TMI Blog1974 (7) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... o sales tax because according to them ice was nothing but a frozen form of water and was, therefore, exempt from the notification made by the Government under the Jammu and Kashmir Sales Tax Act (hereinafter referred to as the Act). The petitioners also took shelter behind a letter written by the Excise and Taxation Commissioner, wherein he appears to have accepted the contention of the petitioners that water included ice. This letter, however, was not written in a quasi-judicial capacity but purely in a private capacity expressing the personal views of the Excise and Taxation Commissioner. The other point raised by the petitioners was that section 4 of the Act of 1962 as amended up to date was ultra vires and violative of article 14 of the Constitution of India inasmuch as the section conferred unguided and uncanalised powers on the Government to fix any rate of tax without laying down any guidelines or criteria for determining the tax. Although the petitioners have not specifically taken the question of the vires of section 4 of the Act in the petition, yet at the time of hearing, since this point was involved in the other writ petition, the petitioners also adopted the same argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts, the source of these articles or their genus is not sufficient to indicate their identity or similarity. The word "ice" has been defined in the Webster's Third International Dictionary thus: "Water reduced to the solid state by cooling and when pure constituting a nearly colourless brittle substance that in freezing expands about one-eleventh in volume, that has a specific gravity of 0.9166 as compared with 1.0 for water at 4 C, that under normal atmospheric pressure is formed at and has a melting point of 0 C or 32 F, that occurs in the common form as hexagonal crystals, and that in large masses is classed as a rock........" An analysis of this definition would clearly show that although ice derives its source or genus from water by being reduced to a solid state, yet water on solidification into ice completely changes its state and becomes a distinct entity: the specific gravity is changed, the melting point has a temperature of 0 C or 32 F and the substance which forms as ice has hexagonal crystals. In these circumstances, therefore, we are unable to agree with the contention of the petitioners that ice and water are the same things and when the notification includes wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t suffers from the vice of excessive delegation of powers. It was next contended that the impugned notification by which the halwais have been made liable to pay sales tax if their maximum turnover amounts to Rs. 40,000 or above is purely discriminatory inasmuch as similar persons equally placed have been exempted from liability to tax and, therefore, there has been an inter se discrimination by virtue of the impugned notification, comprising No. S.R.O. 729 dated 11th October, 1972. The petition has been resisted by the State on a number of grounds: one of the important preliminary objections taken by the Additional Advocate-General in support of his reply affidavit is that the petitioners nowhere state in the petition that their actual turnover amounted to Rs. 40,000 or above so as to attract the penalty of taxation and, therefore, they have no locus standi to file this petition. On merits it was submitted that the legislature has enunciated the policy very clearly and has laid down sufficient guidelines while delegating powers to the Government to impose taxes on various articles. It was further submitted that there is no inter se discrimination between the bakerywallas which for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him and not applicable to others, that single individual may be treated as a class by himself; (b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles; (c) that it must be presumed that the legislature understands and correctly appreciates the needs 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicated, (b) or even from the policy and purpose of the enactment which may be gathered from other operative provisions applicable to analogous or comparable situations or generally from the object sought to be achieved by the enactment." Similarly reliance was placed on a decision of the Supreme Court in Corporation of Calcutta v. Liberty CinemaA.I.R. 1965 S.C. 1107.This case is also distinguishable from the facts of the present case, because in that case their Lordships were considering the distinction between fee and tax. Their Lordships however held that no arbitrary power of taxation was conferred by section 548 of the Calcutta Municipal Act so as to attract the operation of article 19(1)(f) of the Constitution of India. This case does not appear to be of any assistance to the petitioners In the present case. On the other hand, in Kamla Dal Mills v. State of U.P.[1966] 18 S.T.C. 204 at 219., a Division Bench of the Allahabad High Court clearly held that the power conferred on a State Government to select the goods to be subjected to sales tax and the rates at which they are to be taxed does not amount to unconstitutional delegation of powers. In this case while relying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the power of the Government to levy taxes. In the first place, there is a ceiling of 12 per cent and the Government is therefore prohibited from imposing any tax beyond 12 per cent. Secondly, in respect of goods to which the Central Sales Tax Act applies, the ceiling fixed by the State Act is 3 per cent, which also provides a clear guideline and a framework within which the Government is to exercise its functions. In these circumstances, we are convinced that the provisions of the impugned Act in this case are essentially different from the one which was before their Lordships of the Supreme Court, namely, the Punjab General Sales Tax Act of 1948. We might also mention here that in a later case, in Delhi Municipality v. B.C.S. W. MillsA.I.R. 1968 S C. 1232 at 1244., the Supreme Court itself clearly indicated that the maximum rate of tax was a sufficient guideline to the Government which would show that no arbitrary power was conferred on the Government. After a review of a large number of authorities including the case of Devi Dass Gopal Krishnan[1967] 20 S.T.C. 430 (S.C) ; A.I.R. 1967 S.C. 1895. , their Lordships observed as follows: "A review of these authorities ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with one of its essential legislative functions as the power given to the executive is an unduly wide one. We are unable to accede to this contention. Whether a power delegated by the legislature to the executive has exceeded the permissible limits in a given case depends on its facts and circumstances. That question does not admit of any general rule. It depends upon the nature of the power delegated and the purposes intended to be achieved. Taking into consideration the legislative practice in this country and the rate of tax levied or leviable under the various sales tax laws in force in this country, It cannot be said that the power delegated to the executive is excessive." In Hiralal Rattan Lal v. Sales Tax Officer, Section III, Kanpur[1973] 31 S.T.C. 178 at 185-186 (S.C.); A.I.R. 1973 S.C. 1034 at 1038-1039. , it was pointed out that the legislature has wide powers of classification in the case of taxing statutes and that the power of working details regarding the subjects to be taxed and the rate of taxation has to be left to the Government. In this connection their Lordships observed as follows: "It is true that the taxing statutes are not outside the scope of articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69] 74 I.T.R. 49 at 54-55 (S.C.); A.I.R. 1969 S.C. 1094 at 1098., wherein their Lordships observed as follows: "Equal protection clause of the Constitution does not enjoin equal protection of the laws as abstract propositions. Laws being the expression of legislative will intended to solve specific problems or to achieve definite objectives by specific remedies, absolute equality or uniformity of treatment is impossible of achievement. Again tax laws are aimed at dealing with complex problems of infinite variety necessitating adjustment of several disparate elements. The courts accordingly admit, subject to adherence to the fundamental principles of the doctrine of equality, a larger play to legislative discretion in the matter of classification. The power to classify may be exercised so as to adjust the system of taxation in all proper and reasonable ways; the legislature may select persons, properties, transactions and objects, and apply different methods and even rates for tax, if the legislature does so reasonably. Protection of the equality clause does not predicate a mathematically precise or logically complete or symmetrical classification: it is not a condition of the gua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the amount of expenditure necessary for carrying out the purposes of the Act. Quite apart from these circumstances, the fact that section 2 has fixed the maximum rate would indicate that the delegates is not given an uncontrolled discretion in the matter of fixing the rate." This decision therefore clearly holds that fixation of a maximum rate would clearly indicate that the delegates is not given an uncontrolled or uncanalised power to tax. The present case, therefore, clearly falls within the ratio laid down by their Lordships in the aforesaid case. The entire matter was considered by a Division Bench of this Court in Padam Krishan Vohra v. Assessing Authority, S.T.(1) (a case to which I was a party). in all its essential details and after considering the entire case law on the subject we held as follows: "A review of the above authorities clearly indicates and leads one only to the conclusion that the legislature can give guidelines to the executive Government within which taxes may be imposed. It can leave it to the executive to determine details relating to the working of the taxation laws, such as the selection of persons on whom the tax is to be levied, the rates at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by itself constitutes sufficient guideline to the delegates to exercise its powers. (7) There is always a presumption in favour of the constitutionality of a statute and the court should not strike down a statute unless it is satisfied that the powers conferred on the delegates are really untrammelled, uncanalised, naked and arbitrary and are not subject to any guidelines. Applying these tests, let us see whether section 4 of the Act can be said to suffer from the vice of excessive delegation of powers. To begin with, the preamble to this Act clearly enunciates the policy, scope and object of the Act. The preamble runs thus: "......An Act to provide for the levy of a general tax on the sale of goods in the State and for other matters connected therewith......." The preamble therefore lays down a clear-cut policy, namely, that the object of the Act is to levy general tax on the sale of goods in the State. As in a democratic set up it becomes the primary duty of the State to muster financial resources to raise additional revenues in order to meet its commitments to the people for implementing the plans and projects which it has to complete, therefore the raising of revenues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto the merits of the preliminary objection any further. The second plank of argument put forward by the petitioner was that even if the provisions of section 4 of the Act are intra vires, the notification issued under section 5 of the Act bearing No. S.R.O. 729 dated 11th October, 1972, is violative of articles 14 and 19 of the Constitution of India inasmuch as the petitioner was selected for hostile discrimination by the notification as against the bakerywallas who were equally circumstanced with the petitioner. Hence the notification had accorded an unequal treatment to equals, namely, the petitioner and the bakerywallas. In order to appreciate this contention it may be necessary to trace the history of the various notifications issued by the Government ever since 1962 because this would show that the Government appears to have been in two minds regarding imposition of taxes on the petitioner: sometimes tax was imposed, sometimes it was withdrawn. To begin with, there was Notification No. S.R.O. 157 dated 15th May, 1965, entry 68 to Schedule II of which ran thus: "Item 68. Articles of food and drinks sold by boarding houses conducted for the exclusive use of the students or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by S.R.O. 729 dated 11th October, 1972, which is the impugned notification by which a substantial change to the detriment of the petitioner halwai appears to have been made. The relevant portion of this notification which is annexure A to the petition runs as under: "In exercise of the powers conferred by section 5 of the Jammu and Kashmir General Sales Tax Act, 1962 (XX of 1962), the Government hereby make the following amendments in Notification S.R.O. 157 dated 15th May, 1965, namely:................ 34.. Sales made by dhabawallas, tandoorwallas, lohwallas, tea stallholders and halwais 2 per cent................ (iii) for item 68 the following shall be substituted: 'Articles of food and drink sold in boarding houses conducted for the exclusive use of students or canteens run exclusively for the use of employees of factories or armed forces.' (iv) In the last para : (a) for the first and second provisos the following shall be substituted: Provided that in relation to dealers who run hotel, restaurant, cafe and other similar establishments wherein food preparations including coffee and tea (but excluding liquor and beer) are served, the maximum turnover not liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, etc., and, therefore, both of them fall in the same category of dealers so far as the preparation of these articles of food is concerned. It has further been contended that if the provisions of the notification are to be followed then it will be well nigh impossible to collect sales tax from the purchasers amounting to 2 nP. in a rupee and even if the petitioners do so, they are bound to suffer in competition because if their turnover is Rs. 40,000 or over they would have to charge more for the very same articles than other halwais whose turnover is less than Rs. 40,000 as a result of which their business shall come to a standstill and no purchasers will be drawn to purchase the articles of food from the petitioners. In reply to this argument the Additional Advocate-General submitted that the petitioners catered to the luxurious and affluent customers and it was, therefore, a reasonable basis for classification whereas the bakerywallas catered to the general masses, i.e., the hoi polloi. We are not inclined to agree with this argument because there are no reliable materials before us to show as to what is the nature of customers of the halwais and bakerywallas, nor is there any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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