Turnover-based sales tax surcharge upheld where inter-State and export sales were used only for classification, not taxation.

A surcharge on sales tax was treated as valid when it operated only on intra-State sales, while inter-State and export sales were used merely to identify dealers by gross turnover; inclusion of those transactions for classification did not amount to taxing them outside the State's competence. Turnover-based classification was accepted as a rational measure linked to capacity to pay, and the surcharge was found neither discriminatory nor confiscatory because the rate was uniform and no material showed that the levy destroyed the business. The Drugs (Price Control) Order, 1979 did not displace the surcharge, as any overlap with price control was only incidental and the levy remained constitutionally valid.

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Issues: (i) whether surcharge under section 5 of the Bihar Sales Tax Third Ordinance, 1980 and section 5 of the Bihar Finance Act, 1981 was beyond the legislative competence of the State Legislature because gross turnover included inter-State and export sales; (ii) whether the surcharge was discriminatory or confiscatory and violative of Articles 14 and 19(1)(g) of the Constitution of India; and (iii) whether the prohibition on collection of surcharge was ineffective against dealers governed by the Drugs (Price Control) Order, 1979.

Issue (i): whether surcharge under section 5 of the Bihar Sales Tax Third Ordinance, 1980 and section 5 of the Bihar Finance Act, 1981 was beyond the legislative competence of the State Legislature because gross turnover included inter-State and export sales

Analysis: The levy operated only on intra-State sales, which were within the State's taxing power. Inter-State sales and export sales were taken into account only as a basis for selecting the class of dealers liable to surcharge. Inclusion of such transactions in gross turnover for classification or registration purposes did not amount to taxing them. The provision therefore remained within the field of sales tax legislation and did not trench upon the forbidden area.

Conclusion: The challenge on the ground of legislative incompetence failed.

Issue (ii): whether the surcharge was discriminatory or confiscatory and violative of Articles 14 and 19(1)(g) of the Constitution of India

Analysis: Classification based on gross turnover was held to be a rational basis linked to the capacity to pay. Dealers with larger turnover formed a distinct class and could validly be subjected to higher incidence. The rate of surcharge was uniform across all covered dealers, and variations in the underlying sales tax rates did not make the surcharge arbitrary. On confiscation, the material placed did not establish that the levy made the business impossible or deprived the dealers of a real profit; individual hardship or private contractual arrangements could not control the validity of a taxing statute.

Conclusion: The surcharge was neither discriminatory nor confiscatory, and there was no violation of Articles 14 or 19(1)(g) of the Constitution of India.

Issue (iii): whether the prohibition on collection of surcharge was ineffective against dealers governed by the Drugs (Price Control) Order, 1979

Analysis: The price-control regime fixed prices with a fair return and permitted realisation of local taxes, but the State levy fell within the State list and was constitutionally valid. Any overlap with the Central regulatory scheme was only incidental. The order did not compel collection of surcharge, and the petitioners could seek price revision under the order. The levy did not amount to an unreasonable restriction on the right to carry on business.

Conclusion: The Drugs (Price Control) Order, 1979 did not nullify the surcharge provision or render it unconstitutional.

Final Conclusion: The impugned surcharge provisions were upheld in full and the writ applications failed.

Ratio Decidendi: A surcharge on sales tax remains within legislative competence when it is imposed only on intra-State sales, while inter-State or export transactions are used merely for turnover-based classification; turnover-based classification is valid if it bears a rational relation to capacity to pay and does not establish confiscation or unconstitutional discrimination.

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