Case: Twyford Tea Company Limited &amp; Another Vs. State of Kerala &amp; Another

2. The petitioner company is incorporated in India and the majority of its shareholders are Indians. It owns a tea estate in Kuttikanam area in the Peermade hills in Kerala State. The estate consists of 1006 hectares equal to 2486 acres of which 491 hectares equal to 1214 acres are tea plantations.2. The petitioner company is incorporated in India and the majority of its shareholders are Indians. It owns a tea estate in Kuttikanam area in the Peermade hills in Kerala State. The estate consists of 1006 hectares equal to 2486 acres of which 491 hectares equal to 1214 acres are tea plantations.According to the petitioners Peermade hills are in the Western Ghats and are divided into two main parts. Kuttikanam area roughly 35 sq. miles is situated at an altitude of 3400 to 3700 ft. and receives 150 to 200 inches of rainfall annually. The Periyar valley area roughly 60 sq. miles is situated at an altitude of 2800 to 3200 ft. and receives 100 to 150 inches rainfall annually. The Periyar valley area is more fertile than the Kuttikanam area. According to the Petitioners statements M/s. Parkins Private Ltd., are the Managing Agents of Twyford Tea Company and also the Haileyburia Tea Estate. The former is in Kuttikanam and the latter is Periyar area. The extent of produce from these two areas is very different. Between the years 1963 to 1967 Twyford Tea Company produced 959 to 1211 kgs. per hectare while Haileyburia produced 1461 to 1845 kgs. per hectare. The other tea estates disclosed the same differences in production. Examples are given of Penshurst, Karimtharuvi estates under the same management and of Stagbrook and Cheenthalaar and other estates. The Twyford Tea Companys net profits have declined from Rs. 2,28,222 (1963) to Rs. 59,938 (1967). The net profits of Twyford Tea Company after taxation per hectare ranged from Rs. 122.00 (1967) to Rs. 465.00 (1963) with loss in 1966, while the profits of Heileyburia ranged from Rs. 909.00 (1963) to Rs. 770.00 (1967) with Rs. 245.00 in 1966. This difference is attributed to the differences in fertility between the Kuttikanam and Periyar areas. The petitioners state that similar differences exist in the Vandiperiyar and Nelliampathy areas. The petitioners point out that for purposes of excise duty these areas have been formed into different zones and different rates of excise duty are leviable in these zones3. The two statutes which are impugned here imposed a tax on plantations. In the Act XVII of 1960 there is a levy of additional tax on plantations. The Act came into force on 1-4-1960. Plantations mean land used for growing seven kinds of crops. They are (1) Cocoanut, (2) Arecanut, (3) Rubber, (4) Coffee, (5) Tea, (6) Cardamom and (7) Pepper. Section 3 of Act XVII of 1960 is the charging section. Under that section for each financial year a plantation tax additional to the basic tax charged as land tax under the Land Tax Act, 1955 is payable at the rate mentioned in Schedule I of the Act. This Schedule states that no tax is payable if the aggregate extent of plantations held by a person is below five acres. But if the plantations held by a person is 5 acres or more, a tax of Rs. 8/- per acre is payable with exemption for the first two acres. For purposes of finding out the extent of the plantations in acres held by a person a method of calculation is added in Schedule II. It is not necessary to quote this schedule because it has been amended by Act XIX of 1967 and that Schedule will be quoted presently. By the Amended Act the name of the tax is changed. The word additional is removed in all places and it is declared that the tax is additional to land revenue or any tax in lieu thereof, if any, payable in respect of such land. The rate of tax is altered in Schedule I to Rs. 50/- per hectare which is payable in respect of plantations of two hectares or more with an exemption for the first hectare. The method of calculation of the extent of plantation in hectares is restated in Schedule II as follows:For the purposes of the assessment of plantation tax payable by a person, the extent of plantations held by him shall be deemed to be the aggregate of the following, expressed in hectares, namely:-(i) the quotient obtained by dividing the total number of bearing cocoanut trees standing on all lands held by him by 200;(ii) the quotient obtained by dividing the total number of bearing arecanut trees standing on all lands held by him by 1500;(iii) the quotient obtained by dividing the total number of yield rubber plants standing on all lands held by him by 450;(iv) the quotient obtained by dividing the total number of yielding coffee plants standing on all lands held by him by 1500;(v) the quotient obtained by dividing the total number of yielding pepper vines standing on all lands held by him by 1000;(vi) the extent of lands on which tea plants are grown which have begun to yield crops;(vii) the extent of lands on which cardamom plants are grown which have begun to yield crops:Provided that where the total extent of land held by a person, which is cultivated with the aforesaid crops, is less than the aggregate calculated as above, the actual extent alone shall be deemed to be the extent of plantations held by him.4. The petitioners paid tax under the old Act without objection.state that they did so without realising their rights. They were issued three demands for the assessments years 1960-61 to 1968. They had already paid between April 10, 1961 and October 18, 1968 a sum of Rs. 1,02,106.02.Petitioner No. 1, a public limited company, of which the second petitioner is a shareholder, owns the Twyford Estates situate in Kuttikanam area in Kerala State. The estate is a tea plantation admeasuring 1006 hectares (2486 acres), out of which 491 hectares (1214 acres) have tea plants.

Reasoning:
There is no specific entry in the legislative List Nos. 2 and 3 in the Seventh Schedule to the Constitution. The Land Tax Act 1955, as amended by the Travancore-Cochin Land Tax (Amendment) Act, X of 1957, was declared unconstitutional in its operative sections in K. T. Moopil Nairs case, (1961) 3 SCR 77   = (AIR 1961 SC 552  ) (supra). Immediately afterwards the Kerala Land Tax Act 1961 was passed following an Ordinance and that Act is now included in the 9th Schedule to the Constitution at No. 38 and receives the protection of Article 31-B. The competency to impose land tax thus is no longer open to dispute. The present Act is challenged on the same lines as the former Act and the argument is rested upon the principles accepted in K. T. Moopil Nairs case, (1961) 3 SCR 77   = (AIR 1961 SC 552  ) (supra). It is, therefore, necessary to recall what was decided there. Under the Land Tax Act 1955 all lands of whatever description and held under whatever tenure were to be charged and levied an uniform tax per acre known as the basic tax. Section 7 of the Act, however, conferred a power on Government to exempt wholly or in part any land. This Court considered the tax to be discriminatory because it paid no heed to quality or productive capacity of land and the tax was also held to be confiscatory since owners of unproductive land were liable to be eliminated by slow stages. The power of exemption was also considered unreasonable because it enabled Government to pick and choose lands arbitrarily for grant of exemption. The lack of classification was considered to create inequality. Sarkar, J., who dissented held that there was an attempt at classification according to areas, and the tax was levied because land in the State was held, and not because of its productivity.It is hardly necessary to refer to the findings of the Tea Board because it may be assumed without discussion that there are differences. It may also be conceded that the uniform tax falls more heavily on some plantations than on others because the profits are widely discrepant. But does that involve a discrimination? If the answer be in the affirmative hardly any tax direct or indirect would escape the same censure for taxes touch purses of different lengths and the very uniformity of the tax and its equal treatment would become its undoing. The rich and the poor pay the same taxes irrespective of their incomes in many instances such as the sales-tax and the profession tax etc. It may be remembered that in K. T. Moopil Nairs case, (1961) 3 SCR 77   = (AIR 1961 SC 552  ) (supra) the majority accepted the observations of S. R. Das, C. J., in Ram Krishna Dalmia v. Justice S. R. Tendolkar, 1959 SCR 279     at p. 299 = (AIR 1958 SC 538   at p. 548) to the following effect:statute may not make any classification of the persons or things for the purpose of applying its provisions but may leave it to the discretion of the Government to select and classify persons or things to whom its provisions are to apply. In determining the question of the validity or otherwise of such a statute the Court will not strike down the law out of hand only because no classification appears on its face or because a discretion is given to the Government to make the selection or classification but will go on to examine and ascertain if the statute has laid down any principle or policy for the guidance of the exercise of discretion by the Government in the matter of the selection or classification. After such scrutiny the Court will strike down the statute if it does not lay down any principle or policy for guiding the exercise of discretion by the Government in the matter of selection or classification, on the ground that the statute provides for the delegation of arbitrary and uncontrolled power to the Government so as to enable it to discriminate between persons or things similarly situate and that, therefore, the discrimination is inherent in the statute itself.We have always to see what the statute does to make for equality of treatment.9. The contention here is that there is an uniform rate of tax per hectare which every owner of a named plantation has to pay irrespective of the extent or value of the produce and, therefore, the law imposes an uniform tax burden on unequals.In our opinion this is a wrong way to look at the provisions of the Act.10.The Act, no doubt, deals with seven different kinds of plantations and imposes an uniform rate of Rs. 50/- per hectare but it lays down principles on which equal treatment is ensured. In the case of cocoanut, arecanut, rubber, coffee and pepper plantations, plants capable of yielding produce are to be counted and then the hectares are determined by dividing the total number of plants by a certain figure. This is intended to equalise the different plantations for purposes of taxability. In the remaining two cases the extent of land yielding crop is itself taken as the measure for the tax because it is considered fair and just to treat one actual hectare of crop yielding plantation as equal to the other areas converted into hectares on the basis of the number of plants or trees. Differences in yield between one plantation and another having the same crop, no doubt, arise from situation, altitude and rainfall but they are not the only factors. Otherwise how is it that the same areas give different yield in different years.11. The legislature thinks that Rs. 50/- per hectare in the case of Cardamom and Tea is reasonable levy and this is equal to other plantations, where the crop yielding plants and trees has to be converted into hectares according to a formula. It is obvious that the legislature has made an attempt at equalisation of tax burden for different plantations. This is not a case where barren lands have been subjected to equal tax with productive lands. The tax is only levied on crop yielding land. In some cases where the crop may be scattered over a wide area, there is an elaborate mechanism to determine the extent of the crop yielding plantation. The differences which have been pointed out may be the result of some fortuitous circumstance and even bad husbandry. The Court cannot regard the law to be discriminatory on the evidence produced in the case.In State of Andhra Pradesh v. Nalla Raja Reddy, (1967) 3 SCR 28   = (AIR 1967 SC 1458  ), the Andhra Pradesh Land Revenue (Additional Assessment) and case Revision Act (22 of 1962) was held to offend Article 14. That Act was passed to bring uniformity in assessment of Land Revenue in the Telangana and Andhra areas of the State of Andhra Pradesh. An additional assessment at the rate of 75% of the yearly assessment was imposed on dry land and the total assessment was not to be less than 50 n. p. per acre. On wet lands the additional assessment was to be 100% for lands irrigated from a Government source and 50% in the case of other wet lands and a minimum total demand was also prescribed. This Act was considered to be discriminatory as the minimum had no relation to the fertility of land, there was no relationship between the land and the ayacut to which it belonged and the procedure for determining the applicable rate was arbitrary. This Court examined the matter critically and came to the conclusion that the assessment was left to the arbitrary discretion of an officer without any opportunity to question his findings. This Court compared the procedure for assessment at proper settlements and found that those equitable and reasonable methods of assessment were abandoned. That case is peculiar to itself and cannot be called in aid since in this case there is a reasonable attempt to make the burden equal.13. Two other cases were referred to but they bear upon a different topic. In New Manek Chowk Spinning and Weaving Mills Co. Ltd. v. Municipal Corporation of the City of Ahmedabad, (1967) 2 SCR 679   = (AIR 1967 SC 1801  ) and State of Kerala v. Haji K. Kutty Naha, AIR 1969 SC 378   the question was one of rating. The proposition laid down was that taking only the floor area of a building as the basis for determination of the tax was an arbitrary method when buildings must have different rental values depending upon the nature of the construction, the kind of building and the purpose for which they can be used. These were held vital considerations in the rating of buildings and could not be ignored. These cases were decided on different principles and no analogy can be found merely because equal tax was imposed in diverse conditions.One principle on which our Courts (as indeed the Supreme Court in the United States) have always acted, in nowhere better stated than by Willis in his Constitutional Law page 587. This is how he put it:State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably .... The Supreme Court has been practical and has permitted a very wide latitude in classification for taxation.This principle was approved by this Court in East Indian Tobacco Co. v. State of Andhra Pradesh (1963) 1 SCR 404     at p. 410 = (AIR 1962 SC 1733   at p. 1735). Applying it, the Court observed:If a State can validly pick and choose one commodity for taxation and that is not open to attack under Article 14, the same result must follow when the State picks out one category of goods and subjects it to taxation.This indicates a wide range of selection and freedom in appraisal not only in the objects of taxation and the manner of taxation but also in the determination of the rate or rates applicable. If production must always be taken into account there will have to be a settlement for every year and the tax would become a kind of income-tax.16. The next principle is that the burden of proving discrimination is always heavy and heavier still when a taxing statute is under attack. This was also observed in the same case of this Court at page 411 (of SCR) = (at p. 1735 of AIR) approving the dictum of the Supreme Court of the United States in Madden v. Kentucky, (1940) 309 US 83 = 84 Law Ed 590:In taxation even more than in other fields, Legislatures possess the greatest freedom in classification. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it.The burden is on a person complaining of discrimination. The burden is proving not possible inequality but hostile unequal treatment. This is more so when uniform taxes are levied. It is not proved to us how the different plantations can be said to be hostilely or unequally treated. A uniform wheel tax on cars does not take into account the value of the car, the mileage it runs, or in the case of taxis, the profits it makes and the miles per gallon it delivers. An Ambassador taxi and a Fiat taxi give different out-turns in terms of money and mileage. Cinemas pay the same show fee. We do not take a doctrinnaire view of equality. The Legislature has obviously thought of equalising the tax through a method which is inherent in the tax scheme. Nothing has been said to show that there is inequality much less hostile treatment. All that is said is that the State must demonstrate equality. That is not the approach. At this rate nothing can ever be proved to be equal to another.17. There is no basis even for counting one tree as equal to another. Even in a thirty years settlement, the picture may change the very next year for some reason but the tax as laid continues. Siwai income is brought to land revenue on the basis of number of trees but not on the basis of the produce. This is worked out on an average income per tree and not on the basis of the yield of any particular tree or trees.18. What is meant by the power to classify without unreasonably discriminating between persons similarly situated, has been stated in several other cases of this Court.The same applies when the legislature reasonably applies a uniform rate after equalising matters between diversely situated persons.Simply stated the law is this: Differences in treatment must be capable of being reasonably explained in the light of the object for which the particular legislation is undertaken. This must be based on some reasonable distinction between the cases differentially treated. When differential treatment is not reasonably explained and justified the treatment is discriminatory. If different subjects are equally treated there must be some basis on which the differences have been equalised otherwise discrimination will be found. To be able to succeed in the charge of discrimination, a person must establish conclusively that persons equally circumstanced have been treated unequally and vice versa.However, in Khandige Sham Bhat v. Agricultural Income-tax Officer, (1963) 3 SCR 809     at p. 817 = (AIR 1963 SC 591   at p. 594) it was observed:If there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment. Taxation law is not an exception to this doctrine: vide Purshottam Govindji Halai v. Shree B. N. Desai, 1955-2 SCR 887   = (AIR 1961 SC 552  ). But in the application of the principles, the courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the legislature in the matter of classification, so long it adheres to the fundamental principles underlying the said doctrine. The power of the Legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways.19. Taking these principles into consideration we are satisfied that the law does not single out any particular plantation for hostile or unequal treatment. In fact it is nowhere proved in this case that tea has been discriminated against deliberately. As between different tea gardens, it is not possible to say that the difference in the yield is entirely due to natural circumstances and no other cause. It is, therefore, not possible to say that there is discrimination notwithstanding the uniform rate for each plantation based on the actual crop yielding area.