Sales tax surcharge under State law upheld as valid despite incidental impact on price control and turnover-based classification.

Section 5 of the Bihar Finance Act, 1981 was upheld as a valid sales tax measure under entry 54 of List II, with its effect on price control treated as incidental and no repugnancy found against the Essential Commodities Act, 1955 or the Drugs (Price Control) Order, 1979. The surcharge classification based on gross turnover was sustained as a rational fiscal distinction linked to economic capacity, and the fact that dealers were restrained from passing on the burden did not make the levy unconstitutional under Articles 14 or 19(1)(g). The turnover criterion could include wider sales only as a basis for classification, not taxation of those sales. Presidential assent was held not open to judicial review.

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Issues: (i) Whether section 5(3) of the Bihar Finance Act, 1981, prohibiting recovery of surcharge, was invalid for want of legislative competence or for repugnancy with the Essential Commodities Act, 1955, and the Drugs (Price Control) Order, 1979; (ii) Whether section 5(3) offended Articles 14 and 19(1)(g) of the Constitution of India; (iii) Whether the gross turnover criterion in section 5(1) could validly include sales outside the State or in the course of inter-State trade for the purpose of classifying dealers liable to surcharge; (iv) Whether the assent of the President to the Act was open to judicial scrutiny.

Issue (i): Whether section 5(3) of the Bihar Finance Act, 1981, prohibiting recovery of surcharge, was invalid for want of legislative competence or for repugnancy with the Essential Commodities Act, 1955, and the Drugs (Price Control) Order, 1979.

Analysis: The charging and prohibitory provisions of section 5 were held to fall within the State's taxing field under entry 54 of List II. The impugned provision was examined on the test of pith and substance, and the Court held that the State law remained a law on sales tax, with any impact on price control only incidental. Repugnancy under Article 254 was held inapplicable because the State law and the Central control order operated in distinct fields: taxation on sales on the one hand, and regulation of prices of essential commodities on the other. In the case of formulations, paragraph 24 of the Control Order governed manufacturers and producers, and it did not create any conflict with section 5(3). The non obstante clause in section 6 of the Essential Commodities Act, 1955, was therefore not attracted.

Conclusion: Section 5(3) was upheld as constitutionally valid and not repugnant to the Central law.

Issue (ii): Whether section 5(3) offended Articles 14 and 19(1)(g) of the Constitution of India.

Analysis: The surcharge applied uniformly to dealers within the defined class, namely those whose gross turnover exceeded the prescribed threshold. The classification was founded on economic capacity and was treated as a rational basis for fiscal differentiation. The Court also held that a sales tax measure does not lose its character merely because the legislature prevents the dealer from passing on the surcharge to purchasers. No material was shown to establish that the burden was confiscatory or disproportionate.

Conclusion: The challenge under Articles 14 and 19(1)(g) failed, and the provision was upheld.

Issue (iii): Whether the gross turnover criterion in section 5(1) could validly include sales outside the State or in the course of inter-State trade for the purpose of classifying dealers liable to surcharge.

Analysis: The Court held that the turnover reference was not used to tax inter-State, outside-State, import, or export sales. It was used only as a measure for identifying dealers having sufficient economic strength to bear surcharge on intra-State taxable sales. The provision was supported by territorial nexus and by the principle that the State may use turnover as a basis for classification so long as the taxed subject remains within its competence.

Conclusion: The gross turnover criterion was held valid and within legislative competence.

Issue (iv): Whether the assent of the President to the Act was open to judicial scrutiny.

Analysis: The constitutional process under Articles 200 and 201 was treated as a matter beyond judicial review in this context. The Court held that it could not inquire into the Governor's decision to reserve the Bill or into the President's assent once given.

Conclusion: The assent of the President was held to be not justiciable.

Final Conclusion: The Court sustained the surcharge scheme under section 5 of the Bihar Finance Act, 1981, rejected the constitutional challenges, and maintained the levy and the bar on collection by dealers.

Ratio Decidendi: A State taxing measure under entry 54 of List II remains valid if, in pith and substance, it is a tax on sales, and it does not become repugnant to a Central price-control law merely because it incidentally affects the dealer's ability to pass on the tax; repugnancy arises only where both laws operate in the same concurrent field and are truly inconsistent.

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