Right to equality no bar to classify citizens: SC

Court says judiciary is ill-equipped to go into large latitudes given to the legislature to classify people

A Bench of Justices H L Dattu and C K Prasad said that judiciary “is ill-equipped” to go into “large latitudes” given to the legislature to classify people in this regard.

“Discrimination resulting from fortuitous circumstances arising out of particular situations, in which some of the tax payers find themselves, is not hit by Article 14 if the legislation, as such, is of general application and does not single them out for harsh treatment.
“Advantages or disadvantages to individual assesses are accidental and inevitable and are inherent in every taxing statute as it has to draw a line somewhere and some cases necessarily fall on the other side of the line,” the court said.

The bench noted that it has been laid down in a large number of decisions of the apex court that a taxation statute, for the reasons of functional expediency and even otherwise, can pick and choose to tax some.

“The power of the legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways. Even so, large latitude is allowed to the state for classification upon a reasonable basis and what is reasonable is a question of practical details and a variety of factors which the court will be reluctant and perhaps ill-equipped to investigate,” it said. The apex court said that the taxation laws were no exception to the application of this principle of equality enshrined in Article 14 of the Constitution.

But “Article 14 does not prohibit reasonable classification of persons, objects and transactions by the legislature for the purpose of attaining specific ends.
To satisfy the test of permissible classification, it must not be “arbitrary, artificial or evasive” but must be based on some real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the legislature,” the bench said.

The court made the ruling while allowing a batch of eight appeals filed by the government against the decision of the Gujarat High Court, which had held that a provision of the Finance (No 2) Act, 1998, was violative of Article 14 (right to equality) of the Constitution as it sought to deny the benefit of the “Kar Vivad Samadhana Scheme, 1998” to those who had to pay arrears of duties.