TMI Blog2015 (9) TMI 1438X X X X Extracts X X X X X X X X Extracts X X X X ..... se it taxes or exempts from tax some incomes or objects and not others. It could be seen that State legislature in its economic wisdom of taxation has chosen to provide for levy of tax on liquor sold by certain dealers namely, Bar and Restaurants operating in urban areas i.e., licence issued in Form No.CL-9 and in respect of Star Hotels, Clubs and Hotel, Boarding Houses and Lodges located anywhere in the State considering the potential for tax collection being huge, and at the same time, exemption has been extended to similar licence holders running Bar and Restaurants by operating them in rural areas considering the fact of low value addition between the price at which liquor is purchased and sold to customers in rural areas. However, a Hotel, Boarding House or Lodge holding licence in CL-7 though located in rural area would also serve liquor only to the residents of the Hotel and their guests who are elite customers and they can afford to pay more for the comfort they enjoy with varying degree of facilities. Thus, condition of licence itself enables the licence holder to fix the price of the liquor irrespective of MRP on account of substantial value addition and as such, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er KVAT Act coming into force, all the dealers in various categories through out the State enjoyed exemption from levy of VAT and in order to merge Sales Tax with duty, amendment to Karnataka Excise (Excise Duties and Fees) Rules, 1968 was brought whereunder additional duty was levied on Liquor, Fenny, Wine and Beer and imposition of sales tax was given up. On account of Rule 2AE and 2AF being added to the original Karnataka Excise (Excise Duty and Fee) Rules, 1968, sales tax was merged with additional excise duty and thereby uniform levy of all kinds of licences within the State of Karnataka being brought about has been now thwarted by deleting Entry in Sl.No.34 of I Schedule of KVAT Act and inserting Entry No.59A in III Schedule by levying tax at the rate of 5.5% and at the same time, correspondingly issuing notification dated 28.02.2014 under Section 5(1) of the Act exempting all categories of dealers other than person holding licence in Form No.CL-9 for vending Liquor in the Bruhat Bengaluru Mahanagara Palike area, City Municipal Corporation areas and Town Municipal Council or Town Panchayat areas issued under Karnataka Excise (Sale of Indian and Foreign Liquor) Rules, 1968 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission, they have relied upon the following judgments: (1) AIR 1963 SC 98 ORIENT WEAVING MILLS (P) LTD. AND ANOTHER vs UNION OF INDIA AND OTHERS (2) ILR 1999 KAR 1814 BASAVARAJ NAGOOR vs STATE OF KARNATAKA AND ANOTHER (3) ILR 2000 KAR 870 STATE OF KARNATAKA AND OTHERS vs BASAVARAJ NAGOOR AND OTHERS (4) AIR 1962 SC 1733 M/S.EAST INDIA TOBACCO CO. ETC. vs STATE OF ANDHRA PRADESH AND ANOTHER (5) AIR 1991 SC 1722 STATE OF MAHARASHTRA AND ANOTHER vs RAMESH NARAYAN PATIL (6) (1997)11 SCC 179 CHOKSI TUBE COMPANY LTD vs UNION OF INDIA AND OTHERS (7) (1981)2 SCC 410 VISHNUDAS HUNDUMAL AND OTHERS vs STATE OF MADHYA PRADESH AND OTHERS (8) AIR 1952 SC 75 THE STATE OF WEST BENGAL vs ANWAR ALI SARKAR AND ANOTHER (9) (1969)2 SCC 710 THE STATE OF RAJASTHAN AND ANOTHER vs M/S.GHASIRAM MANGILAL ETC. (10) (2007)10 SCC 342 STATE OF UTTAR PRADESH AND OTHERS vs DEEPAK FERTILIZERS AND PETROCHEMICAL CORPORATION LTD. (11) (2013)8 SCC 519 STATE OF MAHARASHTRA AND ANOTHER vs INDIAN HOTEL AND RESTAURANTS ASSOCIATION AND OTHERS (12) (2007)6 SCC 317 GUPTA MODERN BREWERIES vs STATE OF J K AND OTHERS (13) 2006 (4) Kar.L.J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L KHADER FIRM vs THE STATE OF TAMIL NADU AND OTHERS (4) (1983)4 SCC 45 M/S.HOECHST PHARMACEUTICALS LTD AND OTHERS vs STATE OF BIHAR AND OTHERS (5) (1976)1 SCC 916 INCOME TAX OFFICER, SHILLONG AND OTHERS vs R.TAKIN ROY RYMBAI AND OTHERS (6) (1969)1 SCC 681 N.VENUGOPALA RAVI VARMA RAJAH vs UNION OF INDIA AND ANOTHER (7) (1990)4 SCC 366 SHASHIKANT LAXMAN KALE AND ANOTHER vs UNION OF INDIA AND ANOTHER (8) (1989) SUPP (1) SCC 696 P.M.ASWATHANARAYANA SETTY AND OTHERS vs STATE OF KARNATAKA AND OTHERS (9) (1989)3 SCC 634 FEDERATION OF HOTEL AND RESTAURANT ASSOCIATION OF INDIA ETC. vs UNION OF INDIA AND OTHERS (10) (1978)2 SCC 1 PATHUMMA AND OTHERS vs STATE OF KERALA AND OTHERS (11) (1980)4 SCC 697 STATE OF KARNATAKA AND ANOTHER vs M/S.HANSA CORPORATION (12) (1996)10 SCC 304 KHODAY DISTILLERIES LTD. AND OTHERS vs STATE OF KARNATAKA AND OTHERS (13) AIR 1962 SC 955 KEDAR NATH SINGH vs STATE OF BIHAR (14) W.P.No.21792/2013 (DD 17.06.2013) S.P.SWAMINATHAN vs THE JOINT COMMISSIONER FOR TRANSPORT AND SECRETARY 5. Having heard the learned Advocates appearing for the parties and on perusal of the pleadings as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment Bill, 2014 to insert the said Entry, which reads as under: STATEMENT OF OBJECTS AND REASONS It is considered necessary to amend the Karnataka Value Added Tax Act, 2003 to give effect to the proposals made in the Budget particularly to provide for levy of tax on sale of liquor including beer, fenny, liqueur and wine by bar and restaurants operating in urban areas and by clubs, lodging houses and star hotels, and matters connected therewith. Hence, the Bill. 8. Pursuant to said amendment, Notification II bearing No.FD 21 CSL 2014 dated 28.02.2014 came to be issued by the State in exercise of its power under Section 5(1) of the KVAT Act, whereunder the liquor sold by Bars and Restaurants operating in Panchayat limits/rural areas are exempted from levy of tax which is impugned in these writ petitions. PREFACE: 9. At the outset it requires to be noticed that the citizen of the State has no fundamental right to trade or conduct business in liquor as beverage is considered to be an article which is extra commercium Outside commerce and for this proposition, the law laid down by Hon ble Apex Court in the case of KHODAY DISTILLERIES LIMITED OTHERS vs STA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classification and (2) classification should have a rational nexus to the objects sought to be achieved. In this regard, judgments of Apex Court in the case of ITO, SHILLONG vs NTR RYMBAI reported in AIR (1976)1 SCC 916 and NVR VARMA RAJAH vs UNION OF INDIA reported in AIR (1969)1 SCC 681 can be looked up. 13. A fiscal statute has to be strictly construed and nothing can be read into the provision and nothing can be implied and it would not be the endeavour of the Court to ascertain the intendment of the Legislature. It has been held by the Apex Court in the case of RANBAXY LABORATORIES LIMITED vs UNION OF INDIA reported in (2011)10 SCC 292 to the said effect and same reads as under: 14. It is a well-settled proposition of law that a fiscal legislation has to be construed strictly and one has to look merely at what is said in the relevant provision; there is nothing to be read in; nothing to be implied and there is no rule for any intendment. (see Cape Brandy Syndicate vs. IRC and Ajmera Housing Corporation vs. CIT) 14. Keeping these principles in mind, the impugned legislation and the consequential exemption notification issued are required to be examined. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estriction, as may be specified in the notification. Reading of Section 8-A of erstwhile KST Act would indicate that State Government was empowered to grant exemption or reduction in rate in respect of any tax payable under the said Act under the eventualities referred to clause (a) to (c) of sub-section (1). The said clauses would indicate that State Government may by notification make an exemption or reduction in rate in respect of any tax payable under the said Act on the sale or purchase of any specified goods or class of goods or by any specified class of persons or on the sale or purchase of any specified goods by any specified class of dealers. Thus, under both the Acts, the specified goods or class of goods can be exempted from tax and Section 5(1) of the KVAT Act would indicate that such exemption would be subject to such restrictions and conditions as may be specified in the notification. 16. In the background of discussion made herein above, when the impugned notification is perused, it would indicate that it exempts tax payable on sale of liquor and it does not exempt the dealer as such. However, where such dealer of certain identified categories sells the liquor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon; Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured (i) In a free trade zone or a special economic zone and brought to any other place in India; or (ii) by a hundred per cent export- oriented undertaking and brought to any other place in India. (emphasis supplied) In exercise of such power conferred, Government of India has exempted excise duty payable by class of persons. 19. The Hon ble Apex Court in the case of ORIENT WEAVING MILLS PVT LTD ANOTHER vs UNION OF INDIA AND OTHERS reported in AIR 1963 SC 98 was examining the constitutional validity of Rule 8(1) of Central Excise Rules, 1944 as to whether it suffers from the vice of excessive delegation of power to exempt or not. Rule 8(1) of Central Excise Rules, 1944 reads thus: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f MRP and liquor sold by Bar and Restaurants operating in rural areas without scope for much value addition unlike liquor along with food and refreshments sold by Bar and Restaurants of urban areas and liquor sold in similar manner by Boarding House and Lodges in rural areas by following the specific conditions attached to the licence for such sale and thereby they would have relative economic edge and there is scope of value addition and as such, impugned enactment as well as notification is not ultra vires and is within the State s power under Section 5(1) of the Act. RE: DISCRIMINATION: 21. The thrust of the arguments advanced by the learned Advocates appearing for the petitioners has been that impugned notification unreasonably discriminates between the dealers in liquor carrying on business selectively since a person holding licence in Form CL-9 carrying on business in village panchayat areas is exempted but it does not exempt a similar licence holder carrying on similar business in the same area and as such, there is no rationale and it amounts to discrimination and impedes free flow of trade and commerce and such levy is violative of Articles 14, 19 and 304-B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) population more than 20 lakhs in respect of City Municipal Corporation. Even the licence fee prescribed for grant of CL-2, CL-9 and CL-7 licences is dependent on the area/population as could be seen from the following tabular column: Sl.No. Area in operation or Population CL-2 CL-9 CL-7 (a) City Municipal Corporation having population of more than 20 lakhs 4,46,000 6,00,000 6,60,000 (b) Other City Municipal Corporation areas 3,64,000 4,62,000 5,80,000 (c) City Municipal Council areas 3,30,000 3,64,000 4,30,000 (d) Town Municipal Council areas/Town Panchayat areas 2,50,000 2,60,000 3,64,000 (e) Other areas 2,00,000 2,00,000 2,80,000 27. It is not in dispute t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been held that classification must not be arbitrary but must also be rational and it must not only be based on some qualities or characteristics which are to be found in all persons grouped together and which is not in others who are left out but those qualities or characteristics must have a reasonable relation to the object of legislation. 31. Apex Court in the case of STATE OF UTTAR PRADESH AND OTHERS vs DEEPAK FERTILIZERS PETROCHEMICAL CORPORTION LTD reported in (2007)10 SCC 342 was examining as to whether the exemption of Urea NPK 23:23:0 (product of the assessee) petitioner which was exempted from tax being withdrawn was discriminatory or otherwise and in this background, it has been held that whenever any type of law is to be made for the purposes of levying tax on a particular commodity or exempting some other commodity from taxation, a sort of classification is to be made and in the facts obtained in the said case, it was held that the impugned notifications therein does not strike rational balance of classification between the items of the same category. It has been held by Hon ble Apex Court as under: 13. From a perusal of the notifications in question, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itude where measures of economic and fiscal regulation are concerned. There is no dispute on this principle of law as enumerated in the aforesaid decision of this Court. However, this same law must not be repugnant to the Article 14 of the Constitution, i.e., it must not violate the right to equality of the people of India, and if such repugnancy prevails then, it shall stand void up to the level of such repugnancy under Article 13(2) of the Constitution of India. Therefore, every law has to pass through the test of constitutionality, which is nothing but a formal name of the test of rationality. We understand that whenever there is to be made any type of law for the purpose of levying taxes on a particular commodity or exempting some other commodity from taxation, a sort of classification is to be made. Certainly, this classification cannot be a product of a blind approach by the administrative authorities on which the responsibility of delegated legislations is vested by the Constitution. In a nutshell, the notifications issued by the Trade Tax Department of the State of U.P., dated 10- 4-1995 and 15-5-1995 lack the sense of reasonability because it is not able to strike a ration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en held by the Apex Court in the case of K.M.MOHAMMED ABDUL KHADER FIRM vs THE STATE OF TAMIL NADU AND OTHERS reported in 1985(58) STC 12 while dealing with the contentious issue of levy of additional tax at different rates on different dealers depending upon their turnover would be permissible and repelling the contention of levy being non collectable from the persons being not violative of Article 14 of the Constitution, and such classification being permissible. In the following judgments, similar view has been expressed. (i) It has been held by the Apex Court in N.VENUGOPALA RAVI VARMA RAJAH vs UNION OF INDIA AND ANOTHER reported in (1969)1 SCC 681 that a taxing statute is not exposed to attack on the ground of discrimination merely because different rates of taxation are prescribed for different categories of persons, transactions, occupations are objects and if classification is rationale, Legislature is free to choose objects of taxation. It has been held as under: 14. 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 probl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of taxation or the imposition of different rates upon different classes. Weaver again says at p. 397: Class legislation is that which makes an improper discrimination by conferring particular privileges upon a class of persons, arbitrarily selected from a large number of persons, all of whom stand in the same relation to the privilege granted and between whom and the persons not so favoured no reasonable distinction or substantial difference can be found justifying the inclusion of one and the exclusion of the other from such privilege...... A classification must not be arbitrary, artificial or evasive and there must be a reasonable, natural and substantial distinction in the nature of the class or classes upon which the law operates. In respect to such distinction, a legislative body has a wide discretion and an Act will not be held invalid unless the classification is clearly unreasonable and arbitrary. 18. The Mappilla families governed by the Marumakkattayam Law reside in a small part of the country and form numerically a small community. The Parliament has again been accustomed in enacting tax laws to make a distinction between a Hindu Undivided Family consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttainable by the invention and application of a precise formula. Therefore, classification need not be constituted by an exact or scientific exclusion or inclusion of persons or things. The Courts should not insist on delusive exactness or apply doctrinaire tests for determining the validity of classification in any given case. Classification is justified if it is not palpably arbitrary. (4) The principle underlying the guarantee of Article 14 is not that the same rules of law should be applicable to all persons within the Indian territory or that the same remedies should be made available to them irrespective of differences of circumstances. It only means that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabilities imposed. Equal laws would have to be applied to all in the same situation, and there should be no discrimination between one person and another if as regards the subject-matter of the legislation their position is substantially the same. * * * (6) The law can make and set apart the classes according to the needs and exigencies of the society and as suggested by experience. It can reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioning till the enactment are of significance. There is no dispute that the impugned provision includes all employees of the public sector and none not in the public sector. The question is whether those left out are similarly situated for the purpose of the enactment to render the classification palpably arbitrary. It is only if this test of palpable arbitrariness applied in this manner is satisfied, that the provision can be faulted as discriminatory but not otherwise. Unless such a defect can be found, the further question of construing the provision in such a manner as to include all employees and not merely employees of public sector companies, does not arise. (iii) When constitutional validity of Section 20 of Kerala Agriculturists Debt Relief Act, 1970 came up for consideration before Apex Court in the case of PATHUMMA AND OTHERS vs STATE OF KERALA AND OTHERS reported in (1978)2 SCC Page 1 on the ground of discrimination also, said contention was negatived and held that while making classification, the Legislature cannot be expected to provide abstract symmetry and if classification rests upon a real and substantial distinction bearing a reasonable and just relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases, namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration . This case has been relied upon in a large number of cases right from 1959 upto this date. In the case of State of Kerala Anr. v. N. M. Thomas (supra) one of us (Fazal Ali, J.) while delivering the concurring judgment observed as follows regarding the various aspects of the concept of equality : (SCC p.376, para 158) It is also equally well-settled by several authorities of this Court that Article 16 is merely an incident of Article 14. Article 14 being the genus is of universal application whereas - Article 16 is the species and seeks to obtain equality of opportunity in the services under the State. The theory of reasonable classification is implicit and inherent in the concept of equality for there can hardly be any country where all the citizens would be equal in all respects. Equality of opportunity would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orce and life to the intention 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 (1949) 2 All ER 155. 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 construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en full freedom to determine which articles should be taxed, in what manner and at what rate. It would, therefore, 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 (AIR 1962 SC 1753. 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 Article 14, must be negatived. 17. In order to ascertain whether the classification of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of catena of decisions above referred to, the impugned legislation and notification is being examined. Under Section 9 of the KVAT Act, the levy is passable to consumer and it specifically enables the dealer to charge and collect tax from the customers or in other words, tax can be passed on to customers. Under Entry 59A of III Schedule of KVAT Act, tax is levied on sale of liquor including Beer, Fenny, Liqueur, Wine which are goods or commodities. Under the impugned notification exemption is on sale of such liquor, etc. by a dealer in rural area namely, the tax payable under Entry 59A of III Schedule on sale of liquor including Beer, Fenny, liqueur and Wine by a dealer who is not a person holding licence in Form No.CL-9 for vending in Bruhat Bangalore Mahanagara Palike area, City Municipal Corporation areas, City Municipal Council areas and Town Municipal Council or Town Panchayat areas issued under Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968 or dealer who is not holding licence in CL-4 or CL-6A or CL-7 issued under Karnataka Excise (Sale of Indian and Foreign Liquor) Rules, 1968 and they are exempted. 38. The impugned legislation has been enacted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n these writ petitions) was also issued granting exemption in respect of certain categories of dealers . 42. A perusal of the above referred impugned notification would indicate that the State Government has exempted tax payable on the liquor sold by a dealer who is not a person holding licence in Form No.CL-9 for vending liquor in Bruhat Bangalore Mahanagara Palike area, City Municipal Corporation areas, City Municipal Council areas and Town Municipal Council or Town Panchayat areas. The said notification also exempts tax payable on liquor when it is sold by certain categories of dealers. 43. In the matters of tax laws, larger discretion is extended to the State Legislature and ample freedom to select and classify persons, districts, goods, properties, incomes and objects which it would tax and which it would not tax, so long as the classification made within this wide and flexible range, by a taxing statute does not transgress the fundamental principles underlying the doctrine of equality and it would not be vulnerable to attack on the ground of discrimination merely because it taxes or exempts from tax some incomes or objects and not others. It has been held by Hon ble Ape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e differentia. The object of this differentiation between income accruing or received from a source in the specified areas and the income accruing or received from a source outside such areas is to benefit not only the members of the schedule tribes residing in the specified areas but also to benefit economically such areas. If the contention advanced by Mr.Lahiri is accepted and a member of the scheduled tribe residing in a specified area is held entitled to the exemption irrespective of whether the source of his income lies within or outside such areas, it will lead to potentially mischievous results and evasion of tax by assessees who do not belong to the scheduled tribes. All that a non-tribal assessee in India need do would be to enter into a sham partnership with a member of the scheduled tribe residing in the specified area and ostensibly give him under the partnership a substantial share of the profits of the business while, in reality, pay the tribal only a nominal amount. Moreover, but for the condition provided in sub-clause (a), the exemption granted under Section 10(26) is likely to operate unequally and cause inequality of treatment between individuals similarly situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th and substance the imposition of an additional sales tax, it could not legally go on legislating further enactments providing again for levy of additional sales tax. On this basis it is contended that the provisions of the impugned Act, 1976 are ultra vires and devoid of legislative competence. We see no substance in this contention. The impugned enactment has merely amended the 1970 Act. It has not introduced a new tax; what it has done is only to amend the 1970 Act by providing for a different method of computation of the additional tax leviable under that Act. The validity of the 1970 Act has been upheld by a Constitution Bench of this Court in the case of S. Kodar v. State of Kerala (1974) 34 STC 73 (SC) :1975)1 SCR 121. Hence there is no longer any scope for the petitioners to contend that the State Legislature had no competence to provide for the levy of additional sales tax. The nature and identity of the additional sales tax imposed by the 1970 Act have not been in any way altered by the impugned Act. As already pointed out what has been done by the impugned Act is only to provide for a different mode of computation of the additional sales tax by linking the rate of lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not made out that the tax is confiscatory, it is not possible to accept the contention that because the dealer is disabled from passing on the incidence of tax to the purchaser, the provisions of the Act impose an unreasonable restriction upon the fundamental rights of the appellants under article 19 (1) (g) or 19 (1) (f) . Dealing with the contention that since the provisions of the Act imposed different rates of tax on different dealers depending upon their turnover there was a violation of Article 14 of the Constitution, Mathew J., who spoke for the Court observed: The last contention, namely, that the provisions of the Act impose different rates of tax upon different dealers depending upon their turnover which in effect means that the rate of tax on the sale of goods would vary with the volume of the turnover of a dealer and are, therefore, violative of article 14 is also without any basis. Classification of dealers on the basis of their respective turnovers for the purpose of graded imposition so long as it is based on differential criteria relevant to the legislative object to be achieved is not unconstitutional. A classification, depending upon the quantum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both absolutely and relatively, is not arbitrary discrimination but an attempt to proportion the payment to capacity to pay and thus arrive in the end at a more genuine equality. The capacity of a dealer, in particular circumstances, to pay tax is not an irrelevant factor in fixing the rate of tax and one index of capacity is the quantum of turnover. The argument that while a dealer beyond certain limit is obliged to pay higher tax, when others bear a less tax, and it is consequently discriminatory, really misses the point, namely, that the former kind of dealers are in a position of economic superiority by reason of their volume of business and form a class by themselves. They cannot be treated as on a par with comparatively small dealers. An attempt to proportion the payment to capacity to pay and thus bring about a real and factual equality cannot be ruled out as irrelevant in levy of tax on the sale or purchase of goods. The object of a tax is not only to raise revenue but also to regulate the economic life of the society . 45. Turning my attention back to the facts on hand, it can be seen from the terms of the licence conditions issued to a dealer in Form No.CL-2, the liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a dealer holding licence in Form No.9 and operating in urban areas is ` 6.00 lakhs, whereas, licence fee prescribed for a similar licence holder who is running Bar and Restaurant business in rural area is ` 2.00 lakhs though both the class of licence holders run the same business. This exemption is extended to Bar and Restaurants operating in rural areas considering the fact of no value addition between the price at which liquor is purchased and sold to customers in rural areas. However, a Hotel, Boarding House and Lodge holding licence in Form CL-7 though located in rural area, liquor is served only to the residents of the Hotel and their guests who obviously would come from far off places. The customers of this category are affordable class who are willing to pay more for the comfort with varying degree of facilities. Hence, it enables the dealer to fix the rates of liquor without any restriction. Thus, the Legislature with the sole intention of capturing substantial value addition taking place on liquor consumed in the premises of a Boarding House and Lodge, has brought this class of dealer under the net of tax, but Bar and Restaurants located in rural area which do not have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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