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Mr. Salve, however, rightly reminded us that regulatory measures or measures imposing compensatory taxes for using trading facilities do not come within the purview of restrictions contemplated under article 301. Ratio |
Here, it is necessary to refer to the deci sion of this Court in the Automobile Transport (Rajasthan) Ltd. vs The State of Rajasthan & Ors., [1963] 1 SCR 491 which was a decision of a bench of this Court consisting of 7 learned Judges, and was concerned with the Rajasthan Motor Vehicles Taxation Act, 1951. Ratio |
Sub section (1) of section 4 of that Act provided that no motor vehicle shall be used in any public place or kept for use in Rajasthan unless the owner thereof had paid in respect of it, a tax at the appropriate rate specified in the schedules to that Act within the time allowed. Ratio |
The appellants therein were carrying on the busi ness of plying stage carriages in the State of Ajmer. Ratio |
They held permits and plied their buses on diverse routes. Ratio |
There was one route which lay 741 mainly in Ajmer State but it crossed narrow strips of the territory of the State of Rajasthan. Ratio |
Another route, Ajmer to Kishangarh, was substantially in the Ajmer State, but a third of it was in Rajasthan. Ratio |
Formerly, there was an agree ment between the Ajmer State and the former State of Kishan garh, by which neither State charged any tax or fees on vehicles registered in Ajmer or Kishangarh. Ratio |
Later, Kishan garh became a part of Rajasthan. Ratio |
On the passing of the Rajasthan Motor Vehicles Taxation Act, 1951, and the promul gation of the rules made thereunder, the Motor Vehicles Taxation Officer, Jaipur, demanded of the appellants payment of the tax due on their motor vehicles for the period from April 1, 1951 to March 31, 1954. Ratio |
The appellants challenged the legality of the demand on the grounds that section 4 of the Act read with the Schedules constituted a direct and immedi ate restriction on the movement of trade and commerce with and within Rajasthan inasmuch as motor vehicles which car ried passenger and goods within or through Rajasthan ... |
It was held by Das, Kapur, Sarkar and Subba Rao, JJ. as the learned Judges then were, that the Rajasthan Motor Vehicles Taxation Act, 1951 did not violate the provisions of article 301 of the Constitution of India and that the taxes imposed under the Act were compensatory or regulatory taxes which did not hinder the fr... |
Das, Kapur and Sarkar, JJ. held that the concept of freedom of trade, commerce and intercourse postulated by article 301 must be understood in the context of an ordinary society and as part of a Constitution which envisaged a distribution of powers between the States and the Union, and if so understood, the concept mus... |
Mr. Justice Subba Rao, as the learned Chief Justice then was, observed that the freedom declared under article 30 1 referred to the right of free movement of trade without any obstructions by way of barriers, inter State or intra State, or other impediments operating as such barriers; and the said freedom was not imped... |
Parliament may be law impose restrictions, it was stated, on such freedom in the public interest, and the States also, in exercise of their legislative power, may impose similar restrictions, 742 subject to the proviso mentioned therein. Ratio |
Laws of taxation were not outside the freedom enshrined either in article 19 or 301. Ratio |
Mr. Justice Hidayatullah, as the learned Chief Justice then was, and Rajagopala Ayyangar and Mudholkar, JJ. Ratio |
held that section 4(1) of the Rajasthan Motor Vehicles Taxation act, 195 1 offended article 301 of the Constitution, and as resort to the procedure prescribed by article 304(b) was not taken it was ultra vires the Constitution. Ratio |
The pith and substance of the Act was the levy of tax on motor vehicles in Rajasthan or their use in that State irrespective of where the vehi cles came from and not legislation in respect of inter State trade or commerce. Ratio |
A tax which is made the condition prece dent of the right to enter upon and carry on business is a restriction on the right to carry on trade and commerce within article 30 1 of the Constitution. Ratio |
The act was not, in its true character, regulatory. Ratio |
In judging the situation it would be instructive to bear in mind the obser vations of Mr. Justice Das at p. 5 12 of the report, where he observed that in evolving an integrated policy on this subject our Constitution makers seem to have kept in mind three main considerations which may be broadly stated thus: first, in ... |
At p. 523 of the report, it was reiterated that for the tax to become a prohibited tax it has to be a direct tax the effect of which is to hinder the movement part of trade. Ratio |
Dealing with wide interpretation Justice Das observed at p. 523 5 of the said report as follows: "The widest view proceeds on the footing that article 301 imposes a general restriction on legislative power and grants a freedom of trade, commerce and intercourse in all its series of operations, from all barriers, from a... |
This in actual practice will mean that if the State Legislature wishes to control or regu late trade, commerce and intercourse in such a way as to facilitate its free movement, it must yet proceed to make a law under article 304(b) and no such bill can be introduced or moved in the Legislature of a State without the pr... |
The practi 743 cal effect would be to stop or delay effective legislation which may be urgently necessary. Ratio |
Take, for example, a case where in the inter ests of public health, it is necessary to introduce urgently legislation stopping trade in goods which are deleterious to health, like the trade in diseased potatoes in Australia. Ratio |
If the State Legislature wishes to introduce such a bill, it must have the sanction of the President. Ratio |
Even such legislation as imposes traffic regulations would require the sanction of the President. Ratio |
The learned Judge reiterated that the Court will have to ascertain whether the impugned law in a given case affects directly the said movement or indirectly and remotely affects it. Ratio |
Mr. Salve, however, sought to contend that as regards the local sales tax, there were broadly two well accepted propositions, namely, sales tax was a tax levied for the purpose of general revenue. ARG |
Secondly, it was neither a compensatory tax nor a measure regulating any trade. ARG |
Reli ance was placed on the observations of Mr. Justice Raghubar Dayal, J. in Firm A.T.B. Mehtab Majid & Co. vs State of Madras & Anr., ; but the context in which the said observations were made has to be examined. Ratio |
That case dealt with a petition under article 32 of the Consti tution. Ratio |
The petitioners therein were dealers in hides and skins in the State of Madras. Ratio |
The main contention was that the tanned hides and skins imported from outside and sold inside the State were, under r. 16 of the Madras General Sales Tax Rules, subject to a higher rate of tax than the tax imposed on hides and skins tanned and sold within the State and this discriminatory taxation offended article 304 ... |
The contentions of the respondents therein were that sales tax did not come within the purview of article 304(a) as it was not a tax on the import. Ratio |
of goods at the point of entry, that the impugned rule was not a law made by the State legislature, that the im pugned rule by itself did not impose the tax but fixed the single point at which the tax was imposed by sections 3 & 5 of the Act was to 744 be levied; and that the impugned rule was not made with an eye on t... |
It was held that taxing laws can be restrictions on trade, commerce and intercourse, if they hamper the flow of trade and if they are not what can be termed to be compensatory taxes or regulating measures. Ratio |
Reliance was also placed by Mr. Salve on the observa tions of Justice Raghubar Dayal in A. Hajee Abdul Shakoor & Co. vs State of Madras, 17 at 225. Ratio |
See also the observations in State of Madras vs N.K. Nataraja Mudali ar; , at 847 and Andhra Sugars Ltd. & Anr. Ratio |
vs State of Andhra Pradesh & Ors., ; where at p. 7 18 of the report it was reiterated that a sale tax which discriminates against goods imported from other States may impede the free flow of trade and is then invalid unless protected by article 304(a). Ratio |
It is, however, necessary to bear in mind that in N.K.N. Mudaliar 's, case (supra) at p. 850 Mr. Justice Bachawat after referring to several cases observed as follows: "But, there can be no doubt that a tax on such sales would not normally offend Article 301. Ratio |
That Article makes no distinction between movement from one part of the State to another part of the same State and movement from one State to another. Ratio |
Now, if a tax on intra State sale does not offend Article 301, logically, I do not see how a tax on inter State sale can do so. Ratio |
Neither tax operates directly or imme diately on the free flow of trade or the free movement of the transport of goods from the part of the country to the other. Ratio |
The tax is on the sale. Ratio |
The movement is incidental to and a consequence of the sale. Ratio |
" There was a reference in the said judgment to the obser vations of Jagannathadas, J. in The Bengal Immunity Co. Ltd. vs State of Bihar, at 754 wherein it was stated: "Now it is not disputed that a tax on a purely internal sale which occurs as a result of the transportation of goods from a manufacturing centre within ... |
If a sale in that kind of trade can bear the tax and is not a burden on the freedom of trade, it is difficult to see why a single point tax on the same kind of sale where a State boundary intervenes bet 745 ween the manufacturing centre and the consum ing centres need be treated as a burden, especially where that tax i... |
Freedom of trade and commerce applies as much within a State as outside it. Ratio |
It appears to me again, with great respect, that there is no warrant for treating such a tax as in any way contrary either to the letter or the spirit of the freedom of trade, commerce and ' intercourse provided under Article 301. Ratio |
" It was contended that the ex hypothesi violates article 301 of the Constitution since it is a tax on inter State movement of goods. Ratio |
Shah, J. in Mudali ar 's case (supra) at p. 84 1 of the report observed that tax under the on interState sales, it must be noticed, is in its essence a tax which encumbers movement of trade or commerce, if it (a) occasions the movement of goods from one State to another; (b) is effected by a trans fer of documents of t... |
It was contended by Mr. Salve that by exempting the local manufacturers from both local and central sales tax, the State Govt. has clearly made the imposition of both local and central sales tax discriminato ry and prejudicial to outside goods. Ratio |
The goods of the local manufacturer, when sold by him, do not bear any tax whereas the goods imported from outside the State have to bear the burden of sales tax. Ratio |
It was also contended that similarly, the goods of a 'local manufacturer, when exported from the State of U.P. do not have to bear tax, while goods brought into the State of U.P. and further ex , ported in competi tion with the local goods have to bear the tax, so there is clear discrimination against goods produced by... |
The discrimination within the meaning of article 301 read with article 304 arises where there is a difference in the rates of sales tax levied, it was sought to be emphasised by Mr. Sanjay Parikh for some of the peti tioners. Ratio |
This proposition has been reiterated by this Court in a large number of cases, according to counsel, and we were referred to the observations in State of Madhya Pradesh vs Bhailal Bhai & Ors., ; at 268 9 and Mudal iar 's case (supra) where at p. 847 Shah, J. reiterated that imposition of differential rates of tax by th... |
It was also reiterated by this Court in Rattan Lal & Co. & Anr. PRE |
vs The Assessing Authority & Anr. PRE |
, ; at 557 dealing with the Punjab General Sales Tax Act that when a taxing State was not imposing rates of tax on imported goods different from the rates of 746 tax on goods manufactured or produced, article 304 had no application. PRE |
So long as the rate was the same, article 304 was satisfied. PRE |
Reference was made to India Cement & Ors.vs State of Andhra Pradesh & Ors. whereas at p. 759 this Court observed that variation of the rate of inter state sales tax did affect free trade and commerce and created a local preference which was contrary to the scheme of Part XIII of the Constitution. PRE |
To similar effect are the observations to which Mr. Sanjay Parikh has referred us in Weston Electronics & Anr. PRE |
vs State of Gujarat & Ors. PRE |
Mr. Salve strongly relied on the observations of Justice Cardozo in C.A.F. Seeling Inc. vs Charles H. Baldwin, at 1038 where the learned Judge observed while he was dealing with article (1) section 8, clause (3) of the American Constitution which is known as the 'Commerce Clause ' "This part of the Constitution was fra... |
It was framed upon the theory that the peoples of the several States must sink or swim together and that in the long run prosperity and salvation are in union and not division". Ratio |
This passage has been cited with approval in this Court in Atiabari 's case (supra) by Gajendragadkar, J. as aforesaid. Ratio |
We were referred to the observations of Firm A.T.B. Mehtab Majid & Co.s case ; at 445. Ratio |
It was contended that the acceptance of the petitioner 's case would not conflict with the plenary power of the State to grant exemptions under the Act because statutory powers have to yield to constitutional inhibitions and, therefore, article 304(a) & (b) being envisaged to safeguard the eco nomic unity of the countr... |
It was also contended that the petitions under article 301 read with 304(a) are clearly maintainable. ARG |
Reliance was placed in Smt. ARG |
In light of these, it was contended by the petitioners that the petition under article 32 is clearly maintainable. ARG |
The question as we see is, how to harmonise the con struction of the several provisions of the Constitution. Ratio |
It is true that if a particular provision being taxing provi sion or otherwise impedes directly or immediately the free flow of trade within the Union of India then it will be violative of article 301 of the Constitution. Ratio |
It has further to be borne in mind that article 301 enjoins that trade, commerce and 747 intercourse throughout the territory of India shall be free. Ratio |
The first question, therefore, which one has to examine in this case is, whether the sales tax provisions (exemption etc.) in these cases directly and immediately restrict the free flow of trade and commerce within the meaning of article 30 1 of the Constitution. Ratio |
We have examined the scheme of article 30 1 of the Constitution read with article 304 and the observations of this Court in Atiabari 's case (supra), as,also the observations made by this Court in Automobile Transport, Rajasthan 's case (supra). Ratio |
In our opinion, Part XIII of the Constitution cannot be read in isolation. Ratio |
It is part and parcel of a single constitutional instrument envis aging a federal scheme and containing general scheme confer ring legislative powers in respect of the matters relating to list II of the 7th Schedule on the State. Ratio |
It also confers plenary powers on States to raise revenue for its purposes and does not require that every legislation of the State must obtain assent of the President. Ratio |
Constitution of India is an organic document. Ratio |
It must be so construed that it lives and adapts itself to the exigencies of the situation, in a growing and evolving society, economically, politically and socially. Ratio |
The meaning of the expressions used there must, therefore, be so interpreted that it attempts to solve the present problem of distribution of power and rights of the different States in the Union of India, and anticipate the future contingencies that might arise in a developing organism. Ratio |
Constitution must be able to comprehend the present at the relevant time and anticipate the future which is natural and necessary corollary for a growing and living organism. Ratio |
That must be part of the constitutional adjudica tion. Ratio |
Hence, the economic development of States to bring these into equality with all other States and thereby devel op the economic unity of India is one of the major commit ments or goals of the constitutional aspirations of this land. Ratio |
For working of an orderly society economic equality of all the States is as much vital as economic unity. Ratio |
The taxes which do not directly or immediately restrict or interfere with trade, commerce and intercourse throughout the territory of India, would therefore be excluded from the ambit of article 301 of the Constitution. Ratio |
It has to be borne in mind that sales tax has only an indirect effect on trade and commerce. Ratio |
Reference may be made to the Constitution bench judgment of this Court in Andhra Sugar Ltd. & Anr.vs State of A. P. & Ors., where this Court observed that normally a tax on sale of goods does not directly impede the free movement of transport. Ratio |
See also the observations in Mudaliar 's case (supra) where at p. 851 it was observed that a tax on sale would not normally offend article 301. Ratio |
That 748 article made nO distinction between movement from one part of State to another part of the same State and movement from one State to another. Ratio |
In this connection, reference may also be made to the observations in Bengal Immunity 's case (supra). Ratio |
Both the preceding cases clearly establish that if a taxing provision in respect of intra State sale does not offend article 30 1, logically it would not affect the freedom of trade in respect of free flow and movement of goods from one part of the country to the other under article 301 as well. Ratio |
It has to be examined whether difference in rates per se discriminates so as to come within articles 301 and 304(a) of the Constitution. Ratio |
It is manifest that free flow of trade between two States does not necessarily or generally depend upon the rate of tax alone. Ratio |
Many factors including the cost of goods play an important role in the movement of goods from one State to another. Ratio |
Hence the mere fact that there is a difference in the rate of tax on goods locally manufac tured and those imported would not amount to hampering of trade between the two States within the meaning of article 301 of the Constitution. Ratio |
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