# T. G. VENKATARAMAN ETC v. STATE OF MADRAS & ANR

- **Citation:** [1970] 1 S.C.R. 615
- **Court:** Supreme Court of India
- **Decided:** 1969-07-17
- **Bench:** J. C. Shah, G. K. Mitter
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/t-g-venkataraman-etc-v-state-of-madras-anr-4669
- **Pages:** 7

## Headnote

Madras General Sales Ta;x: Act, 1959 as amended by Madras Act 2
of 1968-'Cane iaggery' liable to ta;x: but 'palm ;agger;'
exemptedDiscrimlnation whether violative of Art. 14 of Constitution-Tax on 'cane
jaggery' whether restrictive of trade and commerce within meaning of Art.
301-Whether colourable exercise of power.
As a result of a notification dated December 30, 1967 under s. 59(1)
of the Madras General Sales Tax Act and later by Act 2 of 1968 sales
of jaggery became liable to tax. But while by notification under s. 17 'palm
jaggery was exempted from tax 'cane jaggery' was not. The appellants
who were dealers in 'cane jaggery' challenged the levy by· writ petitions in
the High Court which were, however, dismissed.
Jn appeal before this
Court it was contended (i) that the tax on 'cane jaggery' while exempting
'palm jaggery' was discriminatory and violative of Art. 14 of the Constitution; (ii) that taxation of 'cane jaggery' was restrictive of trade and
r-0mmerce and therefore violative of Art. 301; (iii) that the impugned
legislation constituted a colourable exercise of power.
HELD: (i} The evidence on record clearly showed that 'cane jaggery'
and 'palm jaggery~ were. commercially.diffdrcnt commodities. The methods
of production of
1pahri jagge1y' and 'cane jaggeryt were different; they
reached the consumers through different channels of distribution; the prices
at which they were sold differed and they wefe consumed by different
sections of the community. 'Cane jaggery' and 'palm jaggery' did not thus
belong to the same class and in differently treating them for the purpose
of taxation there was no unlawful disc!rimination. [620 B-E; 621 C-Dl
It was incorrect to .say that the State Legislature had always treated
the two products on the same footing.
For !learly three years before
April I, 1958 sales of ,'palm jaggery' were exempt from tax hut sales of
'cane faggery' were not. [620 BJ
Further, it is for the legislature to determine the objects on which
tax shall be levied.
The courts will not strike down an Act a• denying
equal protection merely because other objects could have been but are not
taxed by the legislature. [621 B-C]
N. Venugopal,\Ravi Varma Raiah v. Union of India, [1969] 3 S.C.R.
827, applied.
.
(ii) Freedom of trade, commerce and intercourse guaranteed by Art.
301 of the Constitution is protected against taxing statutes as weII as
other statute·s, but by iin.position of tax on transactions of sale of 'cane
jaggery' no restriction on the freedom of trade or commerce or in the
courso of trade with or Within the State was imposed. [621 D-F]
State of Madras v. N. K. Nataraia Mudaliar.
[1968] 3 S.C.R. 829,
referred to.
(iii) The plea' of colourable exercise of power had
no
substance
because the legislature l;lad power in the present case to levy the tax.
[621 G]
~
·
L14 Sup. GL/69
616
SUPREME COURT REPORTS
[1970] l S.C.R.
K. C. Gajapali Ncraya11 Deo & Ors. v. State of Orlssa, [1954] S.C.R.
1, applied.
CIVIL APPELLATE JuRJsmcT10N : Civil Appeals Nos. 281,
284, 363, 383 to 393 and 513 to 567 oi 1969.
Appeals from the judgment and order dated December 6,
1968 of the Madras High Court in Writ Petitions Nos. 1659 of
1968.
M. S. Sethu and A. V. V. Nair, for the appellant (in C.As.
Nos. 281 and 363 of 1969).
M. S. Sethu and P. Parameshwara Rao, for the appellant (in
C.A. No. 284 oi 1969).
H. R. Gokhale and K. Jayaram, for the appellant (in C.A.
No. 383 of 1969).
K. Jayaram and T. S. Vishwanatha Rao, for the appellants (in
C.As. Nos. 38ll to 393 and 513 to 567 of 1969).
A
B
c
S. V. Gupte, S. Mohan and A. V. Rangam, for the responD
dent (in C.A. No. 281 of 1969).
S. Mohan and A. V. Rangam, for the respondents (i.n C.As.
Nos. 284, 363, 383 to 393 and 513 to 567 of 1969).

## Text

A
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T. G. VENKATARAMAN ETC.
v.
STATE OF MADRAS & ANR.
July 17, 1969
[J. C. SHAH AND G. K. MITTER, JJ.]
Madras General Sales Ta;x: Act, 1959 as amended by Madras Act 2
of 1968-'Cane iaggery' liable to ta;x: but 'palm ;agger;'
exemptedDiscrimlnation whether violative of Art. 14 of Constitution-Tax on 'cane
jaggery' whether restrictive of trade and commerce within meaning of Art.
301-Whether colourable exercise of power.
As a result of a notification dated December 30, 1967 under s. 59(1)
of the Madras General Sales Tax Act and later by Act 2 of 1968 sales
of jaggery became liable to tax. But while by notification under s. 17 'palm
jaggery was exempted from tax 'cane jaggery' was not. The appellants
who were dealers in 'cane jaggery' challenged the levy by· writ petitions in
the High Court which were, however, dismissed.
Jn appeal before this
Court it was contended (i) that the tax on 'cane jaggery' while exempting
'palm jaggery' was discriminatory and violative of Art. 14 of the Constitution; (ii) that taxation of 'cane jaggery' was restrictive of trade and
r-0mmerce and therefore violative of Art. 301; (iii) that the impugned
legislation constituted a colourable exercise of power.
HELD: (i} The evidence on record clearly showed that 'cane jaggery'
and 'palm jaggery~ were. commercially.diffdrcnt commodities. The methods
of production of
1pahri jagge1y' and 'cane jaggeryt were different; they
reached the consumers through different channels of distribution; the prices
at which they were sold differed and they wefe consumed by different
sections of the community. 'Cane jaggery' and 'palm jaggery' did not thus
belong to the same class and in differently treating them for the purpose
of taxation there was no unlawful disc!rimination. [620 B-E; 621 C-Dl
It was incorrect to .say that the State Legislature had always treated
the two products on the same footing.
For !learly three years before
April I, 1958 sales of ,'palm jaggery' were exempt from tax hut sales of
'cane faggery' were not. [620 BJ
Further, it is for the legislature to determine the objects on which
tax shall be levied.
The courts will not strike down an Act a• denying
equal protection merely because other objects could have been but are not
taxed by the legislature. [621 B-C]
N. Venugopal,\Ravi Varma Raiah v. Union of India, [1969] 3 S.C.R.
827, applied.
.
(ii) Freedom of trade, commerce and intercourse guaranteed by Art.
301 of the Constitution is protected against taxing statutes as weII as
other statute·s, but by iin.position of tax on transactions of sale of 'cane
jaggery' no restriction on the freedom of trade or commerce or in the
courso of trade with or Within the State was imposed. [621 D-F]
State of Madras v. N. K. Nataraia Mudaliar.
[1968] 3 S.C.R. 829,
referred to.
(iii) The plea' of colourable exercise of power had
no
substance
because the legislature l;lad power in the present case to levy the tax.
[621 G]
~
·
L14 Sup. GL/69
616
SUPREME COURT REPORTS
[1970] l S.C.R.
K. C. Gajapali Ncraya11 Deo & Ors. v. State of Orlssa, [1954] S.C.R.
1, applied.
CIVIL APPELLATE JuRJsmcT10N : Civil Appeals Nos. 281,
284, 363, 383 to 393 and 513 to 567 oi 1969.
Appeals from the judgment and order dated December 6,
1968 of the Madras High Court in Writ Petitions Nos. 1659 of
1968.
M. S. Sethu and A. V. V. Nair, for the appellant (in C.As.
Nos. 281 and 363 of 1969).
M. S. Sethu and P. Parameshwara Rao, for the appellant (in
C.A. No. 284 oi 1969).
H. R. Gokhale and K. Jayaram, for the appellant (in C.A.
No. 383 of 1969).
K. Jayaram and T. S. Vishwanatha Rao, for the appellants (in
C.As. Nos. 38ll to 393 and 513 to 567 of 1969).
A
B
c
S. V. Gupte, S. Mohan and A. V. Rangam, for the responD
dent (in C.A. No. 281 of 1969).
S. Mohan and A. V. Rangam, for the respondents (i.n C.As.
Nos. 284, 363, 383 to 393 and 513 to 567 of 1969).
The Judgment of the Court was delivered by
Shah, J. At the conclusion of the hearing of these appeals on
April 23, 1969, we announced that "the appeals are dismiss.A
with costs; reasons in support of the order will be delivered •hereafter". We proceed to record the reasons in support of the order.
The appellants carry on business as 'k~lers in "cane jaggery"
in the State of Tamil Nadu. As a result of certain legislative and
executive measures, transactions of sale in "cane jaggery" were
made liable as from January l, 1968 to tax under the Madras
General Sa'cs Tax Act, 1959, and transactions of sale in "palm
jaggery" remained exempt from sales tax. The appellants filed
petitions in the High Court of Madras challenging the validity
of the levy of tax on "cane jaggery", on three grounds :
( 1) that the levy of tax on turnover from sale of
"cane
jaggery"
was
discriminatory
and
violated the equality clause of the Constitution;
(2) that the levy of tax imposes a restriction on
trade and commerce contrary to the provisions
of Part XIll of the Constitution; and
(3) there is
excessive 1 delegation of
legislative
authority to the executive and on that account
the levy of tax pursuant to an order made· in
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VENKATARAMAN V. MADRAS (Shah, J.)
617
A
exercise of the powers
under s. 59 of the
Madras General Sales Tax Act l of 1959 on
"cane jaggery" is invalid.
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The High Court rejected all the contentions.
Counsel for the appellants have in these appeals urged the
first two grounds and have in addition submitted that in levying
tax on turnover from sale of "cane jaggery" legislative
power
has been coloura bly exercised. The argument that
there was
excessive deleg~tion t(l the executive of the legislative power was
abandoned before this Court, because the State of Madras has
enackd Act II of 1968 authorising levy of tax on sale of jaggery
by amending Sch. III to Madras Act 1 of 1959.
Turnover from sal!e of jaggery-cane or palm-was subject to
tax under s. 3(1) of the Madras Act IX of 1939 at three pies
per rupee. By G.O. 651 dated February 28, 1955
and G.O.
2780 dated September 7, 1955 all
sales of "palm jaggery"'
effected through Co-<iperative Societies and the Palm Gur Federation were exempt ftom tax. By another G.O. No. 1605 dated
April 19, 1956, all transactions of sale in "palm jaggery" were
exempted from sales tax with effect from April l, 1956. Transactions of sale in "can~ jaggery" therefore contim•ed to remain
liable to tax whereas 'sales of "palm jaggery" enjoyed the benefit
of exemption from tax.
After the judgment of this Court in The Bengal Immunity
Company Ltd. v. Th~ State of Bihar & Others(')
the Parliament amended Art. 286 and entry 54 in List TI of the Seventh
Schedule and added a new Entry 92A in List I in the Seventh
Schedule by the Constitution (Sixth Amendment) Act.
Inexercise of the pow.et under Entry 92A List I the Parliament
enacted the Central Sales Tax Act 74 of1956. By Ch. N of that
Act the power reserved under the amended Art. 286 cl. (3) was
exercised by the Parliament, and certain classes of goods were
declared to be of "sl)ecial importance in inter-State trade or
commerce". By s. 15 !certain modifications were declared in State
Acts relating to the levy of taxes on sales and purchases of
declared goods. However in the list of goods of "special impor-,
lance in inter-State trade or commerce" gur or jaggery was when·
the Act was enacted ,mot included.
The Parlfament then enacted
the
Additional
Duties of
Excise (Goods of Special Importance) Act,
1957 (Act 58 of
1957). Section 3 of jhat Act authorised the levy and collection
of additional duties Ht respect of several classes of goods including "sugar". By s. 4 'jt was provided that during each financial
year, there shall be paid out of the Consolidated Fund of India:
(!) [19551 2 S.C.R. 603c
'618
SUPREME COURT REPORTS
[ 1970] I S.C.R
·16 the States in accordance with the provisions of the
second
~chcdule, such sums, representing a part of the net proceeds of
,!he additional duties levied and collected during that financial
year, as are specified in that Schedule. It was enacted by the proviso to cl. (2) of the Schedule that if during that financial year
there is levied and collected in any State specified in the Table a
ta'X ·on the sale or purchase of sugar by or under any law of that
State, no sums shall be payable to that State under sub-cl. (ii)
or sub-cl. (iii) of d. (b) in respect of that financial year, unless
the Central Government by special order otherwise directs. The
expression 'sugar' was defined in s. 2(c) as
having the same
meaning as it has in the First Schedule to the Central Excises and
Salt Act, 1944. The Governor of Madras issued Ordinance 1 of
1957 directing that transactions of sale of "cane jaggery" be
liable to a single point tax at 5 per cent. with effect from April
1, 1957. By virtue of the Central Sales Tax Act,
1956, as
amended by Act 31 of 1958 "sugar" as defined in Item No. 8 of
the First Schedule to the Central Excises and Salt Act, 1944 was
declared a commodity essential to the life of the community and
tax could thereafter be levied on "sugar" at the rate of 2 per cent.
only. But in view of the definition
contained in
the
Central
Excises and Salt Act,
1944, there was some doubt whether the
expression 'sugar' included Rur. The State of
Madras
being
apparently of the opinion that
"palm
jaggery"
and
"cane
jaggery" were subject to the provisions of the Additional Excise
Act 58 of 1957. issued on April 15, 1958, G.0. No.
1457
exempting all sales of "cane jaggery" from tax with effect from
April I. 1958. Transactions of sale of "palm
jaggery"
were
therefore exempt partially from sales tax from
February
28.
1955 and wholly from April I, 1956, and transactions of sale of
"cane ja~gery" were exempt from tax from April 1, 1958.
The State Legislature enacted the Madras General Sales Tax
Act 1 of 1959 with effect from April 1, !959. Bys. 3 every
dealer whose total turnover was not less
than Rs. 10,000 became Jia ble to pay tax for each year at the rate of 2 per cent. of
his taxable turnover. By s. 8 it was provided that sub1cct to such
.restrictions and conditions as may be prescribed, a dealer who
deals .. in goods specified in the Third Schedule shall not be
liable to pay anv tax under the Act in respect of such goods.
Item 5 in the Th.ird Schedule was "sugar including jaggery and
gur." Section 17 of that Act authorised the State Government by
notification to exempt or to make reduction in rate 'in respect of
any tax payable under the Act on the sale or purchase of any
special goods or class of goods at all points or specified points in
respect of sales by successive dealers or by any specified class of
dealers in respect of the whole or any part of their ttrmover. By
s. 59 (1) of the Act the State Government was · authorised by
notification, to alter, add or cancel any of the Schedules.
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VENKATRAMAN v. MADRAS (Shah, J.)
619'
On April 1, 1959 transactions of sale of "sugar including
jaggery and gur" were. exempt from liability to pay tax under !he
Madras General Sales Tax Act
1 of
1959.
The exempUon
applied to all transactions of sale of "'cane jaggery" and "palm
jaggery". On September 10, 1965 the Government
of
Ind!~
advised the State Government that "jaggery" was not included in
the expression 'sugar' in the Additional Duties of Excise Act
58 of 1957. The State of Madras in exercise of the power under
sub-s. ( 1) of s. 59 of the Madras General Sales Tax Act, issued
G.0. 2261 dated December 30, 1967, that:
"In the said (Third) Schedule in item 5, for . the
word 'including' the words 'but not including' shall ·be
substituted."
The State simultaneously issued another notification that :
"In exercise of powers conferred by section 17 ( 1)
of the Madras General Sales Tax Act,
1959, the
Governor of Madras granted exemption in respect of
tax payable under the
Act on
all sales of palm
jaggery."
Jn consequence of the two notifications turnover from transac-·
tions of sale of "cqne jaggery" which was till then exempt from
tax became liable to tax under s. 3 of the Madras Act 1 of 1959
whereas sale of "palm jaggery" remained exempt from Eabi!ity
to pay sales tax.
In support of the plea that the State had practised unlawful'
discrimination between sales of· "palm jaggery" and "cane
iaggery" it was urged that "cane jaggery" and "palm jaggery"
which were identic?l commodities and were
treated
similarly
under the successive Sales Tax Acts of the State for many years
past were v:ithout any rational nexus with the object sought to be
served by the Ma<lras General Sales Tax Act, 1959, differently
treated and on that account the notification issued under s. 59
sub-s. ( 1) which modifies the Third Schedule is ultra vires.
It may be recalled that the notification under s. 59 (1) which
was issued in exercise of executive authority has received legislative sanction by Madras Act 2 of 1968. Amendment in the
Third Schedule now flows from the exercise of legislative authority and not executive authority.
Since s. 8 read with the Third Schedule
as
amended by
Madras Act 2 of 1968 exempts only "sugar" from liability to
tax, sales of jaggery, cane and palm, now fall within the charging section. But the Government of Madras have in. exercise of
power under s. 17 bf Act 1 of 1959 exempted transactioPs of
sale of "palm jaggery" from tax. It is true that .between April 1.
620
SUPREME COURT REPORTS
(1970] I S.C.R
1958 and October 31.
1967
transactions of sale of "cane
A
jaggcry" and ··palm jaggcry" were exempt from liability to pay
sales tax under the ~adras General Sales Tax Acts of 1939 and
1959, but it cannot be inferred therefrom that the Legislature
treated ··palm jaggery" and "cane jaggery" as the "same commodity." For nearly three years before April l. 1958 sales of "palm
jaggery" were exempt from tax but sales of "cane aggcry" were
B
not.
The evidence 0n the
record
ciearly
shows
that
"cane
jaggcry" and "palm jaggcry·· are commercially different commodities. "Cane jaggery" is produced from the juice of sugarcane;
"palm jaggcry" is produced from the juice uf the palm tree. Mr.
Raghupathy, Deputy Secretary to the Government of Madras
C
(Commercial Taxes) has stated in
his
a!Iidavit
that
"palm
jaggery" industry comes under the purvic" of Kh2di and Village
Industries Board and is one of the cottage industries which gives
employ~1ent mainly to poor tappers. 'lbc tappers. accocding
to
Mr. Raμhupathy. collect "nccra" from palm and other trees and
prepare jaggcry by the traditional method of boiling "neera" in
D
their huts and produce jaggery without the aid of any machinery.
Production of "i:;alm jaggcry" in the State compared to
"cane
ja)l:gery" is small. The price of "palm jaggery" and "cane ja~gery•·
differ widely and apparently "palm jaggery" and "cane jaggery"
arc consumed by different sections of the commm1ity. It is clear
that the method of production of "palm jaggery" and "cane
jaggery" are different; they reach the consumers through different
E
channels of distribution: the prices at which they are sold differ
and they ar.~ consumed hv different sections of the community.
In a recent judgment N. Venugopa/a Ral'i Varma Rajah v.
Union of lndia and Another(') this Coun ob;erved:
" .... Tax laws are aimed at dealing with complex
problems of infinite variety necessitating
adjustment
of several disparate elements. The Courts accordingly
admit, subject to adherence to the fundamental principles of the doctrine of equality, a larger play to legislative discretion in the matter of
classification.
The
power to classify may be exercised so as to adjust the
system of taxation in all proper and reasonable ways :
the Legislature may select persons, properties, transctions and objects and apply
different
methods
and
even rates for tax, if the Legislatures docs so reasonably.
. . . . . If the classification is
rational,
the Legislature is free to choose objects of taxation,
impose different rates, exempt c]a">Ses of property from
taxation, subject different classes of
property to
tax
(I) [1969) 1 S.CR. 827.
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VENKATARAMAN V. MADRAS (Shah, J.)
in different ways and adopt different modes of assessment. A taxing statute may contravene Article 14 of
the Constitution if it seeks to impose on the same
class of property, persons, transactions or occupations
similarly situate; incidence of taxation, which leads to
obvious inequality."
It was also said by the Court that :
"It is for the Legislature to determine the objects
on which tax shall be levied, and the rates thereof. The
Courts will not strike down an Act as denying the
equal protection merely because other objects
could
have been, but are not, taxed by the Legislature."
621
We are accordingly of the view that "cane jaggery" and
"palm jaggery" are not commodities of the same class, and in
any event in imposing liability to tax on transactions of sale of
"cane jaggery" and exempting "palm jaggery", no unlawful discrimination denying the guarantee of equal protection was
practised.
· No serious argument was advanced in support of the plea ·
~hat ·the freedom pf trade and commerce guaranteed by Part
XIII of the Constitution is infringed by the imposition of tax on
"cane jaggery". llreedom of trade, commerce and
intercourse
guaranteed by Art. 301 of the Constitution is protected against
taxing statutes as well as other statutes, but by imposition of tax
on transactions of sale of "cane jaggery" no restriction on the
freedom of trade 6r commerce or in the course of trade with or
within the State is imposed. The tax imposed on transactions of
sale of "cane jaggery" does not affect the freedom of trade with-
:in the meaning of;Art. 301. As observed by this Court in The
State of Madras v. N. K. Nataraja Mudaliar(1 ) "a tax may in
certain cases directly and immediately restrict or 'hamper the
free flow of trade, but every imposition of tax does not do so."
There is no substance in the contention that the Act which
impose tax on "cane ia1t1!ery" and the notification which exempts
"palm jaggery" from liability to tax imposes a colourable exercise
of authority. If the. Lel!islature has the power to impose the tax,
its authority is not' open to challenge on a plea of colonrable
exercise of power! K. C. Gajapati Naravan Deo & Others v.
The State of Oriss~(•).
There will be one hearing fee.
G.C.
(I) [196Rl 3 S.C.R. 829.
(2) [1954) S.C.R. I.
Appeals dismissed. ,