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PETITIONER: M/s. STEELWORTH LTD.

       Vs.

RESPONDENT: STATE OF ASSAM

DATE OF JUDGMENT: 16/01/1962

BENCH:

ACT:      Sales Tax-Provincial legislation imposing tax in certain  circumstances-Constitutional validity- Amendment-Effect-Assam Sales  Tax  Act,1947  (Act, XVII of  1947), as  amended  by  Assam  Sales  Tax (Amendment Act,  1960) (Act,  XIII of  1960) s. 15 (1) (b)  (i) (b)  and (c)-Constitution  of  India, Arts. 14, 19 (1)(f).

HEADNOTE:      The  petitioner   carried  on   business   of manufacturing,  selling  and  supplying  iron  and steel materials  in the State of Assam. Before the Assam Sales  Tax Amendment  Act of 1960, it held a registration  certificate   under  which  all  its purchases for  use in manufacture or production of goods taxable  under the  Act were  exempted  from Sales Tax,  but  after  the  amendment  it  became liable to pay tax on those goods. It was contended that by  omission of  sub-cl. (b),  discrimination was   introduced    by   differentiating   between materials  bought  for  articles  to  be  supplied against a  contract and articles produced and sold by  the   petitioner  and  that  this  was  not  a reasonable classification 590 based  on   any   intelligible   differentia   and therefore, the  amendment by Act XIII of 1960, was violative  of  Arts.  14  and  19(1)  (f)  of  the Constitution. ^      Held, that the object of the amending Act was to raise  revenue for  the State.  It was  for the legislature to  decide  as  to  what  articles  it should tax and what articles it should not tax and if  it  decided  to  impose  the  tax  on  certain articles it thought necessary, that was a question of policy  into which  the courts cannot enter and in  such   circumstances  per   se  there   is  no discrimination.  Besides,  the  provision  against discrimination was  not on articles but on persons and  the   petitioner  failed   to  show  how  the imposition  of   this  tax   was  an  unreasonable restriction on the right to carry on trade.

JUDGMENT:      ORIGINAL JURISDICTION  Writ Petition  No. 184

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of 1961.      Petition under Art. 32 of the Constitution of India for enforcement of Fundamental Rights.      C. B.  Agarwala, R.  L. Agarwala  and  P.  C. Agarwala, for the petitioner.      Naunit Lal, for the respondents.      1962. January  16. The  Judgment of the Court was delivered by      KAPUR J.-This  is a petition under Art. 32 of the Constitution  challenging the  legality of the amendment introduced  in s.  15 of the Assam Sales Tax Act,  1947 (Act  XVII of 1947), by s. 2 of the Assam Sales Tax (Amendment) Act, 1960 (Act XIII of 1960), by  which sub-s. (b) of item (i) of sub-cl. (b) of  cl. (1)  was deleted  and thereby sales of goods to  a registered  dealer intended for use in production of  goods for  sale  became  liable  to sales tax.      The appellant  Company is  a limited  company carrying on  in the State of Assam its business of manufacturing,  selling  and  supplying  iron  and steel   materials.    It   held   a   Registration Certificate under  the Assam  Sales Tax Act, as it was before  the amendment  of 1960. Under that Act all  its  purchases  for  use  in  manufacture  or production of  goods taxable  under the  Act  were exempt from  sales tax  but after the amendment of the Act there was a deletion in 591 the Registration  Certificate  of  certain  goods, e.g., cast  iron,  iron  plates,  steel  bars  and galvanised wire  which were used by the petitioner in the  manufacture of its finished products which were also  taxable in  the State.  Consequently it has become  liable  to  pay  tax  on  those  goods purchased for  use in the manufacture of goods and the cost of production has thereby gone up.      Three points were raised by the petitioner:-      (1) that the amendment introduced by Act XIII of  1960  is  violative  of  Art.  14  because  it discriminates  between  manufacturers  who  supply goods according  to orders received and others who manufacture goods  on their  own account  and sell them;      (2)  that  the  restriction  imposed  by  the Amending Act is excessive and violative of Art. 19 (1)(f); and      (3)   that   the   refusal   to   amend   the Registration Certificate  by not  reinstating  the articles mentioned above affects the rights of the petitioner Company under Art. 19(1) (f).      For the  purpose of  deciding these questions it is  necessary to  refer to  the scheme  of  the Assam Sales  Tax Act,  1947 (Act XVII of 1947). By s. 2(2)(a)(b)  of that  Act ’Contract’  is defined as:           "2.  In   this  Act,   unless  there  is      anything  repugnant   in   the   subject   or      context,-           (2) "contract"  means any  agreement for      carrying out  for cash or deferred payment or      other valuable consideration,-           (a)   the    preparation,   contruction,      fittingout,  improvement  or  repair  of  any      moveable property  or of  any building, road,

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    bridge or other immoveable property, or 592           (b) the  installation or  repair of  any      machinery affixed  to  a  building  or  other      immoveable property."      Section 9 of that Act provides for compulsory registration. Section  12 provides  that a  dealer registered  under   s.  9   shall  be   granted  a certificate of  registration which  shall  specify the class  or classes  of goods  in which the said dealer  carries   on  business   and  such   other particulars  as   may   be   prescribed.   Section 15(1)(b)(i)(b) and  (c) deals  with exemptions. It reads:-           "15 The net turnover shall be determined      by deducting  from  dealer’s  gross  turnover      during any given period-           (1) his turnover during that period on.           (a) ... ... ... ... ... ...  .... .....           (b) sale to a registered dealer of-           (i) goods  specified in  the  purchasing      dealer’s certificate of registration as being      intended by him for-           (a) ...  ... ...  ... ...  ...     ..... .....           (b) use  in manufacture or production of      any goods, the sale of which is taxable under      this Act,           (c)  use   in  the   execution  of   any contract." Sub-clause  (b)   has  now  been  omitted  by  the amending Act  above referred  to as  a  result  of which from  the gross  turnover of  a dealer goods specified in  the certificate  of registration  as being intended  by him  for use  in manufacture or production of  any goods  for sale  has  now  been omitted.      The argument  raised was that by the omission of sub-cl.  (b)  discrimination  was  intended  as between  materials  which  were  to  be  used  for manufacture of  goods and  to be sold on their own account by  the petitioner  Company and  materials which were  purchased for  use in the execution of any contract, 593 It was  also contended  that  the  object  of  the amendment of  the Sales  Tax Act  was  to  prevent evasion of  Sales Tax  by manufacturing  goods and sending them  out of  the State and therefore that object could  have been  achieved by  taxing  only those  material   which  were   so  intended.  The amending Act is really a part of the General Sales Tax Act  of the State of Assam the object of which is to  raise revenue  in the  State. It is for the Legislature to  decide  as  to  what  articles  it should tax and what articles it should not tax and if it  decided to tax certain articles in order to effectuate its  policy it  is difficult to see how that would  introduce discrimination.  But it  was argued  that   discrimination  is   introduced  by differentiating  between   materials  bought   for articles to  be supplied  against a  contract  and articles produced  and sold  by the petitioner and that this  was not a reasonable classification nor was there  any intelligible  differentia  in  this

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classification. In  our opinion  this argument  is without force.  The Legislature, having chosen the articles on  which it thinks necessary to impose a tax, has  decided to  impose the  tax  and  it  is difficult to see how it can be said that the goods supplied against a contract and goods manufactured and sold by the petitioner are similarly situated. Besides the  provision against  discrimination  is not on articles but on persons.      It has  not been  shown how the imposition of this tax  is an  unreasonable restriction  on  the rights of the petitioner to carry on trade, but it was submitted  that by  this means  the petitioner will not be able to compete with the manufacturers outside the  State of Assam. Assuming that this is so, it is clear that goods which are purchased are put to  different  uses  and  if  the  legislature thinks that  certain classes  of goods  should pay the tax  and not  others that  is  a  question  of policy into  which the courts cannot enter. We can only say  that in such circumstances, per se there is no  discrimination. There  is no  force in  the second contention either. 594      In view  of our  decision on these two points the third point, that is, the refusal of the Sales Tax Officer  to amend the registration certificate will have no force.      In the  result this  petition  fails  and  is dismissed  and   the  rule   is  discharged.   The petitioner will pay the costs of the respondent.                                Petition dismissed.