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Judgment
Mohd. Ahmed Ansari, J.—These five applications for Writs in the nature of MANDAMUS or for appropriate directions under Article 226, of the Constitution, are by some members of the Wholesale Cloth Merchants Association of Secunderabad. The Applicants claim that the Association consists of about 150 merchants of Secunderabad, and they are registered dealers under the Hyderabad General Sales Tax Act of 1950. The business they carry on is of selling cloths of various qualities including super-fine, coarse and medium varieties made in mills or woven on power-looms. The sales of coarse and medium cotton cloth for the period after 1-8-1952, are being taxed under the third amendment to the Hyderabad General Sales Tax Act, which makes the aforesaid commodity liable to pay the tax, and the common object of the Writ applications is to challenge the legality of such taxation on the grounds which are mentioned later in this judgment.
The Applicants assert that the Sales Tax Officer of Secunderabad had in November, 1952, treated the sale-amounts of coarse and medium, cloths as assessable turnover and demanded payments of tax; on objections the Applicants were advised to tile appeals; but as it is more expedient and desirable to invoke the jurisdiction of this Court under Article 226 on their claim) of the assessments being ultra vires, they have not appealed; but have come directly to this Court.
The following grounds are urged for declaring the aforesaid assessment as unconstitutional:
(i) Under the Essential Supplies (Temporary Powers) Act (24 of 1946), which had been by an amendment extended to the Hyderabad State from 17-3-1950,, ''cotton and woolen textiles'' have been included in the definition of ''Essential commodity''; the amended Hyderabad General Sales Tax Act which imposes the tax on sales of cotton cloth has not received the assent of the President; it, therefore, offends Article 286(3) of the Constitution and the taxing of the commodity is illegal;
(ii) The next ground is that the Parliament has passed the Essential Goods (Declaration and Regulation of Tax on Sale and Purchase) Act (52 of 1952), which came into force from 9-8-1952; in the Schedule to this Act coarse and medium cloths are included; the Act has been enacted for the purposes of Article 286(3), and as the Hyderabad General Sales Tax Act has not after this Act received the President''s assent, that part of the Hyderabad Act, which authorises levy of Sales Tax on the coarse and medium cloths, is void from s-g.1952, for the failure to comply with the provisions of Article 286(3).
(iii) The third ground is that the continuance of the levying of tax on the aforesaid commodity under the Hyderabad General Sales Tax Act without the assent of the President is contrary to the provisions of the taxing statute itself; for according to Explanation (2) to Section 2(k) of the Hyderabad General Sales Tax Act, notwithstanding anything contrary in any other law for the time being in force a transfer of goods, in respect of which no tax can be imposed by reason of the provisions contained in Article 286 of the Constitution, shall not be deemed to be sale within the meaning of this clause.
(iv) The last ground is that the levy and collection of the tax on sales on the ground of a pre-existing law amounts to a denial of equal protection and constitutes unjustifiable and arbitrary discrimination between subjects of different States.
In our opinion, only two questions need be adjudicated in these cases. The tax on the commodity which is being challenged, became leviable under an amendment to the Hyderabad Act, which came into force from 1-8-1952, and its invalidity on the ground of absence of consent of the President to the Hyderabad Act when the Emergency Act was operative in this State, assuming the contention of the Applicants to be correct, covers a very short period of one week. The applications do not disclose how much of the Sales Tax relate to this period, and in absence of such specific allegation we think any pronouncement on the constitutionality of the tax for this period would be inadvisable.
The first question in the case is whether the subsequent enactment by the Parliament declaring a particular commodity as essential for the life of the community necessitates obtaining of the President''s assent under Article 286(3) to preserve the legality of a taxing statute on the sale of such commodity which had been passed earlier by a Legislature. The Explanation to the Hyderabad General Sales Tax Act relied on by the Applicants, in our view, does but declare the constitutional position, which would be the same even if the Explanation was not incorporated in. the Act, and if the answer to the question is against the Applicants no separate adjudication on this issue is necessary. Therefore, the question which we will determine first in these cases is one relating to the interpretation of Clause (3) of Article 286 and the word ''law'' used therein. The other question is whether the guarantee of the equal protection of the laws has been violated by the continuance of the Hyderabad General Sales Tax Act so far as the taxation on the medium cotton cloth is concerned, which we will decide next.
The Hyderabad General Sales Tax Act came into force on 1-5-1950, and the coarse and medium cloths were made liable to taxation under the third amendment to the Act which became enforceable from 1-8-1952. Thus the main Act and its amendment were both existing laws before the Central Act, No. 52 of 1952 became operative on 9-8-1952. It was urged on behalf of the Applicants that the object of Article 286 of the Constitution is to discontinue the practice prevailing under the Government of India Act, 1935, when provinces as they then were, levied Sales Tax on commodities on the basis of one or more ingredients constituting a sale which resulted in multiple taxation of one transaction and heavy burden on the consuming public. In these circumstances, the word ''law'' referred to in Clause (3) of Article 286 should cover pre-existing laws also. Had the intention been to cover subsequent laws only the word ''bill'' would have been used as in Clause (2) of Article 288. Therefore, an existing law levying Sales Tax on a commodity declared essential for the life of the community by Parliament is invalidated unless the assent of the President has been obtained for taxing the commodity under Article 286, Clause (3). The relevant part of the Article reads as follows:
(3) No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent.
We regret that we cannot accept the interpretation sought to be placed on the Clause. The three Clauses of the Article place varying degree of restrictions on the power of the Slates to levy Sales Tax. Under Clause (1) the restriction is absolute, i.e., the States are barred from imposing any tax on sale of goods where the sale transaction takes place outside the State or in the course of exports or imports of the commodity outside or into the territory of India. Then by Clause (2) inter-State trade or commerce cannot be taxed except where Parliament by law otherwise provides. Under Clause (3) the assent of the President is sufficient to validate the law. The use of the present perfect tense in the phrase ''as have been declared by Parliament by law to be essential for the life of the community'' indicates that some sequence of time is intended, and this sequence can only be the passage of law taxing a commodity after its declaration by the Parliament to be essential for the life of the community; otherwise words such as ''existing'' would have been used to indicate earlier laws also.
There are other reasons which support our conclusions on this point. One is the following observation of his Lordship the Chief Justice of India at p. 265 in-- The State of Bihar Vs. Sir Kameshwar Singh, :
...Similarly, Article 31(3) must, in my judgment, be understood as having reference to what, in historical sequence, having been passed by the House or Houses of the State Legislature and reserved by the Governor for the consideration of the President and assented to by the latter, has thus become a law. If it was intended that such a law should have the assent of both the Governor and the President, one would expect to find not only a more clear or explicit provision to that effect, but also some reference in Article 200 to the Governor''s power to reserve a measure for the consideration of the President after himself assenting to it. On the other hand, as we have seen, where reservation by the Governor is made obligatory, he is prohibited from giving his assent.
What has been held about Article 31(3) applies equally to Article 286(3), for in both the assent is made necessary for the validity of an enactment passed by the State Legislature. Then there is the general principle of the construction of statutes that a reasonable doubt must be solved in favour of the legislative action and the Act sustained.
Moreover, Section 3, Essential Goods Act of 1952 in express terms declares that no law made after the commencement of the Act by the Legislature of a Slate imposing a tax on the sale of any goods declared by this Act to be essential for the life of the community, shall have effect unless it has been reserved for the consideration of the President and has received his assent. It is inconceivable that Parliament would place limits on a constitutional provision had the provision been as wide as has been urged by the Advocate of the Applicants. For these reasons, we are of the opinion that as the Applicants are being taxed under an enactment which is earlier to the Central Act, the earlier Act is not covered by Clause (3) of Article 286 and therefore the tax is being validly levied.
It was also urged before us that the enactment of a statute taxing specific commodities immediately before the enforcement of a Parliamentary Act declaring them essential for the life of the community is a colourable exercise of a legislative power. But the Supreme Court in K.C. Gajapati Narayan Deo and Others Vs. The State of Orissa, have said what can be called ''colourable legislation:
It may be made clear at the outset that the doctrine of colorable legislation does not involve any question of ''bona fides'' or ''mala fides'' on the part of the Legislature. The whole doctrine resolves itself into the question of competency of a particular Legislature to enact a particular law. If the Legislature is competent to pass a particular law, the motives which impelled it to'' act are really irrelevant. On the other hand, if the Legislature lacks competency, the question of motive does not arise at all. Whether a statute is constitutional or not is thus always a question of power....
If the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specific legislative entries, or if there are limitations on the legislative authority in the shape of fundamental rights, questions do arise as to whether the Legislature in a particular case has or has not, in respect to the subject-matter of the statute or in the method of enacting, it, transgressed the limits of its constitutional powers. Such transgression may be patent, manifest or direct, but it may also be disguised, covert and indirect and it is to this latter class of cases that the expression ''colourable legislation'' has been applied in certain judicial pronouncements....
Judged by the aforesaid test, the third amendment of the Hyderabad General Sales Tax Act cannot be held as colourable, as it is covered by Item 54 of the Seventh Schedule of the Constitution, was passed earlier to the Central Act, and is not covered by law as used in Article 286(3).
We also think that there is no force in the argument that the enactment infringes the guarantee relating to equality before the law. It is well established by authorities both American and Indian that territorial classification is a good classification for purposes of Article 14. Therefore, if the taxing of a particular commodity within a particular area is otherwise constitutional, it does not become unconstitutional on ground of violating of the equal guarantee contained in Article 14.
In conclusion, we would say that we do not accept the contention of the learned Advocate for the Government that the application for the Writ is not the proper remedy even where constitutional issues are involved. Obviously, the lower civil authorities cannot decide such constitutional issues. Therefore, filing of a suit would not be as efficacious remedy as the filing of the petition. As regards appeals and revisions to the taxing authorities, it is equally obvious that the view of these authorities on constitutional issues are not decisive, and we see no reason why the Applicants, where such issues are raised, should be troubled with seeking redress from authorities when final and satisfactory adjudication on the issues can be had by the applications to this Court.
We, therefore, reject the preliminary objection of the Government Advocate, but we dismiss the applications on the ground that they are not being asked to pay tax which is illegal. This judgment will govern all the five applications. Each party to bear his own costs.