9911796707
TMI Blog2000 (1) TMI 956X X X X Extracts X X X X X X X X Extracts X X X X ..... to declare that the provisions of Explanation II as enacted by section 2 of the Tamil Nadu Additional Sales Tax (Amendment) Act, 1999 (Tamil Nadu Act 37 of 1999) (hereinafter called "the Act 37 of 1999") are ultra vires articles 14, 19(1)(g) and Part XIII of the Constitution of India. (c) In O.P. Nos. 1061 of 1999 to 1063 of 1999, 1066 of 1999 to 1068 of 1999, 1071 of 1999 to 1073 of 1999, 1076 of 1999, 1183 of 1999 to 1185 of 1999, 1193 of 1999 and 1387 of 1999 to 1389 of 1999 the prayer is to quash the notice issued demanding the differential tax/additional sales tax calculated in terms of Act 27 of 1999 and Act 37 of 1999 for the assessment years 1997-98, 1998-99 and 1999-2000 (for the period up to May, 2000 or June, 2000) or asking to file revised returns by working out the tax due on last purchase value in terms of Act 27 of 1999 within the period specified in the notice. 3.. The facts leading to the present cases are as follows: In the meeting held on November 5, 1997 by the honourable Minister for Agriculture, Tamil Nadu with the private sugar mills executives of Tamil Nadu to consider fixation of State advised price for the year 1997-98, among other things, the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ider that the purchase tax for sugarcane may be levied on flat rate basis and that every year it may be calculated on the basis of 8 per cent on the average of State advised price recommended by Government. For 1997-98 crushing season, the Government have recommended the State advised price at Rs. 660 per metric tonne for 8.5 per cent recovery, State average sugar recovery is 9.4 per cent. Therefore, the average State advised price will come to Rs. 730 per metric tonne and the purchase tax at 8 per cent comes to Rs. 58.40. 10.. The Government have therefore decided to fix the purchase tax for sugarcane for 1997-98 at the flat rate of Rs. 60 per metric tonne. Necessary orders in this respect will be issued separately by Government in Commercial Tax Religious Endowment Department." Following this order, Government of Tamil Nadu enacted Act No. 27 of 1999 with retrospective effect from April 1, 1997 and this was published in Government Gazette on June 17, 1999. The Act No. 27 of 1999 reads as follows: "An Act further to amend the Tamil Nadu General Sales Tax Act, 1959. Be it enacted by the Legislative Assembly of the State of Tamil Nadu in the Fiftieth Year of the Republic of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Fiftieth Year of the Republic of India as follows: 1.. Short title and commencement.-(1) This Act may be called the Tamil Nadu Additional Sales Tax (Amendment) Act, 1999. (2) Sub-clause (c) of clause (2) of section 2 shall be deemed to have come into force on the 1st day of April, 1997. 2. Amendment of section 2.-In section 2 of the Tamil Nadu Additional Sales Tax Act, 1970 (Tamil Nadu Act 14 of 1970), in sub-section (1),- (1) clause (a) shall be omitted; (2) in clause (aa), (a) for the expression commencing with the words 'The tax payable under the said Act' and ending with the words 'outside the State', the following expression shall be substituted, namely: 'The tax payable under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) (hereinafter in this section referred to as the said Act), shall, in the case of a dealer including the principal selling or buying goods through agents'; (b) the Explanation shall be renumbered as Explanation I and in Explanation I as so renumbered, the expression 'in this State', shall be omitted; (c) after Explanation I, the following Explanation shall be inserted, namely: 'Explanation II.-Notwithstanding anything ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 51 retrospectively amended (with effect from February 28, 1944). Rules 9 and 49 of the Central Excise Rules to recover duty on manufacture and consumption. It was categorically stated that "if the intention of the Legislature was to nullify the effect of section 11-A, in that case, the Legislature would have specifically provided for the same. Section 51 does not contain any non obstante clause nor does it refer to the provision of section 11-A. In the circumstances, it is difficult to hold that section 51 overrides the provision of section 11-A". This principle equally applies to the present cases. 7.. The impugned levy is violative of article 14 of the Constitution of India because it is- "(i) irrational in imposing taxes at higher rate on less economical/viable units with recovery and profitability. (ii) Different rates on the 5-A price which up to 1999 was the measure of levy. (iii) It is a flat rate operating harshly on unequals." 8.. Historically the tax has been levied on the price of sugarcane and the value of sugarcane is measured by the sucrose content that is recovered. The minimum sugar price fixed by Government of India, the additional price under clause 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 521.58 41.73 9.60 11.50 2 EID-Nellikuppam 457.40 33.18 490.58 39.25 9.10 12.23 3 EID-Pugalur 500.60 33.90 534.50 42.76 9.90 11.23 4 Cauvery Sugars 479.00 40.13 519.13 41.53 9.50 11.56 5 MAC Agro 446.60 29.15 475.75 38.06 8.90 12.61 6 Aruna Sugars 516.80 36.35 553.15 44.25 10.20 10.85 7 Sakthi Unit I 495.20 31.72 526.92 42.15 9.80 11.39 8 Sakthi Unit II 489.80 39.73 529.53 42.36 9.70 11.33 9 Kothari Sugars 500.60 38.22 538.82 43.11 10.00 11.14 10 Thiru Arooran-I 495.20 21.59 516.79 41.34 9.80 11.61 11 Thiru Arooran-II 506.00 15.26 521.26 41.70 10.00 11.51 12 Bannari Amman 446.60 45.78 492.38 39.39 8.90 12.19 13 Dharani Unit-I 489.80 49.94 539.74 43.18 9.70 11.12 14 Rajashree Sugars 543.80 37.74 581.54 46.52 10.70 10.32 15 Average 489.41 34.99 524.41 41.95 9.70 11.47 9. Similarly assuming a flat rate of Rs. 40 per tonne as clause 5-A price for 1998-99 season, the position is as indicated below: Impact of recovery on purchase tax for 1998-99 season Sl. No Name of factory SMP Rs/t 5-A price Rs/t Total SMP+5A price (Rs./t) purchase Tax at 8 per cent Rs/t Peak recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 10.78 per cent with additional liability of Rs. 262.88 lakhs. A constitutional court may frown upon a scheme which substitutes retrospectively from April 1, 1997 as against the existing ad valorem levy when such a scheme imposes different rates on different assessees within the same State, the impact of which is higher on less viable industry and lesser on a better placed assessee. This is a case of failure to classify on rational basis or lack of classification and the following observations in [1995] 96 STC 130 (SC), in the case of Venkateshwara Theatre v. State of Andhra Pradesh at page 146 are relevant: "Just as a difference in the treatment of persons similarly situate leads to discrimination, so also discrimination can arise if persons who are unequals, i.e., differently placed, are treated similarly. In such a case failure on the part of the Legislature to classify the persons who are dissimilar in separate categories and applying the same law, irrespective of the differences, brings about the same consequence as in a case where the law makes a distinction between persons who are similarly placed. A law providing for equal treatment of unequal objects, transactions or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after year, over the last decade, the price under clause 3 as well as clause 5-A has been progressively related to prices, provided tax related to value which was progressive and remunerative to the exchequer. (c) In Ganga Sugar Corporation Ltd. [1980] 45 STC 36 at page 41, the following observation by High Court have been narrated: "The petitioners have not supplied for any period figures of actual prices paid by them, actual quantity of cane crushed by them, actual quantity of juice derived, actual quantity of sugar produced and their earnings. They have not tried to prove that the standard of price would be more just and equitable than the standard of weight for levy of purchase tax. From the meagre data gleaned from the Tariff Commission's Report, it is not possible to take the view that tax by weight is unfair and inequitable. And article 14 ensures to the citizen the basic principle on which rests justice under the law. It assures to the citizen the ideal of fairness (Corpus Juris Secundum, Vol. XVI-A, page 296). The petitioners have failed to discharge the heavy burden of proof." (d) The Supreme Court in [1980] 45 STC 36 (SC) (Ganga Sugar Corporation Ltd. v. State of Utt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 973] 32 STC 368 (Cal) (Shew Bhagwan Goenka v. Commercial Tax Officer). (ii) [1987] 65 STC 191 (Bom) (Olympic Oil Industries Ltd. v. State of Maharashtra). (iii) [1991] 83 STC 59 (Ker) (Mega Traders v. State of Kerala) The Supreme Court in [1990] 76 STC 67 at page 70 in the case of Shri Krishna Enterprises v. State of Andhra Pradesh did not agree to give retrospective effect. Though the State Legislature has power to make retrospective law, considering the hardships over and above clause 5-A liability even if the subsidies are taken into account and with no scope to recoup the extra burden in respect of levy sugar price as explained supra, definitely the Act 27 of 1999 offends article 19(1)(g) of the Constitution of India. 14.. A retrospective levy is ordinarily found reasonable and not stated to offend article 14 or article 19(1)(g) in certain definite circumstances as brought out by the rulings upholding the levy: (i) Legislature cures the infirmity or the defect in phraseology. The lacuna is repaired to effectively carry out the object for which the earlier principal Act was enacted. [1973] 31 STC 190 (SC) (Krishnamurthi and Co. v. State of Madras) where entry 47 introduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and intercourse is not only in respect of inter-State trade, but also intra-State and the observations of the Supreme Court in AIR 1961 SC 232 (Atiabari Tea Co. Ltd. v. State of Assam) at page 250, at paragraph 43 and at page 251, at paragraph 44 and [1988] 69 STC 305 (SC) (Indian Cement Ltd. v. State of Andhra Pradesh) at page 314 are relevant. Atiabari Tea Company at page 315 quotes [1968] 22 STC 376 (SC) (State of Madras v. Nataraja Mudaliar) as follows*: "............. all trade is protected whether it is intra-State or inter-State by the prohibition imposed by article 301, and there is nothing in the language or the context for restricting the power of the Parliament which it otherwise possesses in the public interest to impose restrictions on the freedom of trade, commerce or intercourse, operative only as between one State and another as two entities. There is also no doubt that exercise of the power to tax may normally be presumed to be in the public interest........". 16.. Tax law is also within article 301 and may in circumstances operate as impediment or detriment against freedom of trade as observed in Indian Cement Ltd. v. State of Andhra Pradesh [1988] 69 STC 305 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discriminatory levy which violates article 301. A discriminatory impact for the purpose of article 301 may yet be saved as a reasonable restriction by article 304(b), provided that sanction of the President had been obtained for the Bill or amendment. As no such Presidential sanction has been obtained in this case, there is clear violation of article 19(1)(g). Test of reasonableness is the same for article 19(b) and article 304(b) as considered in AIR 1970 SC 129 (Vrajlal Manilal and Co. v. State of Madhya Pradesh) at para 10. Retrospective tax is an unreasonable restriction which could be saved only by a Presidential assent which is mandatory. In AIR 1963 SC 1667 in the case of (Rai Ramkrishna) page 1676, the following observations made are relevant: "In our opinion, having regard to all the relevant facts of this case, the restrictions imposed by the said retrospective operation must be held to be reasonable and in the public interest under article 19(5) and (6) and also reasonable under article 304(b)." Similarly, the following observations in AIR 1976 SC 182 at page 195 (A.B. Abdul Kadir v. State of Kerala) are important: "It was also observed that in judging the reasonablen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one. Section 4 is not validation, but only a purported validation without the force in law. 25.. Thus the impugned Act being a retrospective levy which validates has to address itself to the infirmity shown in Kothari Sugars case [1996] 101 STC 197, by the Supreme Court and it cannot merely by-pass the judgment or circumvent the same. In this connection, Mr. C. Natarajan, the learned Senior Counsel referred to the case of D. Cawasji & Co. v. State of Mysore reported in [1973] 31 STC 445 (Mys) which was reversed by the Supreme Court in [1985] 58 STC 1 (D. Cawasji & Co. v. State of Mysore). In that case the Mysore High Court having held that the tax authority can only impose sales tax on the price of arrack excluding excise duty and cess collected from the buyer, the State set about to amend the Act retrospectively and to validate the levy. This was done by merely increasing the rate of tax on the price of arrack so that the tax as imposed on the arrack at the increased rate (excluding the tax on excise duty and cess) may be equivalent of the tax originally collected on all the three elements. 26.. The Mysore High Court upheld the retrospective levy and validation stating that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t particularly section 2(r) or section 2(q), etc., to enable a levy adopting State advised price as a measure of levy. This was what was sought to be done and could not be done. The deficiency in the prior law was that the State could not tax State advised price. (ii) The purpose of the amendment appears to be to circumvent the judgment of the High Court and the Supreme Court by taking the State advised price for assessment but by a device equating the probable tax at 8 per cent to Rs. 60 per M.T. (evidenced by the communication in Lr. No. 532 (Agriculture), dated December 8, 1997 by the Government to the Commissioner of Commercial Taxes. Thus, in the light of the observations in the case of D. Cawasji & Co. [1985] 58 STC 1 (SC), the impugned Act 27 of 1999 is ultra vires the legislative power under article 245 of the Constitution. 28.. Inasmuch as there is no turnover of sugarcane acquired because of specific levy by Act No. 27 of 1999, no additional tax could be levied. Inasmuch as the additional tax under the Tamil Nadu Additional Sales Tax Act, 1970 has to be with reference to "taxable turnover" the mere addition of an explanation in Act No. 37 of 1999 will be of no effect. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to legislate and it is its inherent power to legislate either prospectively or retrospectively including the levy of taxes, there is no sanction of law to demand an explanation from the Legislature as to the necessity of the levy. It is another thing to say that a levy or retrospective levy is unconstitutional because of lack of legislative competence or because of its unreasonable nature, which may be appropriately termed as arbitrary". Similarly as observed in [1973] 31 STC 190 (SC) (Krishnamurthi and Co. v. State of Madras) "the fact that a dealer is not in a position to pass on the sales tax to others does not affect the competence of the Legislature to enact a law imposing sales tax retrospectively because that is a matter of legislative policy". As held in [1998] 108 STC 135 (AP) (Association of Pesticides Manufacturers v. State of A.P.) "retrospective legislation is a concomitant function of the Legislature.............. Merely because the tax is not able to be passed on to the customers, it would not render the legislation itself void". 31.. Referring to the equality clause in article 14, Mr. R. Mahadevan, the learned Government Advocate, quoted the following passage f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 (AP) in the case of ITC Limited v. State of Andhra Pradesh, levy of luxury tax on supply of tobacco was held to be not violative of article 301 or 304(b). The following observations of the Madras High Court in (1997) III CTC 255 in the case of R. Gandhi v. Union of India, are relevant in the context of assent of the President of India. "Neither the principal Act nor the aforesaid amendment is relatable to any matter in the Concurrent List. Both of them relate to entry No. 52, List II of the Seventh Schedule of the Constitution. This apart, the amendment Act only varied the form of restriction-about which, indications were made earlier-which was inherent in the principal Act. Such being the position, we are persuaded to hold that the fact that the amendment Act did not receive the assent of the President is of no consequence." Thus, the Act No. 27 of 1999 which levied purchase tax on sugarcane on weight basis from April 1, 1977 is valid. The continued levy of additional tax on ad valorem basis and the amending Act No. 37 of 1999 also is valid. In such circumstances issue of notice demanding the differential tax is also valid. 33.. Mr. C. Natarajan, the learned Senior Counsel, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gar Mills [1988] 71 STC 444 (Mad.) and Kothari Sugars & Chemicals Ltd. [1996] 101 STC 197 (SC) and as the infirmity pointed out in the above judgments was not removed, the amending Act No. 27 of 1999 is invalid in law in terms of the judgment of the Supreme Court in D. Cawasji's case reported in [1985] 58 STC 1. The question considered in State of Tamil Nadu v. Kothari Sugars & Chemicals Ltd. [1996] 101 STC 197 (SC) was whether the purchaser is liable to pay purchase tax under the Sales Tax Act on the amount paid by the purchaser to the cane grower over and above the price fixed under clauses 3 and 5-A of the Sugarcane (Control) Order, 1966? In this connection the Supreme Court has observed as follows: "On a perusal of the relevant provisions of the Sugarcane (Control) Order, 1966, particularly clauses 3 and 5-A therein, it is clear that the total price of sugarcane fixed thereunder is the aggregate of the minimum cane price fixed under clause 3 and the additional cane price fixed under clause 5-A. Thus, unless there be an agreement between the grower and the purchaser for purchase of the sugarcane at a higher price, the obligation of the purchaser is to pay to the grower only the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der clause 5-A then in that case the entire amount would be the price of sugarcane. However, there is no such basis found in the present case wherein the excess amount forming part of the advance was paid only under compulsion on the direction contained in the 'State advice'. It is significant that a provision for adjustment is clearly made in sub-clause (6) of clause 5-A. This provision supports the view we have taken. The decision of the Madras High Court which is reported in Thiru Arooran Sugars Ltd. v. Deputy Commercial Tax Officer, Mannargudi [1988] 71 STC 444 is, therefore, upheld and the appeals against the decision of the Madras High Court are, therefore, dismissed. In the connected matters arising out of the judgment of the Karnataka High Court, similar writ petitions filed by the purchasers of sugarcane were dismissed. The two decisions of the Karnataka High Court which require reference are Pandavapura Sahakara Sakkare Kharkhane (P.) Ltd. v. State of Mysore [1973] 32 STC 104 and Tungabhadra Sugar Works Ltd. v. State of Karnataka [1994] 93 STC 561. In Pandavapura [1973] 32 STC 104 (Mys) it was found proved as a fact that the substance of the transaction between the purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the advance was paid only under compulsion on the direction contained in the "State advice", it was held that the excess amount over and above the clauses 3 and 5-A price of the Control Order would not form part of the purchase consideration for levy of tax. In Thiru Arooran Sugars Ltd. case [1988] 71 STC 444 the Madras High Court considered the "State advised price" as "under compulsion" on the ground that the letter of the Director of Sugars dated November 19, 1980 contained the following expression: "All the sugar mills should show the arrears of cane price in their fortnightly cane price statements worked out at the above rates only". These words were considered to be offending in the sense that they meant take-over of the mills and only in that context the Madras High Court in Thiru Arooran Sugars Ltd. case [1988] 71 STC 444 at page 489 observed as follows: "From this it will be clear that if the petitioner had paid the amount under pressure of the directive of the Director of Sugar, the non-payment will be risky and would attract the provisions of the Sugar Undertakings (Taking Over of Management) Act, 1978 (Central Act 49 of 1978). Therefore, it can never be called the volu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court D. Cawasji & Co. v. State of Mysore [1973] 31 STC 445 held that excise duty and cesses would not form part of the turnover. Therefore, during 1968-69 the privilege of vending arrack was sold without variation in the prices of arrack fixed by the Government during previous year at 55 paise per litre. The appeal filed in the Supreme Court was also withdrawn. As a result, the judgment of the High Court became final and the Government was faced with a situation of refund taxes paid arrack contractors other than those who obtained stay in Court proceedings. In order to avoid liability of refund of the excess tax collected, an Ordinance was passed on July 19, 1969 which ultimately became an Act amending the Sales Tax Act. By virtue of this amendment the sales tax was increased from 6½ per cent to 45 per cent and the Act became effective from April 1, 1966. In the Objects and Reasons of this Act it was specifically stated that "in order to get over the effects of the High Court decision and retain the money already recovered by the Government, it is proposed to enhance the rate of tax on arrack to 45 per cent with retrospective effect from 1st April, 1966". The Mysore Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f April, 1966, and to the extent it seeks to nullify the earlier judgment of the High Court. We declare that section 2 of the impugned Amendment Act to the extent that it imposes the higher levy of 45 per cent with retrospective effect from the 1st day of April, 1966, and section 3 of the impugned Act seeking to nullify the judgment and order of the High Court are invalid and unconstitutional." 37.. However, in the present cases before us, the amending Act of 27 of 1999 was in pursuance of a policy decision taken to levy tax on weight basis to fulfil the wishes of the sugar mills as discussed in detail supra. In this connection, it is relevant to refer to the decision of the Supreme Court in Entertainment Tax Officer v. Ambae Picture Palace reported in [1995] 96 STC 338. The headnote in [1995] 96 STC 338 at page 339 reads as follows: "In Andhra Pradesh, under the old Government, from March 23, 1984, till September 6, 1984, entertainment tax was being levied on the gross collection capacity per show at certain percentage. On a change of Government, the new Government by an Ordinance promulgated with effect from September 7, 1984, restored the tax to its original base of actual pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39.. Thus, in the present cases also, a policy decision of the Government was implemented by enacting the amendment Act No. 27 of 1999 and it was not for circumventing any judgment as contended. Nor does the impugned Act contravene the legal principles enunciated in the said judgments in [1988] 71 STC 444 (Mad.) (Thiru Arooran Sugars Ltd. v. Deputy Commercial Tax Officer) and [1996] 101 STC 197 (SC) (State of Tamil Nadu v. Kothari Sugars Chemicals Ltd.). 40.. Inasmuch as Act No. 27 of 1999 levied purchase tax on weight basis at Rs. 60 per M.T. with effect from April 1, 1997 and that earlier entry 44 of Part C of the First Schedule to the Act levying 8 per cent tax on ad valorem basis was in operation, a validation provision was introduced. It is an admitted fact that at least provisional assessments have been concluded on the basis of monthly returns filed. For was any revision against concluded provisional assessment or any court order in regard to proceedings in this regard, and final assessment to be made on specific duty basis validation provision is needed. Definitely the expression "any judgment, decree or order of any court" was not to overcome the decisions of the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y v. State of Andhra Pradesh [1962] 13 STC 529. "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 Thathunni Moopil Nair v. State of Kerala AIR 1961 SC 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 in classification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... District v. Rodrigues (1973) 411 US 1, speaking through Justice Stewart: "No scheme of taxation, whether the tax is imposed on property income or purchases of goods and services, has yet been devised which is free of all discriminatory impact. In such a complex arena in which no perfect alternatives exist, the court does well not to impose too rigorous a standard of scrutiny lest all local fiscal schemes become subjects of criticism under the equal protection clause." 45.. Similarly, the following observations of the Supreme Court in Income-tax Officer, Shillong v. N. Takin Roy Rymbai [1976] 103 ITR 82; [1976] 3 SCR 413 are worth recalling: "The mere fact that a tax falls more heavily on some in the same category, is not by itself a ground to render the law invalid. It is only when within the range of its selection, the law operates unequally and cannot be justified on the basis of a valid classification, that there would be a violation of article 14." 46.. Sugar recovery percentage depends on various factors, namely, better selection of cane variety and active inter-action between the grower and mills in providing subsidies and timely advices, maximum crushing during peak sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cane in India: V. Statewise duration of crushing season (days). 48. A glance at the statistical statements shows that though average cane yield is much more in Tamil Nadu than Karnataka and Maharashtra, the recovery percentage of sugar is far less than Karnataka and Maharashtra. Statement IV shows that sugar recovery percentage declined sharply in Tamil Nadu in 1995-96 compared to the position in 1988-89. In Karnataka and Maharashtra, the variation is minimal. Similarly statement V shows that crushing season in Tamil Nadu is much more than in other States. The variation in bagasse per cent cane is less in Tamil Nadu than Karnataka and Maharashtra, though molasses percentage recovery is more than in Tamil Nadu than in Karnataka and Maharashtra. 49.. It is seen that while the State average recovery of sugar for 1997-98 season in Tamil Nadu is reported to be 9.4 per cent, it is averred that in Karnataka State it is 10.50 per cent and in Maharashtra State it is 11.13 per cent. 50.. Therefore, it is in the interests of the mill purchasers of sugarcane to co-ordinate and co-operate with the cane growers to develop better varieties and crush the maximum quantity with new machinery d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submission that "unequals were being treated equally by a uniform purchase tax where equality would have dictated classification and taxation based on sucrose recovery from the cane or its market price" the following observations of the Supreme Court after quoting from Murthy Match Works case reported in (1974) 3 SCR 121 at 130-131 are worth mentioning: "Another proposition which is equally settled is that merely because there is room for classification it does not follow that legislation without classification is always unconstitutional. The court cannot strike down a law because it has not made the classification which commends to the court as proper. Nor can the legislative power be said to have been unconstitutionally exercised because within the class a sub-classification was reasonable but has not been made. It is well-established that the modern State, in exercising its sovereign powers of taxation, has to deal with complex factors relating to the objects to be taxed, the quantum to be levied, the conditions subject to which the levy has to be made, the social and economic policies which the tax is designed to subserve, and what not. In the famous words of Holmes, J., i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket price paid for sugarcane linked to a sugar recovery of 9.4 per cent, the State average, is not capricious or unreasonable. In fact in Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh [1980] 45 STC 36 (SC) a flat rate of purchase tax on weight basis without any linkage to recovery rate was held to be constitutionally valid. As already stated, the levy of purchase tax on weight basis was on the basis of request made by the sugar mills in the meeting held on November 5, 1997 to fix "State advised price" for 1997-98 and that in fixing the price the Government took into account the market price of sugar, State average sugar recovery of 9.4 per cent and the existing rate of 8 per cent tax in arriving at the purchase tax rate of Rs. 60 per M.T. This method adopted by the State to fix the purchase tax rate is rational and reasonable. In such circumstances, there is no violation of article 301 of the Constitution of India and as the levy is not confiscatory in nature, it did not amount to unreasonable restriction within the meaning of article 19 of the Constitution of India so as to impose any unreasonable restriction upon the petitioner's right to carry on a business or trade. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he flow of trade, but every imposition of tax does not do so. The declaration contained in Part XIII of the Constitution is against creation of economic barriers and/or pockets which would stand against the free flow of trade, commerce and intercourse. 57.. As our finding is that the purchase tax imposed by Act No. 27 of 1999 is reasonable and is not confiscatory in nature, naturally the tax is nothing but taxation simpliciter and does not offend article 301. In such circumstances, the plea that the impugned Act imposes reasonable restriction and therefore assent of the President as contemplated in article 304(b) is required is untenable. Therefore, in the context of the amending Act of this nature, the relevant article is 200 of the Constitution which inter alia provides that where a Bill has been passed by the Legislative Assembly of a State, it shall be presented to the Governor and the Governor shall declare either that he assents to the Bill or that he withholds assent therefrom or that he reserves the Bill for the consideration of the President. In the present case, the amending Act was assented to by the Governor as he did not think it proper to reserve the Bill for consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reported in [1999] 115 STC 358 (SC) will apply squarely. Further, the specific rate of tax as contemplated in section 3-F of the Act is Rs. 60 per M.T., though the basis adopted to work out the tax rate may be market price or State advised price linked to a sucrose or sugar recovery of 9.4 per cent, the State average for 1997-98. Therefore, there is no substance in this plea of the petitioners also. 60.. As regards Additional Sales Tax amendment in Act No. 37 of 1999, it is contended that no turnover was acquired because of specific levy on weight basis by Act No. 27 of 1999 and therefore the explanation which indicates only a turnover which does not necessarily establish a taxable turnover could not be given effect to. It is seen that the amendment Act No. 37 of 1999 clearly retains ad valorem basis for levy of additional sales tax in respect of "sugarcane" under the Tamil Nadu Additional Sales Tax act, 1970, notwithstanding the specific levy under the Principal Act, Explanation II to section 2 in the amending Act No. 37 of 1999 reads as follows: "Explanation II.-Notwithstanding anything contained in the said Act, for the purpose of this clause, 'turnover' in respect of sugarc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 27 of 1999 and Act No. 37 of 1999. For the reasons stated supra, by applying the tests laid down for determining the reasonableness and constitutional validity of the provisions, we hold that Act No. 27 of 1999 and Act No. 37 of 1999 are neither unconstitutional nor ultra vires but within the competence of the Tamil Nadu Legislature. However, the demand notices issued raising demands or calling for revised returns without following the provisions of the Act and Rules are not in order and accordingly such notices are quashed. 63.. In fine, O.P. Nos. 1059 of 1999, 1064 of 1999, 1069 of 1999, 1074 of 1999, 1181 of 1999, 1192 of 1999, 1385 of 1999, 1241 of 1999, 1060 of 1999, 1065 of 1999, 1070 of 1999, 1075 of 1999, 1182 of 1999, 1191 of 1999, 1386 of 1999 and 1239 of 1999 are dismissed. As regards O.P. Nos. 1061 of 1999, 1062 of 1999, 1063 of 1999, 1066 of 1999, 1067 of 1999, 1068 of 1999, 1071 of 1999, 1072 of 1999, 1073 of 1999, 1076 of 1999, 1183 of 1999, 1184 of 1999, 1185 of 1999, 1193 of 1999, 1387 of 1999, 1388 of 1999 and 1389 of 1999 they are allowed and it is open to the authorities to raise fresh demands for differential tax due by following the provisions of law. An ..... X X X X Extracts X X X X X X X X Extracts X X X X
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