TMI Blog1965 (7) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... le turnover of such oil, required reconsideration, in the light of certain observations of the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officer[1960] 11 S.T.C. 827. Before dealing with this point and some other points which were urged before us, we shall briefly set out the material facts, shorn of figures, which we consider unnecessary in view of the ultimate order we propose to make in these cases. T.R.C. No. 1 of 1962 is against the order of the Sales Tax Appellate Tribunal Appeal No. 472 of 1960; T.R.C. No. 2 of 1962 is against T.A. No. 299 of 1960; T.R.C. No. 3 of 1962 is against T.A. No. 471 of 1960 and T.R.C. No. 4 of 1962 is against T.A. No. 470 of 1960, and they relate respectively to assessments for the years 1955-56, 1956-57, 1954-55 and 1953-54. The petitioner in all these cases is Tungabhadra Industries Limited, which has a factory at Kurnool, which purchases groundnut and groundnut kernel and manufactures amongst other things groundnut oil, refined oil and hydrogenated oil for sale within the State and outside the State of Andhra Pradesh. In the transactions with which we are concerned, the petitioner imported groundnut kernel from dealers outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing questions of law arise for our determination: 1.. Does the Notification (G.O. No. 2923, Revenue, dated 9th November, 1951) offend Article 14 of the Constitution? 2.. Was the Tribunal right in holding that the transactions in question were not inter-State but were intra-State sales? 3.. What is the effect of the notification said to have been issued by the Board of Revenue and published in the Andhra Gazette dated 7th January, 1954, Part II, page 8? As regards the first question, the contention on behalf of the petitioner is that in excluding refined oil from the concession granted to raw oil on the one side and hydrogenated oil on the other, the rule-making authority had acted in contravention of Article 14 of the Constitution, as the discrimination is not based on a reasonable classification. This article has come under judicial scrutiny in numerous cases. Its true content has been put in a tabloid form by S.R. Das, C.J., in Ram Krishna Dalmia v. Justice S.R. TendolkarA.I.R. 1968 S.C. 538. This is what the learned Chief Justice said at page 547: "In Budhan Choudhry v. State of Bihar[1955] 1 S.C.R. 1045 at pp. 1048-49. , a Constitution Bench of seven judges of this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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; and (f) that while good faith and knowledge of the existing conditions on the part of a Legislature are to be presumed, if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the Court on which the classification may reasonably be regarded as based, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discriminating legislation. The above principles will have to be constantly borne in mind by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of oil to other countries. In these circumstances, we hold that this argument also is equally untenable and is overruled." It was, however, contended before us that this ruling requires reconsideration in view of the observations of the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officer[1960] 11 S.T.C. 827. We are unable to accede to this contention. There is nothing in that judgment of the Supreme Court which militates against the view taken by the Division Bench of this Court as to the applicability of Article 14. On the contrary, the observations of the Supreme Court, far from supporting the stand taken by the petitioner in these cases before us, seem to be against it. In that case the Supreme Court was dealing with the question whether hydrogenated groundnut oil is "groundnut oil" within the meaning of rule 18(2) of the Rules. Their Lordships pointed out that under the scheme of the Madras General Sales Tax Act, 1939, and the Rules, while in regard to groundnut the tax is levied at the point of purchase, groundnut oil is taxed at the point of sale. The result of this feature is that when a person purchases groundnut and converts the same into oil and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would still be entitled to the deduction for which provision is made in rule 18(2)." After considering the processes which raw groundnut oil underwent before it became hydrogenated oil, Rajagopala Ayyangar, J., pointed out that since refined groundnut oil was undoubtedly "groundnut oil" for the purpose of the rules, there was no reason why, when beyond the process of refining the oil, the oil is hardened by the use of certain chemical processes, it should not be regarded as groundnut oil. His Lordship pointed out that notwithstanding the processing which is merely for purposes of rendering oil more stable, thus improving its keeping qualities for those who desire to consume groundnut oil, hydrogenated oil serves the same purpose as a cooking medium and has identical food value as refined groundnut oil. Consequently his Lordship held that hydrogenated oil is groundnut oil for purposes of rule 18(2) and the assessee was entitled to the benefit of the deduction of the purchase price of kernel or groundnut which went into the manufacture of the hydrogenated oil from the sale turnover of such oil. It is important to note that both the High Court and the Supreme Court were of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (at page 533): "It is not in dispute that taxation laws must also pass the test of Article 14. That has been laid down recently by this Court in Kunnathat Thathuni Moopil Nair v. State of Kerala[1961] 3 S.C.R. 77; A.I.R. 1961 S.C. 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 or 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 Article 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 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 L. Ed. 590., 'Legislatures possess the greatest freedom in classification. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which must 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', page 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 of a tax on ores which is not imposed upon similar interests in quarries, forests and other forms of wasting asset, nor even the imposition of a tax upon anthracite that is not levied upon bituminous coal. A statute pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question which amended the relevant rules resulting in the withdrawal of rebate to refined oil, does not suffer from the vice of unconstitutionality on the ground of its being repugnant to Article 14 The Appellate Tribunal was therefore right in refusing to allow any rebate in respect of refined groundnut oil. Now we turn to the second contention of the petitioner, namely, that the Appellate Tribunal was in error in holding that the transactions in question constituted intra-State sales and not inter-State sales. On this point the Tribunal examined the terms of a specimen contract and held that as the sales were completed within the State subsequent to the delivery of the goods at the premises of the petitioner, and the property in the goods passed only after weighment and various tests which were done at Kurnool, the sales in question could not be regarded as having taken place in the course of inter-State trade. We are satisfied that this view of the Tribunal is palpably erroneous and does not accord with the crucial test formulated by the Supreme Court in a catena of cases. We need only refer to a recent decision of the Supreme Court in Cement Marketing Co. of India (Private) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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