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Issues: (i) Whether the amended section 15(1)(b) of the Assam Sales Tax Act and rule 80 of the rules, insofar as they confined the exemption to goods purchased for resale in the State and required a declaration to that effect, were ultra vires Article 286(2) of the Constitution. (ii) Whether the same provisions imposed an unreasonable restriction on the petitioner's right to carry on trade under Article 19(1)(g) of the Constitution.
Issue (i): Whether the amended section 15(1)(b) of the Assam Sales Tax Act and rule 80 of the rules, insofar as they confined the exemption to goods purchased for resale in the State and required a declaration to that effect, were ultra vires Article 286(2) of the Constitution.
Analysis: The amendment withdrew the deduction previously available to a registered dealer unless the goods were purchased for resale in the State, and rule 80 compelled a declaration in that form. The effect was to make the seller's deduction depend on the purchaser's undertaking, thereby exposing purchases intended for resale outside the State to tax and coercive consequences. The first judge treated this as, in substance, authorising taxation of transactions connected with inter-State trade. The second judge held that the petitioner's own transactions, on the facts, were not inter-State transactions, but still concluded that the amended scheme exposed the provisions to constitutional invalidity because of their operation in relation to dealers whose sales or purchases fell within the protected field.
Conclusion: The impugned amendment and rule 80 were held invalid and unenforceable to the extent challenged, and the objection under Article 286(2) succeeded.
Issue (ii): Whether the same provisions imposed an unreasonable restriction on the petitioner's right to carry on trade under Article 19(1)(g) of the Constitution.
Analysis: The coercive declaration requirement and the tax consequence attached to non-compliance were treated as materially affecting the petitioner's business freedom. The Court accepted that a valid tax may burden trade, but found that a measure which operated through an unconstitutional restriction and threatened prosecution could not be sustained against the petitioner's right to carry on business.
Conclusion: The challenge under Article 19(1)(g) was accepted to the extent necessary to support relief.
Final Conclusion: The petition was allowed and relief was granted by prohibiting enforcement of the impugned amendment and rule against the petitioner.
Ratio Decidendi: A statutory restriction that, in substance, conditions tax exemption on a declaration confining resale to the State and thereby operates to burden protected inter-State trade cannot be sustained under Article 286(2), and an enforcement mechanism built on such an invalid restriction is unenforceable.
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