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TMI Blog1990 (2) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... mum rate at which a State can levy sales tax on its sale is four per cent. Till about 1987, wheat, which is an essential commodity was being distributed and sold to roller flour mills through the Food Corporation of India throughout the country at fixed rates because of orders under the Essential Commodities Act. However, from the middle of 1987, the Government of India discontinued the policy of distribution of wheat by Food Corporation of India to the roller flour mills at fixed rates and introduced a system of sale by tenders by the Food Corporation of India. At the same time, the roller flour mills were given freedom to purchase wheat from the open market anywhere in the country. Thus, the raw material needed by the roller flour mills has to be procured, either in the open market or by submitting tenders offering appropriate rates to the Food Corporation of India. This introduced an element of play of market forces on the price of this raw material of the petitioners. According to the petitioners, because of the high rate of sales tax under the Andhra Pradesh General Sales Tax Act, 1957, on wheat and its products in comparison with the other States the bakeries in our State are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his turnover liable to tax at the rate of- (a) one half paise on every rupee where the total turnover for the year is three lakh rupees or more but less than fifty lakh rupees; (b) one paisa on every rupee where the total turnover for the year is fifty lakh rupees or more but less than one crore rupees; and (c) one and half paise on every rupee where the total turnover for the year is one crore rupees or more: Provided that in respect of declared goods the total rate of tax together with the rate of additional tax specified in this section shall not exceed four per cent." It is stated that the annual sale turnover of many petitioners is over one crore and of some over fifty lakhs. Section 6-B provides for levy of surcharge on sales tax and reads as follows: "6-B. Levy of surcharge on sales tax.-(1) Every dealer, who is liable to pay tax under this Act on the sale or purchase of goods, shall pay a surcharge on such tax at the rate of ten per cent of such tax: Provided that if, in respect of declared goods, the tax under section 6 and the surcharge under this section, payable by such dealer, exceeds four per cent of the sale or purchase price thereof the rate of surcharge i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tax on wheat itself is 1 per cent. The surcharge under section 6-B and additional turnover tax under section 5-A is applicable to all goods. The surcharge is 10 per cent of the sales tax and the additional turnover tax is 1.5 paise per rupee where the turnover is over 1 crore and 1 paisa per rupee where turnover is between fifty lakhs and one crore. Further, while calculating the levy of tax on wheat products, a set-off is given for any tax paid on wheat which is evident from item 60 of the First Schedule. After some hearing the matter was adjourned to enable the parties to inform the court about the rates of sales tax in other States. From the material given by them (which it is stated may not be up to date) the following facts emerge: ------------------------------------------------------------------------------------- Sl. State Rate of tax Rate of tax on Remarks No. on wheat wheat products ------------------------------------------------------------------------------------- 1. Karnataka 2 per cent 3 per cent Set-off is available (vide item 9, (vide item 138, where the products are Schedule IV) Schedule II) extracted from tax suffered wheat. 2. Tamil Nadu 1 per cent 2 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attack to the validity of certain provisions of the Central Sales Tax Act on the ground of its being violative of articles 301, 302 and 303 was repelled. Part XIII of the Constitution of India is framed to ensure freedom of trade and commerce throughout the country and article 301 puts a fetter on the various legislatures to make any law which will prevent such a free-flow of trade and commerce. This restriction on legislative power is subject to the various conditions mentioned in articles 302 to 304 with which we are not concerned in this case. The Supreme Court in Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232, has held that, even the legislation regarding taxation is subject to the provisions of Part XIII of the Constitution of India. In that case, the question was, whether the levy of tax by the State of Assam on certain goods carried by road or inland water ways in the State violated article 301. The legislation was made by the Assam Legislature under entry 56 of List II with a view to increase the income of the State, as tea and jute which were its main products were moved out of the State by road and river and a very small proportion of these was sold or consume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 386 of STC) of that judgment observed as follows: ".................It must, therefore, be regarded as settled law that a tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so." It also noticed that the Parliament could impose certain restrictions under article 302 in regard to the provisions of that article and article 303. The validity of the provisions was upheld. It is useful to extract what Hegde, J., said in his concurring judgment in paragraph 42 (at page 399 of STC): "If we bear in mind the fact that sales tax on inter-State sales is levied for the benefit of the States and the further fact that each one of the State Governments in its own interest is bound to create the best possible condition for the growth of industry and commerce in that State, it is reasonable to assume that they will not be blind to economic forces. All that one has to guard against is to see that they do not, by having recourse to their taxation power, obstruct the flow of trade into their States. In the normal course they will be interested in seeing that goods produced in their States are sold outside. Reasonably ..... X X X X Extracts X X X X X X X X Extracts X X X X
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