Ordinance satisfaction and sales tax levy under trade freedom provisions: challenges fail, with only prospective exemption preserved.

Governor's satisfaction for promulgating an ordinance under Article 213 was treated as non-justiciable on the sufficiency of circumstances, and colourable exercise was confined to legislative competence rather than motive; the challenge to successive ordinances therefore failed. Additional sales tax under section 3B was held not to impose a direct and immediate restriction on trade under Article 301 and, as a non-discriminatory sales tax, did not require Presidential sanction under Article 304(b); the levy was therefore valid. A later exemption notification operated prospectively only, so liability for the earlier period remained unaffected and the notice could not be quashed for that period.

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Issues: (i) whether successive ordinances amending the Bihar Sales Tax Act could be struck down on the ground that the Governor's satisfaction under Article 213 was justiciable or that the power was exercised colourably or fraudulently; (ii) whether the levy of additional sales tax under section 3B offended the freedom of trade under Article 301 or required Presidential sanction under Article 304(b); and (iii) whether the impugned notice and levy could be quashed despite the later exemption notification.

Issue (i): whether successive ordinances amending the Bihar Sales Tax Act could be struck down on the ground that the Governor's satisfaction under Article 213 was justiciable or that the power was exercised colourably or fraudulently

Analysis: The challenge to the ordinances rested on the contention that the Court could enquire into the existence of circumstances justifying immediate legislative action and could also examine whether repeated promulgation amounted to colourable or fraudulent exercise of the ordinance-making power. The governing principle applied was that the satisfaction required for promulgation under Article 213 is a matter for the Governor alone and is not ordinarily open to objective judicial review. The Court treated the doctrine of colourable legislation as relating to legislative competence and not to the motives of the lawmaker, and held that the same approach applied to an ordinance promulgated as legislative action. The later Supreme Court decision concerning administrative satisfaction under company-law powers was distinguished as dealing with an administrative order and not a legislative act.

Conclusion: The challenge to the ordinances on the grounds of lack of justifying circumstances, colourable exercise of power, or fraudulent exercise of power failed.

Issue (ii): whether the levy of additional sales tax under section 3B offended the freedom of trade under Article 301 or required Presidential sanction under Article 304(b)

Analysis: The Court applied the settled test that only restrictions operating directly and immediately on the free flow of trade, commerce, or intercourse fall within Article 301. A tax on sale or purchase does not by itself amount to such a direct impediment unless it operates as a barrier to movement of goods. The additional tax was treated as a non-discriminatory sales tax measure and not as a regulatory or movement-restricting impost. The notification relating to transport of biri leaves was found not to affect the petitioners' trade in biris, and the later Central excise duty on unmanufactured tobacco did not alter the legal position. Since the levy did not constitute a restriction requiring recourse to Article 304(b), there was no occasion for Presidential sanction under the proviso to Article 213.

Conclusion: The additional sales tax did not violate Article 301 and did not require previous Presidential sanction.

Issue (iii): whether the impugned notice and levy could be quashed despite the later exemption notification

Analysis: Although the petitioners challenged the notice issued to enforce registration and payment of additional tax, the Court noted that a later notification exempted tobacco, including hand-made biris, from the levy with effect from 1 August 1972. The exemption operated prospectively and did not erase liability for the earlier period during which the ordinance and levy remained in force. Accordingly, the petitioners' liability up to 31 July 1972 was unaffected.

Conclusion: The notice and levy were not liable to be quashed for the period preceding 1 August 1972.

Final Conclusion: The constitutional and statutory challenges to the additional sales tax failed, and only the prospective exemption from 1 August 1972 survived, leaving the earlier liability intact.

Ratio Decidendi: A tax on sales does not infringe Article 301 unless it directly and immediately restricts trade, and the Governor's satisfaction for promulgating an ordinance under Article 213 is not ordinarily open to judicial review as to sufficiency of circumstances.

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