Purchase tax validity and limits on trade restraints, while inter-State transport controls were struck down as unauthorised.

Purchase tax under sections 3A and 5A of the Bihar Sales Tax Act, 1959 was upheld because a tax infringes article 301 only when it directly and immediately impedes trade; the levy on notified goods was not shown to have that effect, so Presidential sanction under article 304(b) was not required. The State provisions were also found consistent with section 15 of the Central Sales Tax Act, 1956, as the purchase tax on declared goods operated at the first point and within the statutory ceiling. However, rule 31B and the December 26, 1967 notification were held unauthorised because they extended transport control to inter-State movement and went beyond the State's power.

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Issues: (i) whether the levy of purchase tax under sections 3A and 5A of the Bihar Sales Tax Act, 1959 required Presidential sanction under article 304(b) of the Constitution of India as a restriction on freedom of trade under article 301; (ii) whether sections 3A and 5A and rule 8C were inconsistent with section 15 of the Central Sales Tax Act, 1956; and (iii) whether rule 31B of the Bihar Sales Tax Rules, 1959 and the notification dated December 26, 1967, were authorised.

Issue (i): whether the levy of purchase tax under sections 3A and 5A of the Bihar Sales Tax Act, 1959 required Presidential sanction under article 304(b) of the Constitution of India as a restriction on freedom of trade under article 301.

Analysis: A tax does not in every case directly and immediately restrict the free flow of trade. The constitutional prohibition in article 301 is attracted only when the levy operates as a direct and immediate impediment to trade, commerce or intercourse. The purchase tax imposed on notified goods was not shown on the facts pleaded to have such a direct and immediate restrictive effect. It was therefore not necessary for the validity of the levy to derive support from article 304(b).

Conclusion: The challenge under article 301 failed, and sections 3A and 5A were not invalid for want of Presidential sanction.

Issue (ii): whether sections 3A and 5A and rule 8C were inconsistent with section 15 of the Central Sales Tax Act, 1956.

Analysis: Section 15 of the Central Sales Tax Act, 1956 restricts the tax on declared goods to the prescribed rate and one stage of levy. Jute was a declared good, but the purchase tax under section 3A was levied at the first point of purchase and the rate was not shown to exceed the statutory ceiling. On that basis, the State provisions were not repugnant to the central law.

Conclusion: Sections 3A and 5A were not inconsistent with section 15 of the Central Sales Tax Act, 1956.

Issue (iii): whether rule 31B of the Bihar Sales Tax Rules, 1959 and the notification dated December 26, 1967, were authorised.

Analysis: The State's power under section 42 of the Bihar Sales Tax Act, 1959 extends only to measures ancillary or incidental to levy, collection and recovery of intra-State sales or purchase tax. Rule 31B and the notification were framed in terms that restricted transport of goods to places outside Bihar and therefore operated upon inter-State movement and transactions beyond the State's taxing competence. They were not confined to preventing evasion of intra-State tax liability and exceeded the authority conferred by the Act.

Conclusion: Rule 31B and the notification dated December 26, 1967, were ultra vires, and the related communication to the railway authorities was unauthorised.

Final Conclusion: The statutory levy of purchase tax remained valid, but the transport control measures extending to inter-State movements were struck down as beyond the State's authority.

Ratio Decidendi: A State sales tax measure is not void merely because it imposes purchase tax; article 301 is infringed only by a direct and immediate restraint on trade, and regulatory provisions aimed at tax enforcement must remain confined to intra-State transactions within the State's legislative competence.

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