Anti-evasion transport controls upheld, but declaration forms cannot be denied solely for unpaid disputed tax.

A fiscal transport-control rule designed to support verification, assessment and anti-evasion measures was treated as a valid regulatory incident of the taxing power, not a direct prohibition on trade. The constitutional challenge under article 301 failed because the rule did not impose a direct and immediate restraint on movement of goods. The rule was, however, read down so that declaration forms or exemption could be refused for non-payment of admitted dues, but not merely because genuinely disputed tax remained unpaid, as that would amount to coercive recovery by extra-legal means.

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Issues: Whether the amended rule 45(b) of the Bihar Sales Tax Rules, 1983 was ultra vires section 31(2a) of the Bihar Finance Act, 1981 and beyond the legislative competence of the State; whether it violated article 301 of the Constitution of India; whether it was arbitrary and oppressive to the extent it required payment of disputed tax as a condition for grant of declaration forms or exemption; and whether it could validly be applied to refuse forms or exemption for non-payment of disputed dues.

Analysis: Section 31(2a) authorised prescribed declaration forms and exemption as part of a regulatory mechanism for verification and assessment of tax and for preventing evasion. The earlier and amended transport-control provisions were treated as incidental to the taxing power and as regulatory in character, not as a direct prohibition on movement of goods. The challenge based on article 301 failed because the rule did not impose a direct and immediate restriction on trade; it operated as an anti-evasion and assessment measure. However, the insistence on payment of admitted tax could be sustained, while a demand for prior payment of genuinely disputed tax, where assessment was under lawful challenge, was held to be unreasonable and oppressive, amounting to coercive recovery by extra-legal means. To preserve validity, the amended rule was read down so that refusal of forms or exemption could rest on non-payment of admitted dues, but not merely on non-payment of disputed tax.

Conclusion: The amended rule 45(b) was upheld in principle, but it could not be used to deny declaration forms or exemption solely because disputed tax had not been paid. The assessee was entitled to consideration of its request on that limited basis, while the broader constitutional and competence challenges failed.

Final Conclusion: The judgment sustains the transport-control framework as a valid regulatory anti-evasion measure, but protects assessees from coercive insistence on payment of disputed tax as a precondition for declaration forms or exemption.

Ratio Decidendi: A fiscal transport-control rule enacted to prevent tax evasion and facilitate assessment is valid as a regulatory measure, but it must be read down so that it cannot compel prior payment of genuinely disputed tax as a condition for grant of statutory forms or exemption.

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