Bombay High Court
Federation Of Associations Of ... vs State Of Maharashtra And Another on 7 July, 1994
JUDGMENT Dr. B.P. Saraf, J.
1. As both these writ petitions raise a common question of law, they are taken up for bearing together and disposed of by a common judgment.
2. Writ Petition No. 1259 of 1994 has been filed by the Federation of Associations of Maharashtra, a federation of traders' associations and one Virendra Raichand Shah, who holds a trade mark "Roopam" and markets his products under the said trade mark. Writ Petition No. 1195 of 1993 has been filed by one Shandar Enterprise and its partner. The said firm is also holder of a trade mark or a patent. For the sake of convenience, we will refer to all the petitioners as "petitioners".
3. The petitioners have challenged the constitutional validity of the Explanation to section 2(26) of the Bombay Sales Tax Act, 1959 ("the Act') as inserted by the Bombay Sales Tax (Amendment and Validating Provisions) Act, 1988 (Maharashtra Act 22 of 1988) (hereinafter referred to as "the Validating Act") with effect from April 22, 1988. By the said Explanation sales of goods specified therein have been taken out of the definition of "resale" in clause (26) of section 2 of the Act. Clause (26) of section 2 of the Act defines "resale". Prior to the impugned amendment, it read as under :
Section 2(26) : "resale", for the purposes of sections 7, 8, 8A, 9, 12, 13 and 13AA means a sale of purchased goods -
(i) in the same form in which they were purchased, or
(ii) without doing anything to them which amounts to, or results in a manufacture, and the word "resale" shall be construed accordingly.
By section 2(a)(ii) of the Bombay Sales Tax (Amendment and Validating Provisions) Act, 1988, the following Explanation was added to the above definition of "resale" in section 2(26) of the said Act with retrospective effect from April 22, 1988 :
"Explanation. - For the purposes of clauses (i), (ii) and (iii) of section 8, a sale of purchased goods other than declared goods, shall not be deemed to be a resale, -
(i) if the seller holds a trade mark or a patent in respect of the goods sold, or if the seller holds a patent in respect of the method or process of manufacturing the goods sold; or
(ii) if the seller is entitled to use a trade mark or a patent in respect of the goods sold, or if the seller is entitled to use a patent in respect of the method or process of manufacturing the goods sold;"
To properly appreciate the controversy, it is expedient to set out section 8 of the Act which provides for levy of sales tax on goods specified in Schedule "C" to the Act. Section 8, so far as relevant, reads :
Section 8 : Single point levy of sales tax on goods specified in Schedule C. - There shall be levied a sales tax on the turnover of sales of goods specified in Schedule C at the rate set out against each of them in column 3 thereof, but after deducting from such turnover, -
(i) resales of goods on the purchase of which the dealer is liable to pay purchase tax under section 14;
(ii) resales of goods, purchased by the dealer on or after the appointed day from a registered dealer, otherwise than on a declaration furnished under section 11 or 12, if the requirements of section 12A are satisfied :
Provided that, resales of goods .......
(iii) ..........
(iv) ................"
In the context of section 8 set out above, definition of "resale" in section 2(26) of the Act and the amendment made to it by the Validation Act, 1988, assumes importance. After the amendment of section 2(26) by the Validation Act of 1988, sale of purchased goods other than declared goods is not deemed to he resale if the seller holds a trade mark or a patent in respect of the goods sold or holds a patent in respect of the method or process of manufacturing the goods sold or is entitled to use a trade mark or a patent in respect of the goods sold, or is entitled to use a patent in respect of the method or process of manufacture of the goods sold. As a result, sales of purchased goods by a seller falling within the Explanation are now subject to tax in the hands of such dealer.
4. Section 42 of the Act empowers the State Government to frame rules to provide, inter alia, for drawback, set-off or refund of the whole or any part of the tax paid or levied in respect of any earlier sales or purchases of goods under the Act to the purchasing dealer. In exercise of this power, in the light of the amendment of the definition of section 2(26) read with section 8 of the Act, the State of Maharashtra inserted with effect from April 22, 1988, rule 42H in the Bombay Sales Tax Rules, 1959 ("the Rules"), to provide for drawback, set-off, refund, etc., of tax paid on goods purchased by dealers holding a trade mark or a patent. It reads :
42H. Drawback, set-off, etc., of tax paid on goods purchased by a dealer holding a trade mark or a patent. - (1) In assessing the amount of tax payable by a registered dealer (hereinafter in this rule referred to as "the claimant dealer") for any period on his sales of such taxable goods (not being declared goods) in respect of which he holds a trade mark or a patent, the Commissioner shall, in respect of his purchases of such goods or in respect of his purchases of the goods referred to in sub-clause (ii) of clause (a) of sub-rule (2), grant him a drawback, set-off or, as the case may be, a refund of the aggregate of the sales (sic., sales tax) determined in accordance with the provisions of rule 44D, subject to the conditions, restrictions and reductions mentioned in sub-rule (2).
(2)(a)(i) the goods purchased have been sold by the claimant dealer within a period of nine months of such purchase or within a further period of three months thereafter; or (ii) the goods purchased have been used in the packing of such goods which are referred to in sub-clause (i) and on the purchase of which set-off under this rule is admissible and such goods referred to in sub-clause (i) so packed have been sold within a period of nine months of such purchase of the goods used in packing or within a further period of three months thereafter;
(b) the Commissioner shall in respect of the sale after nine months of the date of purchase but within the aforesaid further period of three months, reduce the amount of drawback, set-off or, as the case may be, refund, by 1/8th thereof or rupees ten whichever is more;
(c) the claimant dealer has not been allowed deduction under clauses (i), (ii) or (iii) of section 8 in respect of his sales referred to in sub-clause (i) of clause (a).
Explanation I. - For the purpose of this rule, the expression "sale" shall mean a sale of purchased goods, -
(i) in the same form in which they were purchased, or
(ii) without doing anything to them which amount to, or results in, a manufacture.
Explanation II. - For the purpose of this rule and for the purpose of Explanation I the expression "sale" shall include a sale in the course of inter-State trade or commerce and a sale covered by sub-section (1) of section 5 of the Central Sales Tax Act, 1956 (LXXIV of 1956) but shall not include a sale-covered by sub-section (3) of section 5 of the Central Sales Tax Act, 1956.
A reading of the above rule, particularly sub-rule (1) thereof, makes it clear that a dealer holding a trade mark or a patent is granted drawback, set-off, etc., of tax paid on goods purchased by him in assessing the amount of tax payable by him on sales of such goods in respect of which he holds a trade mark or a patent.
On a conjoint reading of section 8, amended section 2(26) of the Act and rule 42H of the Rules, the following position emerges in respect of levy of sales tax on goods specified in Schedule C to the Act :
(i) Sales tax is levied on the turnover of sales of goods after deducting from such turnover resales of goods purchased from a registered dealers. In other words, no sales tax is levied on resale of goods purchased from registered dealers.
(ii) So far as a turnover of sales of goods of a person holding a trade mark or a patent is concerned, he cannot claim deduction of the resales of goods purchased by him from registered dealers in view of the Explanation to section 2(26) of the Act which provides that for the purpose of section 8, a sale of purchased goods by such person shall not be deemed to be a resale. As a result, such a dealer shall be liable to pay sales tax also on the turnover of goods purchased by him from registered dealers.
(iii) To avoid incidence of double taxation on the very same goods, rule 42H provides for drawback, set-off or refunds of the whole or any part of the sales tax determined in accordance with the provisions of rule 44D in respect of his purchases of such goods.
(iv) As a result, the dealer who holds a trade mark or a patent, in effect pays sales tax on his turnover reduced by the purchase price of such goods.
The above position will be clear from the following example :
A trade mark holder purchases certain goods for a sum of Rs. 100 and pays sales tax of Rs. 10 thereon calculated at the rate of 10 per cent. If the said goods are sold by him for Rs. 150, he will be assessed in respect of his turnover of Rs. 150 and sales tax amounting to Rs. 15 will be levied on him on the said turnover calculated at the rate of 10 per cent. He will, however, get set-off of the sum of Rs. 10 paid by him by way of sales tax at the time of purchase under rule 42H of the Rules. Thus the net sales tax liability on him in respect of the turnover of Rs. 150 is Rs. 5 only. Same will be the result if the purchase price of such goods is deducted outright from the sale price. In that case, his net taxable turnover will be Rs. 150 - Rs. 100, i.e., Rs. 50 and sales tax thereon Rs. 5.
5. It is evident from the above illustration that the Legislature intended to levy tax on goods sold by a dealer holding a patent or trade mark in the hands of such a dealer. To avoid the hardship that may be caused by double taxation, the very same goods having been already taxed in the hands of the dealer from whom such dealer had purchased it, provision has been made in rule 42H for refund to him of the amount which was paid by him to the first seller at the time of purchase. The element of double taxation has thus been eliminated by rule 42H.
6. However, the fact remains that though no tax is payable by dealers in general on sales of goods purchased from a registered dealer on payment of tax, tax is payable when such goods are sold by a dealer holding a patent or trade mark. Undoubtedly, the sale price of the goods in the later case will ordinarily be higher and, as such, the sales tax will be payable on such higher amount. Evidently, for the purpose of levy of sales tax, the Legislature has classified dealers holding patent or a trade mark and dealers not holding such patent or trade mark into two categories. It is this classification which is sought to be challenged by the petitioners. The challenge is on the ground of lack of legislative competence, violation of articles 301 and 304 of the Constitution and discrimination amounting to violation of article 14 of the Constitution.
7. The submission of Mr. Joshi, learned counsel for the petitioners, is that the levy of sales tax on the turnover of dealers holding a patent or a trade mark is not a levy of sales tax but in effect a tax on user of a patent or a trade mark. It was submitted by the learned counsel that the scheme of the Act, which is evident from section 8 of the Act, is to provide single point levy in respect of the sales of goods specified in Schedule "C" to the Act. The Explanation to the definition of "resale" in section 2(26) of the Act, according to him, goes counter to it as it purports to provide for double point levy in respect of certain sales. Counsel also submits that if we look at the pith and substance of the provision of section 2(26) as amended, it is clear that it is a tax on user of the patent or the trade mark and not a levy of tax on sales and, as such, it is beyond the legislative competence of the State Legislature. The learned counsel also submits that the levy of tax on the resales made by dealers holding patent or trade mark amounts to unreasonable restriction on the free-flow of trade, commerce and intercourse and hence it is violative of article 301 of the Constitution. Counsel further submits that the impugned provision is also not saved by article 304(b) of the Constitution as the Bill in respect thereof had not been introduced with the previous sanction of the President as contemplated by the proviso to article 304(b). Reliance is placed in this connection on the decision of the Supreme Court in Abdulkadir v. State of Kerala . Further submission of the counsel is that the classification made between dealers holding a patent or a trade mark and other dealers is discriminatory, irrational and has no nexus to the object of the Act. Reliance is placed in support of this contention on the decision of the Supreme Court in Arya Vaidya Pharmacy v. State of Tamil Nadu 1989 173 STC 346.
8. In reply, Mr. Andbyarujina, the learned Advocate-General appearing for the State, submits that the impugned provision is fully within the legislative competence of the State Legislature; it does not impose any restriction on freedom of trade or commerce within the meaning of article 301 of the Constitution and there is no violation of article 14 of the Constitution in as much as the classification of dealers made by the Legislature is reasonable and has a clear and direct nexus with the object of the Act. The learned Advocate-General relied on the decision of the Supreme Court in Polaki Motors v. State of Orissa [1993] 88 STC 259 in support of his first contention. So far as the argument based on the pith and substance theory is concerned, the learned Advocate-General submitted that the said theory has no application in the instant case because the tax in question is out-and-out a tax on sales of goods by a dealer and has nothing to do with the user of a trade mark. Reference to trade mark or a patent appears only for the purpose of classifying dealers into two categories, i.e., dealers holding such patent or trade mark and other dealers. The learned Advocate-General also submitted that the enactment in question being purely and exclusively for the purpose of levy of sales tax on the turnover of dealers, even if there is an incidental encroachment on any other field (though in the instant case, according to him, there is no such encroachment), it will not affect the validity of the enactment. In this connection, the learned Advocate-General referred to para 22.26 at page 1908 of Seervai's Constitutional Law of India (3rd Edition), Volume II. So far as the violation of article 301 is concerned, the submission was that it is well-settled that levy of tax per se does not impede free-flow of trade or commerce and in the absence of any material to show that the particular enactment or taxing measure has acted as impediment on free-flow of trade or commerce, the challenge on that count cannot stand. Reliance was placed in this connection on the decision of the Supreme Court in Vrajlal Manilal & Co. v. State of Madhya Pradesh . So far as the question of discrimination is concerned, the submission of the Advocate-General was that the State has wide discretion in selecting the persons or objects it will tax - it is allowed to pick and choose, objects, persons, methods and even rates of taxation, if it does so reasonably. The submission is that it is only when the law operates unequally within the range of selection and it cannot be justified on the basis of valid classification that it will be violative of article 14. The learned Advocate-General submitted a chart before us containing data supplied by the assessing officers of the turnover of the 13 registered dealers holding patents and trade marks for the years 1988-89, 1989-90 and 1990-91. The said chart contains the turnover of the purchases, turnover of sale's of those goods by the dealer holding trade mark, addition to the value and percentage of addition. The said chart is set out below :
INFORMATION REGARDING VALUE ADDITION IN SALE PRICE DUE TO TRADE MARK AND TAX RECEIVED DUE TO AMENDMENT (DATA SUPPLIED BY ASSESSING OFFICERS)
------------------------------------------------------------------------
Sr. Name of Year T.O. T.O. of sale
No. company of R.D. of R.D.
and regi- purchases purchases
stration on trade mark
No.
1 2 3 4 5
------------------------------------------------------------------------
Rs. Rs.
1 M/s. Colgate Palmolive 88-89 1,86,98,291 2,01,58,725
NIA-169 89-90 2,38,64,584 2,84,55,332
90-91 4,70,59,505 6,01,09,403
2 M/s. Berger Paints 89-90 13,06,345 14,70,415
NIA-1017 90-91 8,60,870 13,62,770
3 M/s. Hindustan Ciba- 88-89 12,28,45,553 16,92,10,787
Geigy NIA-1070 89-90 2,31,57,375 3,13,24,486
90-91 2,57,63.250 5,61,45,316
4 M/s. Indexport Ltd. 88-89 1,05,88,590 1,27,68,326
(Divn. of Hindusthan 90-91 4,11,53,693 5,18,07,246
NIA-10380
5 M/s. Methodex System 88-89 11,82,045 35,43,238
Pvt. Ltd. 89-90 15,96,736 22,54,201
NIA-20098 90-91 20,78,265 25,50,358
6 M/s. Blue Star 89-90 51,71,562 73,09,343
NIA-1469 90-91 8,05,641 9,72,009
7 M/s. Kissan Products 90-91 1,23,70,536 1,85,70,659
NIA-21767
8 M/s. Benzer 89-90 1,83,77,043 2,82,08,891
NID-31024 90-91 2,26,94,805 3,69,55,868
9 M/s. Benzer Classic 90-91 1,93,81,395 2,42,03,900
NID-31025
10 M/s. Intereraft 89-90 31,02,853 1,12,02,698
NID-28069 90-91 20,73,111 1,83,26,254
11 M/s. Balsara Hygiene 88-89 27,46,105 49,67,404
Products Ltd. 89-90 74,58,598 1,09,60,169
NIA-26586 90-91 43,12,503 73,22,381
12 M/s. Bata India Ltd. 89-90 66,55,030 5,23,52,736
NIA-1339 90-91 44,33,496 91,59,330
13 M/s. Bradma of India 89-90 32,60,238 44,73,158
NIA-6989
------------------------------------------------------------------------
------------------------------------------------------------------------
Value Percentage Tax Set-off Net tax
addition of value leviable accrued
addition due to
amendment
6 7 8 9 10
------------------------------------------------------------------------
Rs. Rs. Rs. Rs.
14,57,434 8 per cent 16,12,458 14,95,803 1,16,595
45,90,748 9 per cent 19,09,167 18,93,605 15,565
1,30,49,978 28 per cent 48,08,759 34,85,655 13,23,104
1,64,070 13 per cent 2,20,563 1,39,964 80,599
5,01,300 58 per cent 2,04,416 92,229 1,12,187
4,63,65,234 38 per cent 60,84,761 11,41,058 49,43,703
81,67,111 35 per cent 14,88,518 9,11,884 5,76,634
3,03,82,066 117 per cent 21,59,436 10,30,530 11,28,906
21,79,736 21 per cent 13,94,151 7,84,340 6,09,811
1,06,53,553 26 per cent 68,78,367 33,14,487 35,63,880
23,61,193 200 per cent 5,31,486 78,803 4,52,683
6,57,466 41 per cent 3,38,131 1,06,449 2,31,682
4,72,093 23 per cent 3,82,554 1,38,551 2,44,003
21,37,781 41 per cent 6,76,536 4,82,514 1,94,022
1,66,368 21 per cent 97,200 80,564 16,636
62,00,123 50 per cent 39,78,268 11,14,809 28,63,459
98,36,846 54 per cent 11,36,817 6,43,471 4,93,346
1,42,61,063 63 per cent 14,64,819 8,52,846 6,11,973
48,22,505 25 per cent 9,39,436 7,28,521 2,10,915
80,99,845 261 per cent 4,62,640 77,188 3,85,452
1,62,53,143 783 per cent 5,19,456 38,893 4,80,563
22,21,299 81 per cent 3,97,392 3,39,904 57,488
35,01,571 47 per cent 10,05,454 6,94,452 3,11,002
30,09,878 70 per cent 5,85,790 3,59,514 2,26,276
4,56,97,706 686 per cent 41,88,219 3,39,262 38,48,957
47,25,834 107 per cent 9,15,933 3,44,620 5,71,313
12,12,920 37 per cent 3,96,629 1,35,205 2,61,424
------------------------------------------------------------------------
The submission is that the classification between general dealers of purchased goods and dealers of purchased goods who hold patent or trade mark is a reasonable classification which has a rational connection or nexus with the object of the Act. It is made with the object of checking the practice of paying tax on the purchase value which is always lesser, sometimes much lesser than the value realised on the sale thereof on a patent or a trade mark.
9. We have carefully considered the rival submissions. We shall first deal with the challenge on the ground of lack of legislative competence of the State to legislate in respect of dealers holding patent or trade mark. The main ground of challenge is that by classifying dealers holding a patent or a trade mark separately from other dealers and making them liable to pay tax on the turnover of goods sold by them while allowing other dealers to go away by paying taxes on the turnover of the purchase of the goods made by them, tax has been levied in effect on the user of a patent or a trade mark and not on sale. The submission, in other words, is that patents and trade mark fall in entry 49 of List I of the Seventh Schedule to the Constitution and only Parliament has the power to legislate in respect thereof. Entry 49 of List I reads :
"Patents, inventions and designs; copyright; trade marks and merchandise marks."
Sales tax falls under entry 54 of List II of the Seventh Schedule which empowers the State Legislature to enact laws relating to "taxes on the sale or purchase of goods other than newspapers subject to provisions of entry 92A of List I". The question that falls for determination is whether the levy of sales tax on the sales of purchased goods by a dealer holding a patent or a trade mark falls within the item 49 of List I or item 54 of List II of the Seventh Schedule to the Constitution. On perusal of the Explanation to section 2(26) of the Act and its effect, it is abundantly clear that it is not a law relating to a patent or a trade mark, it is a law enacted by the State to impose tax on sales of purchased goods by the dealers who are holders of a patent or a trade mark. The holding of a patent or a trade mark is only a criterion for classification of dealers into a category separate from general dealers. The law does not deal in any way with patents or trade marks as such. It deals with sales tax only. The impugned provision clearly falls within entry 54 of List II of the Seventh Schedule. It is not necessary for that purpose to resort to the theory of pith and substance. In our opinion, Explanation to section 2(26) does not in any way deal with items falling under entry 49 of List I. It is not a legislation in regard to patents or trade marks. It does not even incidentally encroach on entry 49 of List I. However, even if it would have been so, the doctrine of pith and substance would have applied and once it is held that in pith and substance it is a law to levy sales tax, incidental reference to patents or trade marks or its effect on dealers holding patents or trade marks would not affect its validity. Reference may be made in this connection to the decision of the Privy Council in Prafulla Kumar Mukherjee v. Bank of Commerce Limited, Khulna [1947] FCR 28; AIR 1947 PC 60 and Federation of Hotel & Restaurant Association of India v. Union of India . Reference may also be made to the decision of the Supreme Court in Chamarbaugwalla's case . In this case, it was contended that the tax levied by the Bombay Lotteries and Prize Competitions Act, 1948, was a tax on the business of the respondents since the respondents were taxed on the entry fee received on each entry in the competition. It was held by the Supreme Court that ultimately the tax was a tax on each entry fee received from each individual competitor from Bombay and the collection of the tax from the promoters after the entry fee came into their hands was nothing but a convenient method of collecting the tax. In view of the above discussion, we do not find any merit in the challenge on the ground of legislative competence of the State.
10. We now turn to the challenge on the ground of violation of articles 301 and 304 of the Constitution. In this connection, it may be expedient to observe that question of compliance with the requirements of article 304 would arise only if it is held that the imposition of tax violates article 301 of the Constitution. For that purpose, it has to be established that the impugned levy of sales tax on dealers holding trade mark or patents tantamounts to restriction or impediment which directly or immediately impede the free-flow of trade, commerce and intercourse within the meaning of article 301 of the Constitution.
11. We have carefully considered the submits ion of Mr. Joshi, learned counsel for the petitioner, in this regard. We fail to appreciate how in the instant case the levy of sales tax can amount to restriction on the free-flow of trade, commerce and intercourse. True it is that a tax may, in certain cases, directly and immediately restrict or hamper the free-flow of trade but equally true is the proposition that every imposition of tax does not do so. As observed by the Supreme Court in State of Kerala v. Abdul Kadir "every case must be judged on its own facts and on its own setting of time and circumstance". In the instant case, we do not find any material before us to show that by the impugned levy of sales tax on sales of purchased goods by holders of a patent or a trade mark, there is any infringement of the guarantee under article 301 of the Constitution. That being so, the question whether the provision in question is saved by article 304(b) of the Constitution, does not arise. The impugned levy has in no way affected the trade or caused a decline in the sales of goods sold under patent or trade mark. On the other hand the chart furnished above leads to just the opposite conclusion. In view of the above discussion, we do not find any merit in the challenge on the ground of violation of article 301 of the Constitution.
12. We now turn to the last limb of the contention of the petitioner, i.e., challenge on the ground of violation of article 14 of the Constitution. There is no gainsaying that fiscal statutes are not outside the pale of article 14 of the Constitution and any irrational classification and/or discrimination between persons or objects similarly situated would render the classification violative of article 14 of the Constitution. Taxing laws must also pass the test of article 14. However, in deciding whether the taxation laws are discriminatory or not, it is necessary to keep in mind that the State has a wide discretion in selecting the persons or objects it will tax and a statute is not open to attack on the ground that it taxes some persons or objects and not others; it is only when within the range of its selection the law operates unequally which cannot be justified on the basis of any valid classification that it would be violative of article 14. As observed by the Supreme Court in S. K. Dutta, Income-tax Officer v. Lawarence Singh Ingty it is well-settled that a State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably. Reference may also be rare in this connection to a latest decision of the Supreme Court in Federation of Hotel & Restaurant Association of India v. Union of India [1989] 74 STC 102 wherein it was held that it is now well-settled that though taxing laws are not outside article 14, having regard to the wide variety of diverse economic criteria that go into the formulation of fiscal policy, the Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment, what is looked into is not its phraseology, but the real effect of its provisions. If there is equality and uniformity within each group, the law would not be discriminatory. Decisions of the Supreme Court have permitted the Legislature to exercise an extremely wide discretion in classifying items for tax purposes so long as it refrains from clear and hostile discrimination against particular persons or classes. The only requirement is that the classification must be rational and based on some qualities and characteristics which are to he found in all the persons grouped together and absent in the others left out of the class. Moreover, the differential must have a rational nexus with the object sought to be achieved by the law. The State in the exercise of its governmental power, has, of necessity, to make laws operating differently in relation to different groups or class of persons to attain certain ends and must, therefore, possess the power to distinguish and classify persons or things. Classifications based on differences in the value of articles or the economic superiority of the persons of incidence are well-recognised. A reasonable classification is one which includes all who are similarly situated and none who are not. In order to ascertain whether persons are similarly placed, one must look beyond the classification and to the purposes of the law.
13. Looking at the facts and circumstances of the present case, the classification of dealers who are holders of patents or trade marks and dealers who are not, for the purpose of levy of tax on the sale of purchased goods by them, appear to be a reasonable classification, having a nexus with the object sought to be achieved. In that view of the matter, in our opinion, the impugned provision does not violate article 14 of the Constitution.
14. Having dealt with the main grounds of challenge to the validity of the impugned provision, we would like to deal with the two incidental grounds also on which the validity was challenged. The first ground is that the scheme of the Act is to levy a single point tax on goods specified in Schedule "C" whereas the impugned amendment has the effect of double point levy. This submission, in our opinion, is devoid of merit in view of the fact that the impugned amendment has also been made by the State Legislature itself. It is not a case where the State Legislature made a law providing for single point levy but the Government or the executive, in exercise of its executive power or delegated authority provided for double point levy. It would not be correct to say that having originally enacted/contemplated a single point levy at the first stage of sale, it is not open to the Legislature to adopt a double point levy and/or levy at a different stage or take out certain specified transactions or turnover for double point or multi-point taxation at a later stage. As observed by the Supreme Court in Polaki Motors v. State of Orissa [1993] 88 STC 259, rates of tax, point of taxation and single point and multi-point scheme are all subject of legislative changes, additions and modifications. In the instant case, by the impugned provision, the State Legislature has provided that sales of purchased goods by dealers holding patent or trade mark shall not be deemed to he resale within the meaning of section 2(26) of the Act and the turnover of sales of goods purchased by such dealers shall not be deducted from its turnover. In other words in case of sales of such goods the Legislature has now provided for levy of tax in the hands of the dealers selling the purchased goods in respect of resale of such goods also. However, to avoid the incidence of double taxation, provision has been made in rule 42H for drawback, set-off or refund of tax paid on the purchase of such goods. We do not find any infirmity in this action of the State Legislature. It is within the legislative competence of the State Legislature to provide for levy of tax on any transaction at any stage and thus make the levy originally contemplated to be single point levy, a double point or multi-point levy in respect of certain class of goods or dealers. The Legislature may choose certain goods alone or certain dealers or class of dealers alone for the purposes of such levy and make changes in taxation from time to time. The fact that in the principal Act, the Legislature had provided that sales of certain goods would be subject to single point levy would not preclude it from amending the law and to provide for double point or multi-point levy at a different stage or stages or take out certain transactions for double point or multi-point levy.
15. The last submission of learned counsel for the petitioners is that though the drawback, set-off or refund of the sales tax is available to a dealer holding a patent or a trade mark who is liable to pay tax on the sales of purchased goods made by him, he is not entitled to drawback or set-off in respect of additional tax paid by the first dealer in respect of the sales effected to him under section 15A of the Act. We have perused the provision of the section 15A of the Act. Section 15A provides for levy of additional tax on dealers, whose turnover exceeds Rs. 10 lakhs a year. Sub-section (3) of the said section provides that out of the total additional tax so collected, an amount equal to 50 per cent. thereof shall be utilised for the purpose of raising the resources for implementing the Employment Guarantee Scheme under the Maharashtra Employment Guarantee Act, 1977. Sub-section (4) of the said section expressly prohibits collection of additional tax payable by a dealer from the purchasers. It is a non obstanate clause and reads as follows :
"Section 15-A(4). Notwithstanding anything contained in this Act, no dealer shall be entitled to collect any sum by way of additional tax payable by him under this section."
It is thus clear that additional tax is payable by virtue of section 15A by a class of dealers failing thereunder on the sales of goods made by them. Such dealers cannot recover the same from the purchasing dealer. That being the legal position, the petitioner cannot claim any set-off, drawbacks or refund on account thereof as the incidence of that tax has not been shifted to him. Moreover, the validity of section 15A is not a subject-matter of challenge before us in this petition. In that view of the matter, it is not necessary to go into the consequential effect of the impugned amendment on the levy of additional tax on the turnover of the petitioners.
16. In view of the foregoing discussion, we do not find any merit in these writ petitions. The same are, therefore, dismissed.
Having regard to the facts and circumstances of the case we make no order as to costs.
Issuance of certified copy is expedited.
Writ petitions dismissed.