R. K. Dalmia Delhi Administration Ra:liubar Dayal J. J96B A;ril 6. he ·was the chief person to oa.rry out the ma.in work of the conspiracy. We also do not consider Dalmia.'s sentence, in
the circumstances of the case, to be severe. We therefore dismiss these appeals. Appeals Dismissed. EAST INDIA TOBACCO CO. v. STATE OF ANDHRA PRADESH (B. P. SINHA, c. J., P. B. GAJENDRAGADKAR,
K. N. WANCHOO, N. RAJAGOPALA AYYANGAR and T. L. VENKATARAVA ArYAR, JJ.) Sales 'I'ax-Tobacca-Imposition of Tax on sale of Virginia Tobacco and exemption of country tobacco-Provision if discrimi· natory-Purchase which procedes sale for export if could be oxem• pted from tax-Madras General Salts Tax Act. 1939 (Mad. 9 of J939), as amended by the Madras General Sales Tax and the
Madras Tobacco (Taxation of Sales and Registration) (Andhra Amendment) Act(Andhra XIV of 1956), ss. 5, 6-0onstitution of India, Arl.9. 14, 286 (I) (b). The appellants firms were doing business in the export of
Virginia tobacco. The usual course of that business was stated to be that appellants first entered into contracts with their customers abroad for the sale of tobacco and there· after they purchased the requisite quantities of goods locally and then exported them to foreign purchasers in performance of their contracts. Section 5 of the Madras General Sales Tax Act 1939, was amended by the Andhra State Legislature
wh:n the Andhra State came into existence by the Amending Act XIV of 1955. As a result of this enactment to sales of countr)' tobacco were exempted ; while sale of Virginia tobacco were liable to be taxed. The appellants were called upon to produce their account books relating to their business in
tobacco for the purpose of assessing salos tax. The appellants ftled petitions undrr Art. 226 of the Constitution challenging the constitutionality of the Amending- Act. XIV of 1955, on I S.C.R.
the grounds inter alia that in taxing sales of Virginia tobacco and exempting from tax sales of other: tobacco, the Act was discriminatory, as obnoxious to Art. 14, and besides that
having regaid to their course of busine~s, any tax levied on their sales was in contravention of Art. 286 (l) (b) as amount· ing to a tax on sales '~in the course of export" of tobacco.
'the High Court dismissed the petition holding that the impugned Act did not infringe any constitutional provision, but granted certificate under Art. 133 of the Constitution to appeal to the Supreme Court.
Held, that it is for the person who assails a legislation as discriminatory to establish that it is not based on a valid classification and this burden is all the heavier when the legislation under attack is a taxing statute.
Though taxation laws must pas~ the test of Art. 14 of the Constitution, in deciding whether such a law is discrimi- natory or not, it is necessary to bear in mind that the State has a wide discretion in selecting the persons or objects it will tax, and that the statute is not open to attack on the mere· ground that it taxes some persons or objects and not others. It is only when within the range of its selection, the law operates unequally, and this catinot be justifieJ on the basis of a valid classification, that there would be a violation of Arts. 14.
The Madras General Sales Tax '(Andhra Amendment) Act, 1955, which taxed sales of Virginia Tobacco but exempted sales of 'Nattu' or country tobacco could not be said to be discriminatory and was not obnoxious to Art 14.
Virginia tobacco has features which distinguishes it from country tobacco and can be treated as a class in itself. It was therefore ~it~ii:1 the power of ~he State to impose tax on the sales of Vug101a tobacco while exempting sales of country
tobacco. It is only the sale undl r which the export is made that is protected by Art. 286 (I) (b) ; a purchase which prcedes such a sale doe~ not faU within its purview though made for the purpose of or with a view to effect an export.
K. T. Moopil Nair v. State of K erala, [1961J 2 S.C.R. 77, Budhan Ohoudhry v. State of Bihar. [1955J I S. C. R. 1045 Sri Ram Krishna Dalmia v. Shri Justice SR. Tendolkar [1959j S. C.R. 270, Mad_dan v. Kantucky, [1940J 309 U. s.'83: 34
L. Ed. 590, 0. lleisfer v. Thomas Oolliary Oo. 250 U. S. 345 : 67 L. Ed. 237, State of Travancore Cochin v. Bomba11 Oo. Ltd.· East India Tobacco Co. v. State of Andhra Pradesh EJsl India ToHcco
Co. v. S1ti1< of dndhra P1adtsh P.952] S. C. R. 1112, State of Travancore Oochtn v. Shamugka Vila• Oashew Nut Factory. [1954] S. C. R. 53 State of Madras v. Ourivish Neidue & Oo., A. [. R 1955 S. c.' 158 and State of Mysore v. Mysore Spinning .r. Manufacture Go., A. I. R. 1958 S. C. 1002, referred to.
CrVIL APPELLATE JurusDICTrON: Civil Appeals Nos. 290 & 291 of 1961. App0als from the judgment a.nd order dated September 25, 1957, of the Andhra Pradesh High Court, in writ Petitions No. 1172of1956 of 1957.
A. S. R. Chari and K. R. Ghoudhri, for ·the Appellants. A. V. Vishwanatha Sastri, T. V. R. Tatachary, P. D .. Menon, for the respondent. I 962. April 6. The Judgment of the Court was delivered by
VENKATARAMA ArYAR, J.-Thcse are appeals against the judgment of the High. Court of Andhra. Pradesh in petitions Nos. 1172 of 1956 and 56 of 1957 filed under Art. 226 of the Constitution ques.
tioning the validity of the Andhra Act XIV of 1955 insofar as it imposes a ta.x on the sale of Virginia tobacco. The appellants are firms doing business in the export of tobacco. The usual course of thiit
business is stated to be that they first enter into contracts with their customers a.broad for the sale of' tobacco, that thereafter they purchase the requisite quantities of goods locally and then
export them to the foreign purchasers in perfor. mance of thAir contracts. Prior to October l, 1953, the arAa wherein the appellants aarried on business formed part of the State of Madras, and on that
date the State of Andhra was constituted, and the area in question fell within that State. The law relating to sales tax in force in that area. ia the Madras General Sales '.J,'ax Act, IX of 1939. Section
5 of this Act provides for exemption of tax on sales of goods specified therein and s. 6 confers on the State Government power to exempt the tax payable on the ea.le of a.ny specified class of goods or by any
apecified class of persons. In exercise of the powers conferred by s. 6 the Government of Madras issued on March 31, 195 ;, a notification No. 144 exempting the sales of unmanufactured tobacco from sales tax.
After the Andhra State came into existence, the Legislature of that State enacted Act XIV of 195.1) hereinafter referred to as ''the Amendment Act" wherebv it amended s. 5 of the Madras General
Sales 'Tax Act by adding as item (viii) the following:- ''(viii) raw tobacco (except country variety thereof) whether cured or uncured, shall be liable to tax under Se"tion 3, Sub
Section 1 Oiily at the point of the first purcha- se effected in the State of Andhra by a dealer who is not exempt from taxation under Section 3, Sub Section 3 but at the rata 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 ot.her similar varieties of tobacco". As a result of this enactment exemption from tax
was limited to sales of what is known as country tobacco (Nattu tobacco) and so far as sales of Virginia. tobacco are concerned, they became liable to be taxed. Pur1mant to the Amendment Act, the
Andhra. Government issued on November 4, 1955, a notification No. 711 cancelling the earlier notifica- tion No; 144 dated March 31, 1953. Acting undAr the provision~ of the Amend-
ment Act, the Additional Commercial Tax Officer, Guntur, issued notices to the appelJants to prod11ce J962 East India Tobacco Oa, v. Sta" of Andhra P1ad,sh East India Tobacco Co. v.
Stat1 nf Andhra Pradesh Ai.JarJ. the account books relating to their business in tobacco for the purpose of assessing sales tax. To this the appellants replied by filing petitions under
Art. 226 of the Constitution in the High Court of Andhra Pradesh challenging the constitutionality of the Amendment Act on the grounds inf.er alia that in taxing sales of Virginia tobacco and exemp·
ting from tax s•des of other tobacco, the Act was discriminatory, and that in consequen ~ it was obnoxious t.o Art. 14 of the Constitution ° and that further ·it was in contravention of Art. 286 (I) (b)
as it was really a tax on sales in the course of export of tobacco. They accordingly prayed that a mandamus might be issued directing the respond- ents to forbear from making an assessment on the
sales of tobacco. The learned Judges disagreed with these contentions and dismissed the petitions, holding that the impugned Act did not infringe any con3tit.utional provisions, but granted ce1 tificates
under Art. 133 of the Constitution. That is how these appeals come before us. On the arguments addressed to us, two questions arise for our determination : (I) Is the impugned Act repugnant to
Art. 14 for the reason that it singles out Virginia tobacco for taxation ? (2) Is the impugned legislation in con- travention of Art. 286 (I) (bl as imposing a tax on sales in the course of export ?
( l) On the first question the contention of the appellants miiy be thus stated. All laws must satisfy the requirements of Art. 14. Taxation laws are no exception to it. In imposing a tax on the
sales of Virginia tobacco and not on other kinds of tohacco the impugned Act is on the face of it discriminatory. It is therefore obnoxious to Art. 14 and is void, 1 S.C.R. SUPREME COURT REllORTS"'
It is not in dispute that taxation laws must a]so pass the test of Art. 14. That has been laid down recently by this Court in M oopil Nair v. 'I'he 8f,afie of Kerala (1). But in deciding whether a taxa·
tion law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting the persons or objects it will tax, and tha.t a statute is not open to attack on the ground that
it taxes some persons or obje<Jts and not others. It is on]y when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any va~id classification, that it
would be violative of Art. 14. The following state- ment of the law in Willis on "Constitutional Law" page 587, would correctly represent the position with reference to taxing statutes under our
Constitution :- ''A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does
so reasonably …………………… The Supreme Court has been practical and has permitted a very wide latitude . in classification for taxation',, In the light of these principles, we may now proce-
ed to discuss whether the impugned Act is repug· nant to Ar~. 14 of the Constitution. The point for consideration is whether there is in fact a real distinotion between Virginia tobacco and other
tobacco called country tobacco 'Nattu tobacco,. If there is, then the Act is valid, if not it must be held to be unconstitutional. The finding of learned Judges on this point is as follows :-
" Broadly, there are two types,Virginia and Nattu, differing in taste, light, colour and texture …………… There are obvious (I) [1961) 2 S c. R, 77, J96J East India Tobatco
Co. v. State of Andhra Prode!h East India Tobacce Co. v. State.11{ AmlhTo p,.,.tJash A(1arJ. 410 SUPREME OOURT REPORTS [1963] differences between the two categories of to- bacco, in the
nomenclature used, in the process of growing, curing and grading, in the market facilities foreign and inland, in the price and in the variety of uses to which they are put and also the class of cmstomers
that take to them." Thus it will be seen that Virginia tobacco has featu- res which distinguiMh it from countary tobacco, and can be treated as a class in itself. It will therefore be within the power of the State to im-
pose a tax on the sales of Virginia tobacco while exempting the count~y tobacco. It it argu1id for the appellants that to repel the charge of dUicrimination in taxing only Virginia
tobacco, and not the country tobacco, it is not sufficient merely to 1how that there are differences between the two varieties, but that it must further be shown, as held in Budhan Clwudhry v. The St,ate
of Bihar (1) and Shri Ram Krishna Dalmia v. Shri Justice 8. R. Tendolkar ('), that the differtntia bas reasonable relation to the object of the legislation. The differences betwee11 the Virginia tobacco and
the country tobacco, as found be the learned Judged, are not, it is argued, germane to the levy of sales tax, and so there is no valid claBBification. We are unable to agree with this contention. If
a State can validly pick and chose one commodity for taxation and that is not open to attack under Art. 14, the same result must follow when the State vicks out one eategory of goods and subjects
it to taxation. It should, in t.his connection, be remembered that under the law it is for the person who assails a legislation a discriminatory to established that it is not based on a valid classification and it is well
settled that this burden is all the heavier when (1 l c1955J 1. s.c.R. 1045. c2J [19591 s.c.R. 219. I S.C.R. SUPitEME OOU.ltT REPORTS the legiidation u:nder attack is a taxing statute.
''In taxation eyen more than in other fields" it was observed by the Supremo Court of United States in Mad<Uin v. Kentucky (1) "Legislatures possess the greatest freedom in classification. The
burden is on tile one attacking the le~ishtive arrangement to .negative every conceivable basis which might snp:port it". How wide the powers , of the Legislature are in classifying objects for
purposes of taxa1tion will be seen from the follow- ing resume of the law given by Rottschaefer, in his "Constitutional Law" p. 668 :- '1The :Federal Supreme Court has seldom any classification made in connection with
the levying of property taxes. ft has susta- ined the le-vy of a heavier burden of taxation upon motor vehicles using the public high ways than that levied upQn other forms of property, and the imposition of a heavier
tax upon oil than upon other property. The equal prot;ection clause does not prohibit the levy of a. tHi.x on ores which is not imposed upon similar interests in quarries, forests and
other forms of wasting asset, nor even the imposition of a. tax upon anthracite that is not levied upon bituminous coal. A statute providing for the assessment of one type of intangible at its actual value while other intan-
gibles a.re assessed at their face value does not deny e:qua.1 protection even when both a.re subject. to the same rate of tax. The decision of the Supreme Court in this field have permit-
ted a State legislature to exercise an extremely wide discretion in classifying property for tax purposes so long a.s it refrained from clear and hostile discrimination Against particular
persons or classes". A decision near to the present case on the facts is 0. Hei.~ler v. ThomJJs Colliery Company (2). (J) (1&40) 309 US EIS; Bf L. Bd. 590. (2) 260 US 245; 67 L. Bd 237.
1J61 East lndi11 Tob•cco Co. v. St1t1tf Andhra Prod11li Ai)lar J'. East lmlia Tobacco Co. v. State af .Andlira P1 atlesh There the question was whether a law imposiug a tax 011 Anthracite coal and not upon bituminous coal
wns uncon8titutional as violating the equal protec- tion of laws guaranteed by the 14th Amendment to the Federal Constitution. In upholding the validity of the Jaw, Justice Mckenna observed as follows:-
"The fact of competition may be accepted. Both coals, being compositions of carbon are of course capable of combustion and may be used as fuels but under different conditions and manifestations and the difference deter-
mines a. choice between them as fuels. By disregarding that difference and the greater ones which exist and by dwelling on competi- tion alone, it is easy to erect an argument of strength against the taxation of one and not
of the other- But this may not be done. The differences between them are a just basis for their different classification; and the differen- ces are great and important. They differ even
as fuels, they differ fundamentally in other particulars. Anthracite coal has no sutshnti- al 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 that 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 or the power of the State expressed in the cases we have cited. The distinction in the treatment of the respec- . tive coals being within the power conceded by
the cases to the State it has logical and legal justification and is' necessarily, not unreasona- ble or arbitrary". In our Judgment the differences which exist between the Virginia and 'Nattu' oountry tobaooo,
I S.0.R. SUPREME COURT R~POR'rS as found by the learned Judgea, a.re materials on which the State could treat Virginia tobacco as forming a class by itself for purpose of taxation,
and the impugned legislation must be held to be not obnoxious to Art. 14 of the Constitution. (2) It is next argued that the Amendment Act i1 ultra vires because in reality it imposes a tax
on sales in the c.')urse of export and that is hit by Art. 286 (1) (b). The course of business followed by the appellants has already been set out. It may be assumed for the purpose of the present
discussion that the purchases made by the appel- lants on which the ta::x iEI sought to be imposed were made for the purpose of executing specHic orders which they had received from their foreign custo-
mers. The question is whether even so the sales in· question took place in the course of export for the purpose of Art. 286 (1) (b). In suppOTt of their contention that they did, the appeJlants rely on the
following observations· in St,at,e of Travancore-Oochin. v. ·The, Bombay Co. Ltd. (1) :- "A sale by export thus involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and
ending with the delivery of the goods to a common carrier for transport out of the coun- try bay la.nd or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and result-
ant export forms parts of a single transaction. Of these two integrated activities, which together constitute an export sale, whichever first occurs can well be regarded as ta.king
place in the course of the other". Now the contention is that the agreement entered into with the foreign purchasers for sale of the Virginia tobacco, the purchase of the same (J) [l9 52] S. C.R. 1112, Ul8.
l!Jut India Tobacco Stat.a! A. ndlira Pradtsll .fiyar J. llMI Will ToJ"'° c.. SW.ti """'• p,..,,, SUPREME OOURT REPORTS [1963] locally by the appellants for performing the con- tract and their subsequent export to the foreign
purchasers must all be held to form one integrated trn.nsaction of sale in the course of export. Now the observations quoted above were made in refutation of the contention that the
expression "sale in the course of export or import" meant only a sale which takes place while the goods are actually in movement, in the course of export or import, as for example, when shipping docu-
ments are endorsed and delivered when the goods are in transit. This Court held that this was too narrow an interpretation to put on the words in question and that a sale which actually occasions
the export or import would fall within Art. 286 (1) (b). The question whether sales which precede export are sales in the course of export within Art. 286 (1) (b) arose directly for decision in State of
Trarxmcore-Oonhin v. Shanmuga VilaB Oaakew Ntl.t Factory(') and it was held that they were not. Explaining, in the course of the judgment, the true scope of the obs11rvations in State of Travancore-
Oonhin'8 caae (') quoted a.hove, Patanjali Sastri, C.J. observed :-· "The phrase 'integrated activities' was used in the previous decision to denote that 'such a sale' (i. e., a sale which occasions the
export) 'cannot be dissociated from the export without which it cannot be effectuated, and the sale and the resultant export from parts of a single transaction'. It is in that sense
that the two activities-the sale ud the export-were said to be integrated .. A pur· chase for the purpose of export like produc- tion or manufacture for export, is only Ml act preparatory to export and cannot, in our opi·
nion, be regarded as an act done 'in the course (I) ~J!IMJl5.1C.(R. 53, {2)[[1952) S. C.R. 1112, lll8. l I s.c.:e.. SUPREME OOURT REPORTS of the export of the goods out of the territory
of India', and more than the other two activi- ties can be so regarded." We may refer to two other decisions of this Court where this question has been considered. In The, St,ate of Madras v. Guriviak Npidue & Co. Ltd.(1),
the facts were that an assessee secured orders for the supply of untanned hides and skins from London purchasers and then, he purchased them locally in order to implement those orders and ex-
ported them, and the question was whether a tax on those purchases was hit by Art. ~86(l)(b). In hold- ing that it was not, this Court observed :- "Such purchases were, it is true, for the
purpose of export but such purchases did not themselves occasion the export and consequ- ently did not fall within the exemption of Art. 286(l)(b) of the Constitution as held by this Court in The, State of Travancore-Cockin v.
The Bombay Company Ltd. ((1952] S.C.R. 1112). Nor did such purchases in the State by the exporter for the purpose of export come within the ambit of Art. 286(1)(b), as held by the
decision of the majority in The St,ate of Travan- C<Yre Cochin v. Shanmuga V ilaB Caske.w Nut Factory ((1954] S.C.R. 53)." The point came up again .for consideration before this Court in The, 8tme of Mysore v. Mysore
Spinning & Manufacturing Co. (2) and it was held following the decision cited above that Art.286((l)(b) could be invoked only in :respect of the sale which occasions the export, and not of any sales precedent
to it. On these authorities the law muat be taken· to be well settled that it ia only the sale under which the export is made that is protected by Art. 286 (l)(b), and that a purchase which precedes such a
(1) A.LR. 1956 S.C. 158. (2) A I.R. 1958 S.C. 1002, 1005. 196! East India Tob"co 011. Slate of .Antlllra Prai1slt A.b• .J.