V. M. Syed Mohammad and Co. vs State of Andhra

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 187 and 188 of 1953

Decision Date: 11 March 1954

Coram: Mehar Chand Mahajan, B.K. Mukherjea, Vivian Bose, Ghulam Hasan, DAS

In this case the matter was titled V. M. Syed Mohammad and Company versus the State of Andhra, with a connected appeal, and the judgment was delivered on 11 March 1954 by the Supreme Court of India. The bench that heard the appeal comprised Mehar Chand Mahajan, B. K. Mukherjea, Vivian Bose and Ghulam Hasan, with Mehar Chand Mahajan acting as Chief Justice. The petitioner was V. M. Syed Mohammad and Company and the respondent was the State of Andhra, and the appeal was recorded as a connected appeal dated 11 March 1954. The same bench is also noted in the record as Das, Sudhi Ranjan together with Mahajan (Chief Justice), Mukherjea, Bose and Hasan. The decision is reported in the All India Reports at 1954 AIR 314 and in the Supreme Court Reports at 1954 SCR 1117. Citator references include R 1955 SC 661 at page 205, R 1957 SC 877 at page 16, R 1958 SC 538 at page 12, R 1960 SC 1254 at pages 3 and 9, and RF 1992 SC 1277 at page 85. The legal issues concerned the Constitution of India, article 14, the Government of India Act 1935, specifically entry 48 in List II of the Seventh Schedule, and the Madras General Sales Tax Act IX of 1939. The questions presented were whether the Madras General Sales Tax Act was ultra vires the Constitution or the Government of India Act, whether Rule 16(5) framed under the Act was ultra vires section 5(vi) of the Act, and related constitutional challenges. The headnote records that the Court held the Madras General Sales Tax Act IX of 1939 was not ultra vires the Government of India Act because entry 48 in List II of the Seventh Schedule, as appearing in the Government of India Act 1936, was sufficiently broad to encompass a law imposing a tax on the purchaser as well as on the seller. The Court also held that there was no violation of article 14 because the classification of purchasers of certain commodities was reasonable, having a rational relation to the purpose of the law, and that although Rule 16(5) conflicted with section 5(vi) it was severable and did not affect the validity of the remaining rules within the Act.

On 11 March 1954, Justice Das delivered the judgment in this matter. The two appeals before the Supreme Court arose from writ petitions numbered 21 and 41 of 1952, which had been filed in the Madras High Court under article 226 of the Constitution. The writ petitions challenged the validity of the Madras General Sales Tax Act of 1939 and of the Turnover and Assessment Rules that had been framed under that Act. The petitioners were tanners who carried on their business in Eluru, a town that at the time lay in West Godavari District of the former Madras State and that now belongs to the newly created State of Andhra. Their business involved purchasing large quantities of raw hides and skins, tanning those hides in their own tanneries, and then either exporting the finished products or selling them to local buyers. In the High Court the appellants contended that both the Act and the Rules were unconstitutional on four principal grounds: (a) that the Provincial Legislature lacked authority under the Government of India Act of 1935 to enact a law imposing a tax on purchasers; (b) that the liability to pay tax on sales was not created by the statute itself but by the Rules, thereby constituting an unlawful delegation of legislative power to the executive; (c) that the Act violated article 14 of the Constitution because it singled out purchasers in certain trades for taxation, resulting in discrimination; and (d) that the Rules framed under the Act were inconsistent with the provisions of the Act itself and were therefore void. The High Court rejected the first three arguments, accepting only the contention under point (d). It held that Rule 16(5) was beyond the powers of the legislature because it conflicted with section 5(vi) of the Act, and it dismissed the petitioners’ petitions. Consequently, the appellants obtained a certificate from the High Court permitting an appeal to this Court. The counsel appearing for the appellants chose not to press the objection based on point (b) and focused only on the remaining three grounds of challenge.

The Court observed that the High Court’s decisions on the three surviving grounds were substantially well-founded and correct. Regarding the issue of legislative competence, the counsel for the appellants referred to entry 54 in List II of the Seventh Schedule to the Constitution of India and argued that this entry clearly demonstrated that entry 48 in List II of the Seventh Schedule to the Government of India Act of 1935—under which the impugned Act had been enacted—was far narrower in scope and could not be interpreted as authorising a law that imposed a tax on the purchase of goods. The Court found this line of reasoning to be untenable. It held that the intention expressed by the Constituent Assembly in entry 54 of List II to the Constitution could not be employed as a tool for discerning the intention of the British Parliament, which had enacted entry 48 in List II of the Government of India Act. In other words, the purpose and construction of a provision in a post-independence constitutional schedule could not be used to read into a pre-independence statutory schedule, and therefore the argument advanced by the counsel was rejected as fallacious.

The Court observed that the British Parliament, when it enacted entry 48 in List II of the Seventh Schedule to the Government of India Act, 1935, intended a broad scope for that entry. The Court noted agreement with the High Court’s view that, upon proper construction, entry 48 was sufficiently wide to encompass legislation that imposed a tax on the purchaser of goods. Moreover, the Court held that the Constituent Assembly, by placing entry 54 in List II of the Seventh Schedule to the Constitution, adopted the same liberal construction of the corresponding entry 48 and expressed in clearer language what had been implicitly contained in that earlier entry.

Turning to the argument raised under article 14 of the Constitution, the Court recorded that the appellants complained that the impugned Act singled out purchasers of certain specified commodities for taxation while leaving purchasers of all other commodities untouched. The Court referred to the well-settled principle of equal protection of the laws, as explained in Chiranjitlal Chowdhury v. Union of India and in subsequent authorities, and stated that it need not be reiterated. The Court affirmed that the guarantee of equal protection does not obligate the legislature to apply the same law to every person. Article 14, the Court explained, does not prohibit classification for legislative purposes provided that such classification rests on a differentiating factor that bears a reasonable relation to the objective and purpose of the law. The majority judgment in the Chiranjitlal Chowdhury case was cited for the proposition that there is a strong presumption in favour of the validity of legislative classification, and that the onus lies on those who challenge the classification to prove beyond doubt that the legislation arbitrarily discriminates between persons who are similarly situated. The Court found no material on record indicating that purchasers of the other commodities were in the same situation as purchasers of hides and skins. Accordingly, the majority decision applied, and the appellants had not discharged the burden of proof that the majority decision required of them.

Finally, the Court addressed the contention that rule 16(5) of the regulations conflicted with section 5(vi) of the Act. The Court noted that the High Court had already held the sub-rule ultra vires, and that the Advocate-General of Madras did not dispute its repugnancy to section 5(vi). However, the Court observed that the sub-rule affected only unlicensed dealers, whereas the appellants were admittedly licensed dealers and therefore were not subject to its operation. The Court further observed that there was no allegation that the appellants had ever been required to pay any tax on the purchase of hides or skins in respect of tax that had already been paid by a prior purchaser. Consequently, the Court held that the sub-rule was severable and could not invalidate the remaining rules that were otherwise within the scope of the Act.

In this case the Court noted that the issues raised might otherwise have fallen within the scope of the Act, but it was not informed of any additional defect in the rules that had been challenged. After reviewing the material before it, the Court concluded that the appeals presented no substantive ground for relief. Consequently the Court ordered that the appeals be dismissed and that the costs of the proceedings be awarded against the appellants. The order was signed by the agent who represented the respondent as well as the intervening States of Madras, Mysore and Bihar, identified as R. H. Dhebar. The judgment was reported in the 1950 volume of the Supreme Court Reports at page 869, citation (1) [1950] S.C.R. 869.