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Judgment
K. Subba Rao, C.J.—This batch of applications has been filed under Article 226 of the Constitution of India for issuing Writs of mandamus against the respondent to forbear from, enforcing against them the provisions of the Madras General Sales Tax Act (Act IX of 1939) as amended by Andhra Act XIV of 1955.
As the main question raised in all the applications relates to the constitutional validity of Act XIV of 1955, it is not necessary to give, in detail the facts of each case. All the applicants are merchants carrying on export business In tobacco. They purchase tobacco in the local market with a view to export it to foreign countries like Great Britain, Hongkong, China and Japan. Under the Madras General Sales Tax Act (Act IX of 1939), no sales tax is payable in regard to raw tobacco. But by Act XIV of 1955 in Section 5 of the Original Act after item (vi) item (vii) and the following item (vii) were added:
(viii) raw tobacco (except country variety thereof) whether cured or uncured, shall be liable to tax u/s 3, sub-section (1) only at the point of the first purchase effected in the State of Andhra by a dealer who is not exempt from taxation u/s 3 sub-section (3), but at the rate of seven and half pies for every rupee on his turnover.
Explanation: For the purpose of this item country variety of tobacco means variety of tobacco other than Virginia and other similar varieties of tobacco.
The constitutional validity of item (viii); is impugned on the ground that it is obnoxious to the doctrine of equal protection of laws enshrined in Art. 14 of the Constitution of India. The State, the argument proceeds, by selecting'' Virginia tobacco from the other categories of tobacco and by imposing tax thereon has discriminated against dealers in that variety without any rational basis and without any reasonable relation to the object sought to be achieved, namely, the raising of revenue and, therefore the said discrimination offends the provisions of Art. 14 of the Constitution of India.
To appreciate the argument advanced. It is necessary at the out set to notice the doctrine of the equal protection of laws and its impact on the laws of taxation. The doctrine of equality of the law and the equal protection of the laws and the principle of classification which sorted the rigour of the doctrine and made it capable of application to the realities of life have been so well settled and it would be pedantic on our part to attempt to trace them in detail to the classical judgments of the Supreme Court of America, The twin principles have been authoritatively restated by the Supreme Court of India in Budhan Chowdary v. State of Bihar, 1955 SCJ 163: ( (S) AIR SC 191 (A) thus:
It is now well-established that while Art. 14 forbids class legislation, it does not forbid reasonable classification for the purpose of legislation. In order, however, to pass the test of permissible classification, two conditions must be fulfilled, namely (i) that the classification must be founded on an intelligible differentia which distinguishes persons Or things that are grouped together from others left out of the group, and (ii) that that differentia must have a rational relation to the object sought to be achieved by the statute in question.
The classification may be founded on different basis, namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. It is also well-established by the decisions of this Court that Art. 14 condemns discrimination not only by a substantive law but also by a law of procedure.
This is a concise but complete statement prescribing the limits of the rule of classification.
A Division Bench of this Court, of which] one of us was a member in Pitchayya v. The Government of Andhra, 1956 Andh WR 622: (AIR 1957 Andh Pra 136) (B), after considering the relevant decisions, has summarised the law thus:
All persons are equal before the law is fundamental of every civilised constitution. Equality before law is a negative concept; equal protection of laws is a positive one. The former declares that every one is equal before law, that no one can claim special privileges and that, all classes are equally subjected to the ordinary law of the land; the latter postulates an equal protection of all alike in the same situation and under like circumstances. No discrimination can be made either in the privileges conferred or in the liabilities imposed.
But those propositions conceived in the interests of the public, if logically stretched too far, may not achieve the high purpose behind them. In a society of unequal basic structure, it is well, nigh impossible to make laws suitable in their application to all the persons alike. So a reasonable classification is not only permitted but is necessary if society should progress. But such a classification cannot be arbitrary but must be based upon differences pertinent to the subject in respect of all the purposes for which it is made.
To this, we will add the statement of Professor Willis that:
If any state of fact can reasonably be conceived to sustain a classification, the existence of the state of facts must be assumed. One, who assails a classification, must carry the burden of showing that it does not rest upon any reasonable basis. It is also necessary to bear in mind the presumption of law laid down in Middleton v. Texas Power and Light Company, (1918) 249 US 152 (O), at p. 157 that:
It must be presumed that a Legislature understands and correctly appreciates the need of its own people that Its laws are directed to problems made manifest by experience and that its discriminations are based upon adequate grounds.
To the above statement, we would like to add the following caution administered by Brewer J., In Gulf. Colorado and Santa Fo Railway Co. V. Ellis, (1897) 165 US 150 (D) :
While good faith and a knowledge of existing conditions on the part of a Legislature is to be presumed, yet to carry that presumption to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile and discriminating legislation is to make the protecting clauses of the 14th Amendment a mere rope of sand, in no manner restraining state action.
But the more difficult question is the applicability of the aforesaid twin doctrines to taxing statutes. The principle of classification was construed by the Supreme Court of America more liberally in the case of taxing statutes that in other cases. In Willis on "Constitutional Law'' at page 587, the following passage appears:
The Supreme Court permits a wider discretion in classification under the power of taxation if possible than it does under the Police power One reason for this undoubtedly is the urgen(sic) need for revenue by the various Government a agencies. A State does not have to tax everythin(sic) in order to tax something. It is allowed to pic and choose districts, objects, persons, method and even rates for taxation if it does so reason ably.
The Constitution does not say how cases sha(sic) be decided. All it says is that the States sha(sic) not deny to any person within their jurisdiction equal protection of the laws. It does not said when persons are within the jurisdiction of state or what are equal laws. As a consequence the Supreme Court decides cases as it thinks the ought to be decided with no other mandate that one to decide. The Supreme Court has been practical and has permitted a very wide latitude (sic) classification for taxation.
This passage is sought to be illustrate by some of the leading decisions of the Supreme Court which we shall now proceed to consider.
By the law of Pennsylvania, all money securities are subject to an annual state tax three mills on the dollar of their actual value e(sic) cept bonds and other securities issued by corporations which are taxed at three mills on the dol(sic) of the nominal or par value. In the Bell''s G(sic) Railroad Company v. The Commonwealth Pennsylvania, (1888) 33 Law Ed 892 (E), the sa(sic) law was sought to be impugned on the srou(sic) that it denied the tax payers equal protection the laws. But the Supreme Court repelled 1 argument. In doing so they made the following observations :
The provision in the XLVth Amendment the no state shall deny to any person within its judication the equal protection of the laws, was : intended to prevent a State from adjusting system of taxation in all proper and reasons ways. It may, if it chooses, exempt certain class of property from any taxation at all such churches, libraries and the property of charita(sic) Institutions.
It may impose different specific taxes u(sic) different trades and professions and may vary rates of excise upon various products; it may real estate and personal property in a different manner; it may tax visible property only and tax securities for payment of money; it : allow deductions for indebtedness, and not a them.
All such regulations and those of like chapter, so long as they proceed within reason limits and general usage are within the discre(sic) of the State Legislature or the people of State in framing their Constitution. But (sic) and hostile discriminations against particular sons and classes especially such as are of an usual character unknown to the practice of Government might be obnoxious to the cons(sic)tlonal prohibition.
This decision does not say that the tax laws Immune from Constitutional prohibitions should be viewed with more latitude so ion(sic) they proceed within reasonable Emits and (sic)ral usage.
Where an Act imposed a licence tax on. a manufacturer engaged in the business of (sic)ning sugar but exempted from tax those who (sic)ned the products Of their own plantations, Supreme Court held in American Sugar Re-(sic)ng Co. v. State of Louisiana, (1900) 45 Law Ed (F), that the said law did not deny the equal (sic)tection of the laws. In sustaining the law, (sic)Court made the following observations at (sic)e 105;
To entitle a party to the exemption it must (sic)ear (1) that he is a farmer or a planter (2) (sic)t he grinds the cane as well as refines the (sic)ar and molasses (3) that he refines his own (sic)ar and molasses, meaning thereby the product (sic)lis own plantation. Whether he may also re-(sic)the sugar of others may be open to question: (sic)ough by its express terms the act does not (sic)ly to planters who granulate syrup for other (sic)ters during the rolling seasons. The description is obviously intended as an encourage-it to agriculture, and does not deny to per-(sic) and corporations engaged in a general refin-(sic)business the equal protections of the laws.
(sic)Court found in this case that the differences between the two classes of refining had a rational (sic)s to the object sought to be achieved, namely, (sic)encouragement of agriculture.
Exempting steam laundries and women (sic)ged in the laundry business, where not more (sic)two women are employee from the licence imposed by Mont. Rev. Codes S, 2776, upon (sic)Laundry business, does not deny the equal (sic)ection of the laws to a man operating a hand dry. See Quong Wing v. Thomas Kirkendall, (sic)1) 56 Law Ed 350 (G). Holmes J., in sustain-the law lays down the following principles: (sic)A State does not deny the equal protection (sic)e laws merely by adjusting its revenue laws (sic)taxing system In such a Way as to (sic)r certain industries Or forms of indus-(sic)(2) It may make discriminations if founded (sic)listinctions that we cannot pronounce unreadable and purely arbitrary. (3) The particular (sic)s at which that difference shall be emphasis by legislation are largely in the power of State.
The said principles are culled out from decisions cited at the Bar, (l4) In Roland C. Heisler v. Thomas Colliery (sic)67 Law Ed 237 (H), it was held that the (sic)rences between bituminous coal and anthra-form a just basis for their different classification under the tax laws, so that a tax may be upon one and not upon the Other, without (sic)ting the equal protection of the laws guaran(sic)ty the 14th amendment to the Federal (sic)titution. Adverting to an argument similar (sic)at advanced before us, Mr. Justice McKenna (sic)the following observations at Page 242: The fact of competition may be accepted, (sic) coals, being compositions of carbon are of (sic)e capable of combustion and may be used as but under different conditions and manifes(sic)ts and the difference determines a choice (sic)en them as fuels. By disregarding that diff-(sic) and the greater ones which exist and by (sic)ng on competition alone, it is easy to erect argument of strength against the taxation of (sic)nd not of the other.
But this may not be done. The differences (sic)n them are a Just basis for their different classification: and the differences are great and (sic)rtant. They differ even as fuels, they differ (sic)mentally in other particulars. Anthracite (sic)las no substantial use beyond a fuel; bituminous coal has other uses. Products of utility are obtained from it. The fact is not denied and the products are enumerated and the extent of their use.
They are therefore incentives to industries that the State in natural policy might well hesitate to obstruct or burden and to yield to the:, policy or consider it is well within the concession of the power of the State expressed in the cases we have cited. The distinction in the treatment of the respective coals being within the power conceded by the cases to the State, it has logical and legal justification and is, necessarily, not unreasonable or arbitrary." The differences in the two kinds of coal based upon their nature and the extent of their uses, was held to be a sufficient justification for imposing less tax on bituminous coal so that there-should be an incentive to industry.
The Supreme Court of America in Roberts and Sahaefor Co. v. Louis L. Emmerson,. (1926) 70 Law Ed 827 (I), justified the imposition of a franchise tax upon a domestic corporation measured by its authorised capital stock. The Supreme Court restated the following principles:
(1) One who challenges the validity of State taxation on the ground that it violates the equal protection clause of the Federal Constitution cannot rely on theoretical inequalities but must show that he himself is affected unfavourably by the discrimination of ''which he complains.
(2) The question to be considered is whether there are such differences between the two privileges to issue the two classes of stock as to constitute proper basis for classification for purposes of taxation.
(3) To meet the constitutional requirement of equality it is enough that a classification for purposes of taxation is reasonably founded upon or related to some permissible policy of taxation.
So too, in James C. Colgate v. Erwin M Hervey, (1935) 80 Law Ed 299 (J), the imposition of a tax on a corporation in respect of dividends earned outside the State, from which tax the dividends earned within the State were exempt was held to sustain a valid classification. The Court in coming to the conclusion laid before itself the following principles:
The equality clause of the Fourteenth Amendment does not require that the amount of taxes shall be mathematically equivalent in order to admit of exoneration from one form of taxation because of the imposition of another but if'' the evident intent and general "Operation of the tax legislation are to adjust the burden with a fair and reasonable degree of equality the constitutional requirement is satisfied.
The boundary between what is permissible and what is forbidden by the constitutional'' requirement of equal protection of laws is incapable of exact delimitation.
The equal protection clause of the 14th-Amendment does not preclude the States from resorting to classification for the purposes of legislation, so long as the classification is founded upon pertinent and real differences as distinguished from irrelevant and artificial ones.
From the aforesaid statement of the principles, it is clear that tile fundamental, principle of classification is the same whether it relates to tax law or other laws but the approach is slightly different and greater latitude is given to a State, if the classification Is made to adjust the burden on a fair and reasonable degree of equality.
The same principles have been restated in New York Rapid Transit Corporation v. City Of New York, (1937) 82 Law Ed 1024 (K), wherein the question for decision was the constitutional validity of the local laws of the City of New York which provided that for the privilege of exercising its franchise or franchises, or of holding property Or of doing business in the City of New York, an excise tax shall be paid by every utility doing business in the City of New York during 1935 and the first six months of 1936.
It was contended that the classification for the purposes of taxation did not rest upon any ground of difference having a fair and substantial relation to the object of the legislation and the imposition of tax at different rates upon utilities and other business violated the protection clause. In repelling the contention, Mr. Justice Reed restated the following principles :
A distinction in legislation is not arbitrary if any state of facts reasonably can be conceived that would sustain it.
The rule of equality permits many practical inequalities.
What satisfies this equality has not been and probably never can be precisely ''defined.
The power to make distinctions exists with full vigour in the field of taxation, where no iron rule of equality has ever been enforced upon the States.
The aforesaid principles guide more the perspective or the approach rather than introduce any modification in the fundamental principles governing the law of classification.
Where a State statute imposed higher tax on bank deposits outside the State than upon similar deposits within the State, the classification was justified in John E. Madden v. Commonwealth of Kentucky, (1939) 84 Law Ed 590 (L), on the ground that it was more difficult to collect and enforce the tax on deposits outside the State than on deposits within the State. At page 593, Mr. Justice Road says :
This Court fifty years ago concluded that ''the Fourteenth Amendment was not intended to compel the State to adopt an iron rule of equal taxation'' and the passage of time has only served to underscore the wisdom of that recognition of the large area of discretion which is needed by the Legislature in formulating sound tax policies. Traditionally classification has been a device for fitting tax programmes to local needs and usages in order to achieve an equitable distribution of the tax burden.
An exhaustive treatment of the aforesaid principles is also found in the judgment of a Division Bench of the Madras High Court in V.M. Syed Mohamed and Co. and Another Vs. The State of Madras and Another,
The well settled principles culled out by the learned Judges from the decided cases may be grouped thus :
The guarantee of equal protection of laws does not require that the same law should be made applicable to all persons or that the law should have the same operation on all persons. It prohibits only an application of different laws to persons who are in similar circumstances.
The requirements as to equal protection of laws do not forbid legislative classifications, Provided such classifications rest on some differance germane to the purpose of the statute.
A classification cannot be upheld on purely fanciful grounds. ''We have no right to conjure up possible situations which might Just discriminations.''
With reference to taxing statutes, the Legislature has considerable latitude in making classifications.
Taxing statutes must also satisfy the t(sic) of equal protection and are liable to. be struct down if. they do not.
There is a strong presumption in favour of the validity of legislative classification and is for those who challenge it as arbitrary a unconstitutional to establish it beyond all dou(sic) We respectfully accept the aforesaid principle as laying down the correct law oh the subject.
The above judgment was confirmed the Supreme Court in Syed Mohammad and (sic) v. State of Andhra, 1954-1 Mad LJ 619: (A 1954 SC 314) (N), Das, J., as he then was, observed at p. 621 (of Mad LJ): (at pp. 315, 316 AIR) :
It is well settled that the guarantee equal protection of laws does not require the same law should be made applicable to persons. Art. 14, it has been said, does not (sic) bid classification for legislative purposes, proved that such classification is based on sc(sic) differentia having a reasonable relation to(sic) object and the purpose of the law in question.
As pointed out by the majority of the Bench which decided Chiranjit Lal Chowdhuri Vs. The Union of India (UOI) and Others, ; the is a strong presumption in favour of the validity legislative classification & it is for those who cl(sic)lenge it as unconstitutional to allege and pr(sic) beyond all doubt that the legislation arbitrator discriminates between different persons similar circumstanced. There is no material on the cord before Us to suggest that the purchasers other commodities are similarly situate as (sic) chasers of hides or skins.
Further citation is unnecessary. (sic) law is well-settled and, if we have referred to (sic) decisions cited at the bar, it was more in res(sic) to the argument advanced rather than for(sic) necessity to cover the ground which had been(sic) with better effect trodden by other judges.
The law on the subject may now summarised. Though in America at the o(sic)the Court did not regard that the equal pr(sic)tion clause had any bearing on taxation, g(sic) ally the Supreme Court conceded that hostile crimination against all persons and classes m be obnoxious to the constitutional prohibitation The power of the State to adjust its taxing tem with a fair and reasonable degree of equal has never been in dispute.
But this -latitude in the manner of class(sic)tion does not enable a State to classify so(sic)trarily as to subvert the fundamental doc(sic) of equal protection of laws nourished and (sic) loped with so much care by the Constitution Law of America and incorporated in our Co(sic)tution. We have no right to conjure up post situations which might justify discrimination in the words of another learned Judge the d(sic)minations are not to be supported by mere f(sic)ful conjecture.
Subject to this caution, sufficient latitu(sic) Shown to States in the matter of classifies It is also well-settled that there is a strong sumption in favour of the validity of legislature classification and it is for the person who to question it, to allege and prove that the classification is obnoxious to the constitutional (sic) bition. The decided cases have gone (sic) (sic) of holding that if any state of facts can reasonably be conceived to sustain a classification, existence of that state of facts must be as-(sic)led.
Briefly stated, whether It is a taxation law any other law, it must satisfy the test of the (sic)ality clause. But, in the case of tax laws, (sic)sumably in view of their importance for the (sic)d administration of the country, a larger decision is given to the State in the matter of classification. The presumption of constitutional (sic)dity raised by the Courts and the burden of thrown on the citizen have given sufficient (sic)ide to the State to adjust the burden of taxation on a fair and reasonable degree of equality.
The next question Is whether the petitioners have alleged and proved the necessary (sic) for this Court to hold that the classifica(sic)is so arbitrary and so unconnected with the (sic)sought to be achieved that it should be (sic)k down as impinging upon the fundamental (sic) guaranteed under Art. 14 of the Constitution of India. Learned counsel for the petitioners (sic) upon the phraseology used In item (viii) support of his contention that the Legislature (sic) does not treat Virginia tobacco as a product (sic) than tobacco. In item (viii) raw tobacco, (sic)t country variety thereof, is made liable to (sic)t the point of the first purchase at a parti(sic)rate.
In the explanation, it is stated that country (sic)ty of tobacco means variety of tobacco other (sic)Virginia and other similar varieties of to-(sic) It is. therefore, contended that the legis(sic)itself realises that Virginia is not a species (sic)nt from tobacco and, therefore the section emphasises that there cannot be any real (sic)ence between the two varieties. This argu-(sic) is rather fallacious.
Tobacco is a genus and there are different (sic)pecles with distinct characteristics accentu. (sic)by the process of growing or curing. The (sic)n, in our view, cannot be construed so as to (sic)that the Legislature accepts the fact that (sic)are no differences between the different (sic)s of tobacco.
The next circumstance relied upon is (sic)ict that some grades of natu tobacco would be higher prices than some grades of Virginia. (sic) affidavit filed In support of writ Petition No. 37 of 1956, the following facts are alleged : (sic)ne candy of country tobacco, which can (sic)wn in the same soil as the Virginia to-(sic)and costs of production of which would (sic) even equal to the costs Of production of (sic)a tobacco would fetch any amount from (sic)0/- to Rs. 280/- for WAG or WAF grades is the Virginia tobacco which is similarly (sic)red would sell from Rs 25/- to Rs. 150/-(sic)BR and VDK grades. Even in the case of (sic)a tobacco grades PI, DB, B, LBY2, DG, could sell from Rs. 50 to Rs. 150/- only." (sic) These allegations are not specifically (sic)in the counter-affidavits filed by the Government. But the mere fact that some lower (sic)of Virginia tobacco would fetch less price (sic)he higher grades of natu tobacco, is not (sic)e on the question that there are no other differences between them. It is true that, (sic)various counter-affidavits filed by the (sic)no further facts are brought out to sustain classification.
Learned Counsel, therefore, is justified In (sic)ling that it is not the duty of the Court (sic)e a minute inspection of the field of possl-(sic)to persuade itself somehow to sustain the tax at all events but must base its judgment on facte'' established in the case. Bearing in mind the said caution, we shall ascertain whether there are facts that can reasonably be conceived without pure speculation to sustain the classification.
Learned Counsel also relies upon tile provisions of the, Madras Tobacco (Taxation of Sales and Licensing) Act (Madras Act VIII of 1939) and the Madras Tobacco (Taxation of Sales and Registration) Act (Madras Act IV of 1953) in support of his contention that there is no substantial difference between Virginia tobacco and Natu tobacco for the purpose of taxation. This Legislative practice, the argument proceeds, indicates that tobacco does not admit of any differential treatment on the basis Of rural differences. The mere fact that no such distinction was made for the purpose of those Acts, cannot efface the real existing differences, if any, sustaining separate treatment for the purpose of imposition of the new tax.
The report on the Marketing of Tobacco in India published under the auspices of the Director of Marketing and Inspection Ministry of Food and Agriculture, Government of India, gives sufficient facts pertaining to the cultivation of tobacco in India of different grades and of their export to foreign countries- It is common place that this product was introduced into India from foreign countries but it has taken deep root and has new become one of the most important commercial crops of our country, particularly in the Andhra Pradesh State. It is rich In variety and quality, catering to the tastes and requirements of the rich and the poor alike in different shapes and forms.
There are many varieties of tobacco and there are different grades in the same kind Of tobacco. Broadly, there are two types, Virginia and Natu, differing in taste, light, colour and texture. They also differ In the manner of cultivation, harvesting, curing and grading. Ordinarily, the process of flue-curing is adopted in the case of Virginia tobacco while that of rack? ground and pit curing is resorted to in the case of Natu tobacco.
The figures shown in the above publication disclose that most of the Virginia tobacco grown in this country is exported to foreign countries and that only a limited quantity of Natu tobacco has a foreign market. Virginia tobacco is used for manufacturing medium quality cigarettes, while Natu tobacco is utilised for low quality cigarettes Natu tobacco is also much in demand for manufacturing beedies, snuff, chewing tobacco and cherogts.
Virginia tobacco is consumed by the rich, or perhaps by some who ape them particularly in urban areas, while Natu tobacco in varying forms is consumed by the poorer classes and, particularly those in rural areas. Though there is overlapping of price in the lower grades of Virginia and higher grades of Natu tobacco, broadly speaking, tobacco of the Virginia type fetches higher price, for it has a foreign market and is a rich man''s luxury.
There are obvious differences between the two categories of tobacco, in the nomenclature used, in the process of growing, curing and grading, in the market facilities foreign and in land, In the price and in the variety of uses to which they are put and also the class of consumers that take to them. The object of the Amending Act was to enhance the revenues of the State. Why did the State pick out Virginia and leave out Natu tobacco? We are told that the subsequent Act imposes a tax also on Natu tobacco though at a lower rate for the purpose of revenue.
Neither the preamble to the Amending Act, nor the provisions thereof elucidate this point. The Legislative proceedings do not disclose the reason. The counter-affidavits filed by the Government do not state the reasons for this discrimination. But the aforesaid differences between the two products, as disclosed in the aforesaid official publication, appear to us to be real and they can afford a reasonable basis for the State to classify them for the purpose of taxation.
It is likely we are not speculating but there is every justification for assuming - that the Legislature, having regard to the obvious difference between the two products, particularly from the point of view of prices and the class of consumers, thought that Virginia tobacco could bear the tax without detriment to the export trade, the business of the dealers and the class of consumers of that product, while any such imposition at the same rate would stifle the business in Natu tobacco and ultimately affect the consumers of the product.
To put it differently, the State classified tobacco into luxury and non-luxury categories and attempted to tax the former to the exclusion of the latter, presumably in the belief that the former could reasonably bear the burden without any serious effect on the business or profits of dealers, while exemption would encourage the business in the latter to the ultimate benefit of poor consumers. The equality clause does not Prevent the State from adjusting its system of taxation in all proper and reasonable ways and we are satisfied that the general operation of the tax introduced by the amendment really adjusted the burden with a fair and reasonable degree of equality.
That apart, the petitioners on whom the burden lies have failed to establish by placing before Us the necessary facts that the classification for the purpose of taxation had no rational basis to the object sought to be achieved, namely, the raising of revenue. We, therefore, hold that the said amendment is not obnoxious to the fundamental right of the equal protection of laws and is constitutionally valid.
It is then contended that the said provision is invalid on the ground that it is in conflict with Art. 286 (1) (b) of the Constitution of India, Art. 286 (1) (b) reads:
286 (1). "No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place-
X X X X
(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.
Learned Counsel for the petitioners contends that Virginia tobacco was purchased by the petitioners to fulfil orders received by them from foreign countries and the purchase of the goods by them was in the course of export of the same out of the territory of India and, therefore, the Legislature could not impose a tax on the said goods. The facts to sustain this argument are not very clear. Assuming, without deciding, that Virginia tobacco was purchased by the petitioners with a view to export them to foreign countries to fulfil their obligations under contracts entered into by them with merchants in foreign countries, in view of the settled law the subject, the argument would not avail them.
The phrase ''in the course of the export the goods out of the territory of India'' has be authoritatively considered by the Supreme Court of India in State of Travancore-cochin and Others Vs. Shanmugha Vilas Cashew Nut Factory and Others, Therein, (sic) tanjali Sastri C. J., elucidated the position clearly thus at p. 475 (of Mad LJ): (at P. 336 of AIR(sic) The phrase ''integrated activities'' was us(sic) in the previous decision to denote that ''such(sic) sale'' (i.e., a sale which occasions the export) sic) not be dissociated from the export without which it cannot be effectuated and the sale and sic) resultant export form parts of a single transaction. It is in that sense that the two activities the sale and the export-were said to be integ(sic)ted, A purchase for the purpose of export (sic) production or manufacture for export, is only act preparatory to export and cannot, in opinion, be regarded as an act done ''in(sic) course of the export of the goods out of(sic) territory of India'' any more than the other(sic) activities can be so regarded. As pointed by a recent writer :
From the legal point of view it is essential to distinguish the contract of sale which has object the exportation of goods from this c(sic) try from other contracts of some relating to same goods, but riot being the direct and i(sic) diate cause for the shipment of the goods (sic) When a merchant shipper in the United K(sic) dom buys for the purpose of export goods (sic) a manufacturer in the same country the contract of sale is a home transaction but when resells these goods to a buyer, abroad that tract of sale has to be classified as an (sic) transaction.
This passage shows that, in view of the dis(sic) character and quality of the two transaction it is not correct to speak of a purchase for e(sic) as an activity so integrated with the export that the former could be regarded as don(sic) the course of the latter.
The aforesaid observations do not lend scop(sic) further argument. The petitioners'' case is(sic) the goods were purchased by them for e(sic) But in view of the aforesaid observations,(sic) said purchases were only preparatory to (sic) and could not be regarded as acts done i(sic) course of the export of the goods out of territory of India.
The Supreme Court again affirmed(sic) decision in two subsequent cases. In the(sic) of State of Madras Vs. Gurviah Naidu and Co. Ltd. and Others, , Das dating Chief Justice, delivering the judgment the Supreme Court, held that dealers who, securing orders for supply of untanned(sic) and skins to London buyers went about pi(sic) sing untanned hides and skins of the re(sic) kinds and quantities in the State in order(sic) plement such orders, were liable to pay sal(sic) on the amount of their purchases. The (sic) of the decision was stated by the learned(sic) Justice in the following words:
Such purchases were, it is true, for the(sic) pose of export but such purchases did not selves occasion the export and consequent(sic) not fall within the exemption of Art. 286 (sic) of the Constitution as held by the Court State of Travancore-Cochin v. The Bombay company Ltd., 1952-3 STC 434: (AIR 1952 S(sic) (R). Nor did such purchases in the St(sic) the exporter for the purpose of export come the ambit of Art. 286 (1) (b) as held by the (sic)ciston of the majority of a Constitution Bench (sic)this Court in 1953-4 STC 205: (AIR 1953 SC (sic) (P). In this view of the matter, there could (sic) no question that these purchases were liable (sic)be included in the turnover and assessed to (sic)leg tax.
A Division Bench of this High Court of (sic)ich one of us was a member, on the basis of the aforesaid decisions held in Deputy Commissioner of Commercial Taxes, Anantapur v. Nagen(sic)appa, 1956 Andh LT 863: (AIR 1957 Andh Pra (sic) (S), that a purchase for the purpose of ex(sic)rt is only an act preparatory to export and (sic)t an act done in the course of the export of (sic)ds out of the territory of India, and, therefore (sic)levy of tax under Rules 4 (2) (d) and 16 (2) (sic)es not contravene Art. 286 (1) (b) of the Constitution. The question has been finally set at (sic)it by the three decisions of the Supreme Court (sic)d- it is not open to the1 petitioners to attempt (sic)reopen the same before us.
It is then argued that though the Act (sic)rports to impose tax on the purchase of goods (sic)hin the Andhra State it is a fraud on power,, indirectly, it operates as a burden on export (sic)de. The same argument was advanced in a (sic)htly different form in 1953-4 STC 205: (AIR (sic)3 SO 333) (P), and was rejected by the Su(sic)me Court at p. 213 (of STC): (at pp. 336, 837 (sic)AIR), in the following words :
Nor is it correct to say that it is necessary extend the exemption to these transactions to (sic)id double taxation. It is true that in the (sic)vious decision it was indicated that the object (sic)lerlying the exemption was the avoidance of (sic)hie taxation on the foreign trade of this (sic)ntry which is of great importance to the na~ (sic)S economy. But the double taxation sought be avoided consisted in the imposition of ex-(sic)t duty by the Central Government and the constitution of sales tax by the State Government the same transaction in its different aspects (sic)an export and a sale.
Such double taxation is already avoided by (sic)holding that the export sale and the import (sic)hase are exempt, under ttfause (b) from the (sic) of sales tax by the State. The foreign trade (sic)this country thus already enjoys immunity (sic)h double tax burden and suffers only one tax,, (sic)lely, the export or import duty as the case (sic) be. The claim now made for extension of (sic)exemption under clause 1 (b) in the name (sic)ivoiding double taxation cannot be supported.
The same reasoning applies with equal (sic)e to the question now raised before us. The (sic)islature of the State does not expressly or by necessary implication impose any tax on exports, takes into consideration only completed pur(sic)ses within the State which may be preparation for export. These purchases fall within the (sic)dative ambit of the State. No question, (sic)efore, of any fraud on power can conceivably (sic) as the power is exercised, within the strict (sic)ines allocated to the State.
Lastly, it is said that the words first (sic)hase'' in item (viii) are so vague that they (sic)lot afford a basis for taxation. We do not any justification for this comment. Item (sic) cannot be read in vacuum. Items (vii) (viii) are added by the Amending Act in (sic)on 5 after Hem (vi). Section 2 (b) defines (sic)er'' to mean_ ''any person who carries on the (sic)bess of buying or selling goods.'' Section 3, (sic)charging section, says that, subject to the (sic)sions of this Act, every dealer shall pay for each year a tax on his total turnover for such year.
Sub-Section (3) of Section 3 gives general exemption to dealers, whose total turnover in any year is less than Rs. 10,000/-, Section 3, which prescribes exemptions and reductions of tax in certain'' cases says that subject to such restrictions and conditions as may be prescribed, including conditions as to licenses and licence fees, raw tobacco, except country variety, shall be liable to tax only at the point of the first purchase effected in the State of Andhra by a dealer, who is not exempted under sub-section; (3) of Section 3.
Item (viii) gives the rate, the person to be taxed, the first point at which he Is taxed and the transaction with reference to which the tax is imposed. Having regard to the charging sec-Won and the definition of ''dealer'', there is absolutely no vagueness in the matter of the imposition of tax. A dealer, who purchases raw tobacco of the Virginia type, shall be liable to tax at the Point of time when his purchase is effected in the Andhra State. We do not, therefore, see any ambiguity in the provision.
For all the aforesaid reasons, We hold that the applications are liable to be dismissed and we accordingly do so with costs. Advocates fee Rs. 100/-.