Andhra HC (Pre-Telangana)
Venkateswara Chemicals vs Government Of Andhra Pradesh And Others on 3 July, 2001
Equivalent citations: 2001(4)ALT347, [2001]124STC515(AP)
ORDER
S.R. Nayak, J
1. The petitioners in this batch of writ petitions arc engaged in the manufacture and sale of poultry feeds supplements and medicine etc. In these writ petitions, they have assailed the constitutionality of the incorporation of the new Entry 80-A in the First Schedule of the Andhra Pradesh General Sales Tax Act, for short 'the APGST Act'; by Amendment Act 27 of 1996 with effect from 1-8-1996. In WP No. 12121 of 1998, the petitioner has also sought for a direction that the poultry feed supplements are taxable only at the rate of 4% with effect from 1-8-1996. The constitutionality of the impugned Entry is assailed on the ground that it is arbitrary, discriminatory and violative of Articles 14 and 19(1)(g) of the Constitution of India.
2. The pleading of the petitioner as set out in the affidavit filed in support of the writ petitions, to state briefly, is as follows: The petitioners are proprietorship concerns or limited companies incorporated under the provisions of the Companies Act and they are engaged in the manufacture and sale of poultry feeds supplements, medicines etc. Prior to 1-8-1996 with effect from which date Amendment Act 27 of 1996 was brought into force, the petitioners were assessed to tax under Entry 80 of the First Schedule of the APGST Act. Before the amendment, this Court and the Supreme Court in number of cases had opined that the poultry feed ingredients/poultry feed supplements are to be treated as poultry feed and as such the rate of tax applicable to both should be the same. In view of this settled position in law, the Commercial Tax Officers in the State of Andhra Pradesh are levying tax on the poultry feed supplements as the item falling under Entry 80 of the First Schedule to the APGST Act at the rate of 4%. The Stale Legislature by amending the APGST Act by Amendment Act 27 of 1996 added new entry, Entry 80-A, and in view of this amendment, the poultry feed supplements which were hitherto subjected to tax at 4% are liable to be taxed at higher rate of 9%. Poultry feed and poultry feed supplements constitute as one commodity and therefore the classification sought to be made by the Amendment Act 27 of 1996 by adding a new Entry 80-A for poultry feed supplements is ex facie discriminatory and violative of Articles 14 read with 19(1)(g) of the Constitution of India. Under the amended Entry 80-A, manufacturers and dealers of poultry feed supplements are liable to be assessed to tax at the rate of 9% whereas the other dealers who deal with poultry feed as such are liable to be taxed only at the rate of 4% under Entry 80 of the First Schedule of the APGST Act. The Amended Act has made a classification between poultry feed and poultry feed supplements without any rational basis for the purpose of applying differential rate of tax.
3. In response to rule nisi, the respondents have filed counter affidavits. The contents of counter affidavits in all these writ petitions are substantially same. In the counter-affidavits, the respondent authorities of the Commercial Tax Department have contended that the new Entry 80-A was introduced in the First Schedule to the APGST Act with effect from 1-8-1996 for the items viz., Feed Supplements, Nutrients, Mineral Mixture, Vitamins, Medicines and other categories for Feed Supplements which are used in poultry feed, fish feed, prawn feed and feed of livestock by Amendment Act 27 of 1996. The petitioners-assessees are the manufacturers of the items specified in Entry 80-A of the First Schedule and therefore the relevant turnovers were liable to be taxed at 9%. The items included in Entry 80 and Entry 80-A are distinct and different goods and there is every legal justification to treat them differently for the purpose of taxation. The intention of the Legislature in introducing new Entry 80-A is clear and it is intended to kept the feed supplements in a separate category. The poultry feed contains either maize, starch or rice bran, decoiled cakes, fish feed only whereas the feed supplements are added in minor quantities at different ratios depending upon the stages of life of birds or other livestock. The Legislature in its wisdom has chosen to treat the feed supplements, mineral mixture, nutrients, vitamins, medicines and other categories of feed supplements for the purpose of subjecting them to higher rate of tax with the objective to generate more revenue for development activities of the State and therefore introduction of new Entry 80-A is neither discriminatory nor violative of Articles 14 and 19(1)(g) of the Constitution.
4. We heard Sri J.V. Rao, learned Counsel for the petitioners and the learned Special Government Pleader for Taxes Sri J. V. Rao, would strenuously contend that the Supreme Court and this Court in number of cases opined that the poultry feed and the poultry feed supplements constitute as one commodity covered by Entry 80 of the First Schedule and therefore both of them are liable to be taxed at the same rate i.e., at 4%. The learned Counsel would submit that the Andhra Pradesh State Legislature to wriggle out of the above well settled position in law has deliberately introduced Entry 80-A with a motive to generate more revenue for the State and has made an irrational classification of the same items earlier covered by Entry 80 into two Entries now, i.e., Entry 80 and Entry 80-A. The learned Counsel would contend that as a consequence of the amendment, the poultry feed supplements which were liable to be taxed at 4% before the amendment are liable to be taxed at 9% after the amendment and this has resulted in an invidious discrimination and violation of Article 14 read with Article 19(1)(g) of the Constitution. The learned Counsel would submit that in view of the impugned amendment, the dealers in poultry feed supplements are assessed to tax at higher rate of 9% even though the feed supplements come under the ambit of poultry feed as interpreted by the Supreme Court and this Court in number of decisions. The learned Counsel would place reliance on the decisions in Navodaya Traders v. Commissioner, Commercial Taxes, , Sun Export Corporation v. Collector of Customs, , Ayurveda Pharmacy v. State of Tamil Nadu, , State of Andhra Pradesh v. Blue Cross Farms, (1995) 97 STC 6 (SC) (SN 17), Cooch Behar Contractors' Association v. State of West Bengal, , Fenoplast v. State of A.P. and others, (1998) 27 APSTJ 244 (SC), State of A. P. v. Karnatakam Govindayya Setty & Sons, , Hindustan Agencies v. Dy. Commissioner, (CT), (1977) 40 STC 384 (AP), Chiranjit Lal Anand v. State of Assam, , Coromandal Agro Products Oils Ltd. v. State of A.P., (1987) 5 APSTJ 33 (APHC), State of A.P. v. Pharma Craft Laboratories, (1989) 8 APSTJ 124 (APHC), State of A.P. v. Tirumala Traders, Gudivada, (1989) 8 APSTJ 246 (APHC), State of A.P. v. J.K. & Co., Hyd., (1992) 15 APSTJ 166 (APHC), State of A.P. v. Alved Pharma, Azampur, Hyderabad, (1989) 9 APSTJ 230 (APHC).
5. The learned Special Government Pleader for Taxes, on the other hand, would contend that the petitioners have utterly failed to make out any ground to assail the constitutionality of the incorporation of Entry 80-A to the First Schedule of the APGST Act. The learned Special Government Pleader would contend that a law made by a competent Legislature can be struck down by Courts only on two grounds, viz., (1) lack of legislative competence, and (2) violation of any of the fundamental rights guaranteed in Part III of the Constitution or of any other constitutional provision, The learned Counsel would point out that poultry feed and poultry feed supplements cannot be treated as one commodity. The learned Counsel would submit, be that as it may, the Andhra Pradesh State Legislature in its wisdom has chosen to subject the feed supplements differently as regards tax liability and such a course is undoubtedly permissible for any competent Legislature. The sales tax being noncompensatory in nature, the petitioners cannot have any valid grievance simply because the feed supplements are subjected to tax at a higher rate. The learned Special Government Pleader placing reliance on the judgment of the Division Bench of this Court in Good Year India Ltd v. State of A.P., (1994) 19 APSTJ 247, would contend that whatever may be the opinions of the Supreme Court and this Court delivered on the question whether poultry feed includes poultry feed implements, after Amendment Act 27 of 1996 with effect from 1-8-1996, the position in altered and those decisions cannot be pressed into service in support of the contention that even after the amendment, feed supplements, nutrients, mineral mixture, vitamins, medicines and any other category of feed supplements which are used in poultry feed, fish feed and prawn feed and feed for livestock should be treated as integral part and component of poultry feed and cattle feed and therefore they should be taxed only at 4%.
6. In India, the doctrine of "power to tax" is embodied in Article 265 of the Constitution. The Legislature is omnipotent in the exercise of the taxing prerogative, however, subject to the provisions of the Constitution. The right to impose taxes and to determine the circumstances under which they will be done is always a privilege of the concerned Legislature. Article 265 mandates that no tax shall be levied or collected except by authority of law. The power to tax is an incident of sovereignty.
Apart from the limitation by the division of the taxing power between the Union and the State Legislature by the relevant entries in the Legislative Lists, the taxing power of either Legislature is subjected to certain limitations imposed by the Constitution. For example, the taxing power of a Legislature must not contravene Article 13 as held in Kunnathat Thathunni Moopil Nair v. State of Kerala, ; it must not deny equal protection of the laws as guaranteed under Article 14 as held in State of Kerala v. Kutty Naha, Haji K. Haji K, ; and it must not be discriminatory or arbitrary as held in Ayurveda Pharmacy v. State of Tamil Nadu (supra), Regional Transport Officer-Cum -Taxing Authority, Rourkela v. Steel Authority of India, 1995 Suppl. (4) SCC 165; it must not constitute an unreasonable restriction upon the right of business guaranteed under Article 19(1)(g) as held in Chandrakanth Krishnarao Pradhan v. Jasjit Singh, . Apart from these constitutional limitations on the law making power of the concerned Legislature, the other limitations on the taxing power of the Legislature can be culled out from the provisions of Articles 27, 285, 286, 287 and 289.
7. It is true that taxation law is no exception to the doctrine of equal protection as held by the Apex Court in Khandige, Sham Bhat v. Agricultural ITO, AIR 1963 SC 591, State of M.P. v. Gwalior Sugar Co., , Kunnathat Thathunni Moopil Nair v. State of Kerala (supra), State of A.P. v. Nalla Raja Reddy, , Vishweshar Thirtha Swamiar v. State of Mysore, , Ashwathnarayana Setty P.M. v. State of Karnataka, . Hence, a taxation law will be struck down as violative of Article 14 if there is no reasonable basis behind the classification made by the Legislature. However, if the taxation, generally speaking, imposes a similar burden on every one with reference to a particular kind and extent of property, on the same basis of taxation, the law shall not be open to attack on the ground that the result of the taxation is to impose unequal burdens on different persons. There is no violation of Article 14 if there is a reasonable basis for the classification.
8. A power conferred on the Legislature to levy tax must be widely construed. It must include the power to impose a tax and select the articles or commodities for the exercise of such power; it must likewise include the power to fix the rate and prescribe the machinery for the recovery of tax including provisions necessary to prevent evasion of tax. The Legislature can also appoint authorities for collecting taxes and may prescribe the procedure for determining the amount of taxes payable by any person. All these provisions are subsidiary to the main power to levy a tax. Nevertheless, all this is subject to the constitutional limitations as pointed out supra, Therefore, it becomes necessary that even tax statutes have to satisfy the test of reasonableness prescribed by Article 19(6) and the fundamental right of equality before law guaranteed by Article 14 of the Constitution. In tax matters, the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably, as held by the Supreme Court in Balaji v. ITO, , B. Basavalingappa v. State of Karnataka, (1985) 59 STC 1, 6 (Kar). The entries in the Legislative Lists of the Constitution were not powers but were only fields of legislation and therefore the widest importance and significance should be given to the language used by the Legislature in various entries. In interpreting the fiscal statutes, we must also remember the provisions in a fiscal statute are not to be so construed as to furnish a chance of escape and a means of evasion as held by the Full Bench of the Karnataka High Court in C. Arunachalam v. CIT, (FB). A Full Bench of this Court in Shri Lakshmi Venkateswara Trading Co. v. State of A.P., (1974) 33 STC 192 (AP-FB), has opined that the power to tax includes the power to pick and choose objects and persons for the purpose of taxation and to grant exemptions. In the matter of taxation laws, as held by Apex Court in Ms. Steelworth Ltd v. State of Assam, 1962 Supp. (2) SCR 589, Gopal Narain v. State of UP., , Ganga Sugar Corpn. Ltd. v. State of U.P., , Mafatlal Industries Ltd. v. Union of India, , Khyerbari Tea Co., Ltd. v. State of Assam, , State of Kerala v. Aravind Ramakant Modawadakar, (1999) 7 SC 400, the Courts permit a greater latitude to the discretion of the Legislature in the matter of classification. State has wide discretion in respect of classification of objects, persons and things for the purposes of taxation. The Legislature can devise classes for the purpose of taxing or not taxing, exempting or not exempting, granting incentives and prescribing rates of tax, benefits or concessions as held by the Apex Court in State of UP. v. Kamla Palace, AIR 2000 SC 617. Thus, as to what article should be taxed is a question of policy and there cannot be any complaint merely because Legislature has decided to tax certain articles and no others. The freedom of the Legislature is conceded not only in the choice of the articles to be taxed but also as regards the manner and rate of taxation i.e., to prescribe different rates for different categories of goods, persons and transactions, as held by the Supreme Court in Twyford Tea Co., Ltd. v. State of Kerala, . It is also well settled that the Court would be slow to interfere with the Legislative discretion in the matter of choice of persons, transactions or objects or different rates, even if no reasons arc disclosed for such choice, unless it is shown to be capricious or whimsical, in the circumstances of the case. Now in the premise of the above noted well settled principles governing the challenge to constitutional validity of taxation law, let us consider the contentions raised by the learned Counsel for the petitioners.
9. Entries 80 and 80-A of the Schedule I to the APGST Act read:
"80. Poultry feed and cattle feed".
"80-A. Feed Supplements, nutrients, mineral mixture, vitamins, medicines and any other category of feed supplements which are used in poultry feed, fish feed, prawn feed and feed for livestock".
In the counter filed by the respondents, it is stated that poultry feed contains either maize starch or rice bran, decoiled cakes, fish feed, whereas the feed supplements in the form of nutrients, mineral mixture, vitamins, medicines etc., are used in poultry feed, fish feed, prawn feed and livestock in different quantities depending upon the stages of life of birds or other livestock. The basic argument of the learned Counsel for the petitioner is that feed supplements are integral part of poultry feed and cattle feed and therefore the legislative action of the State in taking out feed supplements, nutrients etc., from Entry 80 and including the same in new Entry 80-A is totally irrational and discriminatory. From the pleadings of the petitioners, it appears to our mind, the petitioners seem to think that the items included in Entry 80-A are poultry feed supplements only. On a plain reading of Entry 80-A, it can be seen that it contains not only poultry feed supplements but also other feed supplements. There are several items in Entry 80-A. It includes not only feed supplements, but also nutrients, mineral mixture, vitamins, medicines and any other category of feed supplements which are used in poultry feed, fish feed, prawn feed and feed for livestock. In other words, Entry 80-A is an inclusive Entry and it may include any other category of feed supplements also which are used in different feeds enumerated in that Entry. It is true that this Court in some of the judgments cited by the learned Counsel for the petitioners before incorporation of Entry 80-A had opined that poultry feed supplements should be taxed under Entry 80-A only and they cannot be taxed differently. We are afraid those decisions of this Court in any way would advance the case of the petitioner after incorporation of new Entry 80-A. The constitutional validity of new Entry is sought to be assailed on the ground of arbitrariness, unreasonableness and discrimination, in other words, being violative of Article 14 postulates.
10. It is well settled law that a law made by Parliament or Legislature can be struck down by Courts only on two grounds and those two grounds are, viz., lack of legislative competence, and (2) violation of any of the fundamental rights guaranteed in Part III of the Constitution or of any other constitutional provision. It is also well settled law that no enactment can be struck down by just saying that it is arbitrary or unreasonable. The Supreme Court in State of A.P. v. Mc Dowell & Co., , in para (43) has observed:
"......No Court in the United Kingdom can strike down an Act made by Parliament on any ground. As against this, the United States of America has a Federal Constitution where the powers of the Congress and the State Legislatures to make laws is limited in two ways, viz., the division of legislative powers between the States and the Federal Government and the fundamental rights (Bill of Rights) incorporated in the Constitution. In India, the position is similar to the United States of America. The power of Parliament or for that matter, the State Legislatures is restricted in two ways. A law made by Parliament or the Legislature can be struck down by Courts on two grounds and two grounds alone, viz., (1) lack of legislative competence and (2) violation of any of the fundamental rights guaranteed in part III of the Constitution or of any other constitutional provision. There is no third ground. We do not wish to enter into a discussion of the concepts of procedural unreasonableness and substantive unreasonableness - concepts inspired by the decisions of United States Supreme Court. Even in USA, these concepts and in particular the concept of substantive due process have proved to be of unending controversy, the latest thinking tending towards a severe curtailment of this ground (substantive due process). The main criticism against the ground of substantive due process being that it seeks to set up the Courts as arbiters of the wisdom of the Legislature in enacting the particular piece of legislation, it is enough for us to say that by whatever name it is characterised, the ground of invalidation must fall within the four corners of the two grounds mentioned above. In other words, say, if an enactment is challenged as violative of Article 14, it can be struck down only if it is found that it is violative of the equality clause/equal protection clause enshrined therein. Similarly, if an enactment is challenged as violative of any of the fundamental rights guaranteed by clauses (a) to (g) of Article 19(1), it can be struck down only if it is found not saved by any of the clauses (2) to (6) of Article 19 and so on. No enactment can be struck down by just saying that it is arbitrary or unreasonable. Some or other constitutional infirmity has to be found before invalidating an Act. An enactment can be struck down on the ground that Court thinks it unjustified. Parliament and the Legislatures, composed as they are of the representatives of the people, are supposed to know and be aware of the needs of the people and what is good and bad for them. The Court cannot sit in judgment over their wisdom. In this connection, it should be remembered that even in the case of administrative action, the scope of judicial review is limited to three grounds viz., (i) unreasonableness, which can more appropriately be called irrationality, (ii) illegality and (iii) procedural impropriety (Council of Civil Service Unions v. Minister of Civil Service, 1985 AC 374 = (1984) 3 All ER 935 = (1984) 3 WLR 1174, which decision has been accepted by this Court as well). The applicability of doctrine of proportionality even in administrative law sphere is yet a debatable issue. (See the opinions of Lords Lowry and Ackner in R. v. Secy, of State for Home Deptt. Ex p Brind, 1991 AC 696 = (1991) 1 All ER 720). It would be rather odd if an enactment were to be struck down by applying the said principle when its applicability even in administrative law sphere is not fully and finally settled. It is one thing to say that a restriction imposed upon a fundamental right can be struck down if it is disproportionate, excessive or unreasonable and quite another thing to say that the Court can strike down enactment if it thinks it unreasonable, unnecessary or unwarranted"......
In S. Bharat Kumar and others v. Government of Andhra Pradesh, (DB), a Division Bench of this Court speaking through one of us (S.R. Nayak, J.) has observed in Para 27 as follows:
"27. It is trite law that mandamus is the proper relief to be asked for where the petitioner seeks a declaration that an 'Act' or 'Ordinance' is unconstitutional and a consequential direction restraining the State and its officers or the concerned statutory authorities, as the case may be, from interfering or giving effect to the provisions of such unconstitutional law. It is also trite law that the presumption is always in favour of the constitutionality of an enactment, and the burden is upon him who attacks it to show that there has been a clear transgression of constitutional principles and limits, whether it is a pre-Constitution or post-Constitution law. This position is well settled by the judgments of the Apex Court in Chiranjit Lal v. Union of India, (1950) SCR 869. In Madhu Limaye v. Sub-Divisional Magistrate, and in Cf Rao Bahadur v. State of U.P., (1953) SCR 1188, the Supreme Court held that the burden of proving all the facts which are requisite for the constitutional invalidity is upon the person who challenges the same. However, it is not to state that by reason of the presumption in considering the validity of the impugned law, the Court will be restricted to the pleadings only. The Court would be free to satisfy itself whether under any provision of the Constitution the impugned law can be sustained having due regard to the circumstances in which such law was enacted, as opined by the supreme Court in Burarkar Coal Co. v. Union of India, , Hamdard Dawakhana v. Union of India, . For the same reason, the Court should, if possible, make such a progressive and/or narrow construction of the impugned statute as would sustain its constitutional validity, as opined by the Supreme Court in Sunil v. Delhi Admn., AIR 1978 SC 1675. The Supreme Court in Naresh v. State of Maharashtra, , has opined that the Court should not cover grounds or make observations on points not directly involved in the proceeding, thereby meaning that unless a point arises for consideration and decision out of the pleadings of the parties, the Court shall not express its opinion on such point. It is well settled by the judgments of the Supreme Court in Diamond Sugar Mills v. State of U.P., AIR 1962 SC 652, Navinchandra v. Commr. of IT, and in Peerless v. RBI, , that when the vires of an enactment is challenged, and there is any difficulty in ascertaining the limits of a Legislature's power, the difficulty must be resolved, so far as possible, in favour of the legislative body, putting the most liberal construction upon the relevant legislative entry so that it may have the widest amplitude, and looking at the substance of the legislation.
In the same judgment, the Division Bench in para (34) further observed as under:
"Although non-arbitrariness, reasonableness and fairness are postulates of Article 14 of the Constitution, when an enactment is sought to be struck down on the ground of arbitrariness and unreasonableness, the reviewing Court should find some or other constitutional infirmity in addition to those grounds before invalidating the enactment. An enactment cannot be struck down merely on the ground that the Court thinks it is unjustified and unwise. This position is fairly well settled by the decision of the Supreme Court in State of A. P. v. Mc Dowell & Company, AIR 1996 SC 1625 (supra). It is not open to a Court to declare an enactment unconstitutional and void solely on the ground of unwise and harsh provisions or that it is supposed to violate some of the perceived natural, social, economic or political rights of the citizen, unless it can be shown with satisfactory proof that such injustice is in fact prohibited or such rights guaranteed or protected by the Constitution".
The Court has further held in para (40) as follows:
"..... It is true that it will become the duty of the Constitutional Courts under our Constitution to declare a law enacted by the Parliament or the State Legislature as unconstitutional when the Parliament or the State Legislature has assumed to enact a law which is void, either from want of constitutional power to enact it, or because the constitutional forms or conditions have not been observed, or where the law infringes the fundamental rights enshrined and guaranteed in Part III of the Constitution or any other substantive constitutional provisions. It is needless to state that Legislature and Judiciary are co-ordinate organs of the State, of equal dignity and status under the constitutional scheme. It is permissible for the Constitutional Courts to declare legislative enactments unconstitutional and void in some cases, but not because the judicial power is superior in degree or dignity to the legislative. The Court while declaring a law as invalid or unconstitutional is only enforcing the legislative will and the limits imposed by the Constitution on the law-making bodies. No Court can declare a statute unconstitutional and void, solely on the ground of unjust and harsh provisions, or because it is supposed to violate some natural, social, political or economic rights of citizen, unless it can be shown that such injustice is, in fact, prohibited or such rights guaranteed or protected by the Constitution. Strictly speaking, the Courts are not guardians of all kinds of rights of the people of the State, unless those rights are secured and protected by some constitutional provision which comes within the judicial cognizance. In 'A Treatise on the Constitutional Limitations' by Thomas M. Cooley, it is stated that the Court cannot run a race of opinions upon points of right, reason, and expediency with the law-making power; and that any legislative act which does not encroach upon the power apportioned to the other organs of the State, being prima facie valid, must be enforced, unless restrictions upon the legislative power can be pointed out in the Constitution itself, and the case shown to come within them. In the same Treatise, it is also stated that the Courts are not at liberty to declare statutes void because of their apparent injustice and impolicy, neither can they do so because they appear to the minds of the Judges to violate fundamental rights of republican Government, unless it shall be found that those rights are placed beyond legislative encroachment by the Constitution nor are the Courts at liberty to declare an enactment unconstitutional, because in their opinion it is opposed to a spirit supposed to pervade the Constitution, but not expressed in words or discernible from the context. It is not permissible to limit the legislative power of the Legislatures by judicial interposition, except so far as the expressed words a written Constitution gives that authority to the Court. In 'A treatise on the Constitutional limitations' by 'Thomas M. Cooley, it is aptly stated that the law-making power of the State recognises no restraints, and is bound by none except such as or imposed by the Constitution itself placing reliance on the opinion handed down in Sill v. Village of Corning, 15 NY 303. The above noted well recognised principles and proposition fully answer many of the aspects of the second contention urged before us by the learned Counsel for the petitioners".
11. It is relevant to note that in the field of taxation, the Courts 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 as could be seen from the decisions in East India Tobacco Company v. State of AP., , P.M. Ashwathanarayan Shetty v. State of Karnataka, (1988) Supp. 3 SCR 155, Federation of Hotel and Restaurant Association of India v. Union of India, , Kerala Hotel and Restaurant Association v. State of Kerala, . Imposition of purchase tax at different rates for sugar mills and kliandasari units was upheld by the Supreme Court in Ganga Sugar Corporation Ltd. v. State of U.P., . The Supreme Court in Cannon Dunkerley & Co. v. State of Rajasthan, , has observed:
"A question has been raised whether it is permissible for the State Legislature to levy tax on deemed sales falling within the ambit of Article 366(29A)(b) by prescribing a uniform rate of tax for all goods involved in the execution of a works contract even though different rates of tax for all goods involved in the execution of a works contract even though different rates of tax are prescribed for sale of such goods. The learned Counsel for the contractors have urged that it would not be permissible to impose two different rates of tax in respect of sale of the same article, one rate when the article is sold separately and a different rate when there is deemed sale in connection with the execution of a works contract. On behalf of the States, it has been submitted that it is permissible for the State to impose a particular rate of tax on all goods involved in the execution of a works contract which may be different from the rates of tax applicable to those goods when of sold separately. In the field of taxation the decisions of this 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."
12. What Article 14 prohibits is class legislation and not reasonable classification for the purpose of legislation as held by the Apex Court in Budhan Chowdhry v. State of Bihar, . If the Legislature takes care to reasonably classify persons or things for legislative purposes and if it deals equally with all persons and things belonging to a 'well-defined class'. It is not open to the charge of denial of equal protection on the ground that the law does not apply to other persons. However, in order to pass the test of permissible classification, two conditions must be fulfilled, viz., (i) that the classification must be founded on an intelligible differential which distinguishes persons or things that are grouped together from others left out of the group and (ii) that, that differential must have a rational relation to the object sought to be achieved by the statute in question. In the counter affidavit filed on behalf of the State, it is stated that the items included in Entry 80 and feed supplements and other items included in Entry 80-A are added in appropriate quantities in different ratios depending upon the stages of life of birds or other livestock. It is also stated that new Entry 80-A has been incorporated by way of amendment with objective to get more revenue for developmental activities of the State. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration as held by the Apex Court in Kedar Nath Bajoria v. State of W.B., , P.B. Roy v. Union of India, . Article 14 does not insist that legislative classification should be scientifically perfect or logically complete. In fact such expectation would be totally irrational having due regard to the diverse and complex fields of legislative activities.
The Court would not interfere unless the classification results in pronounced inequality. It is also true that there should be no discrimination between one person and another if as regards the subject-matter of the legislation their position is the same as held by the Supreme Court in Chiranjit Lal Anand v. State of Assam (supra). In other words, its action must not be arbitrary but must be based on some valid principle which itself must not be irrational or discriminatory as opined in Ramana Dayaram Shetty v. IAAI, , Kasturi Lal Lakshnii Reddy (M/s.) v. State of J&K, . The doctrine of equal protection embodied in Article 14 does not take away from the State, the power of classifying persons and things for legitimate purposes. The Legislature is competent to exercise its discretion and make classification. Every classification is in some degree likely to produce some inequality, and mere production of inequality is not enough as opined by the Apex Court in State of Bombay v. Balasara F.N., 1951 SCR 682 = AIR 1951 SC 318. Further, the Supreme Court in Ameeroonisa Begum v. Mehboob Begum, , Babulal Amthalal Mehta v. Collector of Customs, Calcutta, , Gopi Chand v. Delhi Administration, , has opined that differential treatment does not per se constitute violation of Article 14. It denies equal protection only when there is no reasonable basis for the differentiation. If a law deals equally with members or things of a well-defined class, it is not obnoxious and it is not open to the charge of denial of equal protection or discrimination on the ground that it has no application to other persons and things. It is for the Legislature to determine what categories it would embrace within the scope of legislation and merely because certain categories which would stand on the same footing as those which are covered by the legislation are left out would not render the legislation which has been enacted in any manner discriminatory and violative of Article 14. The Supreme Court in Sociedade De Fomento Industrial Pvt. Ltd. v. Mormugao Dock Labour Board, 1995 Supp (1) SCC 534, has opined that no economic measure has yet been devised which is free from discriminatory impact and that in such a complex arena in which no perfect alternatives exist, the Court does well not to impose too rigorous a standard of criticism, under the equal protection clause, while reviewing fiscal matters.
13. Article 14 guarantees right of equality before the law and equal protection thereunder. The content and reach of Article 14 today is no more confined to "classification". The Supreme Court in E.P. Royappa v. State of Tamil Nadu, (, has observed:
"Equality is a dynamic concept with many aspects and dimensions and it cannot be 'cribbed, cabined and confined' within traditional and doctrinaire limits. From a positivistic point of view, equality is anithetic to arbitrariness. In fact equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an Act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is, therefore, violative of Article 14."
In the same case, the Supreme Courts proceeds to observe:
"Article 14 thus strikes at arbitrariness and ensures fairness and equality of treatment. As observed by Bhagwati, J., (as his Lordship then was) in Ramana Dayaram Shetty v. International Airport Authority of India (supra 48):
".......arbitrariness is antithetic of Article 14".
The Supreme Court in Shaw Wallace & Co. Ltd. v. State of Karnataka, (1993) 91 STC 37 (Karn.), has observed that the Legislature is presumed to be aware of the prevailing circumstances relevant to the subject-matter in question as these exist, or did exist, when the relative law was enacted by it. Further the Supreme Court in CST v. Agra Belting Works, , has opined that the power both of granting exemption and withdrawing an already granted exemption, also of varying the rate of tax categorically belongs to the Legislature.
14. Nothing is placed before us to prove that the items included in Entry 80-A are the integral and essential constituents of poultry feed and cattle feed. The terms "poultry feed and cattle feed" are not defined and therefore they should be understood as the common man understands those items in ordinary parlance. Since the petitioners have not contested the correctness of the statement made by the State in its counter that poultry feeds contains mainly either maize, starch or rice bran, decoiled cakes, fresh feed and the feed supplements are only added as an option in different quantities depending upon the stages of life of birds or other livestock, it cannot be said that items Entry 80 and items in Entry 80-A are the same so as to attract equal protection clause embodied in Article 14 of the Constitution. Therefore, in our opinion it would be permissible for the Legislature to tax differently the goods included in Entry 80-A and therefore the incorporation of Entry 80-A would not offend either Article 14 or 19(1)(g) of the Constitution. In view of the above, we hold that there is no discrimination violating Articles 14 and 19(1)(g) of the Constitution as contended by the learned Counsel for the petitioners.
15. The learned Counsel for the petitioners however, would place strong reliance on the judgment of the Supreme Court in Ayurveda Pharmacy v. State of Tamil Nadu (supra), State of Andhra Pradesh v. Blue Cross Farms (supra), Cooch Behar Contractors' Association v. State of West Bengal (SC) (supra), Chiranjit Lal Anand v. State of Assam (supra) and a judgment of this Court in Navodaya Traders v. Commissioner, Commercial Taxes (supra) in support of his contention. In our considered opinion, none of these authorities would in any way support or advance the contention of the learned Counsel, in Ayurveda Pharmacy v. State of Tamil Nadu (supra), the Supreme Court held that Arishtams and Asavas, (Ayurvedic medicines containing alcohol) are medicinal preparations and even though they contain a high alcohol content, so long as they continue to be identified as medicinal preparations they must be treated, for the purposes of the Sales Tax Law, in like manner as medicinal preparations generally, including those containing a lower percentage of alcohol and that levy of higher rate of sales tax on these two Ayurvedic medicinal preparations on ground that they contain a high percentage of alcohol is therefore discriminatory. However in the same decision, the Apex Court has held that it is open to the Legislature, or the State Government if it is authorised in that behalf by Legislature, to select different rates of tax for different commodities and what the actual rate should be, is not a matter for the Courts to determine generally. The ratio decidendi of the judgment in that case is that where the commodities belong to the same class or category, there must be a rational basis for discriminating between one commodity and another for the purpose of imposing tax. Since we have held that the commodities included in Entry 80 and the commodities included in Entry 80-A are not the same, the above ratio of the judgment of the Apex Court has no application to the facts of this case.
16. In State of Andhra Pradesh v. Blue Cross Farms (supra) in SLP (Civil) No.2363 of 1995, the Supreme Court dismissed the State's SLP preferred against the judgment and order of this Court dated 21-12-1987 in TRC No.267 of 1987 whereby this Court while dismissing the State's Revision application, had held that poultry supplement manufactured and sold by the dealer was not taxable at 4% as unclassified item but was taxable at 1% under Entry 80 of the First Schedule to the APGST Act. The special leave petition was dismissed in limine. The judgment of this Court was delivered in TRC No.267 of 1987 well before the Amendment Act 27 of 1996. Further, the above opinion of this Court cannot be equated as the opinion of the Supreme Court because the SLP was dismissed in limine. In Navodaya Traders v. Commissioner, Commercial Taxes (supra), a Division Bench of this Court held that Shell grit and mineral mixture used as supplementary diets for poultry in combination with other suitable ingredients necessary for manufacture of poultry feed, fall within the meaning of poultry feed in Entry 80 of the First Schedule to the APGST Act. This case dealt with the situation that obtained before incorporation of Entry 80-A. The learned Counsel would place strong reliance on the following observation of the Supreme Court in Coach Bihar Contractors' Association v. State of West Bengal (SC) (supra).
"In our opinion, therefore, it would be permissible for the State Legislature to tax all the goods involved in the execution of a works contract at a uniform rate which may be different from the rates applicable to individual goods because the goods which are involved in the execution of the works contract when incorporated in the works can be classified into a separate category for the purpose of imposing the tax and a uniform rate may be prescribed for sale of such goods."
The above observation of the Supreme Court is, in fact, against the petitioners. From the observation of the Supreme Court that a uniform rate of tax may be applied to all the goods which are involved in the execution of the works contract, it cannot be said that the State Legislature lacks legislative competence to tax differently the goods involved in the execution of the works contract. In that case, the Legislature in its wisdom has chosen to tax similarly all the goods involved in the execution of the works contract. As an analogy, what could be culled out from the above observation of the Supreme Court is that, it is equally permissible for the State Legislature to tax the goods involved in the execution of the works contract at different rates also. We need not dilate this aspect further because we have found that the items included in Entry 80-A are different in kind and nature from the items included in Entry 80. The judgment of the Supreme Court in Chiranjit Singh Anand v. State of Assam (supra) is also not helpful to the petitioner. In that case, the appellants supplied various items of ration, including "meat on hoof, to the Central Reserve Police Units in Assam for which the meat on hoof was supplied was for the meat, and though "meat on hoof was live animal. In those circumstances, the Supreme Court held, that "meat on hoof was to be understood in the context of the persons who were dealing in "meat or hoof". We are at a loss to understand how the above judgment of the Apex Court would support the contention of the learned Counsel for the petitioner in any way. It is pertinent to note that in the same judgment, the Supreme Court has opined that it is well settled that in interpreting items in statutes like Sales Tax Acts whose primary object is to raise revenue and for which purpose they classify diverse products, articles and substances, resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning i.e., the meaning attached to them by those dealing in them. If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined. But, in the absence of any definition being given in the enactment, the meaning of the term in common parlance or commercial parlance, as the case may be, has to be adopted.
17. The judgment of the Division Bench of this Court in Good Year India Ltd. v. State of A.P. (supra) squarely supports the contention of the learned Special Government Pleader for Taxes. In that case, the petitioner for the assessment year 1986-87 was assessed on the sales of 'Transmission Beltings', treating the same as covered by Entry 101, Clause (iv) of the First Schedule to APGST Act. The tax due thereon was paid. The writ petition was filed seeking for a direction for refund of the said tax paid. It was contended before the Division Bench on behalf of the petitioner that Transmission Beltings fall under Entry 5 of the Fourth Schedule and so not liable to tax. In support thereof reliance was placed on the decision in State of Andhra Pradesh v. Good Year India Ltd., . On behalf of the Commercial Tax Department, it was contended that the said judgment of Division Bench has no application after Entry 101 was inserted in the First Schedule under which Transmission Beltings are one of the specified items exigible to tax at the point of first sate in the State. The Division Bench, after referring to Entry 101 of the First Schedule and Entry 5 of the Fourth Schedule and the earlier Bench decision in Stale of A.P. v. Good Year India Ltd (supra) held as under:
"That case pertained to the assessment year 1975-76 when Entry 101 of Schedule-I was not in statute book. After Entry 101 was inserted in Schedule I the position has changed. The Transmission Beltings are one of the items specifically covered by Entry 101 of Schedule-I and so exigible to tax at the prescribed rate at the point of first sale in the State. It is settled law (vide State of Gujarat v. Patel Ramjibhai Danabhai, that when there is a conflict between special provision and general provision the special provision prevails. The law as laid down by this Court in State of Andhra Pradesh v. Good Year India Ltd. (supra), holding that Transmission Beltings are cotton fabrics, will not be of any assistance to the petitioner in view of the subsequent insertion of Entry 101 to Schedule I. The assessment year in question being 1986-87, the Transmission Beltings are liable to tax under Entry 101 of Schedule I. The assessee is not entitled to claim exemption on the ground that the same are cotton fabrics falling under Entry 5 of Schedule-IV."
18. We do not find any merit in the other contention of the learned Counsel for the petitioners that the Andhra Pradesh State Legislature to wriggle out of the consequence of the judgments of the Supreme Court and this Court has deliberately introduced Entry 80-A with a motive and for extraneous consideration to generate more revenue for the State and therefore the impugned amendment is nothing but a piece of colourable legislation. This contention of the learned Counsel has to be noticed only to be rejected.
19. Essentially, the question of constitutionality is always a question of power. It is needless to state that the whole doctrine of 'colourable legislation' revolves itself into the question of competency of a particular Legislature to enact a particular law. The constitution Bench of the Supreme Court in Shankaranarayana v. State of Mysore, , after referring to the dictum in K.C. Gajapathi Narayan Deo v. State of Orissa, , in paragraph (13) was pleased to observe:
"........... the whole doctrine of colourable legislation resolves itself into the question of competency of a particular Legislature to enact a particular law. If the Legislature is competent to pass the particular law, the motives which impel it to pass the law are really irrelevant. It is open to the Court to scrutinise the law to ascertain whether the Legislature by device, purports to make a law which, though in form appears to be within a sphere, in effect and substance, reaches beyond it."
20. No motive can be attributed to Legislature and such a plea could never be entertained at all where constitutionality of an enactment is assailed. In the Cooley's Treatise on the Constitutional Limitations, it is stated thus:
"From what examination has been given to this subject, it appears that whether a statute is constitutional or not is always a question of power; that is, whether the Legislature in the particular case, in respect of the subject-matter of the act, the manner in which its object is to be accomplished, and the mode of enacting it, has kept within the constitutional limits and observed the constitutional conditions. If so, the Courts are not at liberty to inquire into the proper exercise of the power in any case. They must assume that legislative discretion has been properly exercised. If evidence was required, it must be supposed that it was before the Legislature when the act was passed; and if any special finding was required to warrant the passage of the particular act, it would seem that the passage of the act itself might be held equivalent to such finding. And although it has sometimes been urged at the bar, that the Courts ought to inquire into the motives of the Legislature where fraud and corruption were alleged, and annul their action if the allegation were established, the argument has in no case been acceded to by the judiciary, and they have never allowed the inquiry to be entered upon."
The judgments of the Supreme Court in Mohan Lal Tripati v. Districi Magistrate, , and in State of Himachal Pradesh v. Kailash Chand Mahajan, are the authorities to state that a Legislature does not act on extraneous consideration and that an enactment cannot be struck down on the ground of mala fide and that no motive could be imputed to the Legislature. The Court, under no circumstances, can enquire into the motive of the Legislature to enact a law. What persuaded the Legislature to enact a law cannot be subject-matter of judicial scrutiny. In State of Himachal Pradesh v. Kailash Chand Mahajan (supra), the Supreme Court in paragraph (48) of the judgment was pleased to observe:
"...For adumbrating this policy a legislation is enacted by the State. It is not for this Court to find out whether there was any need for such a legislation. Of course, for lack of legislative competence or for violation of the right to equality under Article 14 etc. The validity of the legislation may be scrutinised. But, certainly that is far from saying the Court could examine the legislation from the point of view that it came to be passed with mala fide intention. By long established practice, which has received approbation through authorities of this Court, it has always refrained from attributing mala fides to the Legislature. In fact, such a thing is unknown to law. Here again, we can usefully refer to the case K. Nagaraj v. State of Andhra Pradesh, . In para 36 it is stated as:"
"............The Legislature, as a body, cannot be accused of having passed a law for an extraneous purpose. Its reasons for passing a law arc those that are stated in the Objects and Reasons and if, none are so stated, as appear from the provisions enacted by it. Even assuming that the executive, in a given case, has an ulterior motive in moving a legislation, that motive cannot render the passing of the law mala fide. This kind of 'transferred malice' is unknown in the field of legislation".
21. In the result and for the foregoing reasons, we upheld the constitutionality of the incorporation of new Entry 80-A in the First Schedule of the APGST Act by the APGST Amendment Act 27 of 1996 with effect from 1-8-1996 and dismiss the writ petitions with no order as to costs.