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TMI Blog1974 (4) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... --------- The judgment of the court was delivered by MATHEW, J.-The question raised in the civil appeals are substantially the same as those raised in the writ petition. We will deal with the civil appeals and our decision there will govern and dispose of the writ petition. The appellants filed writ petitions before the High Court of Madras challenging the validity of the Tamil Nadu Additional Sales Tax Act, 1970 (Act No. 14 of 1970) (hereinafter referred to as the Act) on the ground that the State Legislature has no competence to enact it, that its provisions violated their fundamental rights under article 19(1)(f), 19(1)(g) and article 14 of the Constitution. The High Court dismissed the writ petitions by a common judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to the same effect as sub-sections (2) and (3) of section 2. Section 4 relates to the rule-making power. In the exercise of this power, rules have been framed which are called the Tamil Nadu Additional Sales Tax Rules, 1970. The appellants contend firstly that the Legislature of Tamil Nadu has no power to enact the Act as the tax imposed by the Act is a tax on the income of the dealer, and that the imposition of such a tax is outside the scope of entry 54 of List II. Secondly, they contend that the provision of the Act, in so far as it prohibits a dealer from collecting the tax from purchaser, is an unreasonable restriction upon their fundamental right to carry on trade under article 19(1)(g) and of their right to hold property under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t view. Entry 54 in List II authorises the State Legislature to Impose a tax on the sale or purchase of goods. So, the contention of the appellants that the additional sales tax is not a tax on sales but on the income of the dealer is without any basis. As regards the second contention that the provisions of the Act are violative of the fundamental rights of the appellants under article 19(1)(f) and 19(1)(g), as the tax is upon the sale of goods and is not shown to be confiscatory, it cannot be said that the provisions of the Act impose any unreasonable restrictions upon the appellants' right to carry on trade. It is, no doubt, true that every tax imposes some restriction upon the right to carry on a business; but it would not follow that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax legislation, it is not an essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer, nor is the power of the Legislature to impose a tax on sales conditional on its making a provision for sellers to collect the tax from the purchasers. In Konduri Buchirajalingam v. State of Hyderabad [1958] 9 S.T.C. 397 (S.C.)., this court said: "It is then said that the sales tax is essentially an indirect tax and therefore it cannot be demanded of the appellant without allowing him to recoup himself by collecting the amount of the tax from the persons with whom he deals. This court has already decided in the case of Tata Iron and Steel Co. Limited v. The State of Bihar [1958] 9 S.T.C. 267 (S.C.)., that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the increase in turnover would be reasonable. The basis is that just as in taxes upon income or upon transfers at death, so also in imposts upon business, the little man, by reason of inferior capacity to pay, should bear a lighter load of taxes, relatively as well as absolutely, than is borne by the big one. The flat rate is thought to be less efficient than the graded one as an Instrument of social justice. The large dealer occupies a position of economic superiority by reason of his greater volume of business. And, to make his tax heavier, both absolutely and relatively, is not arbitrary discrimination, but an attempt to proportion the payment to capacity to pay and thus to arrive in the end at a more genuine equality. The economic wisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oportion the payment to capacity to pay and thus arrive in the end at a more genuine equality. The capacity of a dealer, in particular circumstances, to pay tax is not an irrelevant factor in fixing the rate of tax and one Index of capacity is the quantum of turnover. The argument that while a dealer beyond certain limit is obliged to pay higher tax, when others bear a less tax, and it is consequently discriminatory, really misses the point, namely, that the former kind of dealers are in a position of economic superiority by reason of their volume of business and form a class by themselves. They cannot be treated as on a par with comparatively small dealers. An attempt to proportion the payment to capacity to pay and thus bring about a real ..... X X X X Extracts X X X X X X X X Extracts X X X X
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