Ramachandra Rao, J.
1. In this batch of writ petitions, the petitioners challenge the validity of Section 5-A of the Andhra Pradesh General Sales Tax Act (6 of 1957) (hereinafter called the Act). As the challenge to the said section is mainly on legal grounds, it is sufficient, to refer to the facts of one typical case.
2. The facts in Writ Petition No. 748 of 1967 are briefly as follows:-
The petitioner is a firm and a dealer in paddy and rice. For the year 1964-65, the Commercial Tax Officer, Palakole, by an assessment order dated 30th November, 1965, assessed the petitioner on a net turnover of Rs. 21,19,609.14 p. and levied a tax of Rs. 5,299.20 p. at per cent. under Section 5-A of the Act, in addition to the tax at 3 per cent. on a turnover of Rs. 14,63,021.86 p. and 1 per cent. on a turnover of Rs. 6,56,647.16 p. The total tax levied was Rs. 55,756.33 p. and after deducting the same from the advance tax paid, the refund of the excess of Rs. 2,257.33 p. was directed by the assessing authority. An objection was raised before the assessing authority as to the vires of Section 5-A of the Act, but the said authority negatived the objection observing that such an objection was of no avail before an authority constituted under the Act, and that, therefore, he was unable to give any relief in that regard. The same objection was raised on appeal before the Appellate Assistant Commissioner and the Sales Tax Appellate Tribunal, but with the same result. The petitioner has, thereupon, filed the above writ petition for a writ of certiorari for quashing the assessment order in so far as it relates to the levy of the per cent. of additional tax under Section 5-A of the Act. The challenge to its validity is made mainly on two grounds :
(1) that Section 5-A of the Act is beyond the legislative competence of the State Legislature as the said provision does not fall within entry 54 of List II of the Seventh Schedule of the Constitution; and
(2) that Section 5-A is discriminatory in its scope and effect, and that it violates Article 14 of the Constitution of India.
3. Sri Venkatappayya Sastri contends that the unit of taxation under entry 54 of List II, is the transaction or the event of sale and not the actual trade or the goods sold and that as Section 5-A of the Act authorises the levy of an additional tax of one-fourth per cent. on the turnover when the turnover is Rs. 3 lakhs or more, it amounts to a tax on the totality of the turnover and it is the turnover that is taken as the unit of taxation and consequently it amounts to taxing the trade itself. His contention is that such a provision falls under entry 60 of List II of the Seventh Schedule and that it cannot exceed the limit of Rs. 250 per annum by virtue of Article 276 of the Constitution. Relying upon entry 84 of List I and entry 51 of List II which relate to duties of excise and entry 83 of List I which deals with duties of customs and entry 59 of List II which refers to tolls and entry 52 of List II which refers to taxes on the entry of goods into a local area for consumption, use or sale therein and entry 54 of List II and entry 92-A of List I which refer to taxes on the sale or purchase of goods, Sri Sastri argues that the taxable event in each of these cases is the manufacture or production or the movement or sale or purchase of goods and that the goods themselves are not the subject of taxation. His submission is that under a law made under entry 54 of List II, a tax can be levied only on the transaction or event of sale or purchase and that no other unit of taxation can be adopted. Mr. Sastri's further argument is that if the turnover of a dealer is taken as the basis for imposition of a tax, it amounts to levying a tax on the status of the dealer on account of the volume of his trade and that it amounts to a tax on the dealer himself and it is not a tax on the activity of sale or purchase of the dealer and that it consequently falls outside entry 54 of List II.
4. Sri Anantha Babu raises a further contention that the nature of the tax imposed under Section 5-A is different from that imposed under Section 5 of the Act, that there is a difference between the yardstick employed for imposing a tax and that employed for collection of the tax, that the method of computation or mode of assessment does not determine the nature of the tax and that Section 5-A is a charging section by itself and the nature of the tax imposed should be determined only with reference to the provisions of Section 5-A of the Act. His submission is that the taxable entity or event under Section 5-A is not the individual sale or purchase but the turnover of a dealer reaching rupees three lakhs or more.
5. Before we deal with the aforesaid contentions, it is appropriate that we should read the relevant provisions of the Act for a proper appreciation of the points raised. The definition of 'sale' omitting the portions not relevant for the purpose of this case, is as follows :
2. (n) 'sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business, for cash, or for deferred payment, or for any other valuable consideration, and includes a transfer of property in goods involved in the execution of a works contract or in the supply or distribution of goods by a society (including a co-operative society), club, firm or association to its members, but does not include a mortgage, hypothecation or pledge of, or a charge on goods.
* * *Total turnover' and 'turnover' are defined in Section 2(r) and (s) as follows :
(r)total turnover' means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover, is liable to tax ;
(s) 'turnover' means the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods (whether such consideration be cash, deferred payment or any other thing of value) including any sums charged by the dealer for anything done in respect of goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, whatever be the description, name or object thereof.
6. The proviso to this definition is omitted, as it is not relevant for this case.
7. Section 5 which is the charging section is in the following terms:
5. Levy of tax on sales or purchases of goods.-(1) Every dealer (other than a casual trader and an agent of a non-resident dealer) whose total turnover for a year is not less than Rs. 10,000 and every casual trader or agent of a non-resident dealer, whatever be his turnover for the year, shall pay a tax for each year, at the rate of two naye paise on every rupee of his turnover:
Provided that if and to the extent to which, such turnover relates to articles of food or drink or both sold in a hotel, boarding-house, restaurant, stall or any other place, the tax shall be calculated at the rate of three naye paise in the rupee, if the total turnover relating to those articles is not less than Rs. 25,000.
(2) On the first sale of any of the goods mentioned in the First Schedule by a dealer who is liable to tax under Sub-section (1), a tax at the rate specified as applicable thereto shall be paid by the dealer on his turnover in each year relating to such goods, and the said tax shall be in addition to the tax to which such dealer is liable under Sub-section (1).
(3) Notwithstanding anything contained in Sub-section (1), the tax under this Act shall be levied-
(a) in the case of the goods mentioned in the Second Schedule, at the rates and only at the point of the sale specified as applicable thereto effected in the State by the dealer selling them, on his turnover of sales in each year relating to such goods irrespective of the quantum of turnover;
(b) in the case of the goods mentioned in the Third Schedule, at the rates and only at the point of the purchase specified as applicable thereto, effected in the State by the dealer purchasing them, on his turnover of purchase in each year relating to such goods irrespective of the quantum of turnover.
(4) For the purpose of this section and the other provisions of this Act, the turnover on which a dealer shall be liable to pay tax shall be determined after making such deductions from his total turnover, and in such manner as may be prescribed.
(5) The taxes under this section shall be assessed, levied and collected in such manner, as may be prescribed :
Provided that-
(i) in respect of the same transaction, the buyer or the seller, but not both, as determined by such rules as may be prescribed, shall be taxed ;
(ii) where a dealer has been taxed in respect of the purchase of any goods, in accordance with the rules referred to in Clause (i) of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him.
8. Section 5-A which is impugned in these petitions, is as follows :
5-A Levy of additional tax on turnover.--Every dealer who is liable to pay tax under Section 5 shall, in addition to the tax payable under that section pay for each year a tax at the rate of one-fourth naya paisa on every rupee of his turnover liable to tax, if his total turnover for that year is rupees three lakhs or more.
9. The legislative power to make laws for imposing taxes on sale or purchase of goods is conferred by entry 92-A of List I and entry 54 of List II of the Seventh Schedule of the Constitution. The word 'sale' in the said entries is used in the sense in which it occurs in Section 4 of the Sale of Goods Act. It is not disputed that what are taxable under Section 5 of the Act are the transactions of sales or purchases, and that Section 5 has been validly enacted in exercise of the power under entry 54 of List II of the Seventh Schedule of the Constitution. But what is contended for the petitioners is that the unit of taxation fixed under Section 5-A is different from that prescribed under Section 5. We have therefore to see whether on the plain language of the provisions of Section 5-A, the nature of the tax that is sought to be levied under Section 5-A is in any way different from that leviable under Section 5 of the Act, for it is not disputed before us that what is taxable under Section 5 is the transaction or event of sale.
10. Under Section 5 it is prescribed that every dealer whose total turnover for a year is not less than Rs. 10,000 and every non-resident dealer whatever be his turnover for the year, shall pay a tax for each year at the rate of 0.02 naye paise (now 0.03 paise) on every rupee of his turnover. The 'turnover' as defined in Section 2(s) is only the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods. The tax is therefore levied on the total amount of consideration in respect of each sale. But an exemption is granted in respect of a dealer, whose total turnover is less than Rs. 10,000 per year. The taxable event under Section 5 is only the sale transaction under Section 5. Section 5-A similarly provides for an additional tax at the rate of one-fourth naya paisa (now paisa) on every rupee of the turnover of a dealer liable to be taxed under Section 5 provided the total turnover is rupees three lakhs or more. What is taxed under Section 5-A is also the event or transaction of sale but a higher rate by way of an additional tax of one-fourth naya paisa (now paisa) on every rupee of the turnover is prescribed in respect of dealers having a total turnover of rupees three lakhs or more. The mere fact that the additional tax of one-fourth naya paisa is provided in an independent section of the Act, does not make it any the less a tax on the sale transaction. Just as dealers having a total turnover of less than Rs. 10,000 are exempt from paying any sales tax, dealers having a total turnover of less than rupees three lakhs are exempt from paying the additional tax leviable under Section 5-A. An argument has been raised upon the language of the marginal notes of the two Sections 5 and 5-A. It is contended that the marginal note of Section 5 is 'levy of tax on sales or purchases of goods', while the marginal note for Section 5-A is 'levy of additional tax on turnover'. It is submitted that the taxable event is the sale or purchase of goods under Section 5 while that under Section 5-A it is the turnover. It is an established principle of interpretation of statutes that when the words used in the sections of the Act are clear and unambiguous the marginal notes cannot control the construction of the section. Even otherwise we are not persuaded that the marginal note of the two sections, Sections 5 and 5-A, are in any way materially different. As already mentioned the 'turnover' as defined in the Act is the total amount of consideration for the sale or purchase of goods. Therefore the levy, even according to the marginal note, under Section 5-A refers only to the levy of additional tax on the sale or purchase of goods. The plain language of the section does not therefore support the contention of the learned counsel that the unit of taxation under Section 5-A is not the transaction of sale and that it falls outside entry 54 of List II of the Seventh Schedule of the Constitution.
11. Sri Venkatappayya Sastri next contended that the additional tax levied under Section 5-A is a tax on the status of the dealer or on the trade itself. In support of his contention, he relies upon certain decisions. In re Sea Customs Act, Section 20(2) A.I.R. 1963 S.C. 1760 and State of Bombay v. R.M.D. Chamarbaugwala A.I.R. 1957 S.C. 699. What is laid down in the decision first cited is that the taxable event is either a sale or purchase of goods or production or manufacture or the movement of the goods and that the duties of excise or customs or sales tax are not taxes on the goods themselves. Similarly in the second case referred to above, their Lordships held that what is taxed under the Bombay Lotteries and Prize Competitions Control and Tax Act is the activity of betting and gambling, and that it is not a tax on the trade itself. We do not think that the said two decisions lend any assistance to Mr. Sastri's contention.
12. The next case cited by Mr. Sastri is State of Jammu and Kashmir v. Caltex (India) Ltd. [1966] 17 S.T.C. 612. But this case does not lend any support to the argument advanced by the learned counsel. It is observed by their Lordships at page 623 :
that the sales tax is imposed, in ultimate analysis, on receipts from individual sales or purchases of goods effected during the entire period.
13. These observations do not in any way militate against the construction which we have placed upon Section 5-A.
14. The next contention of Mr. Sastri is that the additional tax levied under Section 5-A is on the status of the dealer, because the additional tax is imposed on the basis of the volume of the trade. In other words, his contention is that the additional tax is referable to the point at which the turnover reaches rupees three lakhs or more of a particular dealer. Therefore it is the volume of the trade that is taken as the criterion for imposing this additional tax and not the individual sale or purchase. We have already held that the said contention cannot be supported on the basis of the plain language of the section itself. Mr. Sastri tries to support his contention on the basis of a decision of the Patna High Court reported in Bihar Bolts, Rivets & Engineering Works Ltd., In re [1959] 10 S.T.C. 578, where Sahai, J., referred to the important points of difference between the Bihar Sales Tax Act and the Income-tax Act and observed as follows:
Firstly, income-tax for one year called the assessment year, is assessed on the income of the previous year, called the accounting year. Sales tax, on the other hand, becomes liable to be paid immediately after each sale is effected though, for the facility of computation and payment of tax, provision has been made for the filing of returns at the expiry of each quarter. Secondly, rates of income-tax vary in accordance with the amount of income whereas the amount of sales tax does not vary on the amount of taxable turnover. The result is that no one can be certain of what income-tax he has to pay at least until the accounting year expires. But a dealer can always be certain of what sales tax he has to pay as soon as he effects the sale.
15. We do not think that these observations with reference to the difference between the income-tax and the sales tax lend us any assistance in the matter of interpretation of the provisions of Section 5-A.
16. We shall next deal with the contentions raised by Sri T. Anantha Babu that the nature of tax imposed under Section 5-A is different from that imposed under Section 5. His contention is that Section 5-A is an independent charging section unconnected with the provisions of Section 5 and that the nature of tax imposed by Section 5-A should be determined solely on an interpretation of its provisions. He submits that the tax is imposed on a thing or an activity or an event and that the nature of the tax does not depend upon the procedure employed for collection of the tax. His contention in short is that Section 5-A imposes a tax upon the turnover while Section 5 imposes a tax on the individual sale or purchase and that therefore Section 5-A is not a tax on a sale falling within entry 54 of List II. He seeks to draw support for his contention from the marginal notes of the two sections. He also refers to the averments in para. 4 of the counter-affidavit filed on behalf of the State wherein it has been stated by the Government as follows:-'I submit that Section 5-A contemplates levy of additional tax on the turnover liable to tax under Section 5.' We have already held that the marginal notes, even assuming that they can be looked into for construing the sections, do not lend any support to the argument that the unit of taxation under Section 5-A is the turnover and not the individual sale. The averment in para. 4 of the Government's counter-affidavit does not also lend support to the contention of the learned counsel. What is stated there is that the turnover, which is liable to tax under Section 5, is liable to the levy of an additional tax under Section 5-A when the total turnover reaches rupees three lakhs or more. He also relies upon a certain passage in the decision of the Federal Court, In re C.P. Motor Spirit Taxation Act[1938] 1 S.T.C. 1. At page 40 of the said report, the learned Chief Justice Gwyer observed as follows :
Strictly, a turnover tax appears to be the correct description of a tax, usually calculated in the form of a percentage, on the gross receipts of wholesalers or of retailers or of both, and in some countries also on receipts in respect of services. It is however sometimes included under the more general name of sales tax, and it is evident from the various modern writers who have dealt with the subject and to whose works we were referred [Findlay Shirras, Science of Public Finance (3rd Edition 1936), Vol. II, Ch. 25 ; Comstock, Taxation in the Modern State, Ch. 8], that the latter expression is often used as a convenient name for a number of taxes ranging from turnover taxes to taxes on the retail sale of specified classes of goods ; the so-called sales taxes which have been imposed by a large number of the State Legislatures in the United States seem to be often of the latter variety.
17. Sri Anantha Babu also invited our attention to the observations occurring at the bottom of page 73 where his Lordship Sulaiman, J., observed as follows :
It is thus obvious that a turnover tax or a sales tax is not by any means co-extensive with 'tax on the sale of goods'. The first certainly includes services, fees, commissions etc. which the third cannot. The second may be a mere producers' or manufacturers' tax and may also possibly cover services and enterprises, which the third cannot. The third must necessarily be a tax imposed at the time of the sale of goods and must exclude other forms of transfer like mortgages, leases, etc.
18. Mr. Anantha Babu relies upon a passage at page 669 of Volume 2 of Willoughby on the Constitution of the United States which reads as follows :
The Courts have firmly fixed the proposition that, for the determination of the amounts of taxes to be assessed upon individual persons, corporations, or places of property, any reasonable standard of measurement may be selected, and that the intrinsic character of the tax is not determined by the mode of measurement thus selected.
19. He elaborates his contention that for the purpose of Section 5-A the assessable unit is the turnover of rupees three lakhs or more and that the Legislature expressly designated it as a tax on turnover, that the concept of turnover comes in only at the stage of computation of the tax and has no reference to the incidence of the tax, that though the taxable event, viz., the transaction of sale has taken place, for the purpose of attracting the additional tax under Section 5-A, the event of turnover reaching rupees three lakhs or more is taken as the taxable event, and that therefore the taxable event in Sections 5 and 5-A are wholly different and that in so far as Section 5-A makes the taxable event the turnover and not the transaction of sale or purchase, it falls outside the scope and ambit of entry 54 of List II.
20. In re A Reference under the Government of Ireland Act, 1920, and Section 3 of the Finance Act (Northern Ireland),1934 [1936] A.C. 352, Lord Thankerton observed at page 358 as follows:
But, in the opinion of their Lordships, it is the essential character of the particular tax charged that is to be regarded, and the nature of the machinery-often complicated-by which the tax is to be assessed is not of assistance except in so far as it may throw light on the general character of the tax.
21. At page 359, his Lordship referred to an observation in London County Council v. Attorney-General [1901] A.C. 26, where Lord Macnaghten described the character of income tax as :
Income tax, if I may be pardoned for saying so, is a tax on income. It is not meant to be a tax on anything else. It is one tax, not a collection of taxes essentially distinct.
22. In Ralla Ram v. Province of East Punjab A.I.R. 1949 F.C. 81, Fazli Ali, J., who spoke for the Court, observed at page 87 in para. 17, as follows:
In the first place, we have to look into the charging section of the statute, because as was pointed out in Provincial Treasurer of Alberta and Anr. v. C.E. Kerr and Anr. [1933] A.C. 710, the identification of the subject-matter of the tax is only to be found in that section.
23. Sri Anantha Babu relying on the passages mentioned above, contends that in judging the nature of the tax imposed under Section 5-A it is only the provisions of that section that have to be looked into, as according to him, it is the charging section with regard to additional levy where the turnover of a dealer is rupees three lakhs or more.
24. The learned Government Pleader submits that Section 5-A was introduced by the Amendment Act 16 of 1963 and that Section 5-A is merely an ancillary provision and not an independent charging section. The section does not bring about any change in the subject-matter of the taxation but that it only provides for an additional rate in respect of the very same transactions which are chargeable to tax under Section 5, in cases where the total turnover is rupees three lakhs or more. He also contends that the tax is levied in respect of the transactions of sales or purchases of goods and it is not a tax on goods as such. We feel that the submissions made by the learned Government Pleader are well-founded. Under both Sections 5 and 5-A, the tax is levied only on each sale or purchase. It is only the activity of sale or purchase that is made the taxable event. The tax is imposed on the receipts of the individual sales or purchases in one accountable year. In the case of Section 5, the tax is levied only on each sale or purchase when the aggregate amount of the sales or purchases in one year exceeds Rs. 10,000; while under Section 5-A an additional tax of one-fourth naya paisa (now paisa) per rupee is levied on each sale or purchase where the aggregate amount of the sales or purchases exceeds rupees three lakhs or more. In both the sections the emphasis is only on the sale or purchase for the purpose of taxation. The liability to tax is attracted to the transaction of sale or purchase and not to the turnover. The fixation of a rate in Section 5 or the fixation of an additional rate under Section 5-A cannot, in our opinion, alter the character or nature of the tax that is imposed under either of the sections. Section 5-A itself makes it clear that the additional tax is imposed only on every dealer who is liable to pay the tax under Section 5. It is not disputed before us that under Section 5, a dealer has to pay tax only on the sales or purchases in one year and it is the very same sales or purchases that are sought to be taxed with the additional rate under Section 5-A. Though the additional tax on turnovers of rupees three lakhs or more is imposed under a separate provision under Section 5-A, it is merely a supplemental or ancillary provision to the main charging Section 5. In ascertaining the true nature and character of the additional tax under Section 5-A it is legitimate as well as necessary that both the sections should be read together in order to ascertain the true character of the tax sought to be imposed. We are satisfied that the tax sought to be imposed under Section 5 as well as the additional tax sought to be imposed under Section 5-A partake of the same character, viz., a tax on sale of goods or purchase falling within entry 54 of List II. The learned Government Pleader contends that the limited question that falls for consideration here is as to the true and correct interpretation of Section 5-A and once it is established that it is a tax on sale or purchase of goods which squarely falls within entry 54 of List II there is no want of legislative competence in enacting Section 5-A. The learned Government Pleader further contends that the use of the expression 'turnover' or the imposition of varying rates of tax in respect of different turnovers does not alter the character or the nature of the tax. In this context, he relies upon a decision reported in Corporation of Calcutta v. Liberty Cinema A.I.R. 1965 S.C. 1107 In that case, Sarkar, J., as he then was, speaking for the majority, observed at page 1117 as follows :
The contention of the Corporation that fixation of rates is not an essential part of legislation would seem to be supported by several judgments of this Court to some of which we now proceed to refer.
25. He further submits that the imposition of different rates of tax based upon turnover does not alter the nature of tax, and this proposition is supported by certain observations of their Lordships of the Federal Court in Province of Madras v. Boddu Paidanna [1942] 1 S.T.C. 104, where the learned Chief Justice Gwyer observed at page 119, as follows:
We may here refer to a contention raised by counsel on behalf of the appellants that a turnover tax such as is imposed by the Madras Act is not a tax on specific goods and that therefore the expression 'duty of excise' could never in any circumstance be appropriate to it. It may be conceded that a duty of excise is a duty leviable with respect to specific goods; but where a turnover tax is leviable at a specified rate on the aggregate sum produced by the sale of a number of different articles or commodities, then it seems to us that it is a tax levied at the specified rate on each sale of those goods or commodities. A system of turnover taxation is conceivable where it may not be easy, or even possible, to identify the tax on a particular sale; but no such difficulty arises in a case under the Madras Act, at least if the turnover exceeds Rs. 20,000 per annum, as that of the respondents does. We do not think therefore that there is any substance in the appellants' contention.
26. We think that these observations are apposite in the context of determining the nature of the tax leviable under Section 5-A. Again their Lordships of the Privy Council had to determine the validity of the Madras General Sales Tax Act (9 of 1939) in so far as it imposed a tax on the first sales in Madras of certain goods manufactured or produced in it. In that context their Lordships referred in detail to the various provisions of the Madras Act and observed at page 139 as follows :
Their Lordships have thought it desirable to refer to the provisions of the Madras Act in this detail in order to emphasise its essential character. Its real nature, its 'pith and substance', is that it imposes a tax on the sale of goods. No other succinct description could be given of it except that it is a 'tax on the sale of goods'. It is in fact a tax which according to the ordinary canons of interpretation appears to fall precisely within entry No. 48 of the Provincial Legislative List.
27. Entry 48 in List II of the Seventh Schedule of the Government of India Act also used the expression 'taxes on the sale of goods' though entry 54 of List II of the Seventh Schedule of the Constitution used the expression 'taxes on sale or purchase of goods'. The material provision which their Lordships had to consider in the aforesaid case is similar to the expression used in entry 54 and the observations made therein apply with full force in construing the provisions of Section 5-A.
28. In State of Bombay v. United Motors (India) Ltd. [1953] 4 S.T.C. 133 dealing with the question of the validity of the Bombay Sales Tax Act of 1952, Patanjali Sastri, C.J., who spoke for the Court observed at page 156 as follows :
That in the present case the tax is imposed, in ultimate analysis, on receipts from individual sales or purchases of goods effected during the accounting period, and it is therefore possible to separate at the assessment the receipts derived from exempted sales or purchases and allow the State to enforce the statute with respect to the constitutionally taxable subjects, it being assumed that the State intends naturally to keep what it could lawfully tax, even where it purports to authorise the taxation of what is constitutionally exempt.
29. In Government of Andhra v. Nagendrappa [1956] 7 S.T.C. 568, it has been stated at page 571,
that sales tax as observed in Province of Madras v. Boddu Paidanna [1942] 1 S.T.C. 104., is a tax levied on the occasion of the sale of goods and is a tax on the proceeds thereof, whether taken individually or collectively.
30. Again at pages 573 and 574 their Lordships stated as follows :
In other words, the tax is levied on the purchaser or at the purchasepoint.... The single point is selected by making the last purchaser in the series of sales liable for the tax and it is only when the stage of export is reached in the series of sales by successive dealers, that the tax becomes exigible. But it is not the transaction of export sale on which the tax is levied. The tax is levied on the purchase which precedes the export sale. The taxable event is really the purchase and this is shown by fixing the quantum of the turnover at the price paid by the dealer for the purchase and not the price realised by him on the export sale.
31. Again, their Lordships stated that,
The export by the dealer merely marks the final stage of series of purchases by one licensed dealer from another and it is at that stage that the taxable event, namely, the last purchase, and the person who is liable to pay the tax, namely, the last purchaser, are both determined. In other words, the tax is really one on the transaction of purchase anterior to the sale for export or export sale. The turnover which is taxable under the Act may be the sale or purchase turnover and the State has the option to collect the tax from the dealer on his purchase turnover. There is nothing illegal therefore in making the purchase turnover taxable under the rules.
32. In Konduri Buchirajalingam v. State of Hyderabad [1958] 9 S.T.C. 397, dealing with the question whether purchase of groundnuts by a dealer from an agriculturist is exempt from the liability to sales tax under the Hyderabad General Sales Tax Act of 1950, at page 402, Sarkar, J., as he then was, for the majority observed :
We are however unable to agree that Sections 3 and 4 do not impose a tax on a purchase by a dealer from an agriculturist. Under these sections the tax is on the turnover, that, is to say, the aggregate amount for which the goods are either bought or sold.
33. In George Oakes (Private) Ltd. v. State of Madras [1961] 12 S.T.C. 476, their Lordships considered the validity of the provisions of Section 8-B of the Madras General Sales Tax Act in so far as it authorised sales tax to be levied on the total amount of the sale price and the tax collected by the registered dealer, in cases where the seller passes on the tax to the registered buyer. Referring to the expression 'turnover' their Lordships stated at page 483 :
The expression 'turnover' means the aggregate amount for which goods are bought or sold, whether for cash or for deferred payment or other valuable consideration, and when a sale attracts purchase tax and the tax is passed on to the consumer, what the buyer has to pay for the goods includes the tax as well and the aggregate amount so paid would fall within the definition of turnover.
34. Their Lordships further stated at page 487 in the last para, as follows :
What is taxable is not each transaction of sale but the total turnover of the dealer, computed in accordance with the provisions of the Act and the Rules.
35. These observations fully support the contention of the learned Principal Government Pleader that the taxable event under Section 5-A is not the total turnover of rupees three lakhs and more and that the taxable event is only a sale or purchase of goods. We are therefore satisfied that the argument of the learned counsel for the petitioners that the tax levied under Section 5-A is a tax on the status or on the volume of trade of the dealer is devoid of merit.
36. The next contention of the learned counsel that the tax levied under Section 5-A is a tax on trade and that it cannot exceed the constitutional limit prescribed by Article 276 of the Constitution, is not also acceptable.
37. In Rangaswami Chettiar & Co. v. Government of Madras [1957] 8 S.T.C. 222, their Lordships of the Madras High Court, Rajagopalan and Rajagopala Ayyangar, JJ., held at page 229 as follows:
The Legislature has specifically conferred on it a right to levy a tax on the sale of goods, and it is not disputed that the tax in the present case is a tax on the sale, that is on the transaction of sale. It is not a tax on trade, not a tax for the privilege of trading. It is a tax on a transaction, and that is its pith and substance, and that is not in controversy. The incidence of the tax is wholly irrelevant for considering its substance or nature. A tax on a transaction such as was provided for by entry 48 of the Provincial List has necessarily to be laid upon some person concerned in the transaction and this feature cannot therefore render it other than a tax upon a transaction.
38. Their Lordships rejected the contention that the tax imposed under the Madras General Sales Tax Act on the purchase of groundnut was in contravention of the provisions of Article 276(2) of the Constitution of India.
39. In S. Ramanatha Shenoy & Co. v. Sales Tax Officer, Tellicherry [1963] 14 S.T.C. 231, the validity of Section 3(2) of the Kerala Surcharge on Taxes Act (11 of 1957) fell to be considered. A challenge was made to the said Section on the ground that inasmuch as the dealer himself was made to bear the entire increased tax on surcharge, it really amounted to a levy of a tax on the exercise of a profession or trade by the dealer concerned and therefore it was violative of the provisions of Article 276 of the Constitution. His Lordship Vaidialingam, J. (as he then was), held at page 236,
that it is really a tax on the sale or purchase of goods, and not on the exercise of a profession, trade, calling or employment.
40. His Lordship upheld the contention that the said provision for levying surcharge fell under entry 54 of List II and not under entry 60 of the said List. In that view, his Lordship held that the said provision did not offend the provisions of Article 276 of the Constitution.
41. In Kondayya v. Kurnool Municipality (1963) 1 An. W.R. 267, a Bench of this Court took the view that the surcharge on property tax on certain buildings leviable under the Andhra Pradesh Urban Areas Surcharge on Property Tax Act (13 of 1958) only provided for increasing the property tax and that the subject-matter of the tax was the building itself and that it could not be regarded as a tax on tax and that the Legislature derived competence to enact the said Act under the same entry 49 of List II which related to buildings. Applying the same principle to the instant case, we are of the view that the additional tax leviable under Section 5-A is merely an addition to the tax on sale or purchase of goods falling under entry 54 of List II and is within the legislative competence of the State Legislature. As a result of the foregoing discussion we hold that the provisions of Section 5-A fall within the scope and ambit of entry 54 of List II of the Seventh Schedule of the Constitution and are validly enacted.
42. The next attack on Section 5-A is made on the ground that it violates Article 14 of the Constitution. Sri K. Ranganathachari and Sri T. Anantha Babu contend that the tax is imposed on sales or purchases of goods and that in so far as different rates are prescribed under Section 5 and Section 5-A in respect of the same class of dealers and in respect of similar transactions solely on the basis of the volume of the business it makes an invidious distinction between dealers whose turnover is rupees three lakhs or more and those whose turnover is less than three lakhs. On a plain reading of both the sections; we are satisfied that this contention cannot be accepted. Even under Section 5, only dealers having a total turnover of over Rs. 10,000 are liable to pay sales tax while dealers having a turnover of less than Rs. 10,000 are totally exempt from payment of tax. The legislative policy under Section 5 is based on the principle that the small traders should be relieved of the burden of taxation while traders having higher turnover should be subjected to this levy. Similarly, the principle underlying Section 5-A is to impose a higher tax on traders having a bigger volume of trade with a turnover of rupees three lakhs or more in one year and those having a turnover of less than rupees three lakhs should be taxed at a lower rate. The principle of gradation of rates of tax with respect to the capacity to pay, is well recognized and such a provision is made in the larger interests of augmentation of the public revenue and is in the interests of the public. Section 5-A therefore is based upon a reasonable classification having relation to the objects of the Act and there is no violation of the provisions of Article 14 of the Constitution.
43. A similar contention with regard to the proviso to Section 3(1)(b) of the Madras General Sales Tax Act (9 of 1939) which prescribes a higher rate of tax in respect of a dealer selling articles of food and drink in a hotel, boarding house, or a restaurant with a turnover of not less than Rs. 25,000 was repelled in Kadiyala Chandrayya v. State of Andhra[1957] S.T.C. 33. Subba Rao, C.J. (as he then was), delivering the judgment observed at page 37 as follows :
In the present case, the object to provide for the levy of a general tax and to apportion the burden equitably between different categories of persons has a reasonable nexus with the classification adopted by the Legislature. The question can be considered from the standpoint of the citizen as well as from the standpoint of the State. From the standpoint of the State, the classification can be justified on the ground of equitable apportionment of the burden and easy realisation of the tax. Articles of food and drink are more in demand than other articles. Even in the case of the former, there will be a larger demand in restaurants, boarding houses and hotels than in other places like way-side shops. There may be small or big dealers even in such commodities, who run hotels or keep boarding houses. The State also can reasonably recover taxes at higher rates from prosperous dealers than from impecunious ones. From the standpoint of the dealer also, there is justification for the varied rates. The articles sold, the place where the business is carried on and the expectation of large profits are the characteristics of dealers who are distinct from dealers not covered by the proviso.
44. In Guntur District Co-operative Marketing Society Ltd. v. State of Andhra Pradesh [1967] 20 S.T.C. 476 and Balusu Anandu v. Special Commercial Tax Officer [1968] 21 S.T.C. 424, Gopal Rao Ekbote, J., following the principle laid down in Kadiyala Chandrayya v. State of Andhra [1957] 8 S.T.C. 33 held that Section 5-A was not violative of the provisions of Article 14 of the Constitution. With respect, we agree with the view taken by their Lordships in Kadiyala Chandrayya v. State of Andhra [1957] 8 S.T.C. 33 and the said principles have to be applied in determining the question whether Section 5-A is violative of Article 14 of the Constitution. The same principle has been applied by the Orissa High Court in K.S. Vasudevan v. State of Orissa [1963] 14 S.T.C. 220. In S. Ramanatha Shenoy & Co. v. Sales Tax Officer [1963] 14 S.T.C. 231, Vaidialingam, J. (as he then was) took the same view with regard to the provisions of Section 3(2) of the Kerala Surcharge on Taxes Act which imposes on a dealer whose turnover exceeds a particular sum, a surcharge on sales tax. His Lordship held at page 236 as follows :
All dealers, having a turnover exceeding Rs. 30,000 are treated alike, and there is no discrimination as between one dealer having a turnover exceeding Rs. 30,000 and Anr. dealer having a turnover exceeding Rs. 30,000. If such a distinction has been made, probably there may be some scope for an argument that the provisions of Sub-section (1) of Section 3 are discriminator. Sub-section (2) of Section 3 does not make any such distinction, and it is of universal application in respect of all dealers, whose turnover exceeds Rs. 30,000 and who are made liable for the payment of surcharge under Sub-section (1) of Section 3 of the Act. The position only comes to this, viz., that a part of the sales tax, representing surcharge, is made to be borne by dealers having a total turnover exceeding Rs. 30,000.
45. It is unnecessary to refer to all the other cases cited at the Bar as we are clearly of the opinion that Section 5-A does not make any invidious distinction so as to offend the provisions of Article 14 of the Constitution.
46. Mr. Ranganathachari however strongly relied upon the case reported in Stewart Dry Goods Co. v. Lewis 79 L.Ed. 1054, where Roberts, J., delivering the judgment of the majority, held that:
A gross sales tax which classifies vendors for the imposition of a varying rate of taxation solely by reference to the volume of their transactions denies the equal protection of the laws in violation of the Fourteenth Amendment.
47. Caradozo, J., dissented from the majority view and upheld the principle that a tax upon gross sales, if laid upon a graduated basis, does not result in denial of the equal protection of the laws and that the rate of tax varying progressively with the amount of gross sales, was based upon a classification reasonably related to the capacity to pay. The learned Government Pleader contends that the majority opinion in Stewart Dry Goods Co. v. Lewis 79 L.Ed. 1054, was not followed by Courts in India and the principle on which the opinion of Caradozo, J., is based, has been uniformly accepted and followed by the Courts in India. He relies upon cases in Kadiyala Chandrayya v. State of Andhra [1957] 8 S.T.C. 33, K.S. Vasudevan v. State of Orissa [1963] 14 S.T.C. 220 and S. Ramanatha Shenoy & Co. v. Sales Tax Officer [1963] 14 S.T.C. 231 which have been referred to earlier. He also cited a ruling of the Supreme Court inJagannath Baksh Singh v. State of U.P. A.I.R. 1962 S.C. 1563. At page 1571, Gajendra-gadkar, J. (as he then was), who delivered the judgment of the Court, rejected the contention that a grading scale of rates of tax based upon the annual value of the land-holdings would offend the provisions of Article 14 of the Constitution. Further the said decision in Stewart Dry Goods Co. v. Lewis 79L.Ed. 1054 was itself distinguished in a later decision in New York Rapid Transit Corporation v. City of New York 82 L.Ed. 1024. We are therefore of the view that the provisions of Section 5-A do not offend the provisions of Article 14 of the Constitution.
48. Sri Anantha Babu raised a further contention that Section 5-Aof the Act is repugnant to the provisions of Section 15 of the Central Sales Tax Act and is ultra vires the provisions of Article 286(3) of the Constitution of India. His contention is that Section 15 of the Central Sales Tax Act, which is a law made by the Parliament in exercise of the powers conferred by Article 286(3) of the Constitution, imposes a restriction with regard to the rate of tax payable under a State law, in respect of any sale or purchase of goods inside the State. Section 15(a) as originally enacted fixed a ceiling on the rate of tax at 2 per cent, on the sale or purchase price. The said provision has since been amended on 1st July, 1966, and the ceiling rate has been fixed at 3 per cent. But the learned Government Pleader contends that the provisions of Section 5-A are not applicable to declared goods mentioned in Section 14 of the Central Sales Tax Act and that there is no conflict between Section 5-A of the said Act and Section 15 of the Central Sales Tax Act. Section 6 of the Act is in the following terms :
6. Tax in respect of declared goods.-Notwithstanding anything contained in Section 5, the sales or purchases of declared goods by a dealer shall be liable to tax at the rate, and only at the point of sale or purchase specified against each in the Third Schedule on his turnover of such sales or purchases for each year irrespective of the quantum of his turnover in such goods ; and the tax shall be assessed, levied and collected in such manner as may be prescribed :
Provided that where any such goods on which a tax has been so levied are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be prescribed.
49. The non obstante clause makes it clear that the provisions of Section 5 of the said Act are not attracted to sales or purchases of declared goods. The omission to mention Section 5-ft in Section 6 does not lead to any inference that Section 5-A is intended to be made applicable to declared goods. Section 5-A says that it applies only to those dealers who are taxable under Section 5 by the expression 'every dealer who is liable to pay tax under Section 5.' The dealers who are liable to pay tax under Section 5 are only dealers in goods other than declared goods as Section 6 excludes such dealers from its purview.
50. The further submission of the learned counsel that Section 5-A does not fix any stage for a levy of sales tax and that it violates the provisions of Section 15 of the Central Sales Tax Act cannot also be upheld in the view we have taken that Section 5-A is not applicable to declared goods. The contention of the learned counsel that Section 5-A is repugnant to the provisions of Section 15 of the Central Sales Tax Act has to be negatived.
51. Though it was feebly suggested by the learned counsel that the imposition of additional tax under Section 5-A offends Article 19(1)(g) of the Constitution, this argument has not been elaborated further. It is now well established that sales tax is a tax imposed for the purpose of public revenue and that there is no fundamental right to claim immunity from taxation. It has not been shown that the levy of additional tax under Section 5-A is either excessive or imposes a heavy burden on the petitioner's right to carry on business. There is therefore no substance in the contention of the learned counsel that the provisions of Section 5-A violate Article 19(1)(g) of the Constitution.
52. Sri P. Rama Rao appearing for some of the petitioners raised the contention, that Section 5-A violates Article 301 of the Constitution. He submits that dealers who have a turnover of three lakhs or more necessarily pass on the tax to the purchasers and that purchasers are likely to choose dealers with a turnover of less than three lakhs in order to avoid payment of higher price and that therefore the business of dealers having a turnover of three lakhs and over is adversely affected and that Section 5-A constitutes a fetter on the right to carry on trade and offends Article 301 of the Constitution. It is now fairly well established that only a tax law which directly and immediately restricts flow of trade that would fall within the purview of Article 301 and sales tax not being a law which directly impinges upon the movement of goods from place to place, falls outside the purview of Article 301 of the Constitution: see Atiabari Tea Co. Ltd. v.State of Assam A.I.R. 1961 S.C. 232 and Automobile Transport Ltd. v. State of Rajasthan A.I.R. 1962 S.C. 1406. Even otherwise, we are not satisfied that the mere imposition of additional tax under Section 5-A imposes any restriction on the freedom of trade or commerce. In this view, the challenge to the provisions of Section 5-A that it constitutes a fetter on the freedom of trade and commerce and is violative of the provisions of Part XIII of the Constitution, cannot be sustained. For the reasons which we have given above, all the contentions raised by the learned counsel having failed, these writ petitions are liable to be dismissed and are accordingly dismissed with costs. Advocate's fee Rs. 50 in each writ petition.