ivil Appeals Nos 281 284 363 383 to 393 and 513 to 567 of 1969
Appeals from the judgment and order dated December 6 1968 of the Madras High Court in Writ Petitions Nos
1659 of 1968
MS Sethu and AVV Nair for the appellant in CAs
281 and 363 of 1969
MS Sethu and P Parameshwara Rao for the appellant in CA No 284 of 1969
HR Gokhale and K Jayaram for the appellant in CA No 383 of 1969
K Jayaram and TS Vishwanatha Rao for the appellants in CAs
Nos 384 to 393 and 513 to 567 of 1969
SV Gupte section Mohan and A V Rangam for the respondent in CA No 281 of 1969
section Mohan and A1
V Rangam for the respondents in CAs
Nos 284 363 383 to 393 and 513 to 567 of 1969
The Judgment of the Court was delivered by Shah J
At the conclusion of the hearing of these appeals on April 23 1969 we announced that the appeals are dismissed with costs reasons in support of the order will be delivered thereafter
We proceed to record the reasons in support of the order
The appellants carry on business as dealers in cane jaggery in the State of Tamil Nadu
As a result of certain legislative and executive measures transactions of sale in cane jaggery were made liable as from January 1 1968 to tax under the Madras General Sales Tax Act 1959 and transactions of sale in palm jaggery remained exempt from sales tax
The appellants filed petitions in the High Court of Madras challenging the validity of the levy of tax on cane jaggery on three grounds 1 that the levy of tax on turnover from sale of cane jaggery  was discriminatory and violated the equality clause of the Constitution 2 that the levy of tax imposes a restriction on trade and commerce contrary to the provisions of Part XIII of the Constitution and 3 there is excessive delegation of legislative authority to the executive and on that account the levy of tax pursuant to an order made in 617 exercise of the powers under section 59 of the Madras General Sales Tax Act 1 of 1959 on cane jaggery is invalid
The High Court rejected all the contentions
Counsel for the appellants have in these appeals urged the first two grounds and have in addition submitted that in levying tax on turnover from sale of cane jaggery legislative power has been colourably exercised
The argument that there was excessive delegation to the executive of the legislative power was abandoned before this Court because the State of Madras has enacted Act II of 1968 authorising levy of tax on sale of jaggery by amending Sch
III to Madras Act 1 of 1959
Turnover from sale of jaggery cane or palm was subject to tax under section 31 of the Madras Act IX of 1939 at three pies per rupee
By GO 651 dated February 28 1955 and GO 2780 dated September 7 1955 all sales of palm jaggery effected through Co operative Societies and the Palm Gut Federation were exempt from tax
By another GO No 1605 dated April 19 1956 all transactions of sale in palm jaggery were exempted from sales tax with effect from April 1 1956
Transactions of sale in cane jaggery therefore continued to remain liable to  tax whereas sales of palm jaggery enjoyed the benefit of exemption from tax
After the judgment of this Court in The Bengal Immunity Company Ltd vs The State of Bihar  Others1 the Parliament amended article 286 and entry 54 in List II of the Seventh Schedule and added a new Entry 92A in List I in the Seventh Schedule by the Constitution Sixth Amendment Act
In exercise of the power under Entry 92A List I the Parliament enacted the Central Sales Tax Act 74 of 1956
By Ch
IV of that Act the power reserved under the amended article 286 cl
3 was exercised by the Parliament and certain classes of goods were declared to be of special importance in inter State trade or commerce
By section 15 certain modifications were declared in State Acts relating to the levy of taxes on sales and purchases of declared goods
However in the list of goods of special importance in inter State trade or commerce gur or jaggery was when the Act was enacted not included
The Parliament then enacted the Additional Duties of Excise Goods of Special Importance Act 1957 Act 58 of 1957
Section 3 of that Act authorised the levy and collection of additional duties in respect of several classes of goods including sugar
By section 4 it was provided that during each financial  year there shall be paid out of the Consolidated Fund of India 1 618 to the States in accordance with the provisions of the second schedule such sums representing a part of the net proceeds of the additional duties levied and collected during that financial year as are specified in that Schedule
It was enacted by the proviso to cl
2 of the Schedule that if during that financial year there is levied and collected in any State specified in the Table a tax on the sale or purchase of sugar by or under any law of that State no sums shall be payable to that State under sub cl
ii or sub cl
iii of cl
b in respect of that financial year unless the Central Government by special order otherwise directs
The expression sugar  was defined in section 2c as having the same meaning as it has in the First Schedule to the 
The Governor of Madras issued Ordinance 1 of 1957 directing that transactions of sale of cane jaggery be liable to a single point tax at 5 per cent
with effect from April 1 1957
By virtue of the  as amended by Act 31 of 1958 sugar as defined in Item No 8 of the First Schedule to the was declared a commodity essential to the life of the community and tax could thereafter be levied on sugar at the rate of 2 per cent
But in view of the definition contained in the  there was some doubt whether the expression sugar  included gut
The State of Madras being apparently of the opinion that palm jaggery and cane jaggery were subject to the provisions of the Additional Excise Act 58 of 1957 issued on April 15 1958 GO No 1457 exempting all sales of cane jaggery from tax with effect from April 1 1958
Transactions of sale of palm jaggery were therefore exempt partially from sales tax from February 28 1955 and wholly from April 1 1956 and transactions of sale of cane jaggery were exempt from tax from April 1 1958
The State Legislature enacted the Madras General Sales Tax Act 1 of 1959 with effect from April 1 1959
By section 3 every dealer whose total turnover was not less than Rs 10000 became liable to pay tax for each year at the rate of 2 per cent of his taxable turnover
By section 8 it was provided that subject to such restrictions and conditions as may be prescribed a dealer who deals in goods specified in the Third Schedule shall not be liable to pay any tax under the Act in respect of such goods Item 5 in the Third Schedule was sugar including jaggery and gur
 Section 17 of that Act authorised the State Government by notification to exempt or to make reduction in rate in respect of any tax payable under the Act on the sale or purchase of any special goods or class of goods at all points or specified points in respect of sales by successive dealers or by any specified class on dealers in respect of the whole or any part of their turnover
By section 591 of the Act the State Government was authorised by notification to alter add or cancel any of the Schedules
619 On April 1 1959 transactions of sale of sugar including jaggery and gur were exempt from liability to pay tax under the
Madras General Sales Tax Act 1 of 1959
The exemption applied to all transactions of sale of cane jaggery and palm jaggery
On September 10 1965 the Government of India advised the State Government that jaggery was not included in the expression sugar  in the Additional Duties of Excise Act 58 of 1957
The State of Madras in exercise of the power under sub section
1  of section 59 of the Madras General Sales Tax Act issued GO 2261 dated December 30 1967 that In the said Third Schedule in item 5 for the word including  the words but not including  shall be substituted
 The State simultaneously issued another notification that In exercise of powers conferred by section 171 of the Madras General Sales Tax Act 1959 the Governor of Madras granted exemption in respect of tax payable under the Act on all sales of palm jaggery
 In consequence of the two notifications turnover from transactions of sale of cane jaggery which was till then exempt from tax became liable to tax under section 3 of the Madras Act 1 of 1959 whereas sale of palm jaggery remained exempt from liability  to pay sales tax
In support of the plea that the State had practised unlawful discrimination between sales of palm jaggery and cane jaggery it was urged that cane jaggery and palm jaggery which were identical commodities and were treated similarly under the successive Sales Tax Acts of the State for many years past were without any rational nexus with the object sought to be served by the Madras General Sales Tax Act 1959 differently treated and on that account the notification issued under section 59 sub section
1 which modifies the Third Schedule is ultra vires
It may be recalled that the notification under section 591 which was issued in exercise of executive authority has received legislative sanction by Madras Act 2 of 1968
Amendment in the Third Schedule now flows from the exercise of legislative authority and not executive authority
Since section 8 read with the Third Schedule as amended by Madras Act 2 of 1968 exempts only sugar from liability to tax sales of jaggery cane and palm now fall within the charging section
But the Government of Madras have in exercise of power under section 17 of Act 1 of 1959 exempted transactions of sale of palm jaggery from tax
It is true that between April 1
620 1958 and October 31 1967 transactions of sale of cane jaggery and palm jaggery were exempt from liability to pay sales tax under the Madras General Sales Tax Acts of 1939 and 1959 but it cannot be inferred therefrom that the Legislature treated palm jaggery and cane jaggery as the same commodity
 For nearly three years before April 1 1958 sales of palm jaggery were exempt from tax but sales of cane jaggery were not
The evidence on the record clearly shows that cane jaggery and palm jaggery are commercially different commodities Cane jaggery is produced from the juice of sugarcane palm jaggery is produced from the juice of the palm tree
Mr Raghupathy Deputy Secretary to the Government of Madras Commercial Taxes has stated in his affidavit that palm jaggery industry comes under the purview of Khadi and Village Industries Board and is one of the cottage industries which gives employment mainly to poor tappers
The tappers according to Mr Raghupathy collect neera from palm and other trees and prepare jaggery by the traditional method of boiling neera in their huts and produce jaggery without the aid of any machinery
Production of palm jaggery in the State compared to cane jaggery is small
The price of palm jaggery and cane jaggery differ widely and apparently palm jaggery and cane jaggery are consumed by different sections of the community
It is clear that the method of production of palm jaggery and cane jaggery are different they reach the consumers through different channels of distribution the prices at which they are sold differ and they are consumed by different sections of the community
In a recent judgment N Venugopala Ravi Varma Rajah vs Union of India and Another1 this Court observed 
Tax laws are aimed at dealing with complex problems of infinite variety necessitating adjustment of several disparate elements
The Courts accordingly admit subject to adherence to the fundamental principles of the doctrine of equality a larger play to legislative discretion in the matter of classification
The power to classify may be exercised so as to adjust the system of taxation in all proper and reasonable ways the Legislature may select persons properties transactions and objects and apply different methods and even rates for tax if the Legislatures does so reason ably
If the classification is rational the Legislature is free to choose objects of taxation impose different rates exempt classes of property from taxation subject different classes of property to tax 1  621 in different ways and adopt different modes of assessment
A taxing statute may contravene Article 14 of the Constitution if it seeks to impose on the same class of property persons transactions or occupations similarly situate incidence of taxation which leads to obvious inequality
 It was also said by the Court that It is for the Legislature to determine the objects on which tax shall be levied and the rates thereof
The Courts will not strike down an Act as denying the equal protection merely because other objects could have been but are not taxed by the Legislature
 We are accordingly of the view that cane jaggery and palm jaggery are not commodities of the same class and in any event in imposing liability to tax on transactions of sale of cane jaggery and exempting palm jaggery no unlawful discrimination denying the guarantee of equal protection was practised
No serious argument was advanced in support of the plea that the freedom of trade and commerce guaranteed by Part XIII of the Constitution is infringed by the imposition of tax on cane jaggery
Freedom of trade commerce and intercourse guaranteed by article 301 of the Constitution is protected against taxing statutes as well as other statutes but by imposition of tax on transactions of sale of cane jaggery no restriction on the freedom of trade or commerce or in the course of trade with or within the State is imposed
The tax imposed on transactions of sale of cane jaggery does not affect the freedom of trade within the meaning of article 301
As observed by this Court in The state of Madras vs IV
K Nataraja Mudaliar1 a tax may in certain cases directly and immediately restrict or hamper the free flow of trade but every imposition of tax does not do so
There is no substance in the contention that the Act which impose tax on cane jaggery and the notification which exempts palm jaggery from liability to tax imposes a colourable exercise of authority
If the Legislature has the power to impose the tax its authority is not open to challenge on a plea of colourable exercise of power KC Gajapati Naravan Deo  Others vs The State of Orissa2
There will be one hearing fee
GC Appeals dismissed


Summary:
As a result of a notification dated December 30 1967 under section 591 of the Madras General Sales Tax Act and later by Act 2 of 1968 sales of jaggery became liable to tax
But while by notification under section 17 palm jaggery was exempted from tax cane jaggery  was not
The appellants who were dealers in cane jaggery  challenged the levy by writ petitions in the High Court which were however dismissed
In appeal before this Court it was contended i that the tax on cane jaggery  while exempting palm jaggery  was discriminatory and violative of article 14 of the Constitution ii that taxation of cane jaggery  was restrictive of trade and commerce and therefore violative of article 301 iii that the impugned legislation constituted a colourable exercise of power
HELD i The evidence on record clearly showed that cane jaggery  and palm jaggery  were commercially different commodities
The methods of production of palm jaggery  and cane jaggery  were different they reached the consumers through different channels of distribution the prices at which they were sold differed and they were consumed by different sections of the community
Cane jaggery  and palm jaggery  did not thus belong to the same class and in differently treating them for the purpose of taxation there was no unlawful discrimination
620 B E 621 C D It was incorrect to say that the State Legislature had always treated the two products on the same footing
For nearly three years before April 1 1958 sales of palm jaggery  were exempt from tax but sales of cane jaggery  were not
620 B Further it is for the legislature to determine the objects on which tax shall be levied
The courts will not strike down an Act as denying equal protection merely because other objects could have been but are not taxed by the legislature
621 B C N Venugopala Ravi Varma Rajah vs Union of India   applied
ii Freedom of trade commerce and intercourse guaranteed by article 301 of the Constitution is protected against taxing statutes as well as other statutes but by imposition of tax on transactions of sale of cane jaggery  no restriction on the freedom of trade or commerce or in the course of trade with or within the State
was imposed
621 D F State of Madras vs N K Nataraja Mudaliar   referred to
iii The plea of colourable exercise of power had no substance because the legislature had power in the present case to
levy the tax621 G 4 Sup
CI69 616 KC Gajapati Narayan Deo  Ors
vs State of Orissa 1954 SCR1 applied