ORDER
Gopal Rao Ekbote, C.J.
1. The short but important question involved in this enquiry is whether a part of Section 10 of the Central Sales Tax Act is ultra vires of Article 14 of the Constitution. It arises in the following circumstances:
2. The petitioners are dealers in paddy. They purchase paddy within the State. They pay purchase tax on such purchases. They sell the paddy to dealers outside the State and the paddy is thus exported.
3. The petitioners claimed before the assessing authority exemption from the payment of tax under Section 10 of the Central Sales Tax Act (hereinafter referred to as the Act). Since the turnover in regard to which exemption was sought fell beyond the scope of Section 10, the assessing authority rejected the claim.
4. It is also to challenge the order of the Deputy Commissioner (City Kurnool) dated 25th April, 1970, that the present writ petition is filed. Although an appeal is pending against the said order, since the vires of Section 10 is challenged, the writ petition was admitted for consideration. When the matter came before Vaidya and Sriramulu, JJ., they thought that the decision of the Division Bench of this Court in W.P. No. 5500 of 1968 required reconsideration. They accordingly referred the case by their order dated 11th November, 1971, to a larger Bench and that is how the matter has come before us.
5. Before we appreciate the main contention a few more facts will have to be given.
6. In State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C, 231 (S.C.), the Supreme Court held that if goods are liable at a single point under the State law, Central sales tax cannot be levied on inter-State sale on those commodities at multiple points. This decision was followed subsequently in Modi Spinning and Weaving Mills Co. Ltd. v. Commissioner of Sales Tax [1965] 16 S.T.C. 310 (S.C.). (sic) and State of Mysore v. Mysore Silk House [1966] 17 S.T.C, 309 (S.C.).
7. Five years later the Central Sales Tax Act was amended by amending Act 28 of 1969 which was published on 13th October, 1969. This amendment evidently was made to get over the difficulties created by the said decisions of the Supreme Court.
8. By the said Amendment Act a new provision, Sub-section (1A) to Section 6 of the Act, was added with retrospective effect from 1956. Subsection (1A) reads:
(1A) A dealer shall be liable to pay tax under this Act on a sale of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable (whether on the seller or the purchaser) under the sales tax law of the appropriate State if that sale had taken place inside that State.
9. By the same amending Act Section 10 was enacted which reads:
Exemption from liability to pay tax in certain cases. -- (1) Where any sale of goods in the course of inter-State trade or commerce has been effected during the period between the 10th day of November, 1964, and the 9th day of June, 1969, and the dealer effecting such sale has not collected any tax under the principal Act on the ground that no such tax could have been levied or collected in respect of such sale or any portion of the turnover relating to such sale and no such tax could have been levied or collected if the amendments made in the principal Act by this Act had not been made, then, notwithstanding anything contained in Section 9 or the said amendments, the dealer shall not be liable to pay any tax under the principal Act, as amended by this Act, in respect of such sale or such part of the turnover relating to such sale.
10. In the light of this amendment the Deputy Commissioner, respondent No. 2, commenced the proceedings to revise the assessments made prior to 10th November, 1964, and assessed the petitioners on the inter-State sales of paddy. The petitioners objected for such revision on the ground that they had not collected tax on the relevant transactions and that they were exempted from tax. The objection was rejected by the Deputy Commissioner on the ground that the exemption was granted under Section 10 only for sales after 10th November, 1964, and to the date of the amending Act and not for any prior sales.
11. The only contention raised by the petitioners is that the exemption granted by Section 10 for a specified period is discriminatory inasmuch as dealers similarly placed who had not collected the tax prior to 10th November, 1964, have not been given the benefit of such exemption. A subsidiary contention, in case the main contention is accepted, was also advanced that if the invalid portion of Section 10 granting exemption for a specified period is struck down, even then Section 10 as a whole remains valid as the invalid portion is severable fro.m the valid portion.
12. Now the law relating to Article 14 of the Constitution is no more in doubt. In order to attract Article 14 it is necessary firstly to ascertain the policy underlying the impugned statute and the object intended to be achieved by it. Having ascertained the policy and the object of the Act, then the court has to examine the impugned provision in the light of the following two tests: (1) whether the classification is rational and based upon an intelligible differentia which distinguished persons or things that are grouped together from others that are left out of the group, and (2) whether the basis of differentiation has any rational nexus or relation with its avowed policy and object.
13. It is plain that although class legislation is thus prohibited, yet this does not prohibit a reasonable classification of persons and things for the purpose of legislation. Whether such classification relates to duties, burdens or exemptions the same principle of classification would apply. It is true that a proper classification must embrace all that naturally belongs to the class. Neither existing persons or things can ordinarily be constituted nor the class can be so constituted as to preclude additions to the number included within a class. The classification must be such as to embrace all those who were having similar circumstances or those who may thereafter be in similar circumstances and conditions. In other words, the classification must be reasonable and natural and ought to be based on some public policy. The classification should not be capricious or arbitrary. It is, however, plain that it is not essential that there should be a logical appropriateness of the inclusion or exclusion of objects or persons involved in a classification. The principle of equality in practice permits many justifiable inequalities.
14. It must be borne in mind that in the exercise of its power to make classifications for the purpose of enacting laws over matters within its jurisdiction the State is recognised as enjoying a wide range of discretion. It is manifest that the question of classification is primarily for the Legislature, and it can never become a judicial question except for the purpose of determining, in any given situation, whether the legislative action is clearly unreasonable.
15. We have already noted that unless a statute is curative or remedial, and therefore temporary, the classification must not be based on existing conditions only, but provision must be made for future acquisitions to the class as other subjects acquire the characteristics which form the basis of the classification. This principle is of considerable importance when attempts are made to draw distinction based on time, leaving persons or things out of the class, putting in one class all the instances on a certain date or between a specified time and placing all others in another class. It must, however, be borne in mind that a law which operates alike on all persons similarly situated is not necessarily invalid because it excepts from its operation all instances prior to a certain date on grounds of public policy: vide Chintapalli Achaiah v. Gopalakrishna Reddy (1965) 2 Aa. W.R. 441.
16. It is in this background that we have to consider whether that portion of Section 10 which provides exemption only for a specified period is obnoxious to Article 14. We do not think it is. It was not disputed that prior to the Supreme Court decision given on 10th November, 1964, there was conflict of opinion as to whether the Central Government can tax a commodity at a different point or different rate than what is provided in the respective State Act. In regard to the construction of Section 8 of the Act as well as Section 9 there was difference of opinion. The words 'in the manner' appearing in Section 9 had given rise to the difference of opinion. While it was held by some courts that the said phraseology attracts only the machinery and the procedure for assessment and collection of tax existing in the State, the view of the other courts was that these words include even the rate and the point at which a tax could be levied.
17. It is the Supreme Court that laid down for the first time that the expression 'levy' means 'impose'. It was further said:
When Section 9(1) says that under the Central Act tax shall be levied in the same manner as the tax on the sale or purchase of goods under the general sales tax law of the State is assessed, paid and collected, it is reasonable to hold that the expression 'levied' in Section 9(1) of the Central Act refers to the expression 'levied' in Section 5(3)(a) of the State Act. There is no reason why the Central Act made a departure in the manner of levy of tax on the specified goods which are taxed only at a single point under the State Act; if any such radical departure was intended, the Central Act would have expressly stated so. The Central Act was passed to levy and collect sales tax on inter-State sales to avoid confusion and conflict of jurisdictions; the tax is also collected only for the benefit of the States.
18. The result of this decision was that the uncertainty and the conflict of opinion which prevailed were set at rest. The result of the construction placed by the Supreme Court on Section 9 of the Act compelled the Parliament to more clearly lay down its policy regarding the Central sales tax. In order to lay down such policy clearly the Central Sales Tax (Amendment) Act, 1969, was passed giving the provisions retrospective effect. Section 9 of the Amendment Act validates all the assessments, reassessments, levy or collection of any tax under the principal Act made before 9th June, 1969. It declares that those assessments, etc., shall be deemed to have been made, taken or done under the principal Act as amended by this Act.
19. Section 10 then grants exemption from liability to pay tax where any sale of goods in the course of inter-State trade has been effected during the prescribed period provided the dealer has not collected sales tax on such inter-State transactions. This provision undoubtedly divides the cases into three categories. First: cases irrespective of the fact whether sales tax was collected or not on inter-State transactions prior to 10th November, 1964; second: inter-State transactions of the specified period where the dealer has riot collected the sales tax; and third: cases relating to the transactions taking place during the same specified period where the dealer has collected the sales tax.
20. It will be seen that for the specified period the dealers have been put into two classes for the purpose of granting exemption -- the dealers who have collected the tax and those who have not so collected the tax. This classification has not been attacked as violative of Article 14 of the Constitution. It was stated that although in Hira Lal Rattan Lal v. Sales Tax Officer [1973] 31 S.T.C. 178 at 187 (S.C.), it was decided that the argument that the dealers could not pass on the tax payable to the consumers has not much validity and that the tax is levied on the dealer and the fact that he is allowed to pass on the tax to the consumers has no relevance when the court considers the legislative competence, nevertheless the classification based on the fact of the collection or non-collection of the tax has been held to be reasonable for the purpose of Article 14 of the Constitution: vide Jonnala Narasimharao and Co. v. State of Andhra Pradesh [1971] 28 S.T.C. 262 at 282 (S.C.).That is why the said classification during the specified period has not been attacked.
21. The attack is only made because it is said that there has been invidious discrimination made between the dealers who have not collected the tax prior to 10th November, 1964, and those dealers who have similarly not collected the tax during the specified period. The contention was that both these kinds of dealers are very much placed in the same or similar position and, therefore, they ought not to have been given different treatment.
22. We do not see any substance in this contention. Merely because different treatment has been meted out to these two types of dealers the provision does not necessarily conflict with Article 14 of the Constitution. If there are valid reasons for making such classification based on time factor, such classification would be permissible. In this case we have already seen that till the decision of the Supreme Court the law was not settled, but the intention of the Legislature, as has now been disclosed, was to levy the tax and that is why the assessments were validated and the dealers irrespective of the fact whether they have collected the tax or not have not been exempted. The situation, however, became different after the decision of the Supreme Court. Under Article 141 of the Constitution the law laid down by the Supreme Court is binding upon all the States and, consequently, the States could not have levied tax disregarding the Supreme Court decision unless the defect pointed out by the Supreme Court is removed by a proper legislative device. In spite of the Supreme Court decision if the dealers continued to collect taxes, they can have no grievance to pay the same to the State Government. But the dealers who depending upon the Supreme Court decision till the law was amended in 1969, did not collect the tax, could not have been compelled to pay the taxes. It would have been unreasonable and unfair and would have disturbed the confidence of such dealers. The Legislature, therefore, thought it better to adopt a policy on the foot of the decision given by the Supreme Court that before the date of the Supreme Court decision tax shall be levied irrespective of the fact whether the dealers have collected the tax from the consumers or not and that tax shall be collected after the decision of the Supreme Court until the law was amended from those dealers who have collected the tax and not from those who have, on the faith of the decision, not collected the same. It cannot, in these circumstances, be said that the policy underlying the classification is irrational or unreasonable. It cannot also be validly contended that the said classification based on such valid policy has no nexus with the object which Section 10 of the Act seeks to achieve. It must be remembered that the State has a wide discretion in matters in relation to taxes. The Legislature has a wider discretion in matters relating to taxes. It is well settled that a State does not have to tax everything in order to tax something. It is allowed to pick and choose objects and persons for the purpose of taxation. The same wide discretion is available to the Legislature regarding grant of exemptions. It would, therefore, not be difficult to hold that in the exercise of such a wide discretion if the Legislature has reasonably classified the dealers in view of the Supreme Court decision, such classification cannot be attacked on the ground of Article 14 of the Constitution.
23. It is also pertinent to note that if the Legislature had exempted all those who had not collected the tax even prior to 10th November, 1964, it would have meant that right from 1956 till 10th November, 1964, all the assessments would have had to be opened and exemptions in such cases granted. A flood of claims for exemptions in all transactions which had been finalised would have poured in. This very thing the Legislature wanted to avoid and that is why the assessments prior to November, 1964, were validated in view of the Supreme Court decision and because of that decision exemptions were granted to certain dealers till the law was suitably amended.
24. It is not for this court to decide whether the policy of exempting dealers from payment of tax, who have not collected the taxes during the specified period only, was a wise or justifiable policy. Nor this court can decide whether it would have been similarly wise or justifiable if exemptions were to be granted for the dealers who had not collected taxes even prior to the decision of the Supreme Court. When the Legislature within the range of its selection for granting exemption has not discriminated and the law operated equally within the range selected and when such classification is not otherwise objectionable, it is difficult to hold the impugned part of Section 10 as ultra vires of Article 14 of the Constitution.
25. With due respect we find ourselves unable to agree with the view of the learned Judges who referred the case to the Full Bench that there is no rationale behind sub-dividing the dealers who had not collected the tax prior to 10th November, 1964, and subsequent to it. We have already pointed out the two different situations which prevailed in practice prior and subsequent to the Supreme Court decision. It is true that the Supreme Court merely declared what the law was for all the time till it was amended, but it cannot be lost sight of that till the Supreme Court decision was given, the position of law was not clear and, therefore, the distinction can validly be made on the basis of time factor because of these hard realities. It is not the law that between the same class of dealers there can never be a Sub-classification.
26. It is true that the Supreme Court decision in Jonnala Narasimharao and Co. v. State of Andhra Pradesh [1971] 28 S.T.C. 262 (S.C.), was not identical on facts. The relevant point, however, is that the Supreme Court accepted the classification between the dealers who paid the taxes and who have not paid the taxes as a permissible one. The reasons on which classification can be found permissible will have then to be applied to the classification, involved in this case, that is to say, the dealers who had not collected the taxes prior to 10th November, 1964, and those who had not collected the taxes for the specified period after 10th November, 1964. Applying the principles, as discussed above, we have no manner of doubt that the impugned classification is valid and permissible under Article 14 of the Constitution.
27. For the reasons we have given we are of the opinion that W.P. No. 5500 of 1968 and batch decided on 4th March, 1971, by Obul Reddi and Venkateswara Rao, JJ., was rightly decided. It was held that Section 10 of the Act was not ultra vires. The classification was valid. It may be that some of the reasons given in support of their conclusion may not be supported, but that would not mean that the conclusion arrived at by that Bench was erroneous.
28. We are fortified in the view which we have taken by the following decisions:
29. In Basappa and Bros. v. Deputy Commissioner of Commercial Taxes [1971] 27 S.T.C. 241, a Bench of the Mysore High Court was concerned with this very question. Their Lordships observed that:
Before 10th November, 1964, when litigation was pending...the dealers could have foreseen that their sales would be charged to tax and therefore could have made appropriate provision to meet the tax liability. By the classification made under Section 10, it cannot be said that any dealer has been selected for hostile treatment.
30. In Murari Lal Agrawal and Sons v. Assistant Commissioner (J.), Sales Tax [1971] 27 S.T.C. 402., the same question arose before a Full Bench of the Allahabad High Court. The majority took the view for more or less the same reasons that Section 10 was not ultra vires of Article 14 of the Constitution. Their Lordships held:
The date 10th November, 1964, was, therefore, a reasonable line to draw for the purpose of granting exemption under Section 10. The other terminal date is 9th June, 1969, when the Central Sales Tax (Amendment) Ordinance, 1969, was promulgated by which the relevant amendments in the Central Act were made.
31. We were taken through the dissenting judgment of Trivedi, J. With due respect to the learned Judge we do not find it possible to share the view that the demarcating period is arbitrary and has no relation with the object. It is true that the courts in India only interpret the law and as a result of the said Supreme Court decision the levy was invalid and that it had not become invalid from the date of the Supreme Court decision. But, as stated earlier, the line which has been drawn cannot be said to make any invidious discrimination.
32. The same question was again debated before a Full Bench of the Punjab and Haryana High Court. It was unanimously held in Tek Chand Daulat Rai v. Excise and Taxation Officer [1972] 29 S.T.C, 585, that:
The differentiation between the two classes of dealers (mentioned in Section 10 of the Amendment Act) is founded on a justifiable ground and has been devised to achieve one of the objects of the Act. There does exist nexus between the object of the Amendment Act and the classification engendered by Section 10 of the Act.
33. Our concluded opinion, therefore, is that the impugned portion of Section 10 of the Act is not ultra vires of Article 14 of the Constitution. It follows that it is unnecessary to consider whether the impugned portion of that section is severable from the rest of the section.
34. The other contentions raised in the writ petition can be conveniently urged before the appellate authority where admittedly the appeal is still pending. No arguments, therefore, were advanced before us on any other point.
35. For the foregoing reasons, we dismiss the writ petition with costs. Advocate's fee Rs. 200.