PETITIONER: TWYFORD TEA CO. LTD. AND ANOTHER Vs. RESPONDENT: THE STATE OF KERALA AND ANOTHER DATE OF JUDGMENT: 15/01/1970 BENCH: HIDAYATULLAH, M. (CJ) BENCH: HIDAYATULLAH, M. (CJ) SHELAT, J.M. VAIDYIALINGAM, C.A. GROVER, A.N. RAY, A.N. CITATION: 1970 AIR 1133 1970 SCR (3) 383 1969 SCC (1) 633 CITATOR INFO : D 1972 SC 828 (20,25) R 1972 SC 845 (15) ACT: Kerala Plantation (Additional Tax) Act, 1960 (Act 17 of 1960) and the Kerala Plantation (Additional Tax)Amendment I Act 1967 (Act 19 of 1967),s. 3-Constitution of India, Art.l4-Charge of uniform tax from plantations alleged to be defferently situated-Validity of tax-Competency of Kerala legislature to levy land tax in absence of enabling entries in Seventh Schedule, Constitution of India. HEADNOTE: In the Kerala Plantation (Additional Tax) Act 1960 (Act 17 of 1960) there is a levy of additional tax on plantations. "Plantations" mean land used for growing cocoanut, Arecanut, Rubber, Coffee, Tea, Cardamom and Pepper. Under s. 3 of the Act, for each financial year a Plantation tax additional to the basic tax charged on land tax under the Land Tax Act 1955 is payable at the rate mentioned in Schedule I of the Act, the said rate being Rs. 8 per acre. Plantations of 5 acres or below held by a Person do not attract tax. For the purpose of finding out the extent of the; Plantation in acres held by a person a method of calculation is laid down in Schedule 11. Act 17 of 1960 was -amended by the Kerala Plantation (AdditionalTax) Amendment Act 1967 (Act of 1967). By the amending Act the word 'additional' is 'removed from all places and it is declared that the tax is additional to land revenue or any tax in lieu thereof, if any, payable in respect of such land. The unit of assessment is charged from acre to hectare, and the rate of tax in Schedule I is raised to Rs. 501- per hectare. The tax is payable in respect of plantations of two hectares or more with an exemption for the first hectare. According to the new Schedule II the extent of the, plantation for the purpose of tax in-the case of cocoanut, arecanut, rubber, coffee and pepper plantations is arrived at by dividing the total number of trees, plants or vines standing thereon by a number specified in each case. In the case of tea and cardamom the extent of the plantation is the extent of lands on which these plants are grown and have begun to yield crops. The petitioner company was incorporated in India and the majority of its share-holders were Indians. It owned a tea estate in the Kuttikenam area in the Peermade Hills in Kerala State. The company paid without protest the additional tax levied on plantation by Act 17 of 1960. When the rate became heavier as a result of the amendments made. by Act 19 of 1967 the company field the present petitions under Art. 32 of the Constitution. The challenge was based mainly on Art. 14 of the Constitution. It was urged that there were differences of fertility and rainfall in the different areas where the plantations were situated. Figures cornpiled by the Tea Board were submitted to show the difference in yield between different estates. Relying on Moopil Nair's case it was argued that the uniform tax on unequals resulted in discrimination (a) as between the tea plantations themselves and (b) as between different kinds of plantations. The competence of the Kerala Legislature to levy a land tax was also challenged. 384 HELD: Per Hidayatullah, C.J., and Vaidialingam and Ray, JJ.--The Petitions must be dismissed. (i) The legislature has a wide range of selection and freedom in appraisal not only in the objects of taxation and the manner of taxation but also in the determination of the rate or rates applicable. If production were always to be taken into account there will have to be a settlement for every year and the tax will become a kind of income-tax. The burden of proving discrimination is always heavy and heavier still when a taxing statute is under attack.. The burden is on the person complaining of discrimination. The burden is proving not possible 'inequality' but hostile 'unequal' treatment. This is more so when uniform taxes are levied. The State cannot be asked to demonstrate equality. Simply stated the law is this : Difference in treatment must be capable of being reasonably explained in the light of the object for which the particular legislation is undertaken. This must be based on some reasonable distinction between the cases differentially treated. When differential treatment is not reasonably explained and justified the treatment is discriminatory. If different subjects are equally treated there must be some basis on which the differences have been equalised, otherwise discrimination will be found. To be able to succeed in a charge of discrimination, a person must" establish conclusively that persons equally circumstanced have been treated unequally and vice versa. [393 C-D, H; 394 E-G] (ii) Applying the above. principles the impugned law does not single out any particular plantation for hostile or unequal treatment. The Legislature thinks that Rs. 50 per hectare in the case of cardamom and tea is reasonable levy and this is equal to other plantations, where the crop yielding plants and trees have to be converted into hectares according to a formula. It is obvious that the legislature has made an attempt at equalisation of tax burden for different plantations. [395 C] In Moopil Nair's case this Court considered the tax therein impugned to be discriminatory because it paid no heed to quality or productive capacity of land and the tax was also held to be confiscatory since owners of unproductive land were liable to be eliminated by slow degrees. The present was however not a case where barren lands have been subjected to equal tax with productive lands. The tax is only levied on crop yielding land. In some cases where the crop may be scattered over a wide area, there is an elaborate mechanism to determine the: extent of the crop yielding plantation. [389 E-F, 391 F] As between different tea gardens it was not possible to say that the difference in yield was entirely due to natural circumstances and no other cause. It may be conceded that a uniform tax falls more heavily on some plantations than on others because the profits are widely discrepant. But that by itself cannot involve discrimination, for then hardly any tax direct or indirect would escape the same sensure. The rich and the -poor pay the same taxes irrespective of their incomes in many instances such as the sales-tax and profession tax etc. [389 H-390 B] Nunnathat Thathunni Moopil Nair v. The State of Kerala, [1961] 3 S.C. R. 77, State of Andhra Pradesh v. Nalla Raja Reddy, [19671 3 S.C.R. 28, New Mank Chowk Spinning and Weaving Mills Co. Ltd. v. Municipal Corporation of the City of Ahmedabad, [1967] 2 S.C.R. 679 and The State of Kerala v. Haji K. Haji K. Kutty Naha A.I.R. 1969 S.C. 378, distinguished. 385 Shri Ram Krishna Dalmia v. Shri Justice S. R. Tendolkar and Others, [ 1 9591 S. C. R. 279, Fast Indian Tobacco Co. v. Stute of Andhra Pradesh, [1963] 1 S.C. R. 404 and Khandige Sham Bhat and Others, v. The Agricultural Income Tax Officer, [1963] 3 S.C.R. 809, applied. Thuttampara Planting Co. v. Tahsildar, Chittur, 1964 Kerala L.T. 47, Essa Ismail and another v. State of Kerala and others, I.L.R. (1965) Kerala 619 and States in Madden v. Kentucky, (1940) 309 U.S. 83; 84 L.Ed. 590, -referred to. (iii) immediately after the Travancore-Cochin Land Tax Act, 1955 as amended by the Travancore-Cochin Land Tax Act 10 of 1957 was declared invalid by this Court in Moopil Nair's case, the Kerala Land Tax Act 1961 was passed following an ordinance. That Act was included in the 9th Schedule to the Constitution at No. 38 and received the protection of Art. 31-B. The competency of the Kerala Legislature to impose land tax was therefore no longer open to dispute. Per Shelat and Grover, JJ. (dissenting).--The petitions must be allowed. Like Moopil Nair's case the present case also was one where inequality emerged as a result of imposing an ad hoc tax uniformly levied without making any rational or intelligible classification. There is no indication in the Act and none was sought to be shown as to how and on what basis the uniform rate of Rs. 50 per hectare was fixed and whether it had any reference to the productive capacity of the lands. [406 D-F] As regards tea plantations, the tax is uniformly levied merely on the footing of the land being used for growing tea, without any regard to its potentiality, situation, the kind of tea which can suitably be grown at a particular place, its geographical and other features etc. No doubt, the State in exercise of the taxing' power can select persons and objects for taxation but if it is found that within the range of that selection the law operates unequally by reason either of classification or its alsence, such a provision would'be hit by the equality clause of Art. 14. 1408 DI Even among the selected plantations inequality as a result of uniformity of tax must result because it is possible that the user of the land for one specified purpose may give a better and a more valuable yield than the user of another land though situated in the same area for another specified purpose. , This had happened in the case of tea plantation with which alone the present petitions were concerned. Therefore to the extent that Act 17 of 1960 as amended by Act 19 of 1967 imposes the tax on holdings of tea plantations, it is violative of Art. 14 and therefore void. [408 D-F] Moopil Nair's case applied Case-law referred to. JUDGMENT:
ORIGINAL JURISDICTION : Writ Petitions Nos. 135-137 of 1969.
Petitions under Art. 32 of the Constitution of India for en-
forcement of the fundamental rights.
M. C. Setalvad, Joy Joseph, B. Datta, J. B. Dadachanji, O. C.
Mathur and Ravinder Narain, for the petitioners.
Sarjoo Prasad and M. R. K. Pillai, for respondent No. 1.
386
The Judgment of M. HIDAYATULLAH, C.J., C. A. VAIDIALINGAM
and A. N. RAY, JJ. was delivered by HIDAYATULLAH, C.J. Dis-
senting Opinion of J. M. SHELAT and A. N. GROVER, JJ. was
delivered by SHELAT, J.
Hidayatullah, C.J. These are three petitions by Twyford Tea
Company and one of its directors under Art. 32 of the
Constitution seeking appropriate writ, order or direction to
declare the Kerala Plantation (Additional Tax) Act, 1960
(Act XVII of 1960) and the Kerala Plantation (Additional
Tax) Amendment Act, 1967 (Act XIX of 1967) unconstitutional
and void. In addition the petitioners ask that the notices
annexures B, C and D demanding payment of the tax be also
quashed and a sum’ of. Rs. 1,02,106.02 already paid as tax
to the Kerala Government ordered to be refunded. They
further seek a mandamus restraining the State of Kerala and
Tehsildar Peermade from using the two Acts against the
petitioners.
The petitioner company is incorporated in India and the
majority of its shareholders are Indians. It owns a tea
estate in Kuttikanam area in the Peermade hills in Kerala
State. The estate consists of 1006 hectares equal to 2486
acres of which 491 hectares equal to 1214 acres are tea
plantations. According to the petitioners Peermade hills
are in the Western Ghats and are divided into two main
parts. Kuttikanam area roughly 33 sq. miles is situated at
an altitude of 3400 to 3700 ft. and receives 150 to 200
inches of rainfall annually. The Periyar valley area
roughly 60 sq. miles is situated at an altitude of 2800 to
3200 ft. and receives 100 to 150 inches rainfall annually.
The Periyar valley area is more fertile than the Kuttikanam
area. According to the petitioners’ statement M/s. Parkins
Private Ltd., are the Managing Agents of Twyford Tea Company
and also the Haileyburia Tea Estate. The former is in
Kuttikanam and the latter in Periyar area. The extent of
produce from these two areas is very different. Between the
years 1963 to 1967 Twyford Tea Company produced 959 to 1211
kgs. per hectare while Haileyburia produced 1461 to 1845
kgs. per hectare. The other tea-estates disclosed the same
differences in production. Examples are given of Penshurat,
Karimtharuvi estates under the same management and of
Stagbrook and Cheenthalaar and other estates. The Twyford
Tea Company’s net profits have declined from Rs. 2,28,222
(1963) to Rs. 59,938 (1967). The net profits of Twyford Tea
Company after taxation per hectare ranged from Rs. 122.00
(1967) to Rs. 465.00 (1963) with loss in 1966, while the
profits of Heileyburia ranged from Rs. 909.00 (1963) to Rs.
770.00 (1967) with Rs. 245.00 in 1966. This difference is
attributed to the differences in fertility between the
Kuttikanam and Pariyar areas. The petitioners state that
similar differences exist in the Vandiperiyar and
Nelliampathy areas. The petitioners point cut
387
that for purposes of excise duty these areas have been
formed into different zones and different rates of excise
duty are leviable in these zones.
The two statutes which are impugned here imposed a tax on
plantations. In the Act XVII of 1960 there is a levy of ”
additional tax” on plantations. The Act came into force on
April 1, 1960. “Plantations” mean land used for growing
seven kinds of crops. They are (1) Cocoanut, (2) Arecanut,
(3) Rubber, (4) Coffee, (5) Tea, (6) Cardamom and (7)
Pepper. Section 3 of Act XVII of 1960 is the charging
section. Under that section for each financial year a
plantation tax additional to the basic tax charged as land
tax under the Land Tax Act, 1955 is payable at the rate
mentioned in Schedule I of the Act. This Schedule states
that no tax is payable if the aggregate extent of
plantations held by a person is below five acres. But if
the plantations held by a person is 5 acres or more, -a tax
of Rs. 8/- per acre is payable with exemption for the first
two acres. For purposes of finding out the extent of the
plantations in acres held by a person a method of
calculation is added in Schedule II. It is not necessary to
quote this schedule because it has been amended by Act XIX
of 1967 and that schedule will be quoted presently. By the
Amended Act the name of the tax is changed. The word
“additional” is removed in all places and it is declared
that the tax is additional to land revenue or any tax in
lieu thereof, if any, payable in respect of such land. The
rate of tax is altered in Schedule I to Rs. 501/per hectare
which is payable in respect of plantations of two bectares
or more with an exemption for the first ‘hectare. The
method of calculation of the extent of plantation in
hectares is restated in, Schedule II as follows
“Schedule II
For the purposes of the assessment of plantation tax payable
by a person, the extent of plantations held by him shall be
deemed to be the aggregate of the following, expressed in
hectares, namely :-
(i) the quotient obtained by dividing the total number of
bearing cocoanut trees standing on all lands held by him by
200;
(ii) the quotient obtained by dividing the total number of
bearing arecanut trees standing on all lands held by him by
1500;
(iii) the quotient obtained by dividing the total Dumber
of yield in rubber plants standing on all lands held by him
by 450:
(iv) the quotient obtained by dividing the total number of
yielding coffee plants standing on all lands held by him by
1500;
388
(v) the quotient obtained by dividing the total number of
yielding pepper vines standing on all lands held by him by
1000;
(vi) the extent of lands on which tea plants are grown which
have begun to yield crops;
(vii) the extent of lands on which cardamom plants -are
grown which have begun to yield crops;
Provided that where the total extent of land held by a
person, which is cultivated with the aforesaid crops, is
less than the aggregate calculated as above, the actual
extent alone shall be deemed to be the extent of plantations
held by him.”
The petitioners paid tax under the old Act without
objections -They state that they did so without realising
their rights. They were issued three demands for the
assessments years 1960-61 to 1968. They had already paid
between April 10, 1961 and October 18, 1968 a sum of Rs.
1,02,106.02. It is because of this additional demand arising
from the increase in the rate of tax from Rs. 8/- per acre
or Rs. 20/- per hectare to Rs. 501- per hectare that they
have challenged the constitutionality of the two Acts.
The contention of the petitioners is that there is no
rational :classification of plantations; that unequals have
been treated as equal and that a flat rate imposed upon all
the plantations irrespective of their yield is arbitrary.
According to them some of the plantations cannot make enough
profit to be able to pay tax and in their case the tax
became confiscatory. They also complain of discrimination
and question the legislative competency of the Kerala
Legislature to impose plantation tax in the absence of a
specific entry in the 7th Schedule to the Constitution
either in List II or III enabling the State Legislature to
impose it. They also say that the land tax imposed under
the Land Tax Act was successfully challenged before this
Court in Kunnathat Thathunni Moopil Nair v. The State of
Kerala and another(‘) and the change making it additional
land revenue imposed an obligation upon the– State
Legislature to make assessment on the basis of the produce
from the land in much the same way as land revenue is
calculated after taking into account the fertility of the
soil, its yield and such other factors.
Stated simply there are three contentions. The first is
that the State Legislature lacks competence to impose this
tax and even if it did have the competence it has followed a
wrong method in imposing additional land revenue without
effecting proper settle-
(1) [1961] 3 S.C.R. 77.
389
ment. The next contention is that the Act is discriminatory
in that it takes no account of differences in situation,
fertility and yield between the plantations belonging to the
same category. Lastly it is contended that it is
discriminatory inasmuch as it, seeks to treat plantations of
different kinds as it they were equal in all respects by
reducing them to a common measure of hectares when it is not
possible to do so regard being had to the different incomes
derived from these plantations. We shall take up these
questions one by one.
The first question is of the competence of the State
Legislature. There is no specific entry in the legislative
Lists, Nos. 2 and 3 in the Seventh Schedule to the
Constitution. The Land Tax Act 1955, as amended by the
Travancore-Cochin Land Tax (Amendment) Act, X of 1957, was
declared unconstitutional in its operative sections in K. T.
Moopil Nair’s(1) case. Immediately afterwards the Kerala
Land Tax Act, 1961 was passed following an Ordinance and
that Act is now included in the 9th Schedule to the
Constitution at No. 3 8 and receives the protection of Art.
3 1 -B. The competency to impose land tax thus is no longer
open to this pute. The present Act is challenged on the
same lines as the former Act and the argument is rested upon
the principles accepted in K. T. Moopil Nair’s(1) case. It
is, therefore, necessary to recall what was decided there.
Under the Land Tax Act, 1955 all lands of whatever
description and. held under whatever tenure were to be
charged and levied a uniform tax per acre known as the basic
tax. Section 7 of the Act, however, conferred a power on
Government to exempt wholly or in part any land. This Court
considered the tax to be discriminatory because it paid no
heed to quality or productive capacity of land and the tax
was also held to be confiscatory since owners of unpro-
ductive land were liable to be eliminated by slow stages.
The power of exemption was also corisidered unreasonable
because it enabled Government to pick and choose lands
arbitrarily for grant of exemption. -The lack of
classification was considered to create inequality. Sarkar,
J. who dissented held that there was an attempt at
classification according to areas, and the tax was levied
because land in the State was held, and not because of its
productivity
In dealing with this case the arguments have been , moulded
round the observations in that case. In support of his
contention that yield of tea varies from estate to estate
and district to district (of which figures are already
quoted in the petition) The Tea Statistics (1967-68)
compiled by the Tea Board of India were also cited. It is
hardly necessary to refer to the findings of the Tea Board
because it may be assumed without discussion that there are
differences. It may also be conceded that the uniform tax
falls
(1) [19611 3 S.C.R. 77.
Sup./70-10
390
more heavily on some plantations than on others because the
profits are widely discrepant. But does that involve a
discrimination ? If the answer be in the affirmative hardly
any tax direct or indirect would escape the same censure for
taxes touch purses of different lengths and the very
uniformity of the tax and its equal treatment would become
its undoing.’ The rich and the poor pay the same taxes
irrespective of their incomes in marry instances such as the
sales-tax and the profession tax etc. It may be; remembered
that in K. T. Moopil Nair’s(1) case the majority accepted
the observations of S. R. Das C.J. in Shri Ram Krishna
Dalmia v. Shri Justice S. R. Tendolkar and others(‘) at page
299 to the following effect
“A statute may not make any classification of the persons or
things for the purpose of applying its provisions but may
leave it to the discretion of the Government to select and
classify persons or things to whom its, provisions are to
apply. In determining the question of the validity or
otherwise of such a statute the Court will not strike down
the law out of hand only because no classification appears
on its face or because a discretion is given to the
Government to make the selection or classification but will
go on to examine and ascertain if the statute has laid down
any principle or policy for the guidance of the exececise of
discretion by the Government in the matter of the
selection or classification. After such scrutiny the Court
will strike down the statute if it does not lay down any
principle or policy for guiding the exercise of discretion
by the Government in the matter of selection or
classification, on the ground that the statute provides for
the delegation of arbitrary and uncontrolled power to the
Government so as to enable it to discriminate between
persons or things similarly situate and that, therefore, the
discrimination is inherent in the statute itself.”
We have always to see what the statute does to make for
equality of treatment.
The contention here is that there is a uniform rate of tax
per hectare which every owner of a named plantation has to
pay irrespective of the extent or value- of the produce and,
therefore, the law imposes a uniform tax burden on unequals.
In our opinion this is a wrong way to look at the provisions
of the Act.
The Act, no doubt, deals with seven different kinds of
plantations and imposes a uniform rate of Rs. 50/- per
hectare but itlays down principles on which equal treatment
is ensured. In the
(1) [1961] 3 S.C.R.77.
(2) [19591 S.C.R. 279.
391
case of cocoanut, arecanut, rubber, coffee and pepper
plantations, plants capable of yielding produce are to be
counted and then the hectares are determined by dividing the
total number of plants by a certain figure. This is
intended to equalise the different plantations for purposes
of taxability. In the remaining two cases the extent of
land yielding crop is itself taken as the measure for the
tax because it is considered fair and just to treat one
actual hectare of crop yielding plantation as equal to the
other areas converted into hectares on the basis of the
number of plants or trees. Differences in yield between one
plantation and another having the same crop, no doubt, arise
from situation, altitude and rainfall but they are not the
only factors. Otherwise how is it that the same areas give
different yield in different years. The respondents have
given the figures of yield of Glemmari estate contiguous to
Twyford estate. The produce in that estate ranges from 1427
to 1571 kilograms per hectare which is almost equal to the
estates in Periyar area. The yield of Cardamom also varies
similarly. In the Highland Produce Co. Ltd. the per acre
yield varied from 5770 1bs. in 1965 to 26,890 lbs. in 1962.
In 1961 the per ‘acre yield was 91 lbs. and in 1962, 254
lbs. It is obvious that there are circumstances other than
situation, rainfall etc. which have made the yield almost 2
1/2 times as much.
The legislature thinks that Rs. 501- per hectare in the case
of Cardamom and Tea is reasonable levy and this is equal to
other plantations, where the crop yielding plants and trees
have to be converted into hectares according to a formula.
It is obvious that the legislature has made an attempt at
equalisation of tax burden for different plantations. This
is not a case where barren lands have been subjected to
equal tax with productive lands. The tax is only levied on
crop yielding land. In some cases where the crop may be
scattered over a wide area, there is an elaborate mechanism
to determine the extent of the crop yielding plantation.
The differences which have been pointed out may be the
result of some fortuitous circumstance and even bad
husbandry. The Court cannot regard the law to be
discriminatory on the evidence produced in the case.
may refer to a few cases which were also brought to our
notice. In State of Andhra Pradesh & Another v. Nalla Raja
Reddy & Ors.(1) the Andhra Pradesh Land Revenue (Additional
Assessment) and Cess Revision Act (22 of 1962) was held to
offend Art. 14. That Act was passed to bring uniformity in
assessment of Land Revenue in the Telengana and Andhra areas
of the State of Andhra Pradesh. An additional assessment at
the rate of 75% of the yearly assessment was imposed on dry
land and the
(1) [19671 3 S.C.R. 28.
392
total assessment was not to be less than 50 n.p. per acre.
On wet lands the additional-assessment was to be 100% for
lands irrigated from a Government source and 50% in the case
of other wet lands and a minimum total demand was also
prescribed. This Act was considered to be discriminatory as
the minimum had no relation to the fertility of land, there
was no relationship between the land and the ayacut to which
it belonged and the procedure for determining the applicable
rate was arbitrary. This Court examined the matter
critically and came to the conclusion that the assessment
was left to the arbitrary discretion of an officer without
any opportunity to question his findings. This Court
compared the procedure for assessment at proper settlements
and found that those equitable and reasonable methods of
assessment were abandoned. That case is peculiar to -itself
and cannot be called in aid since in this case there is a
reasonable attempt to-make the burden equal.
Two other cases were referred to but they bear upon
different topic. In New Manek Chowk Spinning and Weaving
Milts Co. Ltd. and others v. Municipal Corporation of the
City of Ahmedabad and others(‘) and The State of Kerala v.
Haji K. Haji K. Kutty Naha and others(‘) the question was
one of rating. The proposition laid down was that taking
only the floor area of a building as the basis for
determination of the tax was an arbitrary method when
buildings must have different rental values depending upon
the nature of the construction, the kind of buildings and
the purpose for which they can be used. These were held
vital considerations in the rating of buildings and could
not be ignored. These cases were decided on different
principles and no analogy can be found merely because equal
tax was imposed in diverse conditions.
As against these cases the otherside relies upon
Thuttampara Planting Co. v. Tehsildar, Chittur(3) and Essa
Ismail and another v. State of Kerala and others (4) where
this tax was upheld. in the second of these cases it was
held that the tax was not related to the productivity of the
land but to its user and the method of calculation was found
to be fair and equitable.
We may now state the principles on which the present case
must be decided. These principles have been stated earlier
but are often ignored when the question of the application
of Art. 14 arises. One principle on which our Courts (as
indeed the Supreme Court in the United States) have always
acted, is nowhere better stated then by Willis in his
“Constitutional Law” page 587. This is how he put it:
“A State does not have to tax everything in order to tax
something. It is allowed to pick and choose dis-
(1) 11 9671 2 S.C.R. 679.
(2) A.I.R. 1969 S.C. 378.
(3) [19641 Kerala L.T. 47.
(4) I.L.R. [1965] Kerala 619.
393
tricts, objects, persons, methods and even rates for taxa-
tion if it does so reasonably…… The Supreme Court has
been practical and has permitted a very wide latitude in
classification for taxation.”
This principle was approved by this Court in East Indian
Tobacco Co. v. State of Andhra Pradesh(‘) at page 409.
Applying it, the Court observed:
“If a State can validly pick and choose one commodity for
taxation and that is not open to attack under Art. 14, the
same result must follow when the State picks out one
category of goods and subjects it to taxation.”
This indicates a wide range of selection and freedom in
appraisal not only in the objects of taxation and the manner
of taxation but also in the determination of the rate or
rates applicable. If production must always be taken into
account there will have to be a settlement for every year
and the tax would become a kind of income-tax.
The next principle is that the burden of proving
discrimination is always heavy and heavier still when a
taxing statute is under attack. This was also observed in
the same case of this Court at page 411 approving the dictum
of the Supreme Court of the United States in Madden v.
Kentucky(‘) :
“In taxation even more than in other fields, Legislatures
possess the greatest freedom in classification. The burden
is on the one attacking the legislative arrangement to
negative every conceivable basis which might support it.”
As Rottschaefer said in his Constitutional Law at p. 668:
“A statute providing for the assessment of one type of
intangible at its actual value while other intangibles are
assessed at their face value does not deny equal protection
even when both are subject to the same rate of tax. The
decisions of the Supreme Court in this field have permitted
a State Legislature to exercise an extremely wide discretion
in classifying property for tax purposes so long as it
refrained from clear and hostile discrimination against
particular persons or classes.)) (Emphasis added).
The burden is on a person complaining of discrimination.
burden is proving not possible ‘inequality’ but hostile
“unequal” treatment. This is more so when uniform taxes are
levied. It is
(1) [19631 IS.C.R. 404. (2) (1940) 309 U.S.
83;84 L.Ed. 590.
394
not proved to us how the different plantations can be said
to be ‘hostilely or unequally’ treated. A uniform wheel tax
on cars does not take into account the value of the car, the
mileage it runs, or in the case of taxis, the profits it
makes and the miles per gallon it delivers. An Ambassador
taxi and a Fiat taxi give different out turns in terms of
money and mileage. Cinemas pay the same show fee. We do
not take a doctrinaire view of equality. The Legislature
has obviously thought of equalising the tax through a method
which is inherent in the tax scheme. Nothing has been said
‘to show that there is inequality much less ‘hostile
treatment’. All that is said is that the state must
demonstrate equality. That is not the approach. At this
rate nothing can ever be proved to be equal to another.
There is no basis even for counting one tree as equal to
another. Even in a thirty years’ settlement, the picture
may change the very next year for some reason but the tax as
laid, continues. Siwai income is brought to land levenue on
the basis of number of trees but not on the basis of the
produce. This is worked out on an average income per tree
and not on the basis of the yield of any particular- tree or
trees.
What is meant by the power to classify without unreasonably
discriminating between persons similarly situated, has been
stated in several other cases of this Court. The same
applies when the legislature reasonably applies a uniform
rate after equalising matters between diversely situated
persons. Simply stated the law is this: Differences in
treatment must be, capable of being reasonably explained in
the light of the object for which the particular legislation
is undertaken. This must be based on some reasonable
distinction between the cases differentially treated. When
differential treatment is not reasonably explained and
justified the treatment is discriminatory. If different
subjects are equally treated there must be some basis on
which the differences have been equalised otherwise
discrimination will be found. To be able to succeed in the
charge of discrimination, a person must establish
conclusively that persons equally circumstanced have been
treated unequally and vice versa. However, in Khandige Sham
Bhat and others v. The Agricultural Income Tax Officer, at
page 817 it was observed
“If there is equality and uniformity within each group, the
law will not be condemned as discriminative though due to
some fortuitous circumstance arising-out of a peculiar
situation some included in a class get an advantage over
others, so long as they are not singled out for special
treatment. Taxation law is not an exception to this
doctrine: vide Purshottam Govindji Halai
(1) [1963] 3 S.C.R. 809.
395
v. Shree B. N. Desai, Additional Collector of Bombay(‘)
and Kunnathat Thatunni Moopil Nair v. State of Kerala ( 2
) . But in the application of the principles, the courts, in
view of the inherent complexity of fiscal adjustment of
diverse elements, permit a larger discretion to the
Legislature in the matter of classification, so long it
adheres to the fundamental principles under lying the said
doctrine. The power of the Legislature to classify is of
“wide range and flexibility” so that it can adjust its
system of taxation in all proper and reasonable ways.”
Taking these principles into consideration we are satisfied
that the law does not single out any particular plantation
for hostile or unequal treatment. In fact it is nowhere
proved in this case that tea has been discriminated against
deliberately as between different tea gardens, it is not
possible to say,that the differences in the yield is
entirely due to natural circumstances and no other cause.
It- is, therefore, not possible to say that there is
discrimination notwithstanding the -uniform rate for each
plantation based on the actual crop yielding, area.
The petitions must therefore fail. They will be dismissed
with costs.
Shelat, J. Petitioner No. 1, a public limited company, of
which the second petitioner is a shareholder, owns the
Twyford Estate situate in Kuttikanam area in Kerala State.
The estate is a tea plantation admeasuring 1006 hectares
(2486 acres), out of which 491 hectares (1214 acres) have
tea plants. In these petitions, the petitioners challenge’
the constitutional validity of the Kerala Plantations
(Additional Tax) Act, XVII of 1960, as amended by the Kerala
Plantations (Additional Tax) Amendment Act, XIX of 1967
(hereinafter reffered to as the Act) The challenge is on the
ground that the Act violates the petitioners’ guaranteed
rights under Arts. 14, 19(l)(f) and (g) and 31(l).
Before we set out the facts and the contentions based
thereon, it is necessary to recite briefly the history of
the legislation pertaining to land taxation in the State.
In 1955, the Legislature of the then State of Travancore-
Cochin passed the Travancore-Cochin Land Tax, Act, XV of
1955 which by ss. 4 and 5 imposed in respect of all lands,
of whatever description and tenure, -a uniform rate to be
called the basic tax at the rate of 3 pies per cent per
amnum in lieu of any existing tax in respect of the said
land. -With the formation of the present State of Kerala
under the reorganisation of States, the
(1) [19551 2 S.C.R. 887.
(2) [1961] 3 S.C.R. 77.
396
State Legislature passed the Travancore-Cochin Land Tax
(Amendment) Act, X of 1957 by which the expressions “the
State of Kerala” and “the Land Tax Act” were substituted for
the words “the State of Travancore-Cochin” and “the
TravancoreCochin Land Tax Act” respectively. The amendment
Act also added a new section, S. 5A, which inter alia,
provided for provisional assessment of the basic tax for
lands so far not surveyed. The constitutional validity of
Act XV of 1955, as amended by Act X of 1957, was challenged
in this Court in Moopil Nair v. The State of Kerala(‘). The
Act was struck down by this Court, inter alia, on the ground
of its being violative of Arts. 14 and 19(1)(f). The
judgment of this Court striking down the Act was pronounced
on December 9, 1960.
Before the case of Moopil Nair(‘) was decided, the Kerala
Legislature passed the impugned Act, XVII of 1960, which on,
receiving the Governor’s assent, was published in the
Gazette Extraordinary of August 24 ,1960. Section 2(6) of
the Act defined a “plantation” to mean land used for growing
one or more of the seven categories of trees on plants set
out therein, category 5 thereof being tea plants. Thus, the
land used for growing any trees, plants or corps other than
these seven categories is not subject to the -additional tax
under the Act. Section 3 provides that there shall be
charged, in respect of the lands comprised in plantations
held by a person, an additional tax or plantation tax at the
rate specified in Sch. I and the person holding such
plantation shall be liable to pay the plantation tax. Sch.
I to the Act lays down that the additional tax would not be
payable if the aggregate extent of the plantation held by a
person is below 5 acres. But if it is 5 acres or more, the
first two acres thereof would be exempt from the tax, and
the remainder would be chargeable at the rate of Rs. 8/- per
acre. Sub-s. 4 of s. 3 provides that for purposes of the
assessment of plantation tax payable by a person under this
Act, the extent of plantation held by him shall be
determined in the manner specified in Sch. II Section 3 (5)
declares that the tax charged under this section shall be in
addition to the basic tax payable under the Land Tax Act,
1955. Sections 4 and 5 deal with the returns relating to
the plantations, the determination of the extent of
plantation and the assessment of the tax. The rest of the
provisions of the Act provide for such subjects as the
provisional assessment, notice of dem and, appeal and
revision against assessment orders, recovery of the tax,
refund etc. Sch. 11 provides that the extent of plantation
held by a person shall be deemed to be the aggregate of the
following expressed in acres, namely
(1) the quotient obtained by dividing the total number of
bearing cocoanut trees standing on all lands held by him by
85;
[1961] 3 S.C.R. 77.
397
(ii) the quotient obtained by dividing the total number of
bearing arecanut trees standing on all lands held by him by
600;
(iii) the quotient obtained by dividing the total number
of yielding rubber plants standing on all lands held by him
by 180;
(iv) the quotient obtained by dividing the total number of
yielding coffee plants standing on all lands held by him by
600;
(v) the quotient obtained by dividing the total number of
yielding pepper vines standing on all lands held by him by
400.
(vi) the extent of lands on which tea plants are grown which
have begun to yield crops; and
(vii) the extent of lands on which cardamom plants are
grown which have begun to yield crops.
Provided that where the total extent of land held by a
person,which is cultivated with the aforesaid crops, is less
than the aggregate calculated as above, the actual extent
alone shall be deemed to be the extent of plantations held
by him. Though the Schedule lays down different quotients
in respect of lands cultivated with cocoanut and arecanut
trees, rubber and coffee plants and pepper vines, they
cannot achieve equality of the burden of the tax as yields
of even the same crop cannot be equal or approximately equal
by reasons of differences in the lands in one area from
those in other areas depending on their soil, situation and
a number Of’ other such factors. Furthermore, no
explanation is forthcoming about the principle, if any, on
which the quotient for each of the said categories was-
fixed and whether they inter se work out reasonable equality
among the plantations cultivating the said trees and plants.
In the case of tea plants, the holder is liable to pay tax
on the extent of lands on which they are grown irrespective
of the number of tea plants which are or can be grown, their
quality Dr their possible yield.
The Act was amended, as aforesaid, by Act XIX of 1967 by
which the expression ‘additional tax’ was substituted by the
word ‘tax’, and in s. 4 instead of the measure for changing
the tax being 5 acres or more, the, measure now adopted was
2 hectares and more. The two new Schedules, which were
substituted for those in Act XVII of 1960 provided by Sch.
I that no tax would be payable if the aggregate extent of
plantation was below 2 hectares, but where it is 2 hectares
or more, there would be no tax on the first one hectare but
the rest of the land would be taxed at Rs. 50 per hectare.
With the substitution of hectare as the measure in
398
place of acre, the quotients were suitably modified in
proportion of a hectare being equal to 2.475 acres. Thus,
under the Act, as amended by Act XIX of 1967, a holder of
land, whose land is plantation, is now required to pay Rs.
50 per hectare instead of Rs. 20 per hectare, over and above
the basic tax payable by him under the Land Tax Act, 1955,
as amended in 1957. The petitioner-company thus is liable
to pay Rs. 24,500/- as additional tax on its 491 hectares
cultivated for tea plants over and above the basic tax
payable by it. It will be noticed that notwithstanding the
reasons on which in Moopil Nair’s(1) decision the Land Tax
Act, XV of 1955 was struck down, no changes in the light of
that decision were made in Act XVII of 1960 even when it was
amended in 1967.
In consequence of Act XV of 1955 having been struck down as
aforesaid, the Kerala Legislature passed a new Act, called
the Kerala Land Tax Act, XIII of 1961 giving it a
retrospective effect by s. 1(3) thereof. The Act was
obviously passed in the light of the observations made by
this Court in Moopil Nair’s case(‘). Section 5 provided
that there shall be charged a tax called “basic tax” on all
lands of whatever description and tenure. Sub-s. 3 of that
section provided that the basic tax so charged shall be
deemed to be public revenue due on lands within the meaning
of the Revenue Recovery Act. Section 6(1) laid down the
rate of the basic tax. The basic tax was first. fixed at
Rs. 2/- per acre Per annum, but subsequently changed to Rs.
9.94 P. per hectare. Section 6 (2) provided that
notwithstanding anything contained in sub-s. 1, where a
land-holder liable to pay basic tax proved to the
satisfaction of the prescribed authority that the gross
income from any land was less than Rs. 10 per acre per annum
(now changed to Rs. 24-70 P. per hectare), the basic tax
payable on such land shall be at a rate fixed by the
prescribed authority calculated at 1/5th of the gross income
from such land. The second proviso to sub-s. 2 laid down
that the Government may, having regard to the potential
productivity of any land used principally for growing
cocoanut, arecanut, pepper, tea, coffee, rubber, cardamom,
or cashew or any other special crop, plant or tea that might
be specified by the Government by notification, levy and
collect basic tax at the rate of two, rupees per acre per
annum on such land notwithstanding the fact that such crops,
plants or trees have not begun to yield or bear and that for
time being no income is made from the land or that the
income made is less than ten rupees per acre per annum.
Explanation (I) to s. 6 laid down that for the purpose of s.
6 gross income shall mean the actual gross income or the
gross income that would be made from the land with due
diligence, whichever was higher. Thus, S. 6(2), the second
proviso thereto and Explanations I and 3 to the section
clearly disclose that this time the Legis-
399
lature taxed the land on the standard of potential
productivity instead of the ad hoc levy originally provided
in the Act of 1955 and also removed the objection as to the
absence of any remedy against assessment by providing appeal
and revision. The position, therefore, is that whereas
under the Kerala Land Tax Act, XIII of 1961, as amended in
1968 and 1969, the basic or land tax is levied on the basis
of potential productivity and yield, the tax as imposed by
the impugned Act as a tax in-addition to the basic tax is a
uniform tax at a flat rate without any regard to the
productivity of the land, potential or actual.
According to the petitioners, Peermade Hills, where their
estate is situate, falls roughly into two areas, the
Kuttikanam area .and the Periyar valley area. Though both
these areas are situate in high ranges, they differ in the
extent of their productivity and quality, the reason being
that the Periyar valley area is the basin of Periyar river.
The difference in the fertility and the quality of soil in
these two areas is sought to be illustrated by showing that
Twyford estate situate in Kuttikanam area and Haileyburia
estate situate in Periyar valley area, though under common
management, give different average yields. The average
yield in 1967 per hectare in Twyford estate was 959 Kgs.
while that of Haileyburia estate was 1542 Kgs. To show such
differences also in other areas in the State and elsewhere
the petitioners have furnished various statistics. These
statistics first,show that the average annual yield per
hectare in the tea-growing areas in Madras, Mysore and
Kerala for the year 1967 was 1394, 1178 and 1076 Kgs.
respectively. The all India average yield according to
these figures was I 1 00 Kgs. per hectare per year. The
average of tea production per hectare in Kerala State thus
compares favourably with that of the other tea growing
regions as also with the all India average. Therefore, the
tea planters in Kerala cannot be said to be backward or less
forward-looking or less venturesome than those in the other
regions. Secondly, these figures also show that the average
yield in thee different districts in Kerala itself varies
from district to district ranging from about 350 Kgs. for
the district of Ernakulam to as much as 1850 Kgs. for
Trichur district. The production figure for the whole of
the Kerala State appears to have remained steady throughout
1965 to 1967 as it varies from about 43000 Kgs. to 44000
Kgs. These figures indicate that different areas in the
State where tea is grown differ in a very large way in
productivity and fertility. These figures are taken from
the Reports of the Tea Board, and therefore, can be safely
regarded as reliable.
In the counter-affidavit filed by the State these
differences, no doubt, are not admitted. To show that such
differences do not exist only. the example of one estate,
Glennmari near Kuttikanam, is taken. It is urged that that
estate has a larger production per hectare than the
petitioners’ estate though-both happen to be situate
400
in the same area. The respondents, however, have frankly
conceded that the fertility of the land and the differences
in productivity of estates in different areas are not
relevant, for, the impugned tax is levied with reference to
the specified user to which the land is put and not to its
productivity, potential or actual.
Counsel for the, petitioners contended that the tax charged
under the Act is discriminatory and arbitrary, and
therefore, violates Art. 14. The argument was that the tax,
being an ad hoc levy uniformly imposed, merely on the basis
of the use of the land for any one or more of the seven
kinds of trees and plants selected by s 2(6) of the Act,
without any classification and without any consideration to
the situation, the kind of land, its potential productivity,
water-supply, natural or artificial, and geographical
features, falls unequally on the holders of the land. It
was submitted that this inequality arises as a result of the
absence of any rational classification, and the Act, for
that reason, suffers from the same infirmity for which in
the Moopil Nair’s case(‘) this Court struck down the
Travancore-Cochin Land Tax Act, 1955, as amended by Act X of
1957. The contention urged, on the other hand, on behalf of
the State was that by selecting the seven kinds of planta-
tions in s. 2(6), the Legislature has made an intelligible
classification amongst holders of land, that that
classification has a reasonable nexus with the object of the
Act, namely, to obtain additional revenue by imposing tax in
addition to the basic tax, that the Legislature in the
matter of taxation has a wide discretion in selecting
persons and properties for imposing a tax, that in exercise
of its power to tax, it was entitled to levy the tax , based
on certain kinds of user of land and was not bound to make a
further classification of the land according to its
potential productivity, its situation, its geographical
features, income and other such considerations.
Before we examine these contentions we think it expedient to
consider first the principle-, laid down by this Court in
the matter of the power to levy taxes of the kind we have
before us. In Moppil Nair’s case(‘), this Court laid down
the following principles : (1) that Art. 14 read with Art.
13(2) applies to a taxing statute as much as to other
statutes, and therefore, if he impugned statute, even though
a taxing one, violates Art. 14, it has to be struck down as
unconstitutional; (2) that the statute there impugned,
namely, the Travancore-Cochin Land Tax Act, 1955, as amended
by Act X of 1957, imposed a uniform tax on all lands,
whether productive or not, and without any reference to
their income, actual or potential; (3) that since the Act in
terms claimed by s. 3 thereof to be a general revenue
settlement of the State, the tax being one on land or land
revenue had to be assessed and levied on the actual or
potential pro activity of the land sought
(1) [1961] 3 S.C.R. 77.
401
to be taxed : in other words, such a tax has reference to
the income actually made or which could have been made, with
due regard to its incidence, and (4) that the inequality
writ large on the Act arose by reason of the absence of any
classification of the land on which the tax was imposed.
The argument which appears to have appealed to the learned
dissenting Judge that the Act made a classification between
holders of land according to the quantum of land held by
them and that that classification was reasonably linked with
the object of the Act to raise revenue for the State, failed
to receive the approval of the rest of the Court. The fact
that a person holds a large area of land and is taxed
according to the area he holds cannot by itself mean that in
taxing him he is meted out equal treatment as compared to a
person who holds a lesser quantity of land but of a better
and more productive quality, merely on the ground that both
hold land and are taxed according to the quantity each of
them holds. A uniform tax without consideration of its
incidence, when actually implemented must result in
inequality of treatment amongst persons similarly situated,
and therefore, would be violative of Art. 14.
In The State of Andhra Pradesh v. Nalla Raja Reddy(1) the
relevant facts were as follows : Originally two different
revenue systems prevailed in Andhra and Telengana. In the
former, the principles of Ryotwari system prevailed which
meant that lands were classified under two principal heads,
wet and dry. Lands of similar grain values were bracketed
together in orders called “tarams”, each with its own rate
of assessment, which was further adjusted in the case of dry
lands with reference to the nature and quality of water
supply. This system prevailed since times immemorial and by
reason of its being equitable had general approval. In
Telengana, the relative scale of soils was classified in
terms of annas. The existing or former rates used to be
taken as the basis for the purpose of resettlements and were
adjusted having regard to altered conditions, such as the
rise and fall of prices, increase in population etc.
Besides, the settlement officers used to fix the rates after
ascertaining what profit would be left to the cultivators.
Thus, under the system of assessment which prevailed in both
the areas, the land revenue fixed varied according to the
classification of soil based upon productivity. Later, the
Andhra Pradesh Land Revenue Assessment (Standardisation)
Act, 1952 and the Hyderabad Land Revenue (Special
Assessment) Act, 1952 were passed to standardize the rates
on the basis of price level. These two Acts increased the
rates by way of surcharge on the existing rates. In 1958,
the State Government appointed a Committee to examine the
existing system of rates of assessment. The Committee inter
alia suggested that assessment should be based on the
quality and productivity of soils, the nature of water
supply
(1) [1967] 3 S.C.R. 28.
402
and the prices. The State Legislature then -passed the
impugned Act, Andhra Pradesh Land Revenue (Additional
Assessment) and Cess Revision Act,XXII of 1962, which was
amended by Act XXIII of 1962. Under ss. 3 and 4 of the Act,
as amended, a new scheme was laid down in accordance with
which an additional assessment at 75% of the earlier
assessment was charged. But the proviso thereto laid down
that the total assessment should not in any case be less
than 50 nP. per acre per year, irrespective of the quality
and_productivity of the soil. Every acre of dry land had
thus to bear a minimum assessment of 50 nP. per acre per
year. For wet lands also, a scheme was adopted which took
no account of the quality and productivity of the soil. The
Act was challenged on the ground of discrimination arising
from the absence of classification as in the case of Moopil
Nair(1). In considering the challenge the Court observed :
“A statutory provision may offend Art. 14 of the
Constitution both by finding differences where there are
none and by making no difference where there is one.
Decided cases laid down two tests to ascertain whether a
classification is permissible or not, viz., (i) the
classification must be founded on an intelligible
differentia which distinguishes persons or things that are
grouped together from others left out of the group; and (ii)
that the differential must have a rational relation to the
object sought to be achieved by the statute in question.
The said principles have been applied by this Court to
taxing statutes. This Court in Kunnathat Tha thunni Moopil
Nair v. The State of Kerala [(1961)3 S.C.R. 77] held that
the Travancore-Cochin Land Tax Act, 1955, infringed Art. 14
of the Constitution, as it obliged every person who held
land to pay the tax at the flat rate prescribed, whether or
not he made any income out of the property, or whether or
not the property was capable of yielding any income. It was
pointed out that that was one of the cases where the lack of
classification created inequality.”
The Court observed that in the case before it the whole
scheme of ryotwari system was given up so far as the minimum
rate was concerned. A flat rate was fixed in the case of
dry lands without any reference to the quality or fertility
of the soil, and in the case of wet lands, a minimum rate
was fixed and it was sought to be justified by correlating
it to the ayacut. The Court held that that scheme of
classification was adopted without any reasonable relation
to the objects sought to be achieved, namely, fixation and
rationalisation of rates, and therefore, clearly offended
the equal protection clause.
(1) [1961] 3 S.C.R. 77.
403
In Khandige Sham Bhat v. The Agricultural Income Officer(1)
the Court reaffirmed the principles laid down in Moopil
Nair’s case(1) and observed with regard to the provisions
there impugned :
“In order to judge whether a law was discriminatory what had
primarily to be looked into was not its phraseology but its
real effect. If there was equality and uniformity within
each group, the law could not be discriminatory, though due
to fortuitous circumstances in a peculiar situation some
included in a class might get some advantage over others, so
long as they were not sought out for special treatment.
Although taxation laws could be no exception to this rule,
the courts would, in view of the inherent complexity of
fiscal adjustment of diverse elements permit a larger
discretion to the Legislature in the matter of
classification so long as there was no transgression of the
fundamental principles underlying the doctrine of
classification. The power of the Legislature to classify
must necessarily be wide and flexible so as to enable it to
adjust its system of taxation in all proper and reasonable
ways.”
The principle emerging from these decisions is thus fairly
wellsettled. While granting a fairly wide discretion to the
legislature in the matter of fiscal adjustment, the Court-
will at the same time insist that the statute in question,
like any other statute, should not infringe Art. 14 either
by introducing unreasonable or irrational classification
between persons or properties similarly situated or by a
lack of classification. Further, in examining the objection
under Art. 14 the Court has not to go by the phraseology
only of the provision under challenge, but its real impact
on persons or properties.
The challenge urged on behalf of the petitioners may now be
examined in the light of these principles. Both the title
and the preamble of Act XVII of 1960 in clear terms call the
tax one in addition, as s. 3(5) declares it, to the basic
tax, payable on lands falling under its purview, i.e.,
plantations, as defined by s. 2(6). A plantation, as
defined by s. 2(6), means the land used for any one or more
of the seven types,of trees and plants set out therein. The
tax is thus chargeable in respect of lands which are
plantations and not the rest of the lands however much their
income may be. Apart from that, as stated in the State’s
counter-affidavit, the tax is imposed on the ground of the
particular use to which the land is put and not on the basis
of its productivity or income, actual or potential. This is
so, although it is a tax in addition to the basic or land
tax levied under the Kerala Land Tax Act, XIII of 1961,
(1) [1963] 3 S.C.R. 809, 817,
(2) [1961] 3 S.C.R. 77.
404
and although that basic-tax under s. 6 of that Act depends
upon the gross income yielded by the particular land. It is
true that under the second proviso to that section, if the
land is used for growing any of the crops therein mentioned,
the Government can impose, having regard to -its potential
productivity; the basic tax at Rs. 2/- per acre, even though
the land has not yet begun to yield or bear the crop and no
income has yet begun to be made therefrom. By subsequent
amendment the rate was changed to Rs. 4.94 per hectare, but
the principle of potential productivity was maintained. The
additional tax imposed by Act XVII of 1960, on the other
hand, is on the same land provided it is used for growing
any one or more of the specified trees or plants, originally
at the uniform rate of Rs. 8/- per acre but now enhanced by
Act XIX of 1967 to Rs. 501/- per hectare, i.e., Rs. 20 per
acre. As already stated, the Amendment Act deleted the word
‘additional’ but the deletion makes no difference as the tax
is still in addition to the basic or land tax and must,
therefore, partake its character, both taxes being taxes in
respect of the same land, where the land is plantation
within s. 2(6). Thus, so far as such ‘lands are concerned,
the basic tax on them is assessed according to their
productivity or income. But the tax under Act XVII of 1960,
as amended by Act XIX of 1967, is imposed in respect of them
as an ad hoc uniform tax, irrespective of the kind of their
soil or their capacity etc. and only for the reason of their
particular user. Prima facie, the incidence of such a tax by
reason of its uniformity is bound to be unequal on persons
similarly situated and would, therefore,, be hit by the
equality clause in Art. 14. Even assuming that the basic
tax is a revenue assessment and the additional tax is not,
it would still make no difference in its unequal incidence
on these whose lands by their particular user are
plantations. In other words, the burden of the tax on
persons situated in similar circumstances, i.e., those whose
lands are plantations, would be unequal. depending upon the
kind of soil, the geographical situation, water supply,
elevation and other relevant factors touching the lands they
hold. The additional tax is by no means low as it is, after
the passing of the amendment Act XIX of 1967, Rs. 50 per
hectare, equivalent to Rs. 20 per acre. A person holding
1,000 acres of land of inferior soil would, by reason of
such, an ad hoc tax, be bound to be hit harder than the one
holding 1,000 acres of superior land with higher fertility
or productivity. Such a result would not occur if the land
is classified and the incidence of the tax is graded
according, to its productivity and other relevant factors,
In support of the Act it was argued that the impugned Act
not only makes a classification between those who hold lands
which are plantations and those who hold lands which are not
plantations, but also makes a further classification within
that classification by the method provided for calculating
the extent of plantations in Sch. 11. That argument does
not appear to be
405
correct. The Schedule only provides the methods for
calculating the extent of the plantations : (1) by means of
quotients and (2) where tea and cardamom plants are
cultivated by the actual extent of the land used for those
purposes. But the Schedule does not solve the difficulty.
A piece of land in one area may have a certain number of
trees or plants of one or more of the specified categories
to make it a plantation. But the incidence of the tax in
respect of it would be unequal as compared to an-other land
situate elsewhere by reason of the latter’s better situation
or fertility even if the number of plants or trees of the
specified kind are the same, depending upon the situation
and the capacity of the two lands. In such a case the very
uniformity of the tax is bound to result in discrimination
on account of the relative potentiality of the two lands not
being taken into account, and the lands not being classified
accordingly. It is, therefore, difficult to say that the
Schedule, intended only for calculating the extent of the
plantations, seeks to achieve equality of treatment between
one kind of plantation and another or between plantations of
the same kind, if the principle of their yield or income,
actual or potential, is not taken into account. How is it
possible to say that the uniform burden of Rs. 50/- per
hectare in the case, say of cocoanut, tea, coffee or
cardamom plantations, is reasonably equal, when the
potential yield of each such plantation is not taken into
consideration ? The’ same result must also follow amongst
holders of the same kind of plantations if the principle of
yield or income is discarded. Thus, Sch. 11 only provides
the two methods, of calculating the extent of the plantation
and does, not make a Classification within a classification
as urged. The only classification made is between those
whose lands fall under the definition of ‘plantation’ and
those whose lands do not. All those who held lands which
are plantations are made liable to pay the tax at the
uniform rate of Rs. 501/- per hectare, no matter what kind
of crop, out of the seven kinds mentioned in the Act, is
cultivated by them. without regard to the fact that one kind
may be more valuable than the other and irrespective of
their situation, their income-yielding capacity and other
factors.
The result of such uniform imposition is that tea planters,
who hold lands in Ernakulam, Trichur and Kottayam districts,
would pay the same amount of tax per hectare although the
average yield per hectare in these districts for the years
1965 to 1967 was about 350, 1825 and 1050 Kgs. respectively.
The difference in yield in these different districts must
clearly be due to the difference in the soil, situation and
such other factors, for, it is nobody’s case (at least not
made out in the counter-affidavit of the respondents) that
the cultivators in Ernakulam district use inferior seed or
are less venturesome than those in Kottayam and Trichur
districts. Such a difference in the average yield per hec-
L7Sup.CI(NP)/70-11
406
tare occurs also in other tea growing districts, namely,
Cannanore, Palghat, Kozhikode, Trivandrum and Quilon, whose
average yield per hectare during the years 1965 to 1967 was
950, 1490, 1575, 975 and 650. Kgs. respectively. Since
these figures are from the statistics prepared by the Tea
Board, they cannot be disputed. That such differences in
the average yield occur also in the different districts of
the States of Madras and Mysore is also clear. Surely, they
cannot arise because the cultivators of one district are
more adventurous or more technology-minded than those of the
other districts. The differences in the yield must,
therefore, be attributed to the differences in the soil,
situation, water supply, rainfall etc.
Imposing a uniform rate of tax in respect of lands where tea
is grown, without classifying them on the basis of their pro-
ductivity, actual or potential, and without differentiating
the inferior from the superior kind of soil or without
taking into consideration the fact of some of these lands
being situated in more advantageous position than the rest,
must, therefore, inevitably result in unequal incidence of
the tax on those who hold those lands. Therefore as in the
case of Moopil Nair(1) the present case is also one where
inequality emerges as a result of imposing an ad hoc tax,
uniformly levied without making any rational or intelligible
classification. There is no indication in the Act and none
was even sought to be shown as to how and on what basis the
uniform rate of Rs. 501- per hectare was fixed and whether
it had any relation to the capacity of those who hold lands
with different average yields ranging from 350 Kgs. per
hectare in Ernakulam to about 1850 Kgs. per hectare in
Trichur, in addition to the basic tax also payable by them.
Obviously, the tax imposed in the manner pointed out above
must result in inequality among the holders who use their
lands for tea growing though they are similarly situated.
The principles laid down in Moopil Nair’s case(1) approved
and confirmed in subsequent decisions and which are binding
upon us, apply to the impugned statute.
But in Thuttampara Planting Co. v. Tahsildar(2) a learned
Single Judge of the Kerala High Court repelled the
contention as to the invalidity of Act XVII of 1960 and held
that the decision in Meopil Nair’s case(3) did not apply as
by adopting the quotients in Sch. 11 the impost had been
related to the potentiality of the land and its possible
yield. As already pointed out, even the counter-affidavit
filed by the State in the present petitions, does not claim
that the additional tax imposed under this Act takes into
account the potentiality of the land or is possible yield.
It, on the other hand, asserts in -plain language that the
tax is levied by reason only of the particular use to which
the land is put and
(1) [1961] 3 S.C.R. 77.
(2) [1964] K.L.T. 47.
407
which makes it fall within s. 2(6). If potentiality of the
land and its possible yield had been taken into
consideration, the amount of tax could not have been uniform
as its quantum would have depended on its quality, situation
and other factors. Indeed, in Essa Ismail v. State of
Kerala(1) a Division Bench of that very High Court held that
what Act XVII of 1960 did was to tax lands comprised in
plantations, not on the basis of their productivity but an
the basis of their user. But the Division Bench held that
the Act was “just and equitable”, and therefore, was not hit
by Art. 14. At page 623 of the Report, the learned Judges
observed that the yield would vary from crop to crop and
place to place, but “it is not the productivity of the soil
that forms the foundation of the tax but its user in a
specific way for a specific purpose”. Though these two
decisions cited Moopil Nair’s case (2) , neither of them
considered the result of the lands being uniformly taxed
without classifying them according to their potentiality so
that the incidence of the tax may be just and equitable.
How a tax imposed uniformly without regard to the
potentiality of the property taxed and without any
classification on any other just basis works inequality is
illustrated by the scrutiny by this Court of the Kerala
Building Tax Act, XIX of 1961 in the State of Kerala v. Haji
K. Kutty(3). After noting the uniform rate of the tax
levied according to the floor area of a building but without
taking into account its kind or its potential yield, the
Court observed :
“For determining the quantum of tax the sole test is the
area of the floor of the building. The Act applies to the
entire State of Kerala, and whether the building is situate
in a large industrial town or in an insignificant village,
the rate of tax is determined by the floor area; it does not
depend upon the purpose for which the, building is used, the
nature of the structure, the town and locality in which the
building is situate, the economic rent which may be obtained
from the building, the cost of the building and other
related circumstances which may appropriately be taken into
consideration in any rational system of taxation of
building.”
At page 380 the Court further observed :
“But in enacting the Kerala Buildings Tax Act no attempt at
any rational classification is made-As already observed, the
Legislature has not taken into consideration in imposing the
tax the class to which the building belongs, the nature of
construction, the purpose for which it is used, its
situation, its capacity for profitable user and other
relevant circumstances which
(1) I.L.R. [1965] 2 Ker- 619 (2) [1961] 3 S.C.R. 77.
(3)A.I.R. 19 S.C. 378.
408
have a bearing on matters of taxation. They have adopted
merely the floor area of the building as the basis of tax
irrespective of all other considerations. Where objects,
persons or transactions essentially dissimilar are treated
by the imposition of a uniform tax, discrimination may
result, for, in our view, refusal to make a rational
classification may itself in some cases operate as denial of
equality.”
On this reasoning the charging section of the Act impugned
in that case was held violative of Art. 14 and therefore
bad.
The same reasoning is, in our view, apposite so far as the
impugned tax is concerned, for, the tax is uniformly levied
merely on the footing of the land being used for growing
tea, without any regard to its potentiality, situation, the
kind of tea which can suitably be grown at a particular
place, its geographical and other features etc. No doubt,
the State in exercise of the taxing power can select persons
and objects for taxation but if it is found that within the
range of that selection the law operates unequally by reason
either of classification or its absence, such a provision
would be hit by the equality clause of Art. 14. (see East
India Tobacco Co. v. State of Andhra Pradesh.(1) Even
amongst the selected plantations inequality as a result of
uniformity of tax must result because it is possible that
the user of the land for one specified purpose may give a
better and a more valuable yield than the user of another
land though situated in the same area for another specified
purpose. This, in our view, has happened in so far as the
tax on tea plantations, with which only we are concerned in
these petitions, is concerned, and therefore, to the extent
that Act XVII of 1960, as amended by Act XIX of 1967,
imposes the tax on holders of tea plantations, it is
violative of Art. 14 and is, therefore, void.
Accordingly, the petitions are allowed with costs.
ORDER
In accordance with the opinion of the majority, the
petitions are dismissed with costs.
(1) [1963] 1.S.C.R. 404.
409