TMI Blog2006 (1) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... bjected coconut oil sold under a brand name to tax at a higher rate in comparison to other edible oils though sold under a brand name as under entry No. 1 of Part "E" of the Second Schedule to the Act has been discriminatory, violative of article 14 of the Constitution of India and liable to be declared as unconstitutional. It is this challenge thrown by the petitioner-dealer registered under the provisions of the Act which is required to be met by the respondent-State in this writ petition. The sole ground of attack on the validity of the legislation rather the change in law brought about by Act No. 5 of 2001 is that it is one resulting in invidious discrimination as against coconut oil sold or marketed in a branded form and in containers whether sachets, bottles or plastic cans is alone subjected to differential treatment vis-a-vis all other edible oils that are marketed in similar fashion. It is the act of the Legislature in singling out branded coconut oil for levy of tax at the rate of 15 per cent from April 1, 2001 to March 31, 2002 and at 20 per cent with effect from April 1, 2002 to July 31, 2004 in terms of Act 5 of 2001 as against levy of tax on other edible oils at f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of objections dated February 6, 2003. The validity of the impugned legislation is sought to be defended mainly on the ground that coconut oil is generally used as a hair oil in the State of Karnataka to the extent of 95 per cent of the user being as hair oil and only about five per cent of the people living in the coastal belt using coconut oil as an edible oil; that coconut oil though had been forming a part of other edible oils under entry No. 1 of Part "E" of the Second Schedule to the Act, as it had been noticed that this particular oil is being substantially used only as a hair oil, a toiletry article, legislation has brought about a change in the existing law to subject coconut oil also to tax at the rate on par with other toiletry articles and that is how entry No. 17-A was introduced by taking out coconut oil from the group of other edible oils as it occurred in entry No. 1 of Part "E" and shifted to entry No. 17-A of Part "C" by Act No. 5 of 2001, with effect from April 1, 2001. It is also the version of the respondents that the very petitioner who has about 80 per cent of the market share of coconut oil sold in branded form, markets it mainly for use as a hair ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s edible oil by pointing out that the version is not supported by any facts and figures nor is the version the correct version. It is averred in the rejoinder statement filed by the petitioner that such figures are projected only to defend the validity of the legislation and is not based on either material which was available or gathered or was that the factual position. It is the version of the petitioner that the coconut oil by and large is being used only as edible oil and that when the petitioner markets coconut oil for the purpose of being used as hair oil or as toiletry article, it is specifically so mentioned on the container and the petitioner also has been paying tax on such part of coconut oil sold by it for use as a toiletry article at the rate of tax as is applicable to toiletry articles under entry 10 of Part "T" of the Second Schedule to the Act. An additional statement of objection is also filed on behalf of the respondent-State though very belatedly and on the verge of completion of arguments, to support the stand that the legislation is a valid piece of legislation; that the effort was to ensure that the levy of tax on coconut oil which was being used for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pearing on behalf of the respondents. Submission of Sri Sarangan, learned Senior Counsel appearing for the petitioner is that introduction of entry No. 17-A by Act No. 5 of 2001 is a glaring instance of discriminatory act; that discrimination is writ large on the face of it; that product which formed part of the group, namely, "edible oils" in terms of entry No. 1 of Part "E" of the Second Schedule to the Act has been carved out/taken out from this group and named as entry No. 17-A in Part "C" of the Second Schedule to the Act; that coconut oil alone being subjected to differential treatment in itself is an act of discrimination and until and unless the State is able to defend such action on justifiable reasons and grounds and is able to show that there exists a valid intelligible classification having nexus to the object of legislation, the Act should be declared as unconstitutional by looking at the very history of this legislation. It is not in dispute that coconut oil sold under brand name did form part of entry No. 1 of Part "E " of the Second Schedule to the Act and when it was carved out from the group of edible oils occurring in this entry which was separately put into en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that coconut oil was being essentially used as hair oil in large part of the State by the people in the State; that it is only a small fraction of the citizens of the State who were using coconut oil as a cooking media; that coconut oil even when used for cooking media is normally purchased by such users in loose form and not in the form of contents in containers, bottles or plastic cans; that to the extent coconut oil is used as a cooking media and purchased in loose or in forms other than any branded forms, coconut oil was treated on par with other edible oils; that it was being subjected to levy of tax on par with other edible oils but only when it was sold in a branded form in containers and as the user when sold in branded form and in containers being mainly as a toiletry article, the rate of tax was sought to be altered to bring it on par with the rate of tax as applicable to other toiletry articles by introduction of entry No. 17-A by Act No. 5 of 2001 and therefore the classification is fully justified; that coconut oil when sold in branded form having distinct and separate use than from other edible oils, formed a class of its own and if so the Legislature is not only jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the sale of branded coconut oil as a sale of toilet article and subject it to tax at a higher rate than the rate of tax applicable to an edible oil. It is not in dispute and cannot be disputed also that coconut oil is an edible oil as the Legislature has understood that to be so by its own conduct and the history of this legislation. This is so because the sale of coconut oil was being subjected to tax as an edible oil classified as nonrefined, refined and hydrogenated oils and cooking medium under entry No. 1 of Part "E" of the Second Schedule to the Act. It was only by Act No. 5 of 2001, this entry was modified to exclude coconut oil from within the scope of "other edible oils" figuring as part of this entry and a separate entry entry No. 17-A was carved out in Part "C" of the Schedule. Even here, the entry was originally introduced as coconut oil sold under brand name and at 15 per cent with effect from April 1, 2001, which rate had come to be enhanced to 20 per cent with effect from April 1, 2002 which rate held the field up to July 31, 2004 and on and after August 1, 2004 the entry is modified to read as "coconut oil sold in consumer sachets, bottles or tins of 200 grams or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State. The test is not an absolute test or a strict classification but one that can pass muster if it is a probable or even if it is a possible classification. It is no doubt true that the State is given a very wide amplitude particularly in the matter of taxation and in choosing whom to tax and at what rate. There is no denial on the competence of the State to levy sales tax at 15 or 20 per cent on the sale of coconut oil sold under brand name as envisaged in entry No. 17-A as it occurred at the relevant point of time, but it is only in comparison with levy of lesser rate of tax under a different entry in respect of other edible oils, the question assumes importance. The distinct feature urged on behalf of the State is that coconut oil sold under brand name is not merely used as an edible oil, but in fact the counter goes on to say that it is almost exclusively used as a hair oil, i.e., to the extent of 95 per cent of the users and only a small portion of it used as an edible oil, i.e., only five per cent of the users use it for cooking purpose and therefore it is separated from the group of other edible oils. If this is to be the fact-situation, there cannot be any doubt th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itute a good defence but only if it is demonstrated that it is so. The State having miserably failed in this regard and notwithstanding repeated opportunities given to the respondents even at the stage of conclusion of the arguments, when the matter was adjourned and the State was given time for more than two weeks to place such materials to support the plea, particularly that the coconut oil sold under brand name is being substantially used by the users as hair oil, no material having been placed before the court, the defence of a different use attributed to coconut oil fails and falls to ground. If a mere opinion or view alone could sustain the validity of a legislation when tested from the angle of unfair action by the State, then it amounts to accepting any whimsical view or reason that can be put forth which can only usher in an era of arbitrariness. Any action on the part of the State can be justified if the State held the view that it is a fair and good law and in its opinion if the classification is valid, it should pass the test of article 14 of the Constitution, if accepted, can only negate the rule of law and open the floodgates to arbitrariness and permissiveness which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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