule framed in the absence of any specific provision in the Act shall be deemed to be a part of the Act itself. Ratio |
In the State of Tamil Nadu vs Hind Stone etc.; , at 757 this Court relied upon the aforesaid dictum in the case of Babu Ram Upadhya, (supra) and distinguished the decision in State of Mysore vs H. Sanjeeviah, ; cited on behalf of the petitioner. Ratio |
This Court in Kailash Nath & Anr.vs State of U. P. & Ors., AIR 1957 SC 790 at 791 has held that the notification having been made in accord ance with the power conferred by the Statute has statutory force and validity and, therefore, exemption is as if con tained in the Act itself. Ratio |
The U.P. Sales Tax Act by section 24(4) confers rule making powers on the State Government. Ratio |
Section 25 confers powers on the State Government to issue notifications with retrospective effect. Ratio |
Hence, it cannot be disput ed that the exemption notification is the exercise of the legislative power. Ratio |
This Court in State of U.P. & Ors.vs Renusagar Power Co. & Ors., ; at 100 has held that the power to grant exemption is quasi legislative. PRE |
In M/s Narinder Chand Hem Raj & Ors.vs Lt. Governor, Adminis trator, U.T., Himachal Pradesh & Ors., at 751 it was held that the exercise of the power is legisla tive whether it is by the legislature or by the delegate. PRE |
In respect of the decisions aforesaid relied on behalf of the petitioner, on examination of the observations in India Cement 's case (supra) to the contrary to which stated hereinbefore on this aspect must be confined to the facts of that case alone as the said decision had no occasion to consider it in the full light.... |
In the aforesaid view of the matter the challenge in these petitions to the aforesaid exemptions cannot, in our opinion, be upheld. Ratio |
The writ petitions dealing with the U.P. matters on the same conten tions, therefore, fail. Ratio |
Writ petition No. 665/88 being M/s Video Electronics Pvt. Ltd. & Anr. Ratio |
By that notification the State Government has differentiated between the manufacturers of electronics goods outside the State and within the State. Ratio |
Under section 5 of the Punjab General Sales Tax Act (hereinafter referred to as 'the Act '), the State of Punjab had been imposing sales tax @ 10% + 2% surcharge on electronics goods sold within the State irrespective of their manufacture. STA |
The State Govt. in pursuance of the powers conferred on it u/s 5 of the Act issued the notification date 11.12.1986 stating that the rate of sales tax payable by an electronic manufac turing unit existing in Punjab in cases of electronic goods specified in Annexure A of the petition within the State will be 1%. Ratio |
Thus the rate of sales tax was brought down from 10% (+ 2% surcharge) to 1% while for similar goods manufac tured outside the State and sold within the respondent State, the rate of sales tax remained 10% (+ 2% surcharge). Ratio |
It was contended that there was differentiation. Ratio |
In support of this contention the petitioners reiterate more or less the same submissions, as indicated before. Ratio |
It is true that there was difference in rate yet there was reason for this differentiation. Ratio |
The State Government in its counter affida vit has stated that a lower rate of tax i.e. to say 1% in the case of new units and 2% in the case of existing units has been levied to boost this industry and to stop the existing industry shifting to neighboring States. Ratio |
The pre vailing peculiar circumstances of Punjab were one of the factors indicated for the same. Ratio |
The lower rate, it was reiterated, was imposed in view of the peculiar circum stances and also to attract new entrepreneurs from other States and from within the State. Ratio |
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