Levy of sales tax on a higher percentage on ‘superior kerosene oil’ (SKO) (also called white kerosene oil) and also levy of resale tax and surcharge on it by Tamil Nadu Government have been upheld by the Madras High Court. The attack by dealers that levy of different rates for same commodity was discriminatory was turned down by the Court which ruled that such allegation of discrimination would “amount to questioning legislative policy of the State to tax a particular commodity”.
Dismissing a batch of writ petitions by Southern Petro Oils (P) Ltd., Chennai, and others challenging Government’s decision to levy sales tax on different rates on ‘superior’ kerosene and ordinary kerosene, Mr Justice K. Chandru said that when the legislature had consciously made a distinction between the two products, same could not be attacked on ground that they were same products and should receive same percentage of levy of tax. The Government had come out with a stand that a separate levy was made to prevent misuse or black-marketing of public distribution commodities.
Under Section 59(1) of TN General Sales Tax Act, the Government issued a notification amending Entry in Eleventh Schedule with effect from March 21, 2003. It was notified that kerosene was taxable at 4 per cent and the new entry ‘white kerosene’ (SKO) at 25 per cent.
The petitioners contended bifurcation of kerosene into kerosene and SKO was not valid, since goods known as ‘white kerosene’ or SKO did not have any separate identity. They were also kerosene for all practical purposes. The levy of tax at 4 per cent on kerosene and 25 per cent on SKO was arbitrary and unconstitutional.
On levy of surcharge, petitioners said that under Section 17(1) of TNGST Act, Government granted an exemption in respect of surcharge payable under Section 3-I on sale of kerosene and some other products as specified in Eleventh Schedule. The said notification was to come into effect from July 1, 2002. Power under this section was independent of power under Section 59(1). Insofar as exemption notification for surcharge and resale tax was not amended, they were entitled to exemption in respect of any levy found in the Schedule, petitioners contended.
The Government said that it had power by delegated legislation to introduce an item into Schedule by virtue of Section 59(1) and even that became a part of the statute.
The Judge ruled that so long as the commodity was an essential commodity and private marketing system was introduced by Parliament to safeguard interest of kerosene supply under PDS, it could not be said State legislature lacked power in taxing kerosene different from that of SKO. The attack of discrimination thus must fall to ground.
On contention that exemption notification under Sec 17(1) would continue to operate notwithstanding amendment to entry in Schedule because same term continued to be in use in amendment notification could not be accepted. Also what applied to surcharge was also applicable to resale tax.
The writ petitions were dismissed. Petitioners were granted liberty to challenge the order before appropriate statutory forums under the TNGST Act.