PETITIONER:
M/s. STEELWORTH LTD.
Vs.
RESPONDENT:
STATE OF ASSAM
DATE OF JUDGMENT:
16/01/1962
BENCH:
ACT:
Sales Tax-Provincial legislation imposing tax
in certain circumstances-Constitutional validity-
Amendment-Effect-Assam Sales Tax Act,1947 (Act,
XVII of 1947), as amended by Assam Sales Tax
(Amendment Act, 1960) (Act, XIII of 1960) s. 15
(1) (b) (i) (b) and (c)-Constitution of India,
Arts. 14, 19 (1)(f).
HEADNOTE:
The petitioner carried on business of
manufacturing, selling and supplying iron and
steel materials in the State of Assam. Before the
Assam Sales Tax Amendment Act of 1960, it held a
registration certificate under which all its
purchases for use in manufacture or production of
goods taxable under the Act were exempted from
Sales Tax, but after the amendment it became
liable to pay tax on those goods. It was contended
that by omission of sub-cl. (b), discrimination
was introduced by differentiating between
materials bought for articles to be supplied
against a contract and articles produced and sold
by the petitioner and that this was not a
reasonable classification
590
based on any intelligible differentia and
therefore, the amendment by Act XIII of 1960, was
violative of Arts. 14 and 19(1) (f) of the
Constitution.
^
Held, that the object of the amending Act was
to raise revenue for the State. It was for the
legislature to decide as to what articles it
should tax and what articles it should not tax and
if it decided to impose the tax on certain
articles it thought necessary, that was a question
of policy into which the courts cannot enter and
in such circumstances per se there is no
discrimination. Besides, the provision against
discrimination was not on articles but on persons
and the petitioner failed to show how the
imposition of this tax was an unreasonable
restriction on the right to carry on trade.
JUDGMENT:
ORIGINAL JURISDICTION Writ Petition No. 184
of 1961.
Petition under Art. 32 of the Constitution of
India for enforcement of Fundamental Rights.
C. B. Agarwala, R. L. Agarwala and P. C.
Agarwala, for the petitioner.
Naunit Lal, for the respondents.
1962. January 16. The Judgment of the Court
was delivered by
KAPUR J.-This is a petition under Art. 32 of
the Constitution challenging the legality of the
amendment introduced in s. 15 of the Assam Sales
Tax Act, 1947 (Act XVII of 1947), by s. 2 of the
Assam Sales Tax (Amendment) Act, 1960 (Act XIII of
1960), by which sub-s. (b) of item (i) of sub-cl.
(b) of cl. (1) was deleted and thereby sales of
goods to a registered dealer intended for use in
production of goods for sale became liable to
sales tax.
The appellant Company is a limited company
carrying on in the State of Assam its business of
manufacturing, selling and supplying iron and
steel materials. It held a Registration
Certificate under the Assam Sales Tax Act, as it
was before the amendment of 1960. Under that Act
all its purchases for use in manufacture or
production of goods taxable under the Act were
exempt from sales tax but after the amendment of
the Act there was a deletion in
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the Registration Certificate of certain goods,
e.g., cast iron, iron plates, steel bars and
galvanised wire which were used by the petitioner
in the manufacture of its finished products which
were also taxable in the State. Consequently it
has become liable to pay tax on those goods
purchased for use in the manufacture of goods and
the cost of production has thereby gone up.
Three points were raised by the petitioner:-
(1) that the amendment introduced by Act XIII
of 1960 is violative of Art. 14 because it
discriminates between manufacturers who supply
goods according to orders received and others who
manufacture goods on their own account and sell
them;
(2) that the restriction imposed by the
Amending Act is excessive and violative of Art. 19
(1)(f); and
(3) that the refusal to amend the
Registration Certificate by not reinstating the
articles mentioned above affects the rights of the
petitioner Company under Art. 19(1) (f).
For the purpose of deciding these questions
it is necessary to refer to the scheme of the
Assam Sales Tax Act, 1947 (Act XVII of 1947). By
s. 2(2)(a)(b) of that Act ‘Contract’ is defined
as:
“2. In this Act, unless there is
anything repugnant in the subject or
context,-
(2) “contract” means any agreement for
carrying out for cash or deferred payment or
other valuable consideration,-
(a) the preparation, contruction,
fittingout, improvement or repair of any
moveable property or of any building, road,
bridge or other immoveable property, or
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(b) the installation or repair of any
machinery affixed to a building or other
immoveable property.”
Section 9 of that Act provides for compulsory
registration. Section 12 provides that a dealer
registered under s. 9 shall be granted a
certificate of registration which shall specify
the class or classes of goods in which the said
dealer carries on business and such other
particulars as may be prescribed. Section
15(1)(b)(i)(b) and (c) deals with exemptions. It
reads:-
“15 The net turnover shall be determined
by deducting from dealer’s gross turnover
during any given period-
(1) his turnover during that period on.
(a) … … … … … … …. …..
(b) sale to a registered dealer of-
(i) goods specified in the purchasing
dealer’s certificate of registration as being
intended by him for-
(a) ... ... ... ... ... ... ..... .....
(b) use in manufacture or production of
any goods, the sale of which is taxable under
this Act,
(c) use in the execution of any
contract.”
Sub-clause (b) has now been omitted by the
amending Act above referred to as a result of
which from the gross turnover of a dealer goods
specified in the certificate of registration as
being intended by him for use in manufacture or
production of any goods for sale has now been
omitted.
The argument raised was that by the omission
of sub-cl. (b) discrimination was intended as
between materials which were to be used for
manufacture of goods and to be sold on their own
account by the petitioner Company and materials
which were purchased for use in the execution of
any contract,
593
It was also contended that the object of the
amendment of the Sales Tax Act was to prevent
evasion of Sales Tax by manufacturing goods and
sending them out of the State and therefore that
object could have been achieved by taxing only
those material which were so intended. The
amending Act is really a part of the General Sales
Tax Act of the State of Assam the object of which
is to raise revenue in the State. It is for the
Legislature to decide as to what articles it
should tax and what articles it should not tax and
if it decided to tax certain articles in order to
effectuate its policy it is difficult to see how
that would introduce discrimination. But it was
argued that discrimination is introduced by
differentiating between materials bought for
articles to be supplied against a contract and
articles produced and sold by the petitioner and
that this was not a reasonable classification nor
was there any intelligible differentia in this
classification. In our opinion this argument is
without force. The Legislature, having chosen the
articles on which it thinks necessary to impose a
tax, has decided to impose the tax and it is
difficult to see how it can be said that the goods
supplied against a contract and goods manufactured
and sold by the petitioner are similarly situated.
Besides the provision against discrimination is
not on articles but on persons.
It has not been shown how the imposition of
this tax is an unreasonable restriction on the
rights of the petitioner to carry on trade, but it
was submitted that by this means the petitioner
will not be able to compete with the manufacturers
outside the State of Assam. Assuming that this is
so, it is clear that goods which are purchased are
put to different uses and if the legislature
thinks that certain classes of goods should pay
the tax and not others that is a question of
policy into which the courts cannot enter. We can
only say that in such circumstances, per se there
is no discrimination. There is no force in the
second contention either.
594
In view of our decision on these two points
the third point, that is, the refusal of the Sales
Tax Officer to amend the registration certificate
will have no force.
In the result this petition fails and is
dismissed and the rule is discharged. The
petitioner will pay the costs of the respondent.
Petition dismissed.