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J.V Seshaiah And Sons And Others v. The State Of Andhra Pradesh And Others
Structured Summary of the Opinion Concerning Rule 45-D (A.P. General Sales Tax Rules, 1957)
Factual and Procedural Background
The petitioners are 33 oil-millers operating in Kurnool District. They filed a writ petition against the State of Andhra Pradesh and the Commercial Tax Officers of Kurnool, Adoni and Nandyal seeking a writ of mandamus or other appropriate relief to restrain the respondents from giving effect to G.O. Ms. No. 300, Revenue (S), dated 8 March 1966. That Government Order added Rule 45-D to the Andhra Pradesh General Sales Tax Rules, 1957. Rule 45-D required every miller of groundnuts, other than a decorticating miller, to maintain a register in Form XXVII showing hour-to-hour working of the decorticator and expeller, the number of coolies employed for decortication and crushing, and the quantity of oil and cake obtained during the process.
The petitioners challenged the rule as causing great hardship, interfering with their business, and as being unreasonable and discriminatory. They alleged violations of Article 19(1)(g) (right to carry on business) and Article 14 (equality) of the Constitution, and contended the rule was beyond the rule-making power conferred by Section 39 of the A.P. General Sales Tax Act. A counter was filed by the respondents. The matter proceeded to judicial determination and the court ultimately allowed the petition and struck down Rule 45-D, awarding costs to the petitioners (advocate's fee Rs. 100).
Legal Issues Presented
- Whether Rule 45-D constitutes an unreasonable restriction on the petitioners' right to carry on business guaranteed by Article 19(1)(g) of the Constitution.
- Whether Rule 45-D discriminates against groundnut oil-millers and thus violates Article 14 of the Constitution.
- Whether Rule 45-D is within the rule-making power of the State Government under Section 39 of the A.P. General Sales Tax Act, 1957 (i.e., whether the rule is made for purposes of the Act and is necessary for levy/collection of taxes).
Arguments of the Parties
Petitioners' Arguments
- The hour-to-hour register requirement would force hourly stoppages of the decorticator and expeller to make weighments and record entries, thereby retarding yield and reducing efficiency.
- Frequent stoppages and cleaning would shorten the life of machinery and cause considerable loss of time and labour; maintaining the register as prescribed would increase production time (claimed to take five hours more for the same output ordinarily produced in eight hours).
- There are already registers maintained under the Central Excise Act and under the Andhra Pradesh General Sales Tax Act from which oil and cake produced can be ascertained, so fresh hourly registers are unnecessary.
- The rule singles out oil-millers for hourly accounting without rational basis, creating invidious discrimination vis-à-vis other businesses (e.g., textile, sugar), and thus violates Article 14.
- The rule is not within the rule-making power conferred by Section 39 of the A.P. General Sales Tax Act.
Respondents' Arguments
- In the counter, respondents did not specifically controvert the petitioners' factual assertions about hardship; they stated maintenance of the register would not cause great hardship nor seriously interfere with millers' business, asserting that details are only required at the commencement and closing of the decorticator or expeller and that the mill need not be stopped each hour.
- The learned Government Pleader argued that the rule was intended to prevent evasion of taxes and thus served the purposes of the General Sales Tax Act.
- The respondents relied on the Bench decision in N. Pullayya v. Government of Andhra Pradesh concerning hour-to-hour registers for rice millers to support legislative competence and the reasonableness of such provisions.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| N. Pullayya v. The Government of Andhra Pradesh [1968] 21 S.T.C. 291 | Upheld amended provisions requiring rice millers to maintain hour-to-hour registers (form XV) as within legislative competence and observed that maintenance of such registers does not impose restrictions on carrying on business. | The respondents relied on this decision to support the impugned rule. The court distinguished that case on facts (different industry and different register details) and noted it was not persuaded that Pullayya justified imposing Rule 45-D on groundnut oil-millers. The court did not accept Pullayya as determinative for the present facts and instead found Rule 45-D excessive and arbitrary in effect. |
Court's Reasoning and Analysis
The court proceeded by examining whether the impugned rule was a reasonable restriction on the petitioners' right to carry on business (Article 19(1)(g)) and whether it fell within the rule-making power under Section 39 of the A.P. General Sales Tax Act. Key elements of the court's analysis were:
- Burden of Proof: The court reiterated the principle that when an enactment infringes fundamental freedoms, those who seek to uphold it (here, the State) must bring the impugned measure within the protective provisions of Article 19(5) and (6); the burden is on the State, not on citizens, to justify the restriction.
- Factual Findings on Burden/Hardship: The petitioners' affidavit described detailed operational burdens from hourly entries (20-column form) — frequent stoppages, reduced yield, adverse effect on machinery life, and substantial loss of time and labour. The court noted that the respondents did not specifically controvert these allegations in the counter and had not demonstrated how hourly maintenance would not impose hardship.
- Nature of the Register and Practical Effect: The prescribed Form XXVII contained about 20 columns tracking times machines start/stop, quantities processed, dip readings, purpose of expeller working, hourly quantities of kernel crushed, oil and oilcake obtained, and numbers of coolies employed. The court found that, prima facie, maintaining such detailed hourly records as required would necessitate interruptions and materially restrict business operations.
- Necessity for Tax Administration: The court examined whether hourly recording was necessary for the purposes of the A.P. General Sales Tax Act (levy and collection of sales and purchase taxes). Respondents asserted the rule was to prevent evasion, but the court found this explanation unsatisfactory: if underreporting could be done at day's end, the court reasoned it could likewise be done hourly, so the connection between hourly records and preventing evasion was not demonstrated.
- Distinguishing Precedent: The Government relied on N. Pullayya (rice millers). The court accepted that Pullayya sustained legislative competence for provisions concerning rice millers but explicitly confined that decision to its facts—different operations and a different register—and declined to adopt Pullayya as controlling for groundnut oil-millers under the present record.
- Conclusion on Reasonableness and Competence: On the combined factual and legal record, the court concluded that Rule 45-D imposed excessive and arbitrary restrictions on petitioners' business and did not demonstrably aid tax levy/collection or check evasion. Further, the rule was held to be beyond the rule-making powers conferred by Section 39 (i.e., ultra vires), because the respondents had not shown the rule was necessary to carry out the purposes of the Act.
- Article 14 Issue: The court considered the discrimination challenge but found the petitioners less strong on this point; it held that the classification of oil-millers into a separate group was based on an intelligible differentia and thus Article 14 was not the basis on which the petition succeeded.
Holding and Implications
Core Ruling: The impugned Rule 45-D is struck down.
Specifically, the court allowed the writ petition and struck down Rule 45-D on two grounds: (1) it contravened Article 19(1)(g) of the Constitution of India (it imposed an unreasonable restriction on the petitioners' right to carry on business), and (2) it was ultra vires the rule-making power conferred on the State Government by Section 39 of the A.P. General Sales Tax Act.
Consequences for the parties: The petitioners succeeded and were awarded costs (advocate's fee Rs. 100). The impugned rule cannot be given effect as between the parties and, insofar as the court's order adjudicates the validity of Rule 45-D, the rule is invalidated.
No broader implications were set out in the opinion beyond the direct effect on the parties in this case; the court treated the earlier Pullayya decision as a distinct, fact-specific authority and did not hold that decision to control the present matter.
End of structured summary based exclusively on the provided opinion.
1. The petitioners who are 33 in number are oil-millers in Kurnool District. The writ was filed against the State of Andhra Pradesh and the Commercial Tax Officers of Kurnool, Adoni and Nandyal. It was filed for the issue of a writ of mandamus or any other appropriate writ, direction or order directing the respondents to forbear from giving effect to G.O. Ms. No. 300, Revenue (S), dated 8th March, 1966, or to pass such other order or orders that this Court may deem fit and proper in the circumstances of the case. Under the G.O. referred to above the Government amended the Andhra Pradesh General Sales Tax Rules, 1957, by adding Rule 45-D to the said Rules. It is convenient 0to extract the impugned rule here:
45-D. Every miller of groundnuts, other than a decorticating miller, shall maintain a register in Form XXVII showing the hour-to-hour working of the decorticator and expeller, the number of coolies employed for decortications and crushing, and the quantity of oil and cake obtained during the process.
2. The case of the petitioners is that the rule works great hardship on the oil-millers and seriously interferes with their business, that it is an unreasonable restriction on their right to carry on business and therefore violates their fundamental right to carry on business guaranteed to them under Article 19(l)(g) of the Constitution. They also complain that the oil-millers alone were singled out. for the purpose of maintaining hourly accounts and there is no reason why invidious discrimination should be made against the business of groundnut oil-millers alone and why the rule was not made applicable to other businesses like textile, sugar etc. and there is no rational basis for classifying groundnut oil-millers into a separate category for imposing such unreasonable restriction on them ; therefore the impugned G. O. is also discriminatory and violative of Article 14 of the Constitution. The rule is further attacked on the ground that it is not within the rule-making power of the Government conferred under Section 39 of the A.P. General Sales Tax Act.
3. It was alleged in the affidavit that if as per the impugned Rule 45-D, the register in question is to be maintained showing hour-to-hour working of the decorticator and expeller, the decorticator and expeller have to be stopped each hour and then all weighments etc. have to be made, the forms filled up and the machines have to be started again. This frequent stoppage is bound not only to retard the yield but has adverse effect on the machinery as frequent stoppage and cleaning will shorten the life of the machinery. There will be considerable loss of time and labour. If the rule is to be given effect to, it will take five hours more to produce the same quantity which will ordinarily be produced in eight hours. The operations like that should not be interrupted each hour and such interruption impairs the efficiency and rate of production resulting ultimately in huge loss to the petitioners. According to them there are registers already maintained under the Central Excise Act and under the Andhra Pradesh General Sales Tax Act from which the oil and cake produced can easily be ascertained and there is absolutely no reason why fresh registers should be insisted upon.
4. Under Section 39 of the A.P. General Sales Tax Act, 1957, power was given to the State Government to make rules to carry out the purposes of the Act. The purposes of the Act are only levy and collection of taxes, namely, sales tax and purchase tax. The right to trade or to do business is a freedom guaranteed under the Constitution. That right can be restricted only when considered as reasonable in the interest of the general public. It is well recognised that when an enactment is found to infringe any of the fundamental rights guaranteed under Article 19(1) of the Constitution it must be held to be invalid unless those who support it can bring it under the protective provisions of Sub-clauses (5) and (6) of Article 19 and the; burden is on those who seek that protection and not on the citizens to show that the restrictive enactment is invalid.
5. In the form prescribed for the register under the impugned rule there are as many as 20 columns. There are columns like time when the decorticator commenced working, time when the decorticator stopped working, quantity of groundnuts used in the decorticator in quintals, time when expeller commenced working, dip reading in the unclean pit, dip reading in the clean pit, purpose of working of expeller, i.e., crushing of kernel into oil or crushing of cake into oil, time when the expeller stopped working, dip reading in unclean pit, dip reading in clean pit, quantity of kernel crushed (in quintals) during the time in columns 9 and 13, quantity of oil obtained from out of the kernel in column 16, quantity of oilcake obtained from out of the kernel in column 16, number of coolies employed in the working of the expeller and the number of coolies employed in the working of the decorticator. According to the petitioners for maintaining the register in this form to show hour-to-hour working will entail stoppage of the machines each hour and it is bound to retard the yield and efficiency and will have an adverse effect on the machinery shortening its life and there will be considerable loss of time and labour. According to them to maintain the register like that it would take five hours more to produce the same quantity which will ordinarily be produced in eight hours.
6. In the counter filed by the respondents these allegations have not been specifically controverted. In the counter it was merely stated that the maintenance of the register like that will not cause any great hardship nor will it seriously interfere with the millers' business for the details to be recorded therein are only at the commencement and closing of the decorticator or the expeller and the mill need not be stopped for each hour. As per the impugned rule the details of the working, namely, the quantities etc. are to be recorded every hour and not merely at the commencement and closing of the machines as stated in the counter filed by the respondents. In our opinion, prima facie the maintenance of the register showing hourly working as per the various columns in the form would work hardship to the oil-millers. In the counter the respondents have not made any attempt to show how the hourly maintenance of the register in the form prescribed will not cause any hardship or restriction to the oil-millers in their business. It appears to us clear that the enactment of the impugned Rule 45-D will certainly result in the restriction of the business of the oil-millers like the petitioners.
7. Therefore the further question to be considered is whether the restriction can be said to be reasonable and is in the interests of the general public. In the counter filed by the respondents it was not stated how the impugned rule works in the interests of the public and what is the object meant to be achieved by the said rule. As provided under Section 39 of the A.P. General Sales Tax Act, the State Government can make rules to carry out the purposes of the Act. It was not even spelled out in the counter how the rule is necessary to carry out the purposes of the Act. The chief objection of the petitioners seems to be not so much against the form in which register is to be maintained as it is against the provision contained in the rule that it should be maintained showing hour-to-hour working and making out the details required for all the 20 columns in the register every hour instead of giving these details at the end of each day. It has not been shown by the respondents how the hourly maintenance of the register will help more in the levy and collection of taxes than its maintenance at the end of each day. Mr. D. V. Sastry, the learned Government Pleader, has argued that the new rule was intended to prevent evasion of taxes. According to him if the register is to be maintained at the end of each day, there will be more scope for evasion by showing less quantities of oil and cake in the registers. We are unable to understand if the millers are able to show less quantities of oil and cake if it is at the end of each day, how they are prevented to do the same thing if they are forced to maintain the register showing the results of the hourly working. If it is a question of showing less quantities, instead of showing them less at the end of the day, they can also show less quantities even when giving them in the register at the end of each hour. It has not been satisfactorily shown how the impugned rule is necessary either to achieve the objects of the A.P. General Sales Tax Act or in any other way necessary in the interests of the general public.
8. In this connection the learned Government Pleader has relied on a Bench decision of this Court in N. Pullayya v. The Government of Andhra Pradesh [1968] 21 S.T.C. 291. In that case the learned Judges were considering the provisions of the A.P. General Sales Tax (Amendment) Act, 1963, in so far as they pertained to rice millers. One of those provisions is that a rice miller shall also maintain a register in form XV showing hour-to-hour working of the sheller and huller and the number of coolies employed for shelling and hulling. The amended provisions were impugned both on the ground of legislative competence and also on the ground that the provisions were unreasonable restrictions in carrying on business. The contention of the State in that case was that the amended provisions were made to prevent evasion of taxes which power is incidental and ancillary to the power to impose and levy tax on the sale or purchase of goods. This contention was accepted by the learned Judges and found that there is legislative competence in enacting the provisions. At the end of their judgment in a small paragraph they considered the objection of the petitioners with regard to unreasonable restrictions in carrying on business. Their Lordships disposed of that matter by observing thus :
We are not convinced that the maintenance of registers of the transactions by the miller imposes any restrictions on his carrying on the business.
9. We are not now concerned with the rice milling business. We do not have before us the various operations with regard to the processing of. rice. We do not also have before us the various columns of the register which they were asked to maintain. On the facts of this case we are satisfied that the new rule imposes excessive and arbitrary restrictions on the business of the petitioners and that the restriction does not in any way help either in the levy and collection of taxes or to check evasion of payment of taxes.
10. There remains to be considered only one ground, namely, the one based on Article 14 of the Constitution of India. We do not think the petitioners are strong on this ground. It cannot be said that the classification of oil-millers into one separate group is not founded on intelligible differentia which distinguishes them from other groups of businessmen.
11. As the petitioners have succeeded on the first two grounds the writ petition is to be allowed and the impugned rule is to be struck down as contravening Article 19(1)(g) of the Constitution of India and also on the ground that it is not within the rule-making power of the Government conferred under Section 39 of the A.P. General Sales Tax Act. Accordingly the petition is allowed and the impugned Rule 45-D is struck down as violative of Article 19(l)(g) of the Constitution and as also ultra vires of the rule-making power of the State Government. The petitioners are entitled to their costs. Advocate's fee Rs. 100.
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