State sales-tax surcharge and gross turnover classification upheld as constitutionally valid, with no repugnancy or fundamental-rights breach.

A surcharge on dealers under the State sales-tax power was upheld as a fiscal levy within entry 54 of List II, and the restriction on passing it on did not alter its true character. The Court found no repugnancy with the Drugs (Price Control) Order, as the taxing field and price-control field operated in distinct spheres, and section 6 of the Essential Commodities Act was not attracted. The classification of dealers by gross turnover was held rational and constitutionally valid, with no violation of Articles 14 or 19(1)(g), and gross turnover could be used to identify surcharge liability without taxing outside-field transactions.

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Issues: (i) Whether sub-sections (1) and (3) of section 5 of the Bihar Finance Act, 1981 were constitutionally valid as a levy of surcharge on dealers whose gross turnover exceeded the prescribed limit and as a prohibition on passing on the surcharge. (ii) Whether section 5(3) of the Bihar Finance Act, 1981 was repugnant to the Drugs (Price Control) Order, 1979 or overridden by section 6 of the Essential Commodities Act, 1955. (iii) Whether section 5(3) of the Bihar Finance Act, 1981 offended Articles 14 and 19(1)(g) of the Constitution of India. (iv) Whether gross turnover could validly be used for identifying the class of dealers liable to surcharge, including transactions outside the taxing field.

Issue (i): Whether sub-sections (1) and (3) of section 5 of the Bihar Finance Act, 1981 were constitutionally valid as a levy of surcharge on dealers whose gross turnover exceeded the prescribed limit and as a prohibition on passing on the surcharge.

Analysis: The surcharge was held to be a form of sales tax within the State's taxing power under entry 54 of List II. The legislation, in pith and substance, was a fiscal enactment on sale or purchase of goods, and the power to impose a surcharge included the power to select the class of dealers and regulate whether the surcharge could be passed on. The restriction on collection did not alter the true character of the levy.

Conclusion: The provisions were upheld as valid and within legislative competence, against the assessee.

Issue (ii): Whether section 5(3) of the Bihar Finance Act, 1981 was repugnant to the Drugs (Price Control) Order, 1979 or overridden by section 6 of the Essential Commodities Act, 1955.

Analysis: The Court held that the taxing field under entry 54 of List II and the price-control field under entry 33 of List III operated in distinct spheres. Manufacturers and producers of medicines and drugs were governed by paragraph 24 of the Control Order, not paragraph 21, and that provision contemplated prices inclusive of sales tax. Since the State surcharge law and the Control Order could both operate without collision, there was no repugnancy and no occasion to invoke section 6 of the Essential Commodities Act, 1955.

Conclusion: No repugnancy was found, and section 5(3) was not overridden by the Control Order, against the assessee.

Issue (iii): Whether section 5(3) of the Bihar Finance Act, 1981 offended Articles 14 and 19(1)(g) of the Constitution of India.

Analysis: The classification of dealers with gross turnover above the prescribed limit was held to be rational and based on capacity to bear the burden of tax. The inability to pass on the surcharge did not make the levy confiscatory or arbitrary. A sales-tax surcharge need not, as a matter of constitutional requirement, be capable of being passed on to consumers, and the burden on controlled-price manufacturers was not shown on facts to be disproportionate.

Conclusion: The challenge under Articles 14 and 19(1)(g) failed, against the assessee.

Issue (iv): Whether gross turnover could validly be used for identifying the class of dealers liable to surcharge, including transactions outside the taxing field.

Analysis: The definition of gross turnover was used only as a basis for classification and identification of dealers with economic superiority, not to levy tax on inter-State, outside-State, import, or export transactions. The Court held that such turnover could be considered for the limited purpose of fixing the surcharge liability on inside sales, supported by sufficient territorial nexus and the fiscal classification adopted by the Legislature.

Conclusion: The use of gross turnover for classification was upheld, against the assessee.

Final Conclusion: The surcharge scheme under section 5 of the Bihar Finance Act, 1981 was sustained in full, and the connected challenges to competence, repugnancy, discrimination, and freedom of trade were rejected.

Ratio Decidendi: A surcharge imposed on dealers under the State's sales-tax power remains valid if, in pith and substance, it is a fiscal levy within entry 54 of List II, and the use of gross turnover for classification is constitutional so long as the levy is confined to the State's taxing field and does not create direct repugnancy with a law operating in a distinct field.

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