Ferdino I. Rebello, J.
1. The petitioner is engaged in the business of import of fabrics which are sold after import pursuant to clearance through the Customs on payment of duty within the State of Maharashtra. The State of Maharashtra has enacted Bombay Sales Tax Act, 1959 (which hereafter shall be referred to as 'BST Act'). Parliament has enacted the Central Sales Tax Act, 1956 (hereinafter referred to as 'CST Act').
2. By the present petition, the petitioners seek to challenge the levy of Sales Tax on fabrics imported into India on which the Additional Duty of Excise in lieu of Sales Tax has already been paid under the Act of 1957. The petitioners challenge the Constitutional validity of Entry 9 of Schedule 'B' of the Act. At the hearing of this petition, on behalf of the petitioners, the learned Counsel has challenged the levy of Sales Tax on fabrics imported from outside India on the following two grounds:
(1) It is firstly submitted that under Section 5(2) of the BST Act, it is open to the State Government to relax or omit any conditions or exception specified in Schedule 'A'. It however, cannot add anything to an entry in Schedule 'A' considering the specific power conferred on the State Government as a delegate of legislature under Section 5(2) of the BST Act.
(2) It is next submitted that between 1.10.1995 to 30.4.1998, the petitioner and other sellers of fabrics in the State of Maharashtra were all exempted from payment of sales tax. However, with effect from 1.5.1998, exemption is only provided to fabrics manufactured or produced in India. The petitioner, who earlier belonged to the same homogeneous class of sellers of fabrics in the State of Maharashtra, has thus been discriminated. The classification between the sellers of products manufactured or produced in India and sellers of fabrics imported from outside India is unreasonable having no nexus with the object which is to grant exemption from sales tax for the benefit of the consumers. The classification therefore is unreasonable having no nexus with the object. The expression 'manufactured or produced in India' is therefore liable to be struck down.
3. A few additional facts may be set out. Parliment has enacted the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Section 3 of that Act provides that in respect of certain goods which include sugar, tobacco, fabrics produced or manufactured, a levy of duty of excise at the rate or rates specified in the First Schedule to this Act. This will be in addition to a duty of excise chargeable under the Central Excise Act, 1944 or any other law for the time being in force. Under Section 12 of the Customs Act, 1962 in respect of goods imported into India, duties are inter alia levied in terms of the Customs Tariff Act, 1975 ('CTA' for short) or any other law for the time being in force. Under Section 3(1) of the CTA, any article which is imported into India shall, in addition, be leviable to duty referred to as 'Additional Duty' equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. By virtue of Section 3(1) of CTA, fabrics imported into India are, inter alia, charged to Additional Duty of excise under the Act of 1957. After clearance for home consumption, such fabrics cleared on payment of duty including the Additional Duty of Excise under the Act of 1957 ceases to be 'imported goods' as defined under Section 2(25) of the Customs Act.
Before 1.5.1998, entry 15 of Schedule 'A' read as under:
15. (1) Fabrics. (Except those covered(2) Sugar and by entry 17 in part I of(3) Tobacco. Schedule C.)as described from time totime in column 3 of theFirst Schedule to theAdditional Duties ofExcise (Goods of SpecialImportance) Act, 1957.
4. With effect from 1.5.1998, respondent No. 1 amended Entry 15 of Schedule A vide Maharashtra Finance Act, 1998 certain amendments were made in Entry 15 which thereafter read as under:
15. (1) Fabrics From(2) Sugar, and 1.5.1998 by Mah. Act.(3) Tobacco 21 of 1998.as described from time to timein column 3 of the FirstSchedule to the Additional Dutiesof Excise (Goods of SpecialImportance) Act, 1957 andmanufactured or produced in India.
Thus, effective from 1.5.1998, exemption is restricted to goods manufactured or produced in India. In other words, goods imported into India from another country will have to pay sales tax on fabrics sold in the State of Maharashtra.
5. The petitioners have relied on the Budget speech of the Union Finance Minister while introducing the Finance Bill 1998, inter alia, giving the reasons for levy of Sales Tax on imported fabrics. It reads as under:
87. Under an agreement between the Union Government and the State Governments, the Union Government levies an additional duty of excise on sugar, textile and tobacco manufactured or produced in India. The proceeds of the duty are distributed amongst the States. On their part, the State Government do not levy any tax on sales of these commodities. However, the additional duty of excise is not levied on sugar, textile and tobacco imported from abroad. The State Government do not get any share from the countervailing duty of customs which is levied by the Union Government on the import of such commodities. But, even imported sugar, textile and tobacco are exempted from Sales Tax. Such a state of affairs is clearly not equitable. I, therefore propose to levy tax at the rate of 4 per cent on sugar, textile and tobacco imorted frm abroad. This will also provide desirable protection to local industry.
6. On behalf of respondent Nos. 1 and 2, a reply has been filed by Shri Sarupchand Banechand Jain, Assistant Commissioner of Sales Tax (Court Matters). It is set out that under the BST Act, only goods which are manufactured or produced in India are exempt from Sales Tax and not other goods. The State Legislature, it is pointed out, is authorised to make laws for levy of tax on the sale or purchase of goods other than newspapers pursuant to Entry 54 List II of the VIIth Schedule to the Constitution of India subject to the provisions of Entry 92A under Article 246 of the Constitution of India. The only restriction on the part of the State is under Article 286 which restricts the tax to a maximum of 4% on the goods declared by Parliament by law, to be of special importance in inter-state trade or commerce. Under Section 14 of the CST Act, different kinds of fabrics are listed as goods of special importance. Accordingly, the State of Maharashtra levied tax at 4% on fabrics imported into India to comply with the provisions of Section 14 read with Section 15 of the CST Act, 1956. The contention of the petitioners that declared goods cannot be subjected to both additional duty of excise under the CST as well as the sales tax under the Sales tax Act is denied. It is further explained that withdrawal of exemption of tax in respect of goods which are manufactured or produced outside India is not violative of Article 301 or 304 of the Constitution of India. The Excise is leviable under Schedule A Entry 15, only in respect of goods manufactured or produced in India. Entry 15 to that extent is explicit and clear. Under Schedule 'B' Entry 9, tax at the rate of 4% is levied on articles excluding those covered by Entry 15 of Schedule 'A'. Thus, the fabrics imported into India cease to be imported goods once the fabrics are cleared for home consumption upon payment of duties including additional duty f excise under the Act of 1957. It is denied that the levy of sales tax on imported fabrics is an unreasonable impediment towards free and smooth movement of the goods from one part of India to another and that the tax is in violation of the mandate contained in Articles 301 and 304 of he Constitution of India. It is further denied that levy of sales tax on fabrics imported by the petitioners would give rise to discriminatory consequences on account of the fact that unregistered dealers in case of out of Maharashtra sales will have to pay Central Sales Tax at the rate of 8% and/or that imposing of sales tax on imported fabrics under Entry 9 of Schedule 'B' of BST act for effecting of imposing restrictions on the petitioner's fundamental rights as alleged.
7. Affidavit has also been filed on behalf of respondent No. 3 by R.K. Bansal, Assistant Commissioner of Customs 9G.VII). His challenge is to the exercise of powers by delegate under Section 5(2) of the BST Act. We really do not deal with the contents of the said affidavit.
8. Considering the above, we now first deal with the submission on behalf of the petitioners. For that purpose, we may gainfully reproduce Section 5 of the BST Act. It reads as under:
Section 5 Sales and purchases of certain goods free from all tax - Notwithstanding anything in this act, but subject to the conditions or exceptions (if any) set out against each of the goods specified in column 3 of Schedule A, no tax shall be payable on the sales or purchases of any goods specified in that Schedule.
(2) The State Government may by notification in the Official Gazette add to, or enlarge, any entry in Schedule A, or relax or omit any condition or exception specified therein; and thereupon, the said Schedule shall be deemed to be [amended accordingly; and the amendment so made shall take effect from the date of the publication of the notification in the Official Gazette or from such other dates as may be mentioned therein.]
It will thus be clear that power conferred on the State Government as delegate of the legislature to add to, or enlarge any entry in Schedule A to relax omit any condition or exception specified therein. The amendment so made shall take effect from the date of publication of the notification in the Official Gazette or from such date as may be mentioned therein.
9. The submission on behalf of the learned Counsel for the petitioners, as earlier noted, is based on the language of Section 5(2) of the BST Act. We may firstly note that Section 5(2) is not the subject matter of any challenge or declaration that it is constitutional invalid. The argument is based on interpretation of Section 5(2) of the Act. Does Section 5(2) leads to the interpretation as sought to be advanced on behalf of the petitioners. The object to relax or omit any condition or exception specified therein presupposes that Schedule 'A' contains a condition which could be relaxed or omitted or exception specified therein. The earlier part of Section speaks about the power of the State Government to add to, or enlarge any entry in Schedule 'A'. What this presupposes is that though Schedule 'A' has been a part of the legislatiive exercises or process, the delegate has been given the power to add to or enlarge any entry or relax or omit any condition or exception specified therein. The power to add or enlarge any entry would include within its ambit the power to add a condition. In the instant case, what has been done is an addition has been made to the Entry 15 in the Schedule by adding the words 'and manufactured or produced in India'. Thus, there was a power under Section 5(2) to the State Government to have amended entry which included power to relax or omit any condition r exception. Such a reading would not be destructive of the principles behind Section 5(2) in conferring power on the delegate. On such exercise is done in terms of Section 5(2) which was within the power of the delegate, it is not possible to accept the contention. That action of the state Government as a delegate of the Legislature pursuant to the powers conferred on it under Section 5(2) is not ultra vires and/or arbitrary. The first contention must therefore be rejected.
10. We may now consider the second contention based on discrimination. The law on the subject and some tests may be spelled out from the Judgment of the Supreme Court in Shashikant Laxman Kale and Anr. v. Union of India and Anr. : (1990) 4 SCC 366, which quoted from the Judgment in Re: the Special Courts Bill, 1978:
(a) The State, in the exercise of its governmental power, has of necessity to make laws operating differently on different groups or class of persons within its territory to attain particular ends n giving effect to its policies, and it must possess for that purpose large powers of distinguishing and classifying persons or things to be subjected to such laws.
(b) The constitutional command to the State to afford equal protection of its laws sets a goal not attainable by the invention and application of a precise formula. Therefore, classification need not be constituted by an exact or scientific exclusion or inclusion of persons or things. The Courts should not insist on delusive exactness or apply doctrinaire tests for determining the validity of classification in any given case. Classification is justified if it is not palpably arbitrary.
(c) The principle underlying the guarantee of Article 14 is not that the same rules of law should be applicable to all persons within the Indian Territory or that the same remedies should be made available to them irrespective of differences of circumstances. It only means that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabilities imposed. Equal laws would have to be applied to all in the same situation, and there should be no discrimination between one person and another if as regards the subject-matter of the legislation their position is substantially the same.
(d) The law can make and set apart the classes according to the needs and exigencies of the society and as suggested by experience. It can recognise even degree of evil, but the classification should never be arbitrary, artificial or evasive.
(e) The classification must not be arbitrary but must be rational, that is to say, it must not only be based on some qualities or characteristics which are to be found in all the persons grouped together and not in others who are left out but those qualities or characteristics must have a reasonable relation to the object of the legislation. In order to pass the test, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differential which distinguishes those that are grouped together from others and (2) that that differentia must have a rational relation to the object sought to be achieved by the Act.
(f) The differentia which is the basis of the classification and the object of the act are distinct things and what is necessary is that there must be a nexus between them. In short, while Article 14 forbids class discrimination by conferring privileges or imposing liabilities upon person arbitrarily selected out of a large number of other persons similarly situated in relation to the privileges sought to be conferred or the liabilities proposed to be imposed, it does not forbid classification for the purpose of legislation, provided such classification is not arbitrary in the sense abovementioned.
(g) Classification necessarily implies the making of a distinction or discrimination between persons classified and those who are not members of that class. It is the essence of a classification that upon the class are cast duties and burdens different from those resting upon the general public. Indeed, the very idea of classification is that of inequality, so that it goes without saying that the mere fact of inequality in no manner determines the matter of constitutionality.
Have the petitioners discharged the initial burden on them to prove that the classification is unreasonable and or has no nexus with the object sought to be achieved. Have the petitioners produced cogent material to show that the petitioners and others similarly situated have been subjected for discriminatory treatment and or hostile treatment. See Ram Krishna Dalmia v. Shri Justice S.R. Tendolkar and Ors. AIR 1958 SC 538.
The preamble of the BST Act itself sets out that the Sales Tax Act is a law relating to levy of tax on sale or purchase of certain goods in the State of Bombay (Maharashtra). In other words, the BST Act is a fiscal enactment for imposition of tax. It s not an Act for the benefit of consumers as was sought to be contended on behalf of the Respondent. A power however has been conferred to exempt payment of sale tax on certain kinds of goods. Between 1.10.1995 to 30.4.1998, all sellers of fabrics in the State of Maharashtra were entitled to the benefit of exemption from the Sales Tax Act. From 1.1.1998, from the earlier homogeneous class, two classes of sellers were created in the State of Maharashtra. They were (a) sellers of fabrics who imported goods into the State of Maharashtra manufactured in other States of the Union of India. The second class were dealers who imported goods for home consumption from foreign countries and sold the fabrics in the State of Maharashtra. Is there the classification between the importers of goods manufactured in other States and importers of goods into the State of Maharashtra by import, based on intelligible differentia. Is the classification founded on intelligible differentia which distinguish persons that are grouped together from others left out of the group and does such classification has a relevant norm and or relevant to the object sought to be achieved by the legislation in question. As pointed out earlier, the BST Act is an Act for levying sales tax. The notification is to exempt sales tax on fabrics manufactured or produced in other States of India and imported into the State of Maharashtra. The notification continued the benefit of exemption to that class which imported goods into Maharashtra produced or manufactured in other States of India but withdrew the benefit of exemption in respect of goods imported from another country. The dealers of such goods may be described as dealers of goods imported in India and dealers of goods manufactured in foreign countries. The two classes of dealers are dealing with similar goods, no doubt but the source of the goods is different. There is therefore a intelligible difference between the two classes. We have no hesitation to hold that the classification is reasonable. Next does the classification have a rational nexus with the object sought to be achieved.
11. The object of the Act is to charge Sales tax on goods sold in the State of Maharashtra. The object of the notification is to exempt the goods notified under Entry 15 pursuant to the notification dated 1.5.1998 from exemption of sales tax. Statement of objects and reasons Clause to the Speech of the Finance Minister of the State of Maharashtra while introducing the Finance Bill 1998 gives a clear indication why imported goods are subject to sales tax. The Union Government levied additional duty of excise on sugar, textile, and tobacco manufactured or produced in India which provides or is distributed amongst the States pursuant to the agreement with the Union Government and the State Government. On their part, the State Government did not levy or tax on consumption of these commodities. However, additional duty of excise is not levied on sugar, textile and tobacco imported from abroad. The State Government did not get a share if the countervailing duty of customs which was levied by the Union of India on the import of such commodities. In terms of the existing notification imported sugar, textile and tobacco are exempt from sales tax and therefore, it was proposed to levy tax at the rate of 4%. The law is now well-settled that the Finance Minister's Speech can be used as an aid to construction of a provision. See K.S. Varghese v. I.T.O. Ernakulum : (1981) 4 SCC 173.
12. Before answering the issue finally, let us examine some of the judgments relied upon on behalf of the petitioner by the learned Counsel.
In The State Trading Corporation of India Ltd. v. The Assistant Commissioner (Assessment) and Anr. : 1986 61 STC (Ker.) 190. The issue was interpretation of the expression 'imported sugar' as defined in entry 1 of the First Schedule to the Central Excise & Salt Act, 1944. The argument advanced was that it is only applicable to the sugar produced in India in contradiction to sugar imported. The Kerala High Court held that it was not possible to give entry a strained interpretation to the definition of 'sugar'. An appeal against the said Judgment was dismissed by the Supreme Court See : 1998 (100) E.L.T. 17 (S.C) State of Kerala v. State Trading Corporation of India Ltd.
In Parekh Prints v. Union of India : 1992 (62) ELT 253 (Del.), the issue was additional duty levied under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and was referable to Entry 84 of the Union List and in any case to Entry 97 of that List. The argument sought to be advanced was that it was sales tax in pith and substance. This contention was rejected. In our opinion, ratio of that judgment is of no assistance.
Next our attention was drawn to the Judgment in the case of Akay Cones Pvt. Ltd. v. Lt. Governor of Delhi : 2003 (154) ELT 22 (Del.). A similar issue as before this Court was in issue before the Delhi High Court. In that case also, the challenge was levy of sales tax on imported fabrics. The Delhi High Court held that levy of sales tax on imported fabric cannot be said to be discriminatory or violative of Article 14 or Article 19(1)(g) or Article 304 of the Constitution. The Delhi High Court relied on the Judgment of the Supreme Court in Md. Zackria v. State of Tamil Nadu 1999 (115) STC 697. It was there also contended that the petitioner having paid additional duties of excise on imported gods no sales tax was leviable was rejected by the Supreme Court.
13. The learned Counsel for the petitioners has sought to bring to our attention Auricle 304 of the Constitution of India. This was in the context to point out that in respect of manufacture fabrics in India, excise duty is payable under Additional Duties of Excise (goods of Special Importance) Act, 1957. Similarly, under the provisions of the Customs Act and the Customs Tariff Act additional excise is also payable by the importer when he imports goods for home consumption. It is submitted that it was not open to the State to treat one homogeneous class into two different classes based on sale of goods depending whether they were imported from other States of India or from foreign State. Reliance placed on Article 304, in our opinion is not really relevant. Under Article 301 of the Constitution, trade, commerce and intercourse. throughout India shall be free. Article 302 confers a power on Parliament to impose restrictions on the trade, commerce and intercourse between one State and another or within any part of the territory of India as may be required in the public interest. This really would be of no assistance. Article 303 is in the nature of restrictions on the exercise of power by a competent legislature or the State to make any law giving or authorising the giving of any preference to one State over another and the like. Article 304, as we have seen, is only in the nature of making a law by the said legislature to impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State and to impose reasonable restrictions etc. This Article therefore is really of no assistance.
14. Considering the discussion, it is clear that under Section 5(2) of the BST Act, the legislature has conferred power on the delegate to add to, or enlarge any entry in Schedule 'A'. The delegate by its notification provided restriction on exemption from sales tax to fabrics manufactured or produced in India. This was within the competence of the delegate. The two classes of persons selling fabrics in Maharashtra are clearly identifiable persons who sell goods manufactured or produced in India or imported into India or manufacture or sell both kids of goods. It is only goods which are imported into India which are the subject matter of sales tax. Sales tax could be imposed by the legislature on fabrics pursuant to Entry 54 of List II of the State List. The object of legislation is to generate revenue in the form of sales tax. The State has chosen to exempt payment of sales tax from what we may describe to domestic manufacturers or producers to the exclusion of foreign manufacturers or producers. The reason is found in the Finance Minister's Speech. It is true that the effect is both on the consumer and the manufacturer. The test however is a nexus with the object of the Act. The State has chosen to forego sales tax dues from manufacturers or producers in India. It is open to the State to pick and choose amongst persons as long as it is reasonable. In our opinion, the classification being reasonable and the petitioners who are left out of class which is based on the reasonable nexus with the object has been unable to discharge the burden that the classification is unreasonable and or has no nexus with the object sought to be achieved. It is not possible to hold that the notification to the extent that it denies the benefit to the petitioners is arbitrary and o discriminatory.
15. Let us deal with two Judgments though not argued at the Bar, but referred to in the petition. Firstly, Weston Electroniks and Anr. v. State of Gujarat and Ors. : (1988) 2 SCC 568 In that case, the rate of sales tax in respect of television sets imported from outside the State was reduced from 15% to 10% and for goods imported within the State or manufactured within the State was reduced to 1 per cent. Considering Articles 301, 304 and 303, the Supreme Court held that the discrimination effected by applying different rates of tax between goods imported into the State of Gujarat and goods manufactured within that State has to be struck down. It may b pointed out that this was not the case of import of goods from outside India, but import of goods fro one State manufactured in a factory located at Delhi and and electronics goods manufactured in the State of Gujarat. Similar issue was considered in West Bengal Hosiery Association and Ors. v. State of Bihar and Anr. (1988) 4 SCC 134. Reliance was placed on the Judgment in Weston Electroniks and Anr. (supra). As pointed out, all these Judgments are clearly distinguishable and not applicable to the issues arising in this petition.
16. For the aforesaid reasons, we find no merit in the Writ Petition. Rule discharged. There shall be no order as to costs.