IN THE HIGH COURT OF KERALA AT ERNAKULAM
OP.No. 30509 of 1999(F)
1. VIKRANT TYRES LTD.
... Petitioner
Vs
1. STATE OF KERALA
... Respondent
For Petitioner :SRI.M.PATHROSE MATHAI
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
Dated :19/12/2007
O R D E R
C.N. RAMACHANDRAN NAIR, J.
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O.P. NO. 30509 OF 1999
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Dated this the 19th day of December, 2007
JUDGMENT
Petitioner is a public limited company which was in arrears of
sales tax for the assessment years 1984-85 to 1987-88. For default in
payment of sales tax, petitioner was liable to pay interest under Section
23(3) of the KGST Act. However, Section 23A(1) introduced to the
Act provides for 60% waiver of interest to dealers ” other than a
company not being a small scale industrial unit or a works contractor
referred to in sub-section (7AAAA) of section 7″. Petitioner’s
grievance is that denial of Amnesty benefit in the form of grant of
reduction of interest to public limited companies is arbitrary,
discriminatory and violative of Art. 14 of the Constitution of India.
O.P. is filed seeking the following reliefs:
(i) to issue an appropriate writ or order declaring that part
of Section 23A(1) reading “other than a company not
being; a small scale industrial unit or a works contract
referred to in sub-section (7AAAA) of Section 7” as
unconstitutional, void and of no effect.
(ii) to issue a ;writ of mandamus or other appropriate ;writ
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or direction to the respondents to grant or extend the benefit
of reduction of 60% of the amount of sinterest accrued on
the tax for the assessment years 1984-85, 1985-86 1986-87
and 1987-88 pending in dispute before the Kerala Sales Tax
Appellate Tribunal.
(iii) to issue a writ of mandamus or other appropriate writ
or order restraining the respondents frosm taking any
coercive action or revenue recovery proceedings for
recovery of the disputed interest;
(iv) to grant interest or other reliefs as may deemed just and
necessary by this Honourable Court.”
2. I have heard senior counsel Sri. Pathros Matthai appearing for
the petitioner and Government Pleader appearing for the respondents.
Counsel for the petitioner has relied on the decisions of the Supreme
Court in STATE OF KARNATAKA V. M/S. HANSA
CORPORATION, (1980) 4 SCC 697, KERALA HOTEL &
RESTAURANT ASSN. V. STATE OF KERALA, 77 STC
253,FEDERATION OF HOTEL & RESTAURANT ASSN. OF INDIA
V.UNION OF INDIA, 74 STC 102, ELEL HOTELS AND
INVESTMENTS LTD. V. UNION OF INDIA, 74 STC 146, and
KHADI & VILLAGE SOAP INDUSTRIES ASSN. v. STATE OF
HARYANA, 95 STC 355, and contended that the provision to the
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extent indicated in relief (i) above is discriminatory and liable to be
interfered with. Government Pleader on the other hand contended that
petitioner does not belong to class of “other dealers” who are granted
the benefit of reduction of 60% of interest and consequently the
legislation does not suffer from any infirmity hit by Art. 14 of the
Constitution of India.
3. Even though the decisions relied on by counsel for the
petitioner are not exactly on the facts of this case, the principle laid
down by the Supreme Court is uniform. The test to be applied is
whether there is intelligible differentia between those grouped together
and those left out and whether the classification so made has a rational
nexus to the object sought to be achieved. In this case, the
classification is between companies on the one side and “other dealers”
under the KGST Act including small scale industrial units, and works
contractors, on the other side. So far as the petitioner is concerned,
petitioner is a public limited company whose business operations
spread across the country. However, small scale industrial units
whether owned by companies or not are noway comparable with large
industrial companies like the petitioner. Therefore I notice that there is
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a reasonable difference between the companies on the one hand and
small scale industrial units on the other, whether run by companies or
not. The “other dealers” covered by the Act who are entitled to rebate
of interest are proprietorship concerns, owned by individuals,
partnership firms, etc. Companies are formed under the Companies
Act and they are subject to strict discipline in regard to maintenance
and auditing of accounts, holding of shareholders’ meetings, etc. Most
of the companies like the petitioner are professionally managed and
therefore legal compliance under the Act are expected from such
companies. In fact any violation of statutory provision does not entitle
any benefit to the employees in management of the company and
consequently employees have no justification to commit violation of
statutory provisions. Therefore I am of the view that companies are not
comparable with individuals or partnership firms or the like. The
object of the amendment in granting reduction of interest is to recover
the entire arrears of tax with balance interest. If companies do not
make payment, so many remedies are available including winding up.
Moreover the object of legislation is not to take lightly the non-
compliance of statutory provisions in regard to payment of tax by
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professionally managed companies. Therefore I do not find companies
like the petitioner are comparable with other dealers and so much so the
classification cannot be said to be arbitrary. The twin tests for validity
of statute under various decisions of the Supreme Court are satisfied in
this case because the incentive offered is to recover tax from
individuals, partnership firms, etc., and so far as companies are
concerned, Government expects statutory compliance and for
inforcement they do not give any incentive. Besides this, it is to be
noted that statutory provision remains unchallenged by other
companies though large number of companies are similarly aggrieved
like the petitioner in regard to impugned legislation. Therefore I uphold
the statutory provision and dismiss the O.P. However, this does not bar
the petitioner from claiming consequential benefits in the form of
reduction if tax gets reduced in appeal.
(C.N. RAMACHANDRAN NAIR)
Judge
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