Full Judgment Text
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PETITIONER:
SRI DOKI CHINA GURUVULU SON & CO. AND ANR.
Vs.
RESPONDENT:
GOVT. OF ANDHRA PRADESH AND ANR.
DATE OF JUDGMENT07/12/1989
BENCH:
MUKHARJI, SABYASACHI (J)
BENCH:
MUKHARJI, SABYASACHI (J)
RAY, B.C. (J)
CITATION:
1989 SCR Supl. (2) 422 1990 SCC (1) 221
JT 1989 Supl. 373 1989 SCALE (2)1249
ACT:
Andhra Pradesh Sales Tax Act, 1957 (As amended by Act 19
of 1986): First Schedule Item 170/Second Schedule Item
14--Tamarind obtained from outside the State--Taxation
of--At a stage different from tamarind produced in the
State--Whether results in double taxation-Whether discrimi-
natory and violative of Articles 304(a) and 14 of the Con-
stitution.
Constitution of India, 1950: Articles 14 and 304: State
sales tax law---Taxing commodity obtained from outside the
State at a stage different from commodity produced in the
State--Whether discriminatory and unconstitutional.
HEADNOTE:
Under item 14 of Second Schedule to the Andhra Pradesh
General Sales Tax Act, 1957 tamarind was subjected to sales
tax at the point of first purchase in the State irrespective
of whether it was purchased within the State or outside the
State. However, by virtue of an amendment to the Act by Act
19 of 1986 tamarind which is purchased within the State was
retained in Second Schedule, while tamarind purchased out-
side the State was transferred to First Schedule as item
170, making it taxable at the same rate at the point of
first sale in the State.
The appellants had purchased tamarind from the State of
Orissa paying tax there and incurred expenditure in bringing
it to Andhra Pradesh for sale. They challenged the said
amendment modifying the point of taxability as discriminato-
ry between tamarind produced and purchased within the State
and the tamarind produced and purchased outside the State
and as such, violative of Articles 304(a) and 14 of the
Constitution. The submission was that imported tamarind
which had suffered tax at the first sale point will again be
taxed at the purchase point when purchased within the State,
which would amount to double taxation, and that tax in case
of imported tamarind would be more because its price will
include freight charges and other State taxes.
The High Court found that there was no discrimination.
Dismissing the appeal by special leave, the Court,
423
HELD: When a taxing State is not imposing rates of tax
on imported goods different from rates of tax on goods
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manufactured or produced, Article 304 of the Constitution
has no application. In the instant case, both tamarind
purchased within, and outside, the State was taxed uniform-
ly. There was. therefore, no infraction of clause (a) of
Article 304 of the Constitution. [429D-E; 426A; 425G-H]
Rattan Lal & Co. & Anr. v. The Assessing Authority &
Anr., [1969] 2 SCR 544, applied.
Firm A.T.B. Mehtao Majid & Co. v. The State of Madras,
14 STC 355 and Indian Cement Ltd. & Ors. v. State of Andhra
Pradesh & Ors., 69 STC 305, distinguished.
It may be that when the rate is applied the resulting
tax in respect of imported tamarind may be somewhat higher
because its price will include freight charges and other
State taxes. But that cannot be said to be the effect of
what law has amended. Tamarind will be imported only when it
can be sold in the market at the same price as the tamarind
produced within the State. Only when after bearing the other
State taxes and freight charges, if it is able to compete
with the locally produced tamarind it will normally be
imported from outside the State. If there is any difference
in prices because of market conditions and other factors,
that cannot be said to be due to discrimination prohibited
by clause (a) of Article 304. [429E; 427D-E]
M/s Associated Tanners, Vizianagaram, A.P. v. C.T.O.,
Vizianagaram, A.P. & Ors., [1986] 2 SCC 479, referred to.
Weston Electroniks & Anr. v. State of Gujarat & Ant.,
[1988] 3 SCR 768, distinguished.
Once the imported tamarind is taxed at the first sale
point under the First Schedule there is no occasion for
taxing it over again at the sale point under the Second
Schedule. The idea of both the Schedules is to tax only at
one point, though the point of taxability is different in
both the cases. In case of tamarind purchased within the
State, i.e., produced within the State, the tax is levied at
the point of first purchase under the Second Schedule, and
in case of imported tamarind i.e., purchased outside the
State, the tax is levied at the point of first sale in the
State under the First Schedule. It could not therefore, be
said that taxing the imported tamarind at the point of first
sale in the State would amount to double taxation. [427H;
428A; 427B-C; 427G]
424
In the facts and circumstances of the case, there was,
therefore, no ground to complain about the breach of Article
14 of the Constitution [429E-F]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4879 of
1989.
From the Judgment and Order dated 12.11.1986 of the
Andhra Pradesh High Court in W.P. No. 16535 of 1986
P. Rama Reddy and A.V.V. Nair for the Appellants.
C. Sitaramaiah, Jagan Rao, D.R.K. Reddy and T.V.S.N.
Chari for the Respondents.
The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. Leave granted.
This is an appeal from the judgment and order of the
High Court of Andhra Pradesh dated 12th November, 1986. The
appellants challenged the validity of an amendment to the
Schedule to the Andhra Pradesh General Sales Tax Act, 1957
(hereinafter called ’the Act’). The appellants are dealers
in tamarind in Parvathipuram in Srikakulam district, a
border district in Andhra Pradesh. They had purchased tama-
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rind from the State of Orissa paying tax there and incurring
expenditure in bringing the said goods to Andhra Pradesh for
the purpose of sale. Under the Act, tamarind was item 14 of
Second Schedule and was subjected to sales tax at the point
of first purchase in the State irrespective of whether it
was purchased within the State or outside the State. The
subject-matter of challenge in this application under Art.
226 of the Constitution before the Andhra Pradesh High
Court, was the validity of an amendment to the Schedule to
the Act modifying the point of taxability of tamarind in
question. Prior to the amendment tamarind was taxable as
mentioned hereinbefore at the first purchase point, being
item No. 14 in Schedule II to the Act. The entry therein
read as follows:
"Description of Point of levy Rate of tax
the goods
14. Tamarind (2014) At the point of 4 paise in
first purchase the rupee.
in the State."
425
By virtue of the amendment, the said entry was amended.
Tamarind which is purchased within the State, was retained
in IInd Schedule while tamarind purchased outside the State
was transferred to 1st Schedule. After the amendment, item
No. 14 in Schedule II and item 170 in Schedule I stood as
follows:
"SECOND SCHEDULE
S. No. Description of goods Point of levy Rate of tax
14. Tamarind when put- At the point of 4 paise in
chased within the first purchase the rupee.
State. in the State.
FIRST SCHEDULE
S. No. Description of Goods Point of levy Rate of tax
170 Tamarind when At the point 4 paise in
obtained from out- of first sale the rupee.
side the State. in the State."
It appears that the result of the said amendment was
that tamarind purchased outside the State, was taxable at
the point of first sale in the State. It was contended
before the High Court that the said amendment brought about
a discrimination between tamarind purchased within the State
i.e. one produced within the State, and the tamarind pur-
chased outside the State i.e. produced in other States; and
that the incidence of tax was more on the tamarind purchased
outside the State. It was contended that it violated clause
(a) of Art. 304 as also Art. 14 of the Constitution.
Clause (a) of Art. 304 states that notwithstanding
anything contained in Art. 301 or Art. 303, the legislature
of State may by law impose on goods imported from other
States or the Union Territories any tax to which similar
goods manufactured or produced in the State are subject, so,
however, as not to discriminate between goods so imported
and goods so manufactured or produced. The question is
whether as a result of the said amendment, there has been
any infraction of clause (a) of Art. 304 of the Constitu-
tion. We are unable to
426
accept the contention that there was any such discrimina-
tion. The High Court in the judgment under appeal has so
held. We are of the opinion that the High Court was right.
Both the tamarind purchased within, and outside, the State
is taxed uniformly.
On behalf of the appellants, reliance was placed on Firm
A.T.B. Mehtao Majid and Co. v. The State of Madras, 14 STC
355, wherein on an analysis of the relevant provisions it
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was held that the provisions of rule 16(2) of the Madras
General Sales Tax [Turnover and Assessment] Rules, 1939
(substituted in the place of the old rule w.e.f. 1st April,
1955) discriminate between hides and skins imported from
outside the State and those manufactured or produced inside
the State and as such contravened the provisions of Art.
304(a) of the Constitution, and therefore were invalid. It
was reiterated by this Court that taxing laws can be re-
strictions on trade, commerce and intercourse, if they
hamper the flow of trade and if these are not compensatory
taxes or regulatory measures. It was further held that sales
tax on hides and skins imposed under the Madras General
Sales Tax Act, 1939 and the rules framed thereunder could
not be said to be a measure regulating any trade or compen-
satory tax levied for the use of trading facilities. The
similarity contemplated by Art. 304(a) is in the nature of
the quality and kind of the goods and not with respect to
whether they were already the subject of tax or not. There
this Court was dealing with rule 16 of the relevant Madras
rules. Sub-rule (a) of rule 16 provides that in case of
untanned (raw) hides and/or skins, the tax u/s 3(1) of the
Act was to be levied from the dealer who is the last pur-
chaser in the State. Sub-rule (2) which was in two parts,
dealt with tanned hides and skins. Clause (i) of sub-rule
(2) provided that in case of hides and skins tanned outside
the State, tax shall be levied upon the dealer who in the
State is the first dealer. Clause (ii) provided that in case
of tanned hides and skins which have been tanned within the
State, the tax u/s 3(1) shall be levied upon a person who is
the first dealer in such hides or skins. The proviso, howev-
er, declared that if the dealer proved that he had already
been taxed under sub-rule (1) on the untanned hides and
skins, he shall not be subjected to tax under sub-rule (2).
It was held by this Court that this rule inevitably brought
about a discrimination in the quantum of tax because while
the tanned hides and skins which were imported from outside
the State and were sold within the State, were taxed at a
higher rate, the hides and skins tanned within the State and
sold within the State, are taxed at a lower rate by virtue
of the proviso. It was, indeed, found that there was a
substantial variation between the prices of tanned and
untanned goods. This Court pointed out that by virtue of the
proviso, the tax on
427
the latter category was, in fact, on the purchase price of
the untanned hides and skins--though ostensibly the rate of
tax under sub-rule (2) was the same Hence, the mischief of
discrimination was brought about by the proviso which said
that if hides and skins are taxed within the State at raw
(untanned) stage, they shall not be taxed again at the
tanned stage. But in view of the facts involved in the
instant case, we are unable to accept that the principles of
the said decision have any scope of application to the facts
of instant case. In the instant case the tamarind purchased
within the State and outside the State, are taxed at the
same rate. But the point of taxability has necessarily to be
different in both the cases. In case of tamarind purchased
within the State i.e. produced within the State, the tax is
levied at the point of first purchase, and in case of im-
ported tamarind i.e. purchased outside the State, the tax is
levied at the point of first sale in the State.
It was contended by Mr. P. Rama Reddy, learned advocate
for the appellants, that tax in case of imported tamarind
would be more because its price will include freight charge
and other State taxes. Hence, it was submitted that the
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sales tax will also be more. That may be so but it cannot be
said to be the effect of what law has amended. Tamarind will
be imported only when it can be sold in the market here at
the same price as the tamarind produced within the State.
Only when after bearing the other’ State tax and freight
charges, if it is able to compete with the locally produced
tamarind, it will normally be imported from outside the
State. If there is any difference in prices because of
market conditions and other factors, that cannot be said to
be due to discrimination prohibited by clause (a) of Art.
304 of the Constitution. In order to ensure this, it would
be necessary that imported goods must always be taxed at a
lower rate than the corresponding goods within the State
because of freight and other charges. That cannot be so. The
High Court observed that tamarind is an agricultural produce
and that is why it was put in Second Schedule i.e. to say,
purchase point, but where it was imported and sold within
the State, there was no reason to tax it at the sale point.
We are of the opinion that the. High Court was ’right.
It was contended on behalf of the appellants before the
High Court that imported tamarind which had suffered tax at
the first sale point, will again be taxed at the purchase
point when purchased within the State, which would amount to
double taxation. Once the imported tamarind is taxed at the
first sale point under the First Schedule, there is no
occasion for taxing it over again at the sale point under
the Second Schedule. The idea of both the Schedules is to
tax only at one point
428
though the point of taxability may be different under dif-
ferent Schedules.
Our attention was drawn on behalf of the appellants to a
decision of this Court in Indian Cement Ltd. & Ors. v. State
of Andhra Pradesh & Ors., 69 STC 305. There this Court was
concerned with Andhra Pradesh General Sales Tax Act. It
appears that in exercise of its powers u/s 9(1) of the Act,
the State Government had passed a notification on January
27, 1987 reducing the rate of sales tax on sale of cement
from 13.75% to 4% in respect of cement manufactured by
cement factories situated in the State and sold to manufac-
turing units situated within the State for the purpose of
manufacture of cement products such as cement sheets, asbes-
tos sheets, cement flooring stones, cement concrete pipes,
cement water and sanitary fittings, concrete poles etc. On
the same day the State Govt. had passed another notification
u/s 8(5) of the Central Sales Tax Act, 1956 reducing the
rate of tax on inter-State sale of cement to 2% with or
without Form C. On February 28, 1987 the State of Karnataka
passed a similar notification reducing the rate of tax on
inter-State sale of cement from 15% to 2%. The petitioners,
of whom some were manufacturers of cement having their
manufacturing units in Tamil Nadu and others, were stockists
having places of business in the States of Karnataka, Kerala
and Tamil Nadu, filed writ petitions before this Court
challenging the validity of these notifications on the
ground that these created trade barriers and directly im-
pinged upon the freedom of trade, commerce and intercourse
provided for in Art. 301 of the Constitution of India. It
was held that the variations in the rates of local and
inter-State sales tax affected free trade and commerce and
created a local preference, which was contrary to the scheme
of Part XIII of the Constitution of India; and as such the
notification were bad.
This decision was rendered in the peculiar facts of that
case. While the principle enunciated by the Court in the
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said decision there can be no dispute that taxation was a
deterrent in some cases, against free flow of trade, and as
a result of favourable or unfavourable treatment by way of
taxation, the course of flow of trade gets regulated either
adversely or favourably, and that if the scheme of Part XIII
guarantees has to be preserved in the national interest, it
is imperative that the provisions of Art. 301 must be
strictly complied with, we are of the opinion that the ratio
of the said decision in the facts and circumstances of this
case would not be relevant. In our opinion, the provisions
of the Constitution should be strictly complied with not
only with the letter but also with their spirit. Part XIII
of the Constitution has to
429
be dealt with the other provisions of the Constitution. Our
attention was drawn to the observations of this Court in M/s
Associated Tanners, Vizianagaram, A.P. v. C.T.O., Vizianaga-
ram. A.P. & Ors., [1986] 2 SCC 479. It was reiterated there
that the effect of an imposition of tax may work differently
upon different dealers, namely, those who import goods and
those who purchase the goods locally. That effect cannot be
said to arise directly or as an immediate effect of the
imposition of tax. It cannot be said that there was any
violation of clause (a) of Art. 304 of the Constitution.
We are of the opinion that in the instant case the
difference, in rates, if any, between the imported tamarind
and locally produced tamarind is not as an immediate or
direct result of the imposition of tax. The decision of this
Court in Weston Electronics & Anr. v. State of Gujarat &
Anr., [1988] 3 SCR 768 dealt, in our opinion, with an en-
tirely different situation and for the purpose of the in-
stant controversy, cannot be of any assistance.
Mr. C. Sitaramiah, appearing for the respondents, drew
our attention to Rattan Lal & Co. & Anr. v. The Assessing
Authority & Anr., [1969] 2 SCR 544 wherein this Court had
reiterated that when a taxing State is not imposing rates of
tax on imported goods different from rates of tax on goods
manufactured or produced, Art. 304 has no application. So
long as the rate is the same Art. 304 is satisfied. In the
instant case the tax is at the same rate and, hence, tax
cannot be said to be higher in the case of imported goods.
When the rate is applied the resulting tax may be somewhat
higher but that does not contravene the equality contemplat-
ed by Art. 304 of the Constitution. In the facts and the
circumstances of the case, there is no ground to complain
about the breach of Art. 14 of the Constitution.
In the aforesaid view of the matter, we are of the
opinion that the High Court was right in the view it took
and this appeal must fail. The appeal is accordingly dis-
missed. In the facts and the circumstances of the case,
however, we make no order as to costs.
P.S.S. Appeal
dismissed.
430