Case: East India Tobacco Co Vs. State Of Andhra Pradesh

The appellants are firms doing business in the export of tobacco. The usual course of that business is stated to be that they first enter into contracts with their customers abroad for the sale of tobacco that thereafter they purchase the requisite quantities of goods locally and then export them to the foreign purchasers in performance of their contracts, Prior to October 1 1953, the area wherein the appellants carried on business formed part of the State of Madras, and on that date the State of Andhra was constituted, and the area in question fell within that State. The law relating to sales tax in force in that area is the Madras General Sales Tax Act, IX of 1939. Section 5 of this Act provides far exemption of tax on sales of goods specified therein and S. 6 confers on the State Government power to exempt the tax payable on the sale of any specified class of good or by any specified class of per- sons. In exercise of the powers conferred by S. 6 the Government of Madras issued on March 31, 1953, a notification No. 144 exempting the sale; of unmanufactured tobacco from sales tax. After the Andhra State came into existence the Legislature of that State enacted Act XIV of 1955 hereinafter referred to as the Amendment Act whereby it amended S. 5 of the Madras General Sales Tax Act by adding as item (viii) theraw tobacco (except country variety thereof) whether cured on uncured shall be liable to tax under Section 3. Sub- section (1) only at the point of the first purchase effected in the State of Andhra by a dealer who is not exempt from taxation under Section 3, Sub-section (3) but at the rate of seven and half pies for every rupee on his turnover.Explanation :- For the purpose of this item, country variety of tobacco means variety of tobacco other than Virginia and other similar varieties ofa result of this enactment exemption from tax was limited to sales of what is known as country tobacco (Nattu tobacco) and so far as sales of Virginia tobacco are concerned, they became liable to be taxed. Pursuant to the Amendment Act, the Andhra Government issued on November 4,1955, a notification No. 711 cancelling the earlier notification No. 144 dated March 31, 1953.2. Acting under the provisions of the Amendment Act, the Additional Commercial Tax Officer, Guntur, issued notices to the appellants to produce the account books relating to their business in tobacco for the purpose of assessing sales tax. To this the appellants replied by filing petitions under Art, 226 of the Constitution in the High Court of Andhra Pradesh challenging the constitutionality of the Amendment Act on the grounds inter alia that in taxing sales of Virginia tobacco and exempting from tax sales of other tobacco the Act was discriminatory, and that in consequence it was obnoxious to Art. 14 of the Constitution and that further it was in contravention of Art. 286 (1) (b) as it was really a tax on sales in the course of export of tobacco. They accordingly prayed that a mandamus might be issued directing the respondents to forbear from making an assessment on the sales of tobacco. The learned judges disagreed with these contentions and dismissed the petitions, holding that the impugned Act did not infringe any constitutional provisions, but granted certificates under Art, 133 of the Constitution. That is how these appeals come before us.

Reasoning: 8.In our judgment the differences which exist between the Virginia and Natu country tobacco, as found by the learned Judges, are materials on which the State could treat Virginia tobacco as forming a class by itself for purpose of taxation, and the impugned legislation must be held to be not obnoxious to Art. 14 of theit will be seen that Virginia tobacco has features which distinguish it from country tobacco, and can be treated as a class in itself. It will therefore be within the power of the State to impose a tax on the sales of Virginia tobacco while exempting the countryare unable to agree with this contention. If a state can validly pick and choose one commodity for taxation and that is not open to attack under Art. 14, the same result must follow when the State picks out one category of goods and subjects it to taxation.Now the observations quoted above were made in refutation of the contention that the expression "sale in the course of export or import" meant only a sale which takes place while the goods are actually in movement, in the course of export or import, as for example, when shipping documents are endorse and delivered when the goods are in transit.On these authorities the law must be taken to be well settled that it is only the sale under which the export is made that is protected by Art- 286 (1) (b), and that a purchase which precedes such a sale does not fall within its purview though it is made for the purpose of, or with a view to export. The impugned legislation must accordingly be held not to contravene Art. 286 (1)(b).