TMI Blog1972 (3) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... es the Constitution as it infringes the petitioner's fundamental right under article 19(1)(g) and is also violative of articles 301 and 304 of the Constitution. 2. Section 6 of the Act provides for imposition of sales tax and section 7 provides for purchase tax. Section 8 (as it stood at the relevant time) enacted as follows: "8. Rate of tax for raw material.-(1) Notwithstanding anything contained in section 6 or section 7 but subject to such restrictions and conditions as may be prescribed, the rate of tax payable on the sale to or purchase by a registered dealer of any raw material for the manufacture of other goods for sale in the State of Madhya Pradesh or in the course of inter-State trade or commerce shall be one per cent. of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on business of manufacturing bidis, the petitioner buys raw material, particularly tendu leaves in which tobacco is rolled for making hand-made bidis. The petitioner purchased tendu leaves for the purpose of manufacturing bidis from the Forest Department of the Government of Madhya Pradesh and paid sales tax at the concessional rate of one per cent. of the sale price. 4.. For the period from 25th October, 1965, to 12th November, 1966, the Assistant Commissioner of Sales Tax assessed the petitioner to sales tax and, while computing the taxable turnover, he imposed a penalty in the sum of Rs. 93,511.88 under section 8(2) of the Act, holding as under: "The dealer has transferred bidi leaves worth Rs. 12,46,824.62 to his branches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there could be no objection, but what section 8(2) imposes is not "tax", but "penalty". 6.. It is abundantly clear from the scheme of the Act that sections 6 and 7 charge a dealer with liability to pay tax at the prescribed rate, which will hereinafter be called as the "full rate". Sub-section (1) of section 8 then bestows a concession upon a registered dealer. The rate of tax payable on the sale to or purchase by him of any raw material for the purposes specified in the sub-section is fixed at 1 per cent. of the sale or purchase price of such raw material. The sale or purchase of the raw material must be for the manufacture of the said goods for sale in the State of Madhya Pradesh, or in the course of inter-State trade or commerce. What ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cannot act in contravention of the conditions attached to the concession and at the same time complain that his right of free trade is infringed. 8.. The imposition of rates of sales tax is normally influenced by factors, political and economic. It has to be determined from the substance of the matter whether the effect of a tax is to hinder the movement part of trade. See State of Madras v. Nataraja Mudaliar[1968] 22 S.T.C. 376 (S.C.); A.I.R. 1969 S.C. 147. and Automobile Transport Ltd. v. State of RajasthanA.I.R. 1962 S.C. 1406.It is incontestable that the State Legislature has competence to prescribe a concessional rate different from the ordinary, that is, the full rate, in order to encourage manufacture and sale of goods within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide for a concessional rate to a registered dealer who sells or purchases raw material for manufacture of other goods for sale in the State of M.P. or in the course of inter-State trade or commerce. Essentially, the provisions in sub-section (2) of section 8 are ancillary and incidental for enforcing sub-section (1) of that section. A provision which is ancillary or incidental for the enforcement of any provision, which is legal and constitutional, cannot be assailed as being unconstitutional. The imposition of penalty is, therefore, within the legislative competence under entry 54, List II, of the 7th Schedule. In Ashoka Marketing v. State of Bihar[1970] 26 S.T.C. 254 (S.C.); A.I.R. 1971 S.C. 946. , it is observed: "The State Legislatu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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