Consumer Guild of India v. State of Kerala — 1997 DIGILAW 142 (KER)

Judgment :- Shanmugam, J. All these Original Petitions challenged provisions of Kerala Tax on Entry of Goods into Local areas Act, 1994, in specific reference to Section 3 of the said Act. The issue raised by the petitioners are already covered by Division Bench Judgment by this Court in Rajan v. State of Kerala (1995) (2) KLT 369) and the judgment in O.P. Nos. 221 of 1996 and connected cases dated 28-2-1997. These Original Petitions were omitted to be posted along with the batch and that is how they are now considered separately. Learned counsel appearing in O.P. No. 2909/ 1977 raised a contention that Section 3 of the said Act imposes a tax on the purchase value of the Motor vehicle. The purchase value had been defined under Section 2(1)(n) of the Act. It is defined as follows : "Purchase Value' means the value of the goods, as ascertained from the original invoice and includes insurance, excise duties, countervailing duties, sales tax, transport fee, freight charges and all other charges incidentally leived on the purchase of the goods and in the case of a motor vehicle includes the value of accessories fitted in the vehicle; Provided that, where the purchase value of the goods is not ascertainable on account of non-availability or non-reduction of the original invoice or when the invoice produced is proved to be false or if the goods are acquired or obtained otherwise than by way of purchase, then the purchase value shall be the value or price at which the goods of like kind or quality is sold or it is capable of being sold, in open market." The main objection of the learned counsel is that the inclusion of sales tax on the purchase value is unconstitutional, as it would amount to taxation on tax. Such imposition of a tax cannot be authorised by law and therefore it violates Article 265 of the Constitution of India, The State of Kerala has enacted this law by virtue of their power under Entry 52 List II of VII th Schedule of the Constitution of India, The legislative competence of the State cannot be doubted in this regard. The charging Section namely Section 3 has fixed the tax on the basis of the purchase value and the purchase value is defined to include the accessories fitted to the vehicle, insurance, excise and other duties, sales tax etc. The charging Section namely Section 3 has fixed the tax on the basis of the purchase value and the purchase value is defined to include the accessories fitted to the vehicle, insurance, excise and other duties, sales tax etc. The purchase value of the vehicle have to be necessarily to include these items. The payment of insurance, excise and other duties, tax and fees and other charges are paid under the respective enactments and consequently the value of the vehicle has to be fixed including these payments. In Shaktikumar M. Sanchati v. State of Maharashtra (1955 KLJ (Tax Cases) 293) the Supreme Court held that tax levied under different legislation in exercise of constitutional power cannot be held bad on assumption that it amounts to double taxation. The taxable event for entry tax is not the same as for octroi. 3. In Ram Krishna Ran-math Agarwal of Kamptee v. Secretary, Municipal Committee, Kqmptee (1950 SCR 15) a Constitution Bench of the Supreme Court held that excise duty and octroi were taxes essentially different in their nature and the power of the Province to levy octroi was not inconsistent with the power of the Centre to levy excise duty on the same goods. Supreme Court followed the observation of the Federal Court in Province of Madras v. Boddu Paidanna and sons to the effect "in the case of a sales tax, the liability to tax arises in the occasion of a sale and a sale has no necessary connection with manufacture or production." The Court ultimately found that Excise Duty is a tax on manufactured goods. Octroi duty is a tax levied on the entry of goods within a particular area. The levy of such duty is therefore not in conflict with the levy of an impost on the entry of the goods within a certain area, 4. Another Constitution Bench of the Supreme Court in George Oakes (Pr.) Ltd v. State of Madras (AIR 1962 Supreme Court 1037) while dealing with the question whether when sales tax was included in the turnover, was it proper to tax the amount so included. The Supreme Court by holding that turn-over can include the tax and held as follows: "Under the definition of turnover in the principal Act the aggregate amount for which goods are bought or sold is taxable. The Supreme Court by holding that turn-over can include the tax and held as follows: "Under the definition of turnover in the principal Act the aggregate amount for which goods are bought or sold is taxable. This aggregate amount includes the tax as part of the price paid by the buyer. The amount goes into the common bill of the dealer till he pays the tax It is money which he keeps using for his business till he pays it over to Government. Indeed, he may turn it over again and again till he finally hands it to Government. There is thus nothing anomalous in the law treating it as Part of the amount on which tax must be paid by him. This conception of a turnover is not new, It is found in England and America and there is no reason to think that when the legislatures in India defined 'turnover* to include tax also, they were striking out into something quite unknown and unheard of before. When the seller passes on the tax and the buyer great to pay sales tax in addition to the price, the tax fc really part of the entire consideration and the distinction between the two mounts-tax and price-loses all significance from the point of view of legislative competence." This does not mean that it is incompetent to the legislature enacting legislation pursuant to Entry 54 in List II by suitable provision to make the tax paid by the purchaser to the dealer together with the sale price in consideration of the, goods sold, a part of the turnover of the dealer nor does it mean that in law the tax as imposed by Government is a tax on the buyer making the dealer a mere collecting agency so that the tax must always remain outside the sale price (S)." (emphasis supplied) In the light of the principles enunciated by the Supreme Court it is clear that the entry tax on the entire consideration can include various items like sales tax which go to make up We purchase price of the goods. And therefore, I do not find any infirmity in fixing the purchase price by including the sales tax paid. Therefore, the challenge to this provision on this ground fails. 5. And therefore, I do not find any infirmity in fixing the purchase price by including the sales tax paid. Therefore, the challenge to this provision on this ground fails. 5. Another contention that was raised in these Original Petitions are that the provisions of the Act imposes restrictions on the freedom of trade guaranteed under Article 301 of the Constitution of India, This aspect ofthe matter has already been dealt with by the Division Bench by this Court on this subject referred earlier. In M/s. Video Electronics Pvt. Ltd. v. State of Punjab (AIR 1990 SC 820) the Supreme Court held that the taxes do not restrict or interfere with the trade or commerce. While so holding Supreme Court held as follows: "Part XIII of the Constitution cannot be read in inclation. It is part and parcel of a single constitutional instrument envisaging a federal scheme and containing general scheme conferring legislative powers in respect of the matters relating to List II of the 7th Schedule on the States. It also confers plenary powers on States to raise revenue for its purposes and does not require that every legislation of the State must obtain assent of the President." "Further, free flow of trade between two States does not necessarily or generally depend upon the rate of tax alone. Many factors including the cost of goods play an important role in the movement of goods from on State to another. Hence the mere fact that there is a difference in the rate of tax on goods locally manufactured and those imported would not amount to' hampering of trade between the two States within the meaning of Art.301 of the Constitution. As is manifest, Art.304 is an exception to Art.301 of the Constitution. The need of taking resort to exception will arise only if the tax impugned is hit by Art.301 and Art.303 of the Constitution. If it is not then Art.304 of the Constitution will not come into picture at all. 6. In Bangalore W.C & S. Mills Co. v. Bangalore Corporation (AIR 1962 SC 562). the Supreme Court held mat the imposition of octroi duty is not contrary to Article 301 of the Constitution. In Automobile Transport Ltd, v. State of Rajasthan (AIR 1962 SC 1406), Constitution Bench of Supreme Court held that regulatory measures did not come within the purview of the restriction contemplated by Article 301. v. Bangalore Corporation (AIR 1962 SC 562). the Supreme Court held mat the imposition of octroi duty is not contrary to Article 301 of the Constitution. In Automobile Transport Ltd, v. State of Rajasthan (AIR 1962 SC 1406), Constitution Bench of Supreme Court held that regulatory measures did not come within the purview of the restriction contemplated by Article 301. Such measures^, need not comply with the requirements of the proviso to the Article 304(b) of the Constitution. In Sri Krishna Das v. Town area Committee, Chairman (1990(77) STC 395), Supreme Court held in order to constitute double taxation they may satisfy the following tests: "To constitute double taxation, the two or more taxes must have been (1) levied on the same property or subject-matter, (2) by the same Government or authority, (3) during the same taxing period, and (4) for the same purpose, 'There is no double taxation, strictly speaking" says Cooley, "where (a) the taxes are imposed by different States, (b) one of the imposition is not a tax, (c) one tax is against property and the other is not a property tax, or (d) the double taxation is indirect rather than direct." Supreme Court further held that when more than one legislative authority such as th6 States legislature and a local or Municipal Body possess the power to levy a tax there is nothing in the Constitution to prevent the same person or property being subject to both the State and Municipal taxation or the same legislature exercising its power. 7. In O.P'. No. 3742/1997 Mr. George Poonthottam learned counsel for the petitioner was raising a contention on behalf of the importer of a car. According to the learned counsel, Article 304 empowers the State to levy the tax on goods imported under the provisions of the Act. The Act having been enacted in compliance with Article 304 and after getting assent of the President, it pre-supposes that the tax is on that import of the goods. The said argument is untenable. The Act has been passed by virtue of the power under Entry 52 List-II of the VII Schedule of the Constitution of India. 8. In this Context learned counsel referred to Commissioner of Sales Tax v. M/s. Leather Facts Co. The said argument is untenable. The Act has been passed by virtue of the power under Entry 52 List-II of the VII Schedule of the Constitution of India. 8. In this Context learned counsel referred to Commissioner of Sales Tax v. M/s. Leather Facts Co. (AIR 1987 SC 1343) wherein the Supreme Court held a transaction of sale or purchase "in the course of export" falling within the purview of the Central Sales tax Act cannot be subject to Sales Tax by any State. The levies are imposed under different enactments and therefore this decision will not help the petitioner. The decisions in George Oakes (Pr.) Ltd. v. State of Madras (AIR 1962 Supreme Court 1037) and Ram Krishna Ramnath Agarwal of Kamptee v. Secretary, Municipal Committee, Kamptee (1950 SCR 15) referred above answer the points raised by the petitioner. 9. In Federation of Hotels & Restaurant v. Union of India (AIR 1990 SC 1637), a Constitution Bench upheld the constitutional validity of Expenditure Tax Act (Central act) and the various State legislation on Tax on Luxuries in Hotels. While upholding both these laws Supreme Court held that merely because the 1987 Act (Central act) as well as the State Acts levy taxes which have ultimate impact on persons who enjoys certain luxuries the pith & substance of both cannot be considered to be the same. In this case the State has enacted on the Item 52 of List II within the competence and there is no question of overlapping the field or the entries. 10. In State of Karnataka v. Hensa Corporation (AIR 1981 SC 463) the Supreme Court considered the Karnataka law on entry tax and held that it is not violative of Art.304 (1)(b) of the Constitution. The points raised are covered. For all these reasons I find that no grounds have been made out to interfere with the provisions of the Act and hence Original Petitions are dismissed.