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2001 DIGILAW 298 (JK)

Ritesh Puri v. State Of J. &K.

2001-11-26

T.S.DOABIA

body2001
1. The petitioner seeks relief on two grounds. These are : 1/ that the petitioner brings within the State of Jammu and Kashmir milk packed in polythene packets. According to the petitioner under entry 35 of schedule E of SRO135, this would be exempted from the payment of sales tax, under General Sales Tax Act, 1962; 2/ that if the import in question is not to be treated as exempt then this act of non grant of exemption would be hit by Article 304(A). It is stated then the respondents cannot impose any tax including sales tax on the goods imported from other States when similar goods manufactured and produced in the State are not subjected to sales tax. This as per the petitioner would be hit by Article 301 and 304(A) of the Constitution of India. 2. Before noticing the argument put across by the learned counsel for the petitioner, the factual submissions as apparent from the amended writ petition be noticed. The petitioner is a distributor and stockiest for various items including milk. He is carrying on business under the name and style of M/S Puri Brothers. According to the petitioner he is importing fresh milk. This is packed in polythene bags. As per the petitioner this is not taxable under SRO 135 referred to above. In addition to it, it is submitted that there is a concern by the brand name "Surya". This concerned it is urged is also manufacturing and producing milk and the milk produced is being sold in polythene packs in the State of J&K. It is submitted that the milk manufactured and produced in the State of J&K when sold in polythene packets in the State is exempt from the payment of Sales tax but milk manufactured and produced by M/s Amrit Foods, Gaziabad when brought and sold in the State of J&K, has been made eligible to sales tax under the provisions of J&K General Sales Tax Act, 1962. It is submitted that the respondents are legally bound to treat the petitioner at par with the respondent No.4, and allow the petitioner to sell his product i.e. Ganga Milk in the State of J&K without insisting upon for payment of sales tax. 3. It is submitted that the respondents are legally bound to treat the petitioner at par with the respondent No.4, and allow the petitioner to sell his product i.e. Ganga Milk in the State of J&K without insisting upon for payment of sales tax. 3. The short question which is required to be seen is that as to whether milk which is produced in Gaziabad, brought and sold in polythene packs can be called as fresh milk. 4. I am of the opinion that the milk which is imported in polythene packs outside the State of J&K cannot be called fresh milk. It is pasteurized milk. It contains preservatives and cannot be equated with fresh milk. Therefore, the petitioner cannot contend that what he brings is covered by entry 35 of Schedule "E" of SRO 135. 5. The learned counsel for the respondents, therefore rightly submits that the milk packed in polythene packs which is being imported from out side the state does not fall under the said entry and the said item is liable to sales tax. It is rightly submitted that only fresh milk has been exempted from the levy of the taxation whereas in the present case the milk imported by the petitioner i.e. Ganga Milk which packed in polythene bags is different. This is not fresh milk 6. The argument put across by the petitioner that products which are manufactured in the State of J&K are exempt and similar exemption has not been granted in favour of the milk being brought from out side the State, and therefore this is in breach of Article 301 and 304(A) be examined. It be seen that the exemption which has been granted under SRO 246 is to operate for a period of 5 years. 7. Exemptions granted for a short duration were upheld by the Supreme Court of India in case reported as Video Electronics Pvt. Ltd. and another Vs. State of Punjab and another 1990(3) SCC 87. It was observed; Power to grant exemption is inherent in all taxing legislations. The economic development of States to bring these into equality with all other States and thereby develop the economic unity of India is one of the major commitments or goals of the constitutional aspirations of this land. For working of an orderly society economic equality of all the States is as much vital as economic unity. The economic development of States to bring these into equality with all other States and thereby develop the economic unity of India is one of the major commitments or goals of the constitutional aspirations of this land. For working of an orderly society economic equality of all the States is as much vital as economic unity. Economic equilibrium and prosperity is also the goal. Development on parity is one of the commitments of the constitution. Articles 38 and 3 9 must be harmonized with economic unit as well economic development of developed and under-developed areas. For achieving the objects enshrined in Articles 38 and 39 the States have necessarily to develop themselves economically so as to secure economic unity and to minimize the inequalities and imbalances between State and State and region and region. If the power to grant exemption has been conferred for achieving these objects on all, it is not possible to assail these as violative of Article 304. In that light on Article 301 and the scope of Article 304 (a) and (b) should be understood and construed. The concept of economic barrier be adopted in a dynamic sense with changing conditions. What constitutes an economic barrier at one point of time often ceases to be so at another point of time. The concept of economic unity would necessarily include the power to grant exemption or to reduce the rate of tax in special cases for achieving the industrial development or to provide tax incentives to attain economic equality in growth and development. When all the States have such provisions to exempt or reduce rates the question of economic War between the States inter se or economic disintegration of the country as such does not arise. It is not open to any party to say that this should be done and this should not be done by either one way or the other. A backward State or a disturbed state cannot with parity engage in competition with advanced or developed States. Even within a State, there are often backward area which can be developed only if some special incentives arc granted. A backward State or a disturbed state cannot with parity engage in competition with advanced or developed States. Even within a State, there are often backward area which can be developed only if some special incentives arc granted. If the incentives in the form of subsidies or grant may given to any pan the form of subsidies or grant are given to any part or units of a State so that it may come out of its liming or infancy to compete as equals with others, that, does not and cannot contravene the spirit and the letter of part XIII of the constitution, it is open to the states to realize tax and thereafter remit the same or pay back to the local manufacturers in the shape of subsides and that would neither discriminate nor be hit by Article 304(a). In this case and as in all constitutional adjudications the substance of the matter has to be looked into to find out whether there is any discrimination in violation of the constitutional mandate. However, this is permissible only if there is a valid reason, that is to say, if there are justifiable and rational reasons for differentiation. If there is none, it will amount to hostile discrimination.� 8. The above view expressed in Video Electronics Pvt. Ltd. is a view expressed by Three Member Bench. Similar view has been expressed by the Supreme Court of India in case reported as Lohara Steel Industries Ltd. Vs. State of A.P. (1997) 2 SCC 37. 9. In this regard it would be apt to keep in mind that taxes may and sometimes do amount to restrictions but it is only such taxes as directly and immediately restrict trade that would fall within the mischief of Article 301. However, regulatory measures or measures imposing compensatory taxes for using trading facilities do not come within the purview of restrictions contemplated under Article 301. If a particular measure not regulatory but a taxing enactment and the is levied upon the entry of goods into local area i.e. upon the movement of goods, then the position may be different. The toll taxes which are imposed are compensatory in nature. If a particular measure not regulatory but a taxing enactment and the is levied upon the entry of goods into local area i.e. upon the movement of goods, then the position may be different. The toll taxes which are imposed are compensatory in nature. This aspect of the matter was noticed by the Full Bench this court in the case of Mehta Food Pvt. Ltd. v State of J&K and Others, OWP 660/82, At page 36 of the judgment the Full Bench observed that the petitioners are not merely using the national highway but they are making use of State Highways and other roads which are being maintained out of State funds. It was also observed that the State authorities are providing other facilities, therefore, element of quid pro quo is there. It was on this basis and also other basis concluded that the toll tax can be levied. Thus, even though, the levy which was under consideration before the Full Bench was considered to be in the nature of tax nevertheless, observations were mode that this levy is also being used for the purposes of providing other facilities also. If this be the position, then a tax which is levied on the entry of goods into local areas for consumption, use or sale therein can be held intra-vires of article 301. This question was considered by the supreme Court of India in the case of State of Biharand others V. Bihar Chamber of Commerce Hid others, (1996) 9 SCC 136. In the above case, the Bihar Legislature enacted the Bihar (Tax on entry of Goods into Local Areas for consumption. Use of S Ale there in the Act, 1993. This provided for levy of tax on entry of scheduled goods into a local area for consumption, use or sale at the rate not exceeding five percent. The items on which this was imposed have been noticed in para 2 of the judgment. The validity of this tax was challenged on the ground that this comes in conflict with Article 301. This argument was repelled by making following observations:- Though not stated in the counter affidavit, we can take notice of the fact that the state does provide several facilities to the trade including laying and maintenance, of roads, waterways and markets, etc. The validity of this tax was challenged on the ground that this comes in conflict with Article 301. This argument was repelled by making following observations:- Though not stated in the counter affidavit, we can take notice of the fact that the state does provide several facilities to the trade including laying and maintenance, of roads, waterways and markets, etc. As a matter of fact, since the levy is by the state, we must also look to the facilities provided by the State for ascertaining whether the State has established the compensatory character of the tax. On this basis, it must be held that the State has established that the impugned tax is compensatory in nature. This finding is by itself sufficient to negative the attack based on Article 301 but even if we assume that the State has not established the said fact even so the result is no different...� 10. Similar view has been expressed yet in another decision reported as 1995 supp(l) SCC 673, Mps Bhagat Ram Rajeev Kumar V. Commissioner of Sales Tax, M.P. and others. The challenge in the above case was made to levy of entry tax on goods such as sugar under section 3(1)(a) of the Madhya.Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976. The argument raised was repelled. It was observed that this tax on entry of goods is compensatory in nature. What was said in paragraph 8 of the judgment is being reproduced below:- Even the submission of Article 301 of the Constitution is not well founded. The article came up for interpretation by this court in Atiabari Tea Co. Ltd. V. State of Assam, AIR 1961 SC 232 and Automobile Transport (Rajasthan) Ltd. V. State of Rajasthan, AIR 1962SC 1406. A combined reading of the two decisions indicate that so long as a tax is regulatory and compensatory it is not within the mischief of Article 301. In the counter-affidavit filed on behalf of the State which was not disputed the nature of levy has been demonstrated to be compensatory. The appellants did not dispute the figure furnished by the State. It is settled by now that if the tax is compensatory then it is immune from challenge under Article 301 (see Khyerbari Tea Co. Ltd. V. State of Assam) AIR 1964 SC 925 and State of Karnatak V Hansa Corporation, (1980) 4 SCC 697. The appellants did not dispute the figure furnished by the State. It is settled by now that if the tax is compensatory then it is immune from challenge under Article 301 (see Khyerbari Tea Co. Ltd. V. State of Assam) AIR 1964 SC 925 and State of Karnatak V Hansa Corporation, (1980) 4 SCC 697. The submission of Shri Ashok Sen, learned Senior Counsel that compensation is that which facilities the trade only does not appear to be sound. The concept of compensatory nature of tax has been widened and if there is substantial or even some link between the tax and facilities extended to such dealers directly or indirectly the levy cannot be impugned as invalid. The stand of the State that the revenue earned is being made over to the local bodies to compensate then from the floss caused, makes the impost compensatory in nature, as augmentation of their finance would enable them to provide municipal services more efficiently, which would help or ease free flow of trade and commerce, because of which the impost has to be regarded as compensatory in nature, in view of what has been stated in the aforesaid decisions, more particularly in Hansa Corp. case." 11. The aforementioned two judgments clearly lay down that if a particular tax on sale or consumption is made, that tax is compensatory in nature and this would be protected by Article 301 of the Constitution. The judgment given in Bhagat Rams case supra is a judgment given by Three Member Bench and I am of the opinion that as indicated above, the ratio of two decisions noticed above fully covers the issue involved in this petition. As indicated above, (sic) had made an observation that under the levy, the toll-tax is being used for maintaining state highways and providing other facilities, judicial note can also be taken of the fact that there is no octroi in the State of Jammu and Kashmir and the collection which is being made at the barriers is for the benefit of local units also Therefore, keeping in view the above position of law it is held; i/ that fresh milk is a distinct and different commodity as compared with milk which is old in polythene packets, it would fall within the term pasteurized milk as it contains preservatives for keeping it fresh from fermentation. Therefore, to say that milk which is imported by the petitioner is fresh milk and can be therefore, exempted is an argument which cannot be accepted. ii/ that argument based on the provisions of article 301 and 304(a) of the constitution of India can also be not sustained This is because, exemptions have been granted to the locally produced goods and this exemption can be granted. In view of the above, this petition is found to be without merit and is dismissed.