AI Structured Summary
Not yet generated for this judgment
Judgment
Sanjay Kishan Kaul, C.J. and M.M. Sundresh, J.—The constitutionality of the Amendment Act No. 25 of 2012 Entry 2 of Second Schedule and Explanation No. 1 of the Tamil Nadu Value Added Tax Act, 2006, (hereinafter referred to as ''''the Act'''') on the touch stone of Articles 14 and 19(1)(g) of the Constitution of India, is challenged before us. Acknowledging the commonality of the issues, we deem it appropriate to dispose of the writ petitions by a single order.
Factual Matrix:--
The petitioners are hotels and clubs holding FL 2 and FL 3 licences to sell alcoholic liquor to their customers. The licences encompass both foreign liquor and Indian Made Foreign liquor. The foreign liquor is being sold by the petitioners to their customers as a first sale in the State and taxed at 58%. In respect of the liquors manufactured outside the state, the first seller is the Tamil Nadu State Marketing Corporation Limited (in short, ''''TASMAC''''). While effecting the first sale to the petitioners, TASMAC pays 58% tax. Hitherto, the sale by the petitioners to their customers was not subjected to any levy of tax. Similarly, for the liquor manufactured within the State, the distiller pays tax at 58% at the point of first sale to TASMAC. Tax at 58% is paid by TASMAC after deducting the tax suffered turnover at the second point of sale to the petitioner. For the third point of sale from the petitioners to their customers, there was no tax. Taking note of this anomaly between a sale of foreign liquor and Indian made foreign liquor, the proposed amendment was introduced. The intention of the amendment appears to be that while the petitioners paid tax on the sale of liquor of foreign origin, the sale of liquor manufactured outside as well as within the State by the petitioners at the second and third point of sale were without any payment of tax. The third sale is also effected by the petitioners to their customers by making suitable value additions. Thus, the respondents brought forth the amendment by levying sales tax at the third point of sale in the State at the rate of 14.5% seeking to augment more revenue and to avoid loss.
The Statement of Objects and Reasons leading to the amendment is recapitulated hereunder:
''''In the Budget Speech for the year 2012-2013, certain tax concessions have been announced to benefit consumers. Further, to implement welfare and developmental programmes more vigorously, certain measures were announced for further revenue mobilization. To give effect to the said announcements, notifications were issued under Sub-section (1) of Section 86 of the Tamil Nadu Value Added Tax Act, 2006 (Tamil Nadu Act 32 of 2006) to amend the First, Second and Fourth Schedules to the Act.''''
The following is the tax that is being levied under the impugned provision:
The working mechanism as per the impugned amendment is provided hereunder for better appreciation:
Aggrieved over the aforesaid levy of tax on the sales effected by the petitioners to their customers at 14.5%, these writ petitions have been filed before us.
From the arguments made on behalf of the petitioners, it appears that the petitioners are not aggrieved with the levy or the point of levy but qua taxing their entire sales turnover at the third point without any set-off of the tax-suffered turnover as adopted at the point of second sale.
Submissions of Petitioners:--
The impugned amendment is contrary to the object and rationale enshrined under the Act, as the benefits hitherto available have been taken away. There is a discrimination between the dealers viz., the TASMAC and the petitioners. The classification, being arbitrary, having no nexus to the object sought to be achieved, will have to be declared as unconstitutional, as it places fetters on the right of the petitioners to carry on their own business. Therefore, Articles 14 and 19(1)(g) of the Constitution of India are violated. It also discriminates between the similarly placed dealers. The respondents ought to have exercised power under Section 80 of the Tamil Nadu Value Added Tax Act, 2006 by framing rules instead of amending the Second Schedule. It would amount to double taxation. The classification is artificial, as an abortive attempt has been made to differentiate dealers into two groups without any basis. Under the Second Schedule, the manner in which the turnover is calculated has not been prescribed. There cannot be a taxation of the entire turnover. To buttress their submissions, the following judgments have been relied upon:
''''(1) Khoday Distilleries Ltd. and Others Vs. State of Karnataka and Others, (1994) 6 JT 588 : (1994) 4 SCALE 528 : (1995) 1 SCC 574 : (1994) 4 SCR 477 Supp ;
(2) State of Maharashtra and Another Vs. Indian Hotel and Restaurants Assn. and Others, (2013) 5 ABR 222 : AIR 2013 SC 2582 : (2013) 3 RCR(Criminal) 455 : (2013) 9 SCALE 47 : (2013) 8 SCC 519 ;
Orissa State (Prevention and Control of Pollution) Board Vs. Orient Paper Mills and Another, AIR 2003 SC 1966 : (2003) 3 CompLJ 55 : (2003) CriLJ 1702 : (2003) 3 JT 74 : (2003) 3 SCALE 44 : (2003) 10 SCC 421 : (2003) 2 SCR 741 : (2003) AIRSCW 1463 : (2003) 2 Supreme 592 ;
J.K. Industries Ltd. and Another Vs. Union of India (UOI) and Others, (2008) 143 CompCas 325 : (2008) 5 CompLJ 369 : (2007) 213 CTR 301 : (2008) 297 ITR 176 : (2007) 12 JT 529 : (2007) 13 SCALE 204 : (2007) 80 SCL 283 : (2007) 12 SCR 136 .''''
Submissions of respondents:--
Learned Special Government Pleader appearing for the respondents submitted that the petitioners, being the FL 2 and FL 3 licensees, form a different and separate category. Article 19(1)(g) is not available to the petitioners while trading in liquor. The petitioners, having purchased the liquor from TASMAC, cannot equate themselves on par with it. The sale by TASMAC to the petitioners is a second sale, whereas the sale by the petitioners to their customers is a third one. The classification based upon economic consideration is perfectly valid. The petitioners were already given adequate benefits on the sale effected by TASMAC. They have made considerable value additions before making sale to their customers. The fact that they are selling at a higher price is not in dispute. The customers of the TASMAC and the customers of the petitioners are totally different. The impugned amendment has been introduced to augment more revenue to carry out welfare measures. The petitioners having availed a set-off at the second point of sale cannot complain that there is no set-off at the third point also. They are catering to the elite clientele, which forms a separate class by itself. The TASMAC is neither a club nor a hotel having FL license. The petitioners'' right to carry on the business has not been taken away. Article 19(1)(g) is subject to Article 19(6). The classification is perfectly valid and there is no arbitrariness involved. As the TASMAC is concerned with the second sale and the petitioners are involved with the third sale, there is no comparison between the two. Certain goods along with liquor have also been included in the Second Schedule which has not been disputed by the petitioners. When they have no quibble with the levy or the point of levy, they cannot challenge the mode of levy at the third point of sale. There is no prohibition in law under Section 3(5) read with Section 80 of the Act in making the amendment to the Second Schedule. In fact, Section 3(5) enables the amendment to the Second Schedule. In support of the said submissions, the following judgments have been relied upon:
"1. Jayam and Co. and Others Vs. The Assistant Commissioner (CT) and Others etc. etc., (2014) 1 MLJ 157 : (2013) 65 VST 260 ;
USA Agencies Vs. The Commercial Tax Officer, (2013) 5 CTC 63 : (2013) 199 ECR 294 : (2013) 6 MLJ 142 : (2013) 66 VST 75 ;
Kadiyala Chandrayya Vs. State of Andhra, AIR 1957 AP 261 : (1957) 8 STC 33 ;
Kottagudem Beer Wines Vs. The Government of Andhra Pradesh, (1985) 1 APLJ 73 : (1987) 66 STC 70 ;
Hotel Elite and Others Vs. State of Kerala and Others, (1988) 2 ILR (Ker) 11 : (1988) 69 STC 119 ;
Quinn India Limited Vs. Government of Andhra Pradesh and Another, (1996) 103 STC 264 ;
Kathyayini Hotels Pvt. Ltd. Vs. Deputy Commissioner of Commercial Taxes (Assessments) V, Bangalore and another, (1998) ILR (Kar) 1020 ;
Sun Direct TV Pvt. Ltd. Vs. State of U.P. and Others, (2013) 61 VST 481 ;
Konduri Buchirajalingam Vs. The State of Hyderabad and Others, AIR 1958 SC 756 : (1958) 9 STC 397 ;
S. Kodar Vs. State of Kerala, AIR 1974 SC 2272 : (1974) 4 SCC 422 : (1975) 1 SCR 121 : (1974) 34 STC 73 ;
Ganga Sugar Corporation Ltd. and Others Vs. State of Uttar Pradesh and Others, AIR 1980 SC 286 : (1980) 1 SCC 223 : (1980) 1 SCR 769 : (1980) 45 STC 36 ;
Provisions of the Act:--
Section 2(15) defines a "dealer'''' as under:--
''''dealer" means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes -
(i) a local authority, company, Hindu undivided family, firm or other association of persons which carries on such business;
(ii) a casual trader;
(iii) a factor, a broker, a commission agent or arhati, a del credere agent or an auctioneer, or any other mercantile agent by whatever name called, and whether of the same description as hereinbefore or not, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal, or through whom the goods are brought, sold, supplied or distributed;
(iv) every local branch of a firm or company situated outside the State;
(v) a person engaged in the business of transfer otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable consideration;
(vi) a person engaged in the business of transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
(vii) a person engaged in the business of delivery of goods on hire purchase or any system of payment by installments;
(viii) a person engaged in the business of transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.
(ix) a person engaged in the business of supplying by way of, or as part of, any service or in any other manner whatsoever of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration.''''
A perusal of the above provision would show that it is very exhaustive in nature. There is no difficulty in holding that both the petitioners and the TASMAC would come under the said definition. However, the said Section merely defines a ''''dealer'''' and it cannot be said that notwithstanding the other provisions, all the dealers are to be treated alike. In other words, a definition provision has to be read in conformity with the substantive ones.
Section 2(38) defines ''''taxable turnover'''' as under:
''''taxable turnover'''' means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed.''''
Section 2(40) defines ''''total turnover'''' as under:
''''total turnover'''' means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not, the whole or any portion of such turnover is liable to tax.''''
and Section 2(41) defines ''''turnover'''' as under:
''''turnover'''' means the aggregate amount for which goods are brought or sold, or delivered or supplied or otherwise disposed of in any of the ways referred to in clause (33), by a dealer either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person of agricultural or horticultural produce, other than tea and rubber (natural rubber latex and all varieties and grades of raw rubber) grown within the State by himself or on any land in which he has an interest whether as owner, usufrcturay mortgageee, tenant or otherwise, shall be excluded from his turnover.''''
Thus, it is clear that the Act speaks about three types of turnovers.
One cannot say that the other substantive provisions will have to be made applicable only to the taxable turnover alone, to the exclusion of others.
Coming to Section 3, it is a charging provision, which deals with ''''levy of taxes on sale of goods''''. Now, we are primarily concerned with Section 3(5). Section 3(5) empowers the Second Schedule qua the tax payable on the sale or purchase of goods specified therein. This is at the point and at the rate specified therein. A perusal of the Second Schedule would show that certain specified goods found place in the White Paper are found thereunder. The Second Schedule also provides for appropriate point and the rate. Thus, Section 3(5) charges the Second Schedule with adequate ammunition.
Under Section 80, the 1st respondent has been conferred with power to make rules. While Section 80(1) deals with general power, Section 80(2) deals with the matters over which it can be exercised. What is important is that Section 80 is meant to give effect to the substantive provisions of the Act by framing rules.
Coming to Section 86, it empowers the 1st respondent to amend the Schedules. Under Section 86(1), the respondent by a notification can alter, add or cancel any of the Schedules. This provision deals with the amendment of the Schedules alone. The specific language used in Section 86 includes ''add to'' to the Schedule in addition to alteration or cancellation. As the constitutionality of this provision is not under challenge and in view of the specification mentioned therein, one can safely conclude that the 1st respondent can exercise the power under Section 86(1) by way of amending the Schedules.
In exercise of the foregoing power, the 1st respondent has duly amended the Second Schedule. As discussed above, the Second Schedule deals with certain goods which would be outside the VAT, such as liquor, aviation gasoline, petrol, high speed diesel oil, light diesel oil, kerosene, Molasses, sugar, Sugarcane, etc. It also specifies the point of levy and rate of tax. A perusal of the Second Schedule would show that based upon the basic price, rate of tax has been fixed even beyond 100%. This Second Schedule has to be read in consonance with Section 3(5) of the Act. In other words, the Second Schedule exists, being empowered by section 3(5) of the Act. As the power is available to the 1st respondent under Section 86 to amend the Second Schedule, there is no necessity to exercise the rule making power under Section 80, since it operates on a different field. Merely because a rule making power is available, it cannot be said that the exercise of power under the Act by duly amending it would become unconstitutional. Thus, even assuming that there exists a rule making power, exercise of power under the statute through a different provision cannot be termed as unconstitutional. The respondents merely exercised the power under the Statute, which cannot be faulted with. A useful reference can be had to the decision of the Supreme Court in Orissa State (Prevention and Control of Pollution) Board Vs. Orient Paper Mills and Another, AIR 2003 SC 1966 : (2003) 3 CompLJ 55 : (2003) CriLJ 1702 : (2003) 3 JT 74 : (2003) 3 SCALE 44 : (2003) 10 SCC 421 : (2003) 2 SCR 741 : (2003) AIRSCW 1463 : (2003) 2 Supreme 592 , wherein, it has been held as follows:--
''''20. We feel that so far the point relating to the meaning of the word "may" used under Section 19 of the Act is concerned it is not relevant for resolving the controversy we are concerned with. Once the manner is prescribed under the rules undoubtedly the declaration of the area has to be only in accordance with the manner prescribed but absence of Rules will not render the Act inoperative. The power vested under Sec. 19 of the Act, would still be exercisable as provided under the provision i.e. by declaring an area as an pollution control area by publication of notification in the official gazette. Non-framing of Rules does not curtail the power of the State Government to declare any area as air pollution control area by means of a notification published in the official gazette. The part of the provision "in such manner as may be prescribed" would spring into operation only after such manner is prescribed by framing the rules under Section 54 (2)(k) of the Act. This view as indicated earlier, is amply supported by the decision of this Court referred to above in the case of T. Cajee Vs. U. Jormanik Siem and Another, AIR 1961 SC 276 : (1961) 2 FLR 304 : (1961) 1 LLJ 652 : (1961) 1 SCR 750 which is a decision by a Constitution Bench of this Court. It has been followed in a subsequent decision of this Court reported in Surinder Singh Vs. Central Government and Others, AIR 1986 SC 2166 : (1986) JT 578 : (1986) 2 SCALE 550 : (1986) 4 SCC 667 : (1986) 3 SCR 946 . The Central Government had not framed rules in respect of disposal of property forming part of the compensation pool as contemplated under the provisions of the relevant Act. It was claimed by one of the parties that the authority constituted under the Act had no jurisdiction to dispose of urban agricultural property by auction sale in absence of Rules. The contention was repelled with the following observations: (scc P,673, PARA 6)
"..... Where a statute confers powers on an authority to do certain acts or exercise power in respect of certain matters, subject to rules, the exercise of power conferred by the statute does not depend on the existence of rules unless the statute expressly provides for the same. In other words framing of the rules is not condition precedent to the exercise of the power expressly and unconditionally conferred by the statute. The expression "subject to the rules" only means, in accordance with the rules, if any. If rules are framed, the powers so conferred on authority could be exercised in accordance with these rules. But if no rules are framed there is no void and the authority is not precluded from exercising the power conferred by the statute..... "
A reference was also made to the decisions of this Court in the cases reported in B.N. Nagarajan and Others Vs. State of Mysore and Others, AIR 1966 SC 1942 : (1967) 15 FLR 332 : (1967) 1 LLJ 698 : (1966) 3 SCR 682 and Mysore State Road Transport Corporation Vs. Gopinath Gundachar Char, AIR 1968 SC 464 : (1968) 2 LLJ 144 : (1968) 1 SCR 767 . Reliance was also placed on U.P. State Electricity Board Lucknow Vs. City Board, Mussoorie and Others, AIR 1985 SC 883 : (1985) 1 SCALE 196 : (1985) 2 SCC 16 : (1985) 2 SCR 815 : (1985) 17 UJ 633 .
In view of the discussion held above, in our view it would not be correct to say that simply because the rules have not been framed prescribing the manner it would render the Act inoperative. The area was notified as air pollution control area by the State Government as authorized and provided by virtue of the powers conferred under Section 19 of the Act....... ''''
Object of the amending provision:--
Coming to the object of the amending provision, it is seen that it has been introduced to implement the various welfare schemes launched by the Government. It was also introduced to get over the anomaly existed hitherto by which the petitioners were given benefits, though they were selling the liquor at the higher price by making considerable value additions. When the object is to augment more revenue as well as to regulate economic life of the Society, it cannot be termed as arbitrary. Though the statement of objects and reasons cannot be the sole basis for construing a provision, it can very well be taken note of for understanding the background and to decipher the real intention behind it. In this regard, it is apposite to refer the following passages of a decision of the Supreme Court in Siddhu Matriculation Hr. Secondary School Vs. K. Shyam Sunder and Others, (2011) 8 SCALE 505 : (2011) 8 SCC 737 , wherein it was held as under:
''''66. The Statement of Objects and Reasons appended to the Bill is not admissible as an aid to the construction of the Act to be passed, but it can be used for limited purpose for ascertaining the conditions which prevailed at that time which necessitated the making of the law, and the extent and urgency of the evil, which it sought to remedy. The Statement of Objects and Reasons may be relevant to find out what is the objective of any given statute passed by the legislature. It may provide for the reasons which induced the legislature to enact the statute. "For the purpose of deciphering the objects and purport of the Act, the court can look to the Statement of Objects and Reasons thereof". (Vide: Kavalappara Kottarathil Kochuni and Others Vs. The State of Madras and Others, AIR 1960 SC 1080 : (1960) 3 SCR 887 ; and Tata Power Company Ltd. and Another Vs. Reliance Energy Ltd. and Others, (2009) 16 SCC 659 : (2009) 10 SCR 625 .
In A. Manjula Bhashini and Others Vs. The Managing Director, A.P. Women''s Cooperative Finance Corporation Ltd. and Another, AIR 2010 SC 3143 : (2009) 9 JT 229 : (2009) 4 LLJ 57 : (2009) 9 SCALE 99 : (2009) 8 SCC 431 : (2009) 2 SCC(L&S) 441 : (2009) 10 SCR 634 : (2009) 7 UJ 3037 , this Court held as under:
"The proposition which can be culled out from the aforementioned judgments is that although the Statement of Objects and Reasons contained in the Bill leading to enactment of the particular Act cannot be made the sole basis for construing the provisions contained therein, the same can be referred to for understanding the background, the antecedent state of affairs and the mischief sought to be remedied by the statute. The Statement of Objects and Reasons can also be looked into as an external aid for appreciating the true intent of the legislature and/or the object sought to be achieved by enactment of the particular Act or for judging reasonableness of the classification made by such Act."
Thus, in view of the above, the Statement of Objects and Reasons of any enactment spells out the core reason for which the enactment is brought and it can be looked into for appreciating the true intent of the legislature or to find out the object sought to be achieved by enactment of the particular Act or even for judging the reasonableness of the classifications made by such Act.''''
Policy decision:--
The power of judicial review over a policy decision in the field of revenue is quite settled. Such a decision is not required to be tested by a Court of law with suspicious and microscopic eye. The parameters for decision are good faith and intention. A Constitutional Court will have to look at the decision made by the Executive or a Legislature by taking a practical view and it should rather avoid an absolute and inflexible concept. An interpretation, which serves the legislative object and intent leading to a purposive construction, is required to be made by the Court. We do not wish to multiply the judicial precedents in this regard except quoting a decision of the Supreme Court rendered in Census Commissioner Vs. R. Krishnamurthy, (2014) 4 RCR(Civil) 991 : (2014) 10 SCJ 222 . A fruitful recapitulation of the following paragraphs of the said judgment would suffice:
"22. At this juncture, we may refer to certain authorities about the justification in interference with the policy framed by the Government. It needs no special emphasis to state that interference with the policy, though is permissible in law, yet the policy has to be scrutinized with ample circumspection. In N.D. Jayal and Another Vs. Union of India (UOI) and Others, (2003) 2 JT 1 Supp : (2003) 7 SCALE 54 : (2004) 9 SCC 362 : (2003) 3 SCR 152 Supp the Court has observed that in the matters of policy, when the Government takes a decision hearing in mind several aspects, the Court should not interfere with the same.
In Narmada Bachao Andolan Vs. Union of India and Others, AIR 2000 SC 3751 : (2000) 2 JT 6 Supp : (2000) 7 SCALE 34 : (2000) 10 SCC 664 : (2000) 4 SCR 94 Supp : (2000) AIRSCW 4809 : (2000) 7 Supreme 264 it has been held thus:
''''It is now well-settled that the courts, in the exercise of their jurisdiction, will not transgress into the field of policy decision. Whether to have an infrastructural project or not and what is the type of project to be undertaken and how it has to be executed, are part of policy making process and the Courts are ill equipped to adjudicate on a policy decision so undertaken. The Court, no doubt, has a duty to see that in the undertaking of a decision, no law is violated and people''s fundamental rights are not transgressed upon except to the extent permissible under the Constitution.''''
In this context, it is fruitful to refer to the authority in Rustom Cavasjee Cooper Vs. Union of India (UOI), AIR 1970 SC 564 : (1970) 40 CompCas 325 : (1970) 1 SCC 248 : (1970) 3 SCR 530 wherein it has been expressed thus:
''''It is again not for this Court to consider the relative merits of the different political theories or economic policies...... This Court has the power to strike down a law on the ground of want of authority, but the Court will not sit in appeal over the policy of the Parliament in enacting a law.''''
In Premium Granites and Another Vs. State of Tamil Nadu and Others, AIR 1994 SC 2233 : (1994) 1 JT 376 : (1994) 1 SCALE 393 : (1994) 2 SCC 691 : (1994) 1 SCR 579 : (1994) 2 UJ 145 while dealing with the power of the courts in interfering with the policy decision, the Court has held that it is not the domain of the court to embark upon unchartered ocean of public policy in an exercise to consider as to whether a particular public policy is wise or a better public policy could be evolved. Such exercise must be left to the discretion of the executive and legislative authorities as the case may be. The court is called upon to consider the validity of a public policy only when a challenge is make that such policy decision infringes fundamental rights guaranteed by the Constitution of India or any other statutory right.
In M.P. Oil Extraction and Another Vs. State of M.P. and Others, AIR 1998 SC 145 : (1997) 6 JT 97 : (1997) 4 SCALE 515 : (1997) 7 SCC 592 : (1997) 1 SCR 671 Supp : (1997) 2 UJ 438 , a two-Judge Bench opined that:--
''''The executive authority of the State must be held to be within its competence to frame policy for the administration of the State. Unless the policy framed is absolutely capricious and, not being informed by any reason whatsoever, can be clearly held to be arbitrary and founded on mere ipse dixit of the executive functionaries thereby offending Article 14 of the Constitution or such policy offends other constitutional provisions or comes in conflict with any statutory provision, the court cannot and should not outstep its limit and tinker with the policy decision of the executive functionary of the State.''''
In Narmada Bachao Andolan Vs. State of Madhya Pradesh and Another, AIR 2011 SC 1989 : (2011) 6 JT 379 : (2011) 5 SCALE 624 : (2011) 7 SCC 639 : (2011) 3 UJ 1977 : (2011) AIRSCW 4473 , after referring to the State of Punjab and Others Vs. Ram Lubhaya Bagga Etc. Etc., AIR 1998 SC 1703 : (1998) 2 JT 136 : (1998) 2 SCALE 33 : (1998) 4 SCC 117 : (1998) SCC(L&S) 1021 : (1998) 1 SCR 1120 : (1998) AIRSCW 1480 : (1998) 2 Supreme 231 the Court ruled thus:
''''The Court cannot strike down a policy decision taken by the Government merely because it feels that another decision would have been fairer or more scientific or logical or wiser. The wisdom and advisability of the policies are ordinarily not amenable to judicial review unless the policies are contrary to statutory or constitutional provision or arbitrary or irrational or an abuse of power. (See Ram Singh Vijay Pal Singh and Others Vs. State of U.P. and Others, (2007) 2 CTLJ 1 : (2007) 6 JT 302 : (2007) 6 SCALE 389 : (2007) 6 SCC 44 : (2007) 5 SCR 1060 , Villianur Iyarkkai Padukappu Maiyam Vs. Union of India (UOI) and Others, (2009) 8 JT 339 : (2009) 7 SCC 561 : (2009) 10 SCR 225 : (2009) 8 UJ 3627 and State of Kerala and Another Vs. Peoples Union for civil Liberties, Kerala State Unit and Others, (2009) 9 JT 573 : (2009) 10 SCALE 25 : (2009) 8 SCC 46 : (2009) 12 SCR 142 .
From the aforesaid pronouncement of law, it is clear as noon day that it is not within the domain of the courts to embark upon an enquiry as to whether a particular public policy is wise and acceptable or whether a better policy could be evolved. The court can only interfere if the policy framed is absolutely capricious or not informed by reasons or totally arbitrary and founded ipse dixit offending the basic requirement of Article 14 of the Constitution. In certain matters, as often said, there can be opinions and opinions but the Court is not expected to sit as an appellate authority as an opinion.''''
Judicial Review:--
There is always a presumption in favour of the constitutionality of an enactment with the onus to prove it otherwise on the person who laid a challenge. There can only be two challenges to the constitutionality. One is qua the legislative competence and another being contrary to Part III of the Constitution. The settled position has once again been reiterated in the following manner in the decision of Division Bench of this Court in Anti Corruption Movement Vs. The Chief Secretary to Government of Tamil Nadu, Co-operation, Food and Consumer Protection Department and Others(2015) 2 CTC 225 : (2015) 2 LW 97 , in which one of us (Sanjay Kishan Kaul, Chief Justice) is a party:
''''38. In the catena of judgments referred to by the learned senior counsel appearing for private respondents 5 to 9, the discussion proceeds on the basis that the compensation in India qua challenge to the constitutional validity of a provision of an enactment is similar to the United States of America, and apart from the two aspects referred to aforesaid, there is no third ground available. It is in this context, it has been observed that no enactment can be struck down by just saying that it is arbitrary or unreasonable, and the endeavour should not be to somehow or the other find a constitutional infirmity to invalidate on it. In fact, an enactment cannot be struck down on the ground that Court thinks it unjustified. The Parliament and the Legislatures, being 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 is not supposed to sit in judgment over their wisdom'''' - vide State of Andhra Pradesh and others, etc. Vs. McDowell and Co. and others, etc., (1996) 3 AD 428 : AIR 1996 SC 1627 : (1996) 3 JT 679 : (1995) 4 SCALE 762 : (1996) 3 SCC 709 : (1996) 3 SCR 721 . Those views have been approved by the Constitution Bench of the Supreme Court in Union of India (UOI) Vs. R. Gandhi, President, Madras Bar Association, (2010) 2 CompLJ 577 : (2010) 3 CTC 517 : (2010) 5 JT 553(1) : (2010) 5 SCALE 514 : (2010) 100 SCL 142 : (2010) 6 UJ 2945 : (2010) AIRSCW 6077 : (2010) 7 Supreme 226 .
The presumption in favour of constitutionality and the burden being on the person who attacks it to show that there has been transgression of the constitutional principles is thus founded on the number of judicial pronouncements discussed above as well as in Greater Bombay Co-op. Bank Ltd. Vs. United Yarn Tex. Pvt. Ltd. and Others, AIR 2007 SC 1584 : (2007) 137 CompCas 63 : (2007) 5 JT 201 : (2007) 5 SCALE 366 : (2007) 6 SCC 236 : (2007) 4 SCR 823 as the Courts would be justified in giving a liberal interpretation in order to avoid constitutional invalidity. Even if very wide and expansive powers are given to an authority, they can be in conformity with legislative intent of exercise of power within the constitutional limitations. It is also the view in State of Bihar and others, etc. etc. Vs. Bihar Distillery Ltd., etc., (1996) 9 AD 153 : AIR 1997 SC 1511 : (1996) 10 JT 854 : (1996) 8 SCALE 768 : (1997) 2 SCC 453 : (1996) 9 SCR 479 Supp : (1997) AIRSCW 259 : (1997) 1 Supreme 121 and State of M.P. Vs. Rakesh Kohli and Another, AIR 2012 SC 2351 : (2012) 3 CTC 770 : (2012) 3 RCR(Civil) 158 : (2012) 5 SCALE 467 : (2012) 6 SCC 312 : (2012) 113 SCL 255 : (2012) AIRSCW 3245 : (2012) 3 Supreme 675 , the beginning of the principle of legislative competence being traced out in A.L.S.P.P.L. Subrahmanyan Chettiar vs. MuttuswamiAIR 1941 47 (Federal Court) .
The challenge laid by the petitioner based on the plea of arbitrariness and unreasonableness on the touchstone of Articles 14 and 19 of the Constitution of India, on the first blush, appeared to be attractive over the possibilities of how the provision may be used, but once the touchstone of constitutional validity in terms of the aforesaid principle is applied, it is difficult to accept the contention of the learned counsel for the petitioner.
The legislative wisdom cannot be gone into or sat in judgment over and thus, even what is perceived to be an erroneous legislation cannot be quashed unless it fails to satisfy the dual test of intelligible classification and rationality.''''
Article 14:--
When a challenge is made to an enactment on the ground of Article 14 being violated, it must be demonstrated that there is an element of negation of equality. A mere discrimination per se cannot be termed as arbitrary, as a classification is meant for providing benefits to a group of persons. A differentiation must distinguish a group of persons or things identified as such from the things left out. While dealing with the classification, an accurate one is not possible. Revenue and economic considerations in taxing statute are permissible classifications. An objective must be a just one. It is a sine qua non for classification. A valid classification is a valid discrimination. A classification without reference to the object sought to be achieved would be hit by Article 14. Such a classification should not be arbitrary, artificial or evasive. In other words, it must confine to rationality.
While dealing with the classification qua the constitutional validity of a statute, a Court of law is required to deal with the facts which made the legislation in classifying a group. However, when the object of the classification itself is discriminatory, then there is no need to go into the classification. Courts are required to afford larger latitude to the legislature in its exercise of classification. In other words, what is reasonable is a question of practical approach. While testing the policy underlying the statute, the intended object is to be ascertained.
A legislation can be challenged on the ground of legislative arbitrariness. Such an arbitrariness as found by the Court should be palpable and apparent. It should rather be seen on the face of it. It cannot be done on the basis of hardship caused to a party, but on a total unreasonableness. The Court must satisfy that the statute contains substantive unreasonableness. The conclusion arrived by us is fortified by the decisions rendered by the Supreme Court in Transport and Dock Workers Union and Others Vs. Mumbai Port Trust and Another, (2010) 127 FLR 1095 : (2011) 1 LLJ 1 : (2010) 12 SCALE 217 : (2011) 2 SCC 575 : (2011) 1 SCC(L&S) 566 : (2010) 6 SLR 691 , Catholic Syrian Bank Ltd. Vs. Commissioner of Income Tax, Thrissur, AIR 2012 SC 1538 : (2012) 248 CTR 1 : (2012) 343 ITR 270 : (2012) 3 SCC 784 : (2012) 206 TAXMAN 182 , Joginder @ Jindi Vs. State of Haryana, (2008) CriLJ 4682 : (2008) 11 SCC 138 , Bharat Petroleum Corporation Ltd. Vs. Sunil Bansal and Others, (2009) 12 JT 335 : (2009) 12 SCALE 604 : (2009) 10 SCC 446 : (2009) 14 SCR 711 : (2009) 9 UJ 4318 and Centre for Public Interest Litigation Vs. Union of India (UOI), AIR 2014 SC 2140 : (2014) AIRSCW 2930 : (2014) 7 JT 474 : (2014) 2 RCR(Criminal) 822 : (2014) 6 SCALE 146 : (2014) 8 SCC 682 : (2014) 4 SCJ 468 .
We would deem it appropriate to recapitulate the following passages of a decision of the Supreme Court in Siddhu Matriculation Hr. Secondary School Vs. K. Shyam Sunder and Others, (2011) 8 SCALE 505 : (2011) 8 SCC 737 :
''''50. In Ajay Hasia and Others Vs. Khalid Mujib Sehravardi and Others, AIR 1981 SC 487 : (1981) 1 LLJ 103 : (1981) 1 SCC 722 : (1981) 2 SCR 79 : (1981) 2 SLJ 651 , this Court held that Article 14 strikes at arbitrariness because an action that is arbitrary, must necessarily involve negation of equality. Whenever therefore, there is arbitrariness in state action, whether it be of the legislature or of the executive, Article 14 immediately springs into action and strikes down such State action. (See also E.P. Royappa Vs. State of Tamil Nadu and Another, AIR 1974 SC 555 : (1974) LabIC 427 : (1974) 1 LLJ 172 : (1974) 4 SCC 3 : (1974) 2 SCR 348 and Mrs. Maneka Gandhi Vs. Union of India (UOI) and Another, AIR 1978 SC 597 : (1978) 1 SCC 248 : (1978) 2 SCR 621 .
In Sharma Transport Rep. by D.P. Sharma Vs. Government of Andhra Pradesh and Others, AIR 2002 SC 322 : (2002) 1 ARBLR 231 : (2001) 2 JT 1 Supp : (2001) 8 SCALE 417 : (2002) 2 SCC 188 : (2001) AIRSCW 4958 : (2001) 8 Supreme 496 , this Court defined arbitrariness observing that a party has to satisfy that the action was not reasonable and was manifestly arbitrary. The expression ''''arbitrarily'''' means, act done in an unreasonable manner, as fixed or done capriciously or at pleasure without adequate determining principle, not founded in the nature of things, non-rational, not done or acting according to reason or judgment, depending on the will alone.
In Bombay Dyeing and Mfg. Co. Ltd. Vs. Bombay Environmental Action Group and Others, AIR 2006 SC 1489 : (2006) 4 CompLJ 4 : (2006) 3 JT 235 : (2006) 3 SCALE 1 : (2006) 3 SCC 434 : (2006) 67 SCL 107 : (2006) AIRSCW 1392 : (2006) 3 Supreme 49 , this Court held that: (SCC p. 511, para 205)
''''205. Arbitrariness on the part of the legislature so as to make the legislation violative of Article 14 of the Constitution should ordinarily be manifest arbitrariness.''''
In Bidhannagar (Salt Lake) Welfare Association Vs. Central Valuation Board and Others, AIR 2007 SC 2276 : (2007) 8 JT 118 : (2007) 7 SCALE 546 : (2007) 6 SCC 668 : (2007) 7 SCR 430 : (2007) AIRSCW 3962 : (2007) 4 Supreme 542 and Grand Kakatiya Sheraton Hotel and Towers Employees and Workers Union Vs. Srinivasa Resorts Ltd. and Others, AIR 2009 SC 2337 : (2009) 121 FLR 407 : (2009) 4 JT 550 : (2009) 3 LLJ 161 : (2009) 3 SCALE 371 : (2009) 5 SCC 342 : (2009) 2 SCC(L&S) 10 : (2009) 3 SCR 668 : (2009) 6 SLR 422 , this Court held that a law cannot be declared ultra vires on the ground of hardship but can be done so on the ground of total unreasonableness. The legislation can be questioned as arbitrary and ultra vires under Article 14. However, to declare an Act ultra vires under Article 14, the Court must be satisfied in respect of substantive unreasonableness in the statute itself.''''
Article 19(1)(g):
A right under Article 19(1)(g) is subject to Article 19(6). When it comes to trading in liquor, such a right becomes a qualified one. Once it is known that liquor as a beverage is dangerous and injurious to health, the fundamental right to trade therein evaporates. Such a right can be enforced only to the extent of enforcing the equality clause provided a party satisfies the Court that a benefit given to a similarly placed person is denied to him. In this connection, the following passage of the Supreme Court in Khoday Distilleries Ltd. and Others Vs. State of Karnataka and Others, (1994) 6 JT 588 : (1994) 4 SCALE 528 : (1995) 1 SCC 574 : (1994) 4 SCR 477 Supp is apposite:
''''55. The contention that if a citizen has no fundamental right to carry on trade or business in potable liquor, the State is also injuncted from carrying on such trade, particularly in view of the provisions of Article 47, though apparently attractive, is fallacious. The State''s power to regulate and to restrict the business in potable liquor impliedly includes the power to carry on such trade to the exclusion of others. Prohibition is not the only way to restrict and regulate the consumption of intoxicating liquor. The abuse of drinking intoxicants can be prevented also by limiting and controlling its production, supply and consumption. The State can do so also by creating in itself the monopoly of the production and supply of the liquor. When the State does so, it does not carry on business in illegal products. It carries on business in products which are not declared illegal by completely prohibiting their production but in products the manufacture, possession and supply of which is regulated in the interests of the health, morals and welfare of the people. It does so also in the interests of the general public under Article 19(6) of the Constitution.
The contention further that till prohibition is introduced, a citizen has a fundamental right to carry on trade or business in potable liquor has also no merit. All that the citizen can claim in such a situation is an equal right to carry on trade or business in potable liquor as against the other citizens. He cannot claim equal right to carry on the business against the State when the State reserves to itself the exclusive right to carry on such trade or business. When the State neither prohibits nor monopolises the said business, the citizens cannot be discriminated against while granting licences to carry on such business. But the said equal right cannot be elevated to the status of a fundamental right.
It is no answer against complete or partial prohibition of the production, possession, sale and consumption etc. of potable liquor to contend that the prohibition where it was introduced earlier and where it is in operation at present, has failed. The failure of measures permitted by law does not detract from the power of the State to introduce such measures and implement them as best as they can.
.......
We may now summarise the law on the subject as culled from the aforesaid decisions.
(a) The rights protected by Article 19(1) are not absolute but qualified. The qualifications are stated in clauses (2) to (6) of Article 19. The fundamental rights guaranteed in Article 19(1)(a) to (g) are, therefore, to be read along with the said qualifications. Even the rights guaranteed under the Constitutions of the other civilized countries are not absolute but are read subject to the implied limitations on them. Those implied limitations are made explicit by clauses (2) to (6) of Article 19 of our Constitution.
(b) The right to practise any profession or to carry on any occupation, trade or business does not extend to practising a profession or carrying on an occupation, trade or business which is inherently vicious and pernicious, and is condemned by all civilised societies. It does not entitle citizens to carry on trade or business in activities which are immoral and criminal and in articles or goods which are obnoxious and injurious to health, safety and welfare of the general public, i.e., res extra commercium, (outside commerce). There cannot be business in crime.
(c) Potable liquor as a beverage is an intoxicating and depressant drink which is dangerous and injurious to health and is, therefore, an article which is res extra commercium being inherently harmful. A citizen has, therefore, no fundamental right to do trade or business in liquor. Hence the trade or business in liquor can be completely prohibited.
(d) Article 47 of the Constitution considers intoxicating drinks and drugs as injurious to health and impeding the raising of level of nutrition and the standard of living of the people and improvement of the public health. It, therefore, ordains the State to bring about prohibition of the consumption of intoxicating drinks which obviously include liquor, except for medicinal purposes. Article 47 is one of the directive principles which is fundamental in the governance of the country. The State has, therefore, the power to completely prohibit the manufacture, sale, possession, distribution and consumption of potable liquor as a beverage, both because it is inherently a dangerous article of consumption and also because of the directive principle contained in Article 47, except when it is used and consumed for medicinal purposes.
(e) For the same reason, the State can create a monopoly either in itself or in the agency created by it for the manufacture, possession, sale and distribution of the liquor as a beverage and also sell the licences to the citizens for the said purpose by charging fees. This can be done under Article 19(6) or even otherwise.
On merits:--
Admittedly, the TASMAC is the sole authority for selling Indian made liquor to the petitioners. It is not a club or hotel having FL 2 and FL 3 licence. On the contrary, the petitioners buy the liquor from the TASMAC. Insofar as sale of foreign liquor is concerned, it stands on a different footing in which 58% of tax is levied on sale. The illustration given earlier would show that the petitioners are the beneficiaries of the earlier sale. They cannot expect the said benefit to be extended to the third point as well. TASMAC has involved in only second sale as against the petitioners third sale. The petitioners made considerable profit by the escalation of sale price. The classification of the customers of TASMAC and the petitioners are different. The petitioners are making considerable value additions to their sales in favour of their customers. The authority of the TASMAC to deal with the liquor within the State is not in dispute. Therefore, having purchased liquor from the TASMAC, the petitioners cannot seek party. Admittedly, TASMAC is an instrumentality of the State. The profit earned by the TASMAC goes to the coffers of the State meant to be used for welfare measures. The fact that the petitioners are selling at a higher price is not in dispute.
The goods that are specified in the Second Schedule are not vatable. A combined reading of Section 3(5) of the Act and the Second Schedule would make the said position very clear. Section 3(5) of the Act has not been put into challenge. The impugned Explanation 1 to the amended Entry 2 of the Second Schedule speaks only about the turnover as such. The classification made is perfectly in order. The petitioners, who are clubs and hotels, cannot be compared with the retail outlets of TASMAC. The customers of the TASMAC and the petitioners form two distinct and different categories based upon their respective socio-economic status. The petitioners are not prevented from doing their business. Therefore, there is no violation of Article 19(1)(g) involved. When the petitioners are selling liquor at a higher price than the TASMAC, they cannot seek parity. Having availed a set-off on the second point of sale, the petitioners cannot compel the respondents to extend the benefit at the third point of sale. With no grievance against the point of levy, the petitioners cannot challenge the manner in which it is imposed. The inclusion of certain goods including liquor in Second Schedule has not been put into challenge. Therefore, we are of the view that the petitioners cannot seek protection under Article 19(1)(g) of the Constitution of India.
Certain incidental issues have also been raised by the petitioners. We do not find any tax on tax being imposed in view of Section 3(5) read with the amended impugned provision. The petitioners do not have a case, particularly, when dealing with third sale with the value addition. Similarly, we do not find any repugnance between the provisions, as they operate in their own respective fields.
In the result, all the writ petitions stand dismissed. However, there is no order as to costs. Consequently, all the connected miscellaneous petitions stand dismissed.