TMI Blog1980 (9) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... useful to recall the observations of this Court in Khyerbari Tea Co. Ltd. case [1963 (12) TMI 24 - SUPREME COURT OF INDIA] that the power conferred on this Court to strike down a taxing statute if it contravenes the provisions of Arts. 14, 19 or 301 has to be exercised with circumspection, bearing in mind that the power of the State to levy taxes for the purpose of governance and for carrying out its welfare activities is a necessary attribute of sovereignty and in that sense it is a power of paramount character. It is, therefore, idle to contend that the levy imposed an unreasonable restriction on the freedom of trade and commerce. As has been repeatedly observed by this Court, the taxes generally are imposed for raising public revenue for better governance of the country and for carrying out welfare activities of our welfare State envisaged in the constitution and, therefore, even if a tax to some extent imposes an economic impediment to the activity taxed, that by itself is not sufficient either to stigmatise the levy as unreasonable or not in public interest. Thus the impugned tax is not discriminatory in character as envisaged by Art. 304(a) and it does impose restricti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on May 17, 1979, and it was published in the State Government Gazette on June 1, 1979, and came into force from that very day. Numerous petitions were filed under Article 226 of the Constitution in the High Court of Karnataka contending that the Act and the Notification issued thereunder were unconstitutional on diverse grounds. As many as 24 different contentions were canvassed before the High Court. Of them two, viz., contention nos. 13 and 19 found favour with the High Court with the result that the Act and the Notification issued thereunder were declared unconstitutional and a mandamus was issued directing the State Government and its officers to forebear from enforcing the provisions of the Act against the petitioners before the High Court. The contentions which found favour with the High Court, are: (i) section 3 of the Act does not empower the State Government to apply the provisions of the Act to certain local areas only and to exclude other local areas; (ii) as the Act imposes the tax on dealers irrespective of the value of scheduled goods brought by them into a local area and does not exempt petty dealers, the Act imposes unreasonable restrictions on petty dealers. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on the entry of goods into a local area for consumption, use or sale therein. This tax in common parlance is known as 'octroi'. Octroi was leviable by the municipality under the power delegated to it under various laws providing for setting up of and administration of municipal corporations and municipalities. Octroi thus understood was being levied by various municipalities and municipal corporations in Karnataka State. Since some time a feeling had grown that octroi was obnoxious in character and impeded the development of trade and commerce and there was a clamour for its abolition. Taking note of the resentment of the business community, Karnataka State abolished octroi with effect from April 1, 1979. However, no one was in doubt that octroi was a major source of revenue to municipalities and its abolition would cause such a dent on municipal finances that compensation for the loss would be inevitable. Accordingly, the State Government undertook a policy of compensating the municipalities year by year. For generating funds for this compensation, rates of sales tax were raised and in some cases a surcharge was levied. The amount so collected was not sufficient to bridg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the State Government has no power to pick and choose local area. In other words, the respondents say that the tax has to be levied on entry of scheduled goods in each and every local area as the word is understood in the Act. The submission is that the expression 'as may be specified by the State Government' qualifies the expression 'such rates' and not local area and this was sought to be reinforced by saying that Article 'a' precedes local area which would mean every local area and not any local area. It was further stated that if what is contended on behalf of the State is correct, one will have to read the word 'and' between the words 'therein' and 'at such rate' which might imply on a grammatical construction that discretion was conferred upon the State Government not only to specify rate but also the local area. Legislative drafting will reach its peak of glory when perfection is attained in demonstrably manifesting the legislative intent by unequivocal language. But it is equally undeniable that language at its best is a very imperfect vehicle of conveying the intent of the speaker. Legislature speaks through legislation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; meaning thereby not every local area but any local area. In this connection reference may be made with advantage to In re. Sankers; ex parte Sergeant, wherein the expression 'under the hand of the Judge of a county court' came up for construction. The construction canvassed for was that a county court would not mean any county court but the country court having jurisdiction in the matter. Repelling this construction the Court, after ascertaining the object of the legislation, held that a county court would mean any county court, an approach dictated by strict grammatical construction. Similarly, in The Queen v. Justices of Durham, the expression 'a Court' was interpreted to mean any court and in accepting this construction the Court was guided by the bare letter of the statute which would be a proper guide unless there would be something in it to modify the ordinary meaning of the words used. The Privy Council in Coast Brick Tile Works Ltd. Ors. v. Premchand Raichand Anr., observed that the expression 'the security' should be read as 'a security', a variation which in a poorly drawn section does not do great violence to the language used. Eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for such local area as Bangalore Municipal Corporation and a small municipal area, the two local areas being uncomparable with regard to area, population, industrial growth and consumption of such scheduled goods in the area. Now, if the impact of the tax is to be equitable keeping in view cost of its collection, a tax levied at such a small rate as one paise for goods worth Rs. 100 ad valorem for a small local area and 2% ad valorem for such industrially developed local area like Bangalore Corporation, it would make nonsense of the levy apart from the uneconomic outcome keeping in view the administrative cost of collection. If the Government is obliged on the construction canvassed on behalf of the respondents to encompass all local areas for the purpose of levying tax under the statute, the rates would have to be varied so much to avoid the evil of making the impost unjust and if the rates have to be varied from area to area the administrative cost in smaller areas with lower rates and negligible entry of scheduled goods in such area would make the tax wholly uneconomic. It must, therefore, logically follow that choice to select local area is a necessary concomitant of a choice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the legislature. This is not charting any hazardous course but is amply borne out by an observation worth reproducing in extenso in Seaford Court Estates Ltd. v. Asher. It reads as under: Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathematical precision. Our literature would be much the poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticised. A judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be idle to contend that a State must tax everything in order to tax something. In tax matters, the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably (see Willis on 'Constitutional Law', p. 587). This statement of law has been approved by this Court in the case of East India Tobacco Co. v. State of Andhra Pradesh. The question, therefore, is, whether a tax of a certain kind can be levied on entry of goods in certain local areas, the classification of local areas, if found to be reasonable, the levy of tax would not be invalid on the ground that choosing certain areas only excluding some others would violate Article 14. Whether in this case the classification is reasonable would be presently examined but the contention that if the State Government is granted a choice in the matter of selection of local area, ipso facto, the statute would be unconstitutional as being violative of Art. 14, must be negatived. In order to ascertain whether the classification of local areas for the purposes of levy of tax is reasonable or not, a reference may be made to the impugned notification. Table annexed to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was that the Act in its application has not excluded petty dealers from its purview. Developing the contention it was said that the abolished octroi would have been less oppressive in its application than the tax under the impugned legislation falling on petty dealers. What appealed to the High Court was that if a petty dealer brought within the local area scheduled goods of the value of Rs. 5 for consumption, use or sale therein, he is to get himself registered after paying the registration fee, maintain accounts for his dealings in such goods and submit monthly and annual returns and to appear before the assessing authority when called upon to do so. The High Court thereafter contrasted the position of a dealer under the Karnataka Sales Tax Act, 1957, and observed that a dealer whose total turnover is less than Rs. 25,000 was not liable to pay sales tax and one whose turnover was less than Rs. 10,000 was not required to get registered, to maintain accounts or to submit returns. The High Court also found the registration fee of Rs. 25 prescribed under the rules, the liability to maintain accounts in the manner prescribed and to submit monthly and yearly returns as constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vent under the impugned Act being entry of scheduled goods in a local area at the instance of a dealer, the volume or quantum of business of the dealer is not at all relevant. The situation now obtaining may be contrasted with the situation when octroi was levied. Octroi was payable by anyone irrespective of the fact whether he was a dealer in the goods or not, on goods which were liable to octroi when they were brought within the octroi limits. It was payable at the octroi limits where there used to be an office called 'octroi naka'. This was found to be cumbersome and the present Act seeks to replace to some extent that infamous octroi. The noteworthy departure made by the Act is that now unlike every importer only a dealer dealing in the scheduled goods will have to pay the tax and that too not at the octroi limit but afterwards while submitting returns. It would be a case of wild imagination that a dealer in scheduled goods would bring within the local area scheduled goods in such a small quantity as to make maintenance of accounts a very difficult task as also a registration fee of Rs. 25 so heavy as to dub it an unreasonable restriction on his right to carry on trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, be necessary to examine some of those contentions which were repeated before us. The contention which was put into forefront was that the impugned Act violates the constitutional guarantee of freedom of trade, commerce and intercourse throughout India as enshrined in Part XIII of the Constitution and is not saved by Art. 304. At one stage there was some controversy whether a tax law was within the inhibition of Part XIII of the Constitution, but this controversy is no more res integra and it has been set at rest by the majority view in Atiabari Tea Co. Ltd. v. The State of Assam Ors., Gajendragadkar, J. speaking for the majority, observed that the intrinsic evidence furnished by some of the Articles of Part XIII shows that taxing laws are not excluded from the operation of Art. 301 which means that tax laws can and do amount to restrictions freedom from which is guaranteed to trade under the said Part. He then posed a question whether all tax laws attract the provisions of Part XIII irrespective of the fact whether their impact on trade or its movement is direct and immediate or indirect and remote, and proceeded to answer it observing that if any Act imposes any direct re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t satisfies the requirements of Art. 304. This very question came up for further examination in Khyerbari Tea Co. Ltd. case (Supra) wherein constitutional validity of Assam Taxation (On Goods carried by Road or on Inland Water-ways) Act, 1961, was challenged on the ground that it was violative of Art. 301 and was not saved by Art. 304. This Court analysed the majority view in Atiabari Tea Co. Ltd. case (Supra) and The Automobile Transport (Rajasthan) Ltd., case (Supra) and observed as under: It would immediately be noticed that though the majority view in the Automobile Transport (Rajasthan) case substantially agreed with the majority decision in the case of Atiabari Tea Co., there would be a clear difference between the said two views in relation to the scope and effect of the provisions of Art. 304(b). According to the majority view in the case of Atiabari Tea Co., if an Act is passed under Art. 304(b) and its validity is impeached, then the State may seek to justify the Act on the ground that the restrictions imposed by it are reasonable and in the public interest, and in doing so, it may, for instance, rely on the fact that the taxes levied by the impugned Act are compen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of legislature of a State to levy tax which may be discriminatory in character by according discriminatory treatment to goods manufactured in the State and identical goods imported from outside the State. The effect of Art. 304(a) is to treat imported goods on the same basis as goods manufactured or produced in a State. This article further enables the State to levy tax on such imported goods in the same manner and to the same extent as may be levied on the goods manufactured or produced inside the State. If a State tax law accords identical treatment in the matter of levy and collection of tax on the goods manufactured within the State and identical goods imported from outside the State, Art. 304(a) would be complied with. There is an underlying assumption in Art. 304(a) that such a tax when levied within the constraints of Art. 304(a) would not be violative of Art. 301 and State legislature has the power to levy such tax. Tax under the impugned legislation would be levied on scheduled goods either manufactured or produced within Karnataka State or imported from outside on their entry in a local area. Thus, this tax is non-discriminatory in that it does not discriminate betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods successively enter different local areas for consumption, use or sale therein, there would be multiple levy. But no attempt was made to substantiate this charge by showing as to how goods are taken from one local area to another local area to third local area for successive sales because if they are taken for consumption or use, there is no question of taking the scheduled goods from one local area to another local area. It is, therefore, difficult to conceive a situation realistically that the impost would be very heavy so as to make it unreasonable. The High Court negatived the contention and in our opinion rightly observing that the petitioners have not been able to show that the burden of the tax was so heavy as to constitute unreasonable restriction on the freedom of trade and commerce. In this connection, however, reliance was placed on the decision of this Court in Kalyani Stores v. State of Orissa Ors. In that case the State enhanced the duty in respect of foreign liquors from Rs. 40 to Rs. 70 per L.P. gallon and this levy was challenged on the ground that it infringed the guarantee of Art. 301. The State attempted to save the levy by contending that it was saved b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this levy is in public interest. As has been pointed out earlier, the levy was to compensate the loss suffered by abolition of octroi. without a demur. After removing the obnoxious features of octroi a very modest impost is levied on entry of goods in a local area and that too not for further augmenting finances of the municipalities but for compensating the loss suffered by the abolition of octroi is certainly a levy in public interest. As has been repeatedly observed by this Court, the taxes generally are imposed for raising public revenue for better governance of the country and for carrying out welfare activities of our welfare State envisaged in the constitution and, therefore, even if a tax to some extent imposes an economic impediment to the activity taxed, that by itself is not sufficient either to stigmatise the levy as unreasonable or not in public interest. The last limb of the argument is whether the proviso to Art. 304(b) is satisfied or not. The proviso imposes an obligation to obtain the Presidential sanction before introducing the bill or amendment for the purpose of clause (b) of Art. 304 in the legislature of a State. It cannot be gainsaid that Presidential san ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on the entry of scheduled goods in a local area. Therefore, the price of the scheduled goods at the time of entry paid by the dealer who is the importer of goods within the scheduled area would be the ad valorem price on the basis of which tax would be computed. No subsequent rise or fall in price has any relevance to the computation of the tax. The charging section says that the tax shall be levied and collected on the entry of scheduled goods in a local area at specified percentage not exceeding two per cent ad valorem. Therefore, the price of the scheduled goods at the time when the tax becomes chargeable irrespective of the fact that it would be computed at a later date when the dealer submits his return as required by the other provisions of the Act, would be the price for computation of tax. And there is no ambiguity or any vagueness in this behalf. There is thus specific guideline in the charging section itself for taking into account the price according to which tax would be computed. The Hight Court negatived this contention by observing that it would be open to the dealer to choose either the sale price or the purchase price whichever is favourable to him for computat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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