TaxTMI 
TaxTMI 
1955 (6) TMI 11
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....is hit by Art.14; and that it is an unauthorised encroachment on entry 52 or entry 84 of List I, the Union List. I may observe at the outset that most of the important submissions of Mr. lyengar, who has addressed the leading argument for the petitioners, are covered by my decision in Atma Ram Budhia v. State of Bihar, AIR 1952 Pat 359 (A), a Special Bench decision in which my other two colleagues almost entirely concurred. I find that the above decision has been quoted with approval by Rajamannar, C.J., sitting with another learned Judge in a recent case of P. Mathurai Pillai v. State of Madras, AIR 1954 Mad 569 (B), where a similar legislation as the one in instance was in question. I do not however claim infallibility for my judgment and I would have gladly revised my views if in the varied and versatile presentation of the subject by Mr. Iyengar I had found anything substantial to deflect me from the opinion which I then held. I regret to say that after giving my anxious consideration to all his arguments I have nothing to that effect. 2. It is idle to repeat what I said in my earlier judgment. It is well known that in deciding about the validity of an impugned legislatio....
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....1951 SC 318 (G), the earlier decisions on the pith and substance rule, held as follows: "It is well settled that the validity of an Act is not affected if it incidentally trenches on matters outside the authorised field and therefore it is necessary to inquire in each case what is the pith and substance of the Act impugned. If the Act, when so viewed, substantially falls within the powers expressly conferred upon the Legislature which enacted it, then it cannot be held to be invalid merely because it incidentally encroaches on matters which have been assigned to another Legislature." I shall be content to close my discussion of the tonic by reference to a passage from another recent decision of the Supreme Court in Dwarkadas Shrinivas v. Sholapur Spinning and Weaving Co. Ltd., AIR 1954 SC 119 (H), where Mahajan, J., as he then was, stated the law thus: "In order to decide these issues it is necessary to examine with some strictness the substance of the legislation for the purpose of determining what it is that the Legislature has really done; the Court,, when such questions arise, is not overpersuaded by the mere appearance....
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....here legislative powers, between the Union and the State Legislatures, have been carefully distributed by exhaustive enumeration of legislative subjects in the various lists appended to the Seventh Schedule of the Constitution. It is to be remembered that in Australia all taxing powers belong to the States, except those which are specifically reserved to the Commonwealth; and the question in Australia always is whether a particular tax falls within the field of taxation reserved to the Commonwealth or not; there can be no overlapping of particular legislative spheres. The decisions from Australia must therefore be treated with caution when interpreting the language of the present Constitution. Sir Maurice Gwyer, C.J., sounded this note of warning - In the matter of central provinces and berar sales of motor spirit and lubricants taxation act, 1938, AIR 1939 P.C. 1 (I). His Lordship discussed the distinctive features of the various Constitutions of Canada, Australia and the United State and observed: "Disputes with regard to central and provincial legislative spheres are inevitable under every federal constitution, and have been the subject-matter of a long series of ....
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....e scope of freedom of trade and commerce. He argues that transport or carriage is the vital artery of trade and commerce or to quote a more felicitous simile transport is to commerce what vital motion is to the living body: it is commerce itself; and therefore any import of the nature envisaged by entry 56 of List II of the Constitution is a direct interference with the freedom of trade, commerce and intercourse and violates Art.301. Entry 56 entitles the State Legislature to levy a transport or carriage tax on goods and passengers because of the use of the road and inland water-ways and not because the goods and passengers have any relation to trade and commerce. Incidentally the transport of the goods or passengers may be in connection with trade or commerce, but the tax envisaged by the entry has no direct connection with them. The nature of the tax as defined by Entry 56 is wholly different and has nothing to do with freedom of trade, commerce and intercourse. Even a Constitution like the Indian Constitution where endeavour has been made to define the respective legislative heads as precisely and elaborately as possible there is bound to be some amount of overlapping, but....
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....clusive jurisdictions are wide enough to bring a particular power within either recourse must be had to the context and scheme of the Act: see Att. Gen. for the Province of Ontario v. Att. Gen. for the Dominion of Canada, (1912) AC 571 at p.583 (M)." Even if we impart a very wide significance to the words used in Art.301, I am not prepared to hold that the imposition of tax such as the one contemplated by entry 56 of List II interferes with the freedom of trade, commerce or intercourse. In that event, many of the taxes which the State Legislature is authorised to levy under the various heads enumerated in List II will have to be declared unauthorised as amounting to interference with trade or commerce and sales tax would be a prominent casualty. Article 265 prescribes that no tax shall be levied or collected except by authority of law. This authority of levying and collecting taxes is given to the State Legislatures by virtue of List II read with Art.246 of the Constitution. If we adopt the interpretation suggested by Mr. Iyengar it will lead to a serious inroad upon the rights of the States to raise revenue for their own finances and to an annihilation of the efforts of the ....
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....rs. For the reason aforesaid I cannot entertain the suggestion that Art.301 of Part XIII is so far reaching in its effect as to override all the other legislative powers given under the Constitution either to the Union or the State Legislature. Article 301 runs thus: "Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free." Mr. Iyengar suggests that the freedom of trade and commerce and intercourse is guaranteed, subject only to the provisions of Part XIII of the Constitution and it is not subject to any other Part of Constitution. He argues that this freedom of trade obviously means absolute freedom including the freedom from taxation and therefore any legislation which seeks to curtail that freedom must be held to be in violation of this mandatory provision of the Constitution and therefore void. He claims that this freedom of trade, commerce and intercourse is on par with the fundamental rights guaranteed by the Constitution if not even higher. I have already dealt with these contentions earlier; but Mr. Iyengar derives some support for his contention from a recent decisio....
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....ng tea and jute as objects of taxation, the Legislature did make any illegal discrimination. He, however, contends that even in the case of tea and jute, a distinction has been made between tea carried in chest and jute carried in bales and those commodities carried otherwise. He argues that there is no rational basis for exempting from taxation these commodities carried otherwise than in chest or bales. For the purpose of a valid classification, two ingredients are essential: (i) there must be an intelligible basis for differentiation and (ii) that the said differentiation must have a rational relation to the object of the legislation. It is suggested that in leaving out of account tea and jute carried otherwise, the Legislature has adopted no rational basis for serving the object of taxation envisaged by the Act. The answer to this contention is obvious. The Courts have to permit wider classification under the power of taxation if possible, than merely in the exercise of the police powers. The reason for it undoubtedly is the urgent need for revenue by the various governmental agencies. "A State does not have to tax everything in order to tax som....
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....is still that of a tax on articles produced or manufactured in the taxing country and intended for home consumption. I am satisfied that that is also its primary and fundamental meaning in India; and no one has suggested that it has any other meaning in Entry 45" This entry 45 was in the government of india act, 1935 which now corresponds to Entry No.84 of List I of the present Constitution. The learned Chief Justice further observed: "In the present case, it could not be suggested that the tax on retail sales has any connexion with production; it is also imposed indifferently on all motor spirit and lubricants, whether produced or manufactured in India or not. I do not say that this is conclusive, but it is to be taken into consideration. And I think that the distinction drawn by the learned Judge corresponds in substance with the distinction which it seems to me ought to be drawn in the case of the federal and provincial spheres in India, that is, between the taxation of goods at the stage of manufacture or production and their taxation by the provincial taxing authority (as in Australia by the State) after they have become part of what I have calle....
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....heir full effect and have to be construed in a natural and liberal sense. But at the same time they have not to be so construed as to destroy the very significance of the context in which they appear. To some extent this entry in List II appears to have been adopted with modification from entry 52 of the government of india act which ran thus: "Dues on passengers and goods on inland water-ways." We thus find that in the entry as it now stands in the Constitution there were three distinct changes introduced: in place of dues we find the word tax, for "passengers and goods", the order has been reversed and "goods and passengers" has been substituted and the word by road has also been added to inland water ways. There is no doubt that the above changes have enlarged the scope of the entry. The whole object of that entry appears to be to enable the State Legislature to impose tax on the transportation of goods and passengers by the road and inland water-ways. Inland water-ways must evidently refer to water-ways which are used for navigation by public boats or crafts. Similarly, road here cannot possibly refer to private roads or tracks but must refer to public roads used....
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....was also suggested in the arguments that the words goods and passengers have to be read together and no tax could be levied on the one to the exclusion of the other. Emphasis is laid on the conjunction "and". The argument, though attractive, does not bear scrutiny. We have been taken through various such entries in the list. These entries are all enabling and empower the legislature to tax both the objects. It was therefore open to the Legislature to tax goods and passengers either individually or collectively. 7. The terms of the Act itself have now to be examined to ascertain whether it does in fact impose a tax as provided by this entry. The Preamble to the Act, its long and short title all go to indicate that it is an Act to provide for the levy of a tax on certain goods and passengers carried by road or inland water-ways. These provisions are strictly in conformity with the terms of entry 56 of List II. The preamble to an Act discloses the primary intention of the Legislature, but it cannot override the provisions of the Act, if in fact these provisions are in conflict with the preamble itself and lead to some result not warranted by the preamble. As it has been observed....
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....carried the goods on his own account and not on account of the producer or dealer; (3) the rate of tax is charged on the weight of the goods, namely at one pice per pound of tea and eight annas per maund of jute and is payable on the net weight carried during a return period; (4) the tax bears no relation whatsoever to the length of the road or inland water-ways used; and (5) the section itself mentions nothing about the carriage of the goods on roads or inland water-ways. On the contrary the qualifying clause "carried by motor vehicle, cart, trolley, boat, animal1 and human agency or any other means except airways" is so comprehensive as to cover any movement of the goods even from one part of the factory or tea garden to any other part. 8. The presence or absence of the features explained in items 1 to 4 above does lend some countenance to the case of the petitioners that the tax sought to be levied by S.3 of the Act is more akin to excise duty. At any rate, those factors do not strengthen the inference that the tax proposed is in the nature of a transport or carriage tax on the goods for user of roads or inland w....
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....more often the distance covered was an uncertain factor. Very few of these goods are actually, if at all, sold out in the factory or garden for carriage by the vendees. The transmission is by private trucks or lorries owned by the producers or dealers themselves or by common carriers requisitioned by them. Some of the gardens have even railway sidings adjoining their premises. Government therefore could not collect profitably the taxes from the carriers even if there were some few instances of title to the goods having passed to others before their carriage. In such cases, it may be that because the goods are carried actually be somebody in his own rights the producer or dealer could not be made liable for any payment of the tax. For the above reasons, I think that the learned Advocate-General is right in contending that the Legislature in the circumstances thought it fit to impose the tax in the manner indicated in S.3. The section does not stand by itself; it has to be read along with and in the light of S.1 of the Act which clearly indicates that the Act is an Act of taxation of goods carried by road and inland water-ways. Any ambiguity in S.3 is removed by S.1 which undou....
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....should be held that the Assam Taxation (On Goods Carried by Roads and inland water-ways) act, act 13 of 1954 is constitutionally valid and should be upheld. The applications must therefore fail and are rejected accordingly. There will be a consolidated hearing fee of Rs. 600 payable to the State of Assam by the petitioners to be distributed equally on the number of petitions filed. RAM LABHAYA, J.:- 11. This order shall dispose of four civil rules nos.8, 9, 26 and 32 of 1955. These rules were issued on petitions under article 226 of the constitution of india. The petitioners have assailed the constitutional validity of the Assam Taxation (On Goods Carried by Roads or Inland Water ways) Act, 1954. The grounds on which the validity of the Act is challenged are common to all the petitions. 12. The impugned Act was passed by the Legislature of the State of Assam. It received the assent of the Governor of Assam on 9-4-1954 and took effect from 1-6-1954. The professed purpose of the Act is to levy tax on goods carried by road or inland water-ways in the State of Assam. Section 3 of the Act provides that "manufactured tea in chests carried by motor veh....
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....ion or transport of tea and also to fix the price of tea. Attention is drawn in support of this argument to the provisions of the Tea Act, 1953. It is urged that all the stages of the industry upto the point of sale and export are within the control of the Union. The impugned act conflicts with the provisions of the central act and therefore is invalid and inoperative. (3) The tax under the Act, it is contended,, is no more than a duty of excise under another name. Being in reality an excise, duty it constitutes an encroachment on the Central sphere. The Central Government alone has the power to levy excise duty under Entry No.84 of the Union List on goads manufactured or produced in India. (4) The impugned act contravenes the provisions of article 14 of the constitution of india, being in its nature a discriminatory piece of legislation. It is contended that the tax is levied only on the manufactured tea in chests, not on manufactured tea in other containers. Besides, tea and jute are the only commodities which are taxed. (5) The impugned legislation is not within the ambit of Entry 56 of List II of the Seventh Schedule. It was outside the limit....
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.... this head. The entry reads as follows:- "Taxes on goods and passengers carried by load or on inland water-ways". The corresponding entry under the government of india act reads as follows:- "Dues on passengers and goods carried on inland water-ways". In the draft Constitution the only change introduced was that the word "dues" was replaced by "taxes". In the Constitution the power of taxation under this heading was enlarged by including within its scope "goods or passengers" carried by road also. The State Legislature therefore has power to levy a tax on goods and passengers carried by road or inland water-ways. Almost every word of the entry has been the subject matter of argument. The petitioners are producers of tea. They grow and manufacture it. Tea packed in chests is the result of agricultural and manufacturing operations. The large bulk of it is admittedly transported to Calcutta in the State of Bengal, which is the major tea market in India. The tea is carried through the State of Assam. It may be carried by road or inland waterways or by rail or air. Tea carried by rail or air is not liable to tax under the Act. Manufactured tea in chests when c....
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....dues carried with it in regard to the use of the money collected is now gone. The change does not add to the States power of taxation in theory. It may have removed some implied restrictions on the use of the money collected under this entry The scope of the entry has however been considerably enlarged by inclusion within its scope taxation on goods and passengers carried by road which was not possible under the government of india act. 19. The expression "goods" has been defined in article 366, clause 12 of the constitution. It includes all materials, commodities and articles. It was so defined in the government of india act, 1935 also. The definition is not made exhaustive in spite of its wide sweep. All materials, commodities and articles are included. All these may be "goods". But when these commodities, articles or materials pass from the hand of the trader to the consumer for personal use, the expression "goods" is generally not applied to them. They are then personal effects and if the person to whom they belong is travelling with his personal effect, they would be described as his luggage. There is a distinction between "goods" on one side and "personal effects" and "....
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.... they can be taxed. This is because of the necessary implication of the expression "passenger. The expression goods carries no such implication. Goods therefore when carried by a common or public carrier or even through the agency of a private carrier, would attract the liability to taxation. The word carried also occurs in entry 89 of List I which corresponds to entry 56 of List II. Both these entries authorise taxes on goods and passengers when carried in the manner specified in the entries. The word used is carried as distinguished from carrier. Mr. Iyengar has argued that the word carried implies carried by a common carrier. The word carried has a large scope. It does not imply carried by a common carrier necessarily. Interpreting this word in entry 56 as carried by a common or a public carrier is limiting the scope of the entry. The expression may not be qualified the way it is suggested. All that entry 56 requires is that goods should be carried by road or inland water-ways. It makes no mention of the agency through which goods are carried. Goods may be carried by a vehicle belonging to the producer or by a hired vehicle. They would be carried even if the vehicle is not....
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....onferred by them should not be cut down by placing any restricted or narrow meaning on them. Nothing may be read into the entry which does not exist, particularly when its effect is to restrict the scope of the entry. 24. The carriage has to be by road or by inland water-ways. Road in the entry should be interpreted as a public road. That is the meaning that is normally given to it in legislative enactments. In - Curtis v. Embery, (1872) 7 EX 369 at p.372 (S), it was held that "a road as used in the Act of Parliament must manifestly mean a public road, a road which the public have a right to use for passage." The word road is on a par with inland water-ways so far as its nature or quality goes. Navigability is the characteristic of inland water-ways. These water-ways are public in character. The carriage has to be by road or water-ways of a public character. Mr. Lahiri has contended that the word road in the entry also should be given its widest meaning and should not be restricted to public roads. This he considers, would be restricting the scope of the entry. I am unable to subscribe to this view. The word road also occurs in entry 13 of List ....
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....combination like loaves and fishes, goods and chattel, stars and stripes. Argument by analogy is always very weak. The analogies are generally not perfect. The expressions to which reference has been made do not support the contention. Goods and passengers are not generally used in the sense in which loaves and fishes, or stars and stripes are used. There are several entries in the Lists which include within, their scope more items than one. The word and is not always used as a conjunction converting two items into one. There is no legal difficulty in taxing goods only or passengers. The two items in entry 56 are enumerative as in the case of several other entries. The entry therefore creates no compulsion for dealing with passengers and goods together in any scheme of taxation. 27. The title and the preamble of the Act use the language of entry 56. Section 1 also provides that the Act may be called the Assam Taxation (on goods carried by roads or inland waterways) Act, 1954. This section also borrows the language of entry 56. This shows the extent of the power given to the State in the matter of taxation under the entry in question. All goods carried by road or inland water-....
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....amble cannot be resorted to control, qualify or restrict it; but where the enacting part is ambiguous, the preamble can be referred to explain and elucidate it......... If on a review of the whole Act a wider intention than that expressed in the preamble appears to be the real one, effect is to be given to it notwithstanding the less extensive import of the preamble." Lord Halsbury L.C. in - Powell v. Kamton Park Racecourse Co., ( 1899) AC 143 at p.157 (V), enunciated the law on the point in these terms: "Two propositions are quite clear, one that a preamble may afford useful light as to what a statute intends to reach, and another that if an enactment is itself clear and unambiguous, no preamble can qualify or cut down the enactment." The contention raised is that the charging section does not limit carriage of goods to carriage by road or inland water-ways. It is expressed in clear and unambiguous terms. It may not be qualified or restricted by what is contained in the title of the Act or in the preamble. This view, in my opinion, is not sound. If the conflict had been between S.3 and the preamble, the principle that the preamble may not be utili....
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....have no access is not carriage that would be hit by the Act. What is intended is carriage outside the place of production or manufacture. If there is no carriage from the place of production or manufacture, it would be a case of tax on production or manufacture which would not be distinguishable from excise duty. It would also not be carriage by road and inland water-ways as provided by the Act. It is possible that tea or jute may have to be carried by public road for taking it to the railway station or an aerodrome from where it is to be carried by rail or air. In that case the liability to tax would be attracted no matter how small the distance that the tea travels by a public road. The Act does not provide for computing tax on distance. It is on weight and therefore liability to tax would be incurred even if a relatively short distance is travelled by a public road. This may be hard. But the Courts are not concerned with any hardship that a piece of legislation may cause where it is obviously within the competence of the legislature. They have no power to relieve hardship in such cases. The remedies for any real hardship Be elsewhere. 31. The tax no doubt is on goods. B....
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....oods and passengers. There is some little difference in the phraseology. Entry 89 of List I to which entry 56 of List II corresponds, provides for terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freights. Entry 56 provides for taxes on goods and passengers carried by road or inland water-ways. The entries are similar in, nature. The taxation permitted by these entries to legislatures covers the same field, though the area in each case is defined and delimited. It follows that the framers of the Constitution made a distinction between duties of excise which may fall under entries 84 (List I) and 51 (List II) on the one side and entries 89 (List I) and 56 (List II) on the other. Taxes under entries 89 and 56 are something separate and distinct from duties of excise. It should therefore be possible for the Central1 and the State Legislatures to impose these taxes under these entries without encroachment on the field of excise duties. We have therefore to find the line of demarcation between the two in order to determine whether the legislature by taxiing goods under entry 56 has consciously or unconsciously levied what may be reg....
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....tative elucidation as to the nature of the excise duty contained in AIR 1942 FC 33 (J), received the approval of their Lordships of the Privy Council in AIR 1945 PC 98 (Y). Their Lordships concurred in the cogent reasoning of the Federal Court in AIR 1942 FC 33 (J). These decisions were given under the government of india act, 1935. The entries relating to excise duties in the Seventh Schedule of the Constitution are in the same language and in any case the expression "duties of excise" has undergone no change by reason of the political changes which replaced the government of india act by the constitution. The conception of duties of excise remains the same. These authorities therefore give what has been understood by "duties of excise" in India since duties of excise came to be recognised in this country. 36. The word excise is of Dutch origin. It assumed different connotations at different times. Originally it was used in the sense of toll or tax. During the seventeenth century it acquired in the United Kingdom the sense of a tax on certain articles of luxury such as spirits, beer, or tobacco produced or manufactured in the United Kingdom. By 1939 the expression was use....
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....nces and Berar. The legislation was under entry 48 of List II of the government of india act, which permitted taxes on the sale of goods . After considering the effect of relevant entries the learned C.J., observed as follows: "In my opinion the power to make laws with respect to duties of excise given by the Constitution Act to the Federal Legislature to be construed as a power to impose duties of excise upon the manufacturer or producer of the excisable articles, or at least at the stage of or in connexion with, manufacture or production, and that it extends no further." At page 11 he observed that "the Central Legislature will have the power to impose duties on excisable articles before they become part of the general stock of the Province, that is to say at the stage of manufacture or production, and the Provincial Legislature an exclusive power to impose a tax on sales thereafter." Sulaiman, J., when distinguishing a duty on goods produced or manufactured from duty on sale of goods observed (at page 23) that "the essence of a tax on goods manufactured or produced is that the right to levy....
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....arded as exclusively within the competence of the Provincial Legislature, provided that they were in no way connected with the production or manufacture of the goods within the province; but that all other taxes on the sale of goods were duties of excise and therefore exclusively within the competence of the Central Legislature. The other two members of the Court were not prepared to go to these lengths, and in effect drew the dividing line between the Central and Provincial spheres at the point of manufacture or production. They were of opinion that, on the true construction of Entry No.45 in List I and Entry No.48 in List 2, the power of the Central Legislature to impose duties of excise was a power to impose duties on the manufacture or produce of the goods and did not extend further, the power to impose a tax upon the sale of goods after manufacture or production being reserved to the Provinces." The majority view was given effect to in AIR 1942 FC 33 (J). In doing so the learned C.J. accepted the general division between the Central and Provincial spheres of taxation which commended itself to the majority of the Court in that case. The majority view, he observed, ....
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.... upon goods not upon sales or the proceeds of sale of goods. Here again their Lordships find themselves in complete accord with the reasoning and conclusions of the Federal Court in the Boddu Paidannas case (J). The two taxes, the one levied upon a manufacturer in respect of his goods, the other upon a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separate and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time upon the occasion of its sale. But that method of collecting the tax is an accident of administration: it is not of the essence of the duty of excise which is attracted by the manufacture itself." Their Lordships came to the conclusion that the tax imposed by the impugned Act was not a duty of excise in the cloak of a tax on sales. 41. It is of the essence of the excise duty no matter at what stage it is imposed that the tax must be on production and manufacture. A tax on goods produced....
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.... .......... a general power ought not to be so construed as to make a nullity of a particular power conferred by the same Act and operating in the same field when by reading the former in a more restricted sense, effect can be given to the latter in its ordinary and natural meaning." Jayakar, J., also treated entry No.48 of the Provincial List as an exception to item No.45 of List I, though he gave a very wide meaning to the expression duties of excise. In AIR 1942 FC 33 (J) (at p.37) the view was reiterated against in the following terms:- "The case however is different where, as in the Indian Act, there are two complementary powers, each expressed in precise and definite terms. There can be no reason in such a case for giving a broader interpretation to one power rather than to the other; and there is certainly no reason for extending the meaning of the expression duties of excise at the expense of the Provincial power to levy taxes on the sale of goods." The reasoning applies fully to the facts of this case. There is no earthly reason why the power of the State to tax goods and passengers when carried by road or inland water-way be completely nu....
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....cularly in the legislative practice of the State which has conferred the power. Chief Justice Gwyer in AIR 1939 FC 1 at p.12 (I), also thought that he was entitled to look at the manner in which Indian Legislation preceding the Constitution Act had been accustomed to provide for the collection of excise duties. He noticed that there were several Central excise duties in force in India at the date of the passing of the Constitution Act, imposed respectively upon motor spirit, kerosene, silver, sugar, matches etc. In all the Acts by which these duties were imposed it is provided that the duty is to be paid by the manufacturer or producer, and on the issue of the excisable article from the place of manufacture or production. Mr. Iyengar has relied on these decisions and Acts and has contended that duties of excise are recovered from the producer and the manufacturer when the goods leave the place where they are manufactured. The tax under the Act is recoverable from the producer or the manufacturer and is recoverable when the goods leave the factory or the place of production. According to legislative practice therefore it should be treated as a duty of excise. He urges that the el....
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....ersion were possible, it would involve disregarding carriage or transport of goods which is a necessary element of entry 56. 44. Section 3 of the Act also provides that manufactured tea in chests carried by motor vehicle, cart, trolley, boat, animal and human agency or any other means except railways and airways shall be liable to tax. An attempt has been made to enumerate the different kinds of conveyances that may be employed for carriage of manufactured tea in chests. The description is not exhaustive, for, all unspecified means except railways and airways are included. Tea therefore, if carried by road or inland water-ways whatever the method or the means can be taxed. In enumerating certain types of conveyances including human agency, the legislature has not exceeded its powers under entry 56, for, entry 56 merely provides a tax on goods carried. The entry does not specify that goods in order to be taxable under entry 56 must be carried by any particular kind of vehicle. Carriage is not limited, for instance, to carriage by mechanically propelled vehicles. If there is carriage of goods it would be within the scope of the entry. It was wholly unnecessary for the legislatu....
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....re not. But that view was discarded later and it was held in - Gloucester Perry Co. v. Pennsylvania, (1885) 114 US 196, (Z2) that transportation of persons was included in commerce. The sending of telegrams, transport of electric current and gas and of films of prize fights were held to be within the ambit of the expression commerce. It follows that transport is almost always commerce. The Supreme Court did not consider profit as a necessary element of commerce. Notwithstanding the trend of decisions which give a very wide meaning to the expression commerce, it is difficult to define the expression. According to Willis (page 287) "the decisions of the United States Supreme Court are irreconcilable. They leave us in doubt whether commerce is trade or, intercourse, whether it must be for profit or may be without profit, whether it is confined to tangibles or may include intangibles" .It is however clear that traffic is definitely included in the expression commerce and the least that may be deduced from these decisions is that traffic and commercial intercourse are commerce. 49. The word occurs in S.92 of the Australian Constitution and even in Au....
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.... freedom of trade or commerce and therefore Art.301 of the Constitution was not offended by the impugned legislation. 50. Article 301 provides that subject to the other provisions of Part XIII, trade, commerce and intercourse shall be free in the territory of India. The freedom provided for is throughout the territory of India. It is thus both inter-State and intra-State. Trade, commerce and intercourse even inside the State has to be free whatever meaning the word free may carry. This is as it should be. For, curtailment or abridgment of freedom of trade and commerce inside the State could easily affect adversely the freedom of trade in the country. The object with which this freedom was reserved for trade and commerce etc., is to maintain the economic unity of the country. The purpose could not have been achieved completely if freedom for trade and commerce had been only inter-State. The mandate of the Article therefore is that freedom for trade, commerce and intercourse shall be throughout the territory of India. The territory includes all the States. Freedom throughout the territory would lose much of its meaning if all States could impose restrictions on trade within the....
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....allow. Restrictive legislation within the limits imposed by the provisions contained in Part XIII is thus permitted both to the Union and the State Legislatures within their spheres. The power may in certain circumstances be exercised concurrently. 55. Mr. Iyengar has contended that Art.301 creates a guaranteed right. He has virtually claimed, for the rights created or recognized by this Article the characteristics of fundamental rights. He could not argue that rights under Art.301 were fundamental. They were not included in Part III of the Constitution. The guarantee provided by Art.32 also is not available for the enforcement of rights under Part XIII. The description of rights under Art.301 as guaranteed rights is merely confusing. It has no constitutional significance. The rights created by this Article are like other legal rights enforceable by appropriate proceedings. 56. Article 301 may be distinguished from the provisions contained in Art.19(1)(g) of the Constitution. Art.19(1)(g) guarantees to the citizens the right to practise any profession or carry on any occupation, trade or business. Both trade and business are included in this clause of Art.19. There appears....
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....fore given my very anxious consideration to the argument advanced and as at present advised I do not feel persuaded to subscribe to the proposition put forward by the learned counsel for the petitioners. He wants us to read Part XIII in isolation on the ground that the effect of the opening words of Article, namely, "Subject to the other provisions of this Part" is that this Part is invested with an overriding effect of its own wherever it comes into conflict with other provisions of the Constitution. He takes it out of the Constitution so to say and wants to determine the constitutionality of the impugned legislation by the test it provides, regardless of any justification for it that other provisions in the Constitution may afford. In his view provisions in other Parts of the Constitution including those relating to taxation cannot in any way abridge the freedom of trade, commerce and intercourse. Limitations on this freedom must fall within the four corners of Part XIII. 59. Mr. Iyengar has brought a wealth of learning to bear on the point. The argument was alluring but I confess, I am left unconvinced. The Constitution with all its Parts is one document. It is a co-ord....
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....here is no limit to the powers of the sovereignty. The State may voluntarily surrender a part of its power of sovereignty. It may also place limits or restrictions on its power of taxation. Within the limits it may impose, it enjoys plenary powers of taxation. According to Cooley (Cooleys Constitutional Limitations, eighth edition, volume 2, page 986) "taxes are defined to be burdens or charges imposed by the legislative power upon persons or property, to raise money for public purposes. The power to tax rests upon necessity, and is inherent in every sovereignty." The power may be restricted by express constitutional limitations or restrictions. 61. Mukherjea, J., (as he then was) in Commr. Hindu Religious Endowments, Madras v. Sri Lakshmindra Tirtha Swamiar, AIR 1954 SC 282 at p.295 (Z7), when bringing out the distinction between a tax and a fee referred to what he regarded as a neat definition of the expression tax. He quoted the observations of Latham, C.J., of the High Court of Australia in 60 Com-W LR 263 at 3576 (X), to the following effect: "A tax is a compulsory exaction of money by public authority for public pu....
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....8 relate to exemptions from taxation of consumption or sale of electricity and also electricity or water in certain circumstances. The greater portion of this Part is devoted to the distribution of revenues. 66. It is interesting to observe that Art.265 though expressed negatively has as large a sweep as Art.301. The large and the unlimited power of taxation vesting in the State is limited by the condition that no tax shall be levied or collected except by authority of law. The taxes therefore have to be imposed by the Legislature. Some more exceptions to the general rule embodied in Art.265 are incorporated in this Part. These have been referred to above. articles 276, 286, 287 and 288 are the instances. A general restriction that all legislation imposing taxes on trade and commerce whether by the Union Legislature or by the Legislatures of the States must be in public interest apart from the public purpose that it admittedly serves by adding to the revenues of the State, should have appeared in that Part. It might well have formed part of Art.265. Taxes on trades or professions, on the sale of goods, on consumption, on sale of electricity or water, are exceptions of a speci....
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....rt of the legislation by the Union and the State Legislatures will have to be justified under the provisions of Part 13 of the Constitution. Parliament before imposing any tax under any entry of List I or in the exercise of its residuary power, where such taxation affects trade commerce or intercourse, would be bound by the requirement that the taxation should be in public interest. Similarly, taxation by the State Legislatures under authorised heads when burden is imposed on trade, commerce and intercourse will have to be in public interest under Art.304(b). I am not convinced that this is the effect of Art.301 read with Arts.302 and 304, nor am I persuaded to hold that this could be the intention of the framers of the Constitution. 69. The undoubted purpose of Art.301 is to preserve and maintain the economic unity of India. It provides for free flow of traffic. It hits State barriers against the free flow of trade and commerce which is contemplated by it. Both prohibitions against and restrictions on the movement and free flow of goods and commodities would be hit by Art.301. Yet trade, commerce and intercourse could not be absolutely free from all kinds of restrictions. ....
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....ed and manufactured inside the State in the matter of taxation when similar goods come into the State from outside. The implication of Art.304(a) is that goods produced and manufactured inside the State may be taxed. When they are so taxed, similar goods imported into the State may also be taxed in order that they be not discriminated against. The provision was necessitated by the fact that the State Legislatures could not tax those imported goods under any specified head in List II. The clause in question assumes that the State Legislature may, notwithstanding the provisions contained in Art.301, legislate for taxes on goods produced or manufactured in the State under someone or the other of the entries in List II. Where such power is exercised similar goods imported may also be taxed. 70. Mr. Iyengar himself conceded that the States were free to impose taxes on the sale and purchase of goods. It is undeniable that sales and purchases of goods would fall within the ambit of the expression trade and commerce. No provision in Part 13 permits this taxation. If it is not possible to tax trade and commerce except under the provisions of Part 13, tax on the sale of goods would not....
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....would be violated only if legislative or executive acts operated to restrict trade or commerce directly and immediately. This would be true of Art.301. The Constitution of India authorises both taxation and restrictions under certain express provisions and taxation by State Legislatures under entries of List II is not excluded on the ground that taxation per se is a restriction on the freedom of trade which Art.301 seeks to preserve. But Art.301 may be violated when legislation purporting to be under any of the authorised heads indirectly restricts or prohibits trade and commerce. 72. The learned Advocate General has argued that taxation does not affect the freedom of trade and commerce at all and under no conceivable circumstances could taxation be hit by the mandate of Art.301. He argues that all that Art.301 aims at is that there should be free movement of trade and commerce. Any legislation regulating trade and commerce falling under Entry 42 of the Union List, Entry 24 of the State List and Entry 33 of the Concurrent List imposing restrictions would be hit by Art.301 if legislative power under relevant entries was exceeded. Stated shortly, his point is that Art.301 conte....
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....and completely free from the mischief of Art.301. If that were so Part 12 may easily nullify its effect, a result which must be avoided. 73. In - Saghir Ahmad v. State of U.P., AIR 1954 SC 728 (Z9) the question before their Lordships of the Supreme Court was whether the u.p. state road transport act (2 of 1951) was repugnant to the provisions contained in Art.301 of the Constitution. Their Lordships did not consider it necessary to decide the question, though they indicated possible arguments both for and against the view. Their Lordships observed that "the Australian Constitution indeed has no provision like Art.19(1)(g) of the Indian Constitution and it is certainly an arguable point as to whether the rights of individuals alone are dealt with in Art.19(1)(g) of the Constitution leaving the freedom of trade and commerce, meaning by that expression only the free passage of persons and goods, within or without a State to be dealt with under Art.301 and the following Articles." The question was left open. This question does not directly arise in this case. Here the challenge to the Act is based not so much on the provisions contained in Art.19(1)(g)....
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.... make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void." These observations were made when effect of AIR 1951 SC 318 (G) declaring some sections of the bombay prohibition act invalid was under consideration. The remarks were made in a different context and may not be regarded as laying down a general proposition governing cases in which the fundamental rights of an individual are not in question, though it would be unquestionable that the taxing power conferred on the Legislatures of the Union as well as of the States by the provisions contained in Arts.245 and 246 read with entries in the respective lists cannot be so utilised as to render nugatory the prohibition contained in Art.13(2) in regard to the fundamental rights. The observations on which reliance has been placed would however indicate that the different parts of the Constitution have to be harmonized and cannot be read independently of each other or in isolation. 75. Mr. Lahiri has relied on - Ananthakrishnan v. The State of Madras, AIR 1952 Mad 395 (Z13) in support of his contention. In thi....
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.... affect adversely the taxing power of the State. Yet if the taxing power is so utilised as to nullify rights under Part 3 or Part 13, the Legislation may be hit by the prohibitions contained in Art.13 or Art.301, as the case may be. In such cases, it will not be purely a case of taxation which does not restrict the freedom of rights guaranteed by Part 3 or Part 13. It would amount to abridgment and the curtailment of freedom by excessive use of the powers of taxation. The powers of taxation have to be so utilised that the freedoms reserved by the Constitution are not taken away. Just as Part 13 does not shut out taxation of trade, commerce and intercourse under Art.246 read with relevant entries, powers of taxation under Part 12 cannot be so used by the Union or the States so as to render nugatory the freedoms reserved for trade, commerce and intercourse. 76. In three States there has been legislation under Entry 56. In AIR 1952 Pat 359 (A) the validity of bihar finance act was called into question. By s. 12 of this act a tax on all passengers and goods carried by motor vehicles at the rate of two annas in the rupee on all fares and freights was payable to owners of such v....
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....t. Sarjoo Prosad, J., (as he then was) delivered the leading judgment of the Special Bench. This is the first decision in which the question raised before us directly arose and was fully dealt with. The erudite judge considered the question in all its bearings in an elaborate and a very well-reasoned judgment, which affords a complete answer to Mr. Iyengars contention on this point. He held that the impugned Act is a legislation directly dealing with the imposition of tax on goods and passengers and it does not profess to impose any restrictions whatsoever either on inter-State trade or on trade with or within the State. As a result Part 13 of the Constitution was found not to have been infringed. It follows from the proposition laid down by the learned Judge that taxation of goods and passengers under Entry 56 does not operate per se as a restriction on trade and commerce. It was also found in the case that freedom of trade and commerce was not actually restricted. The implication is that courts may examine if taxation is intended to or actually results in curtailment of the freedom of trade and commerce. The decision when seen in its true perspective and in the light of ....
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....land water-ways goes to Calcutta from the producing centres. Tea carried to Calcutta may be carried all the way by the inland water-ways. It may be carried by road for some distance and then by inland water-ways. or even by railway. Distance travelled could be by different means of communication and it may not have provided a very equitable basis for taxation from the view point of the producer and the manufacturer. The distinction pointed out by Mr. Iyengar does not take the legislation out of the ambit of Entry 56. It is true that legislation in the other three States under Entry 56 does not adopt weight alone as the measure for determining the tax payable. But these Acts are merely instances of the exercise of the power of the legislature under Entry 56. They may not be utilised in support of the contention that the only method of imposing tax on goods and passengers under Entry 56 is the one adopted in those cases. The entry is silent on that point. The words of the entry have to receive their ordinary grammatical meaning. The power may not be curtailed by laying down how and in what manner tax may be computed when goods are carried by road or inland water-ways. It is not....
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.... both with regard to restrictions and taxation." Mr. Iyengar has relied on this decision in support of his contention with respect to Article 301. It fully supports his argument. I nave profound regard for the views of the distinguished Chief Justice who delivered the judgment in this case. I regret I have found it difficult to give that overriding effect to Art.301, which the learned Chief Justice thought it had. 80. Chagla, C.J., in 57 Bom LR 288 at p.335 (N), when interpreting Art.301 observed as follows : "Therefore, if it (Art.301) is intended to be given effect to, it constitutes a clear restriction upon the legislative competence both of Parliament and of the State Legislature, because it should be noted that Art.301 is only made subject to the other provisions of this Part, which is Part XIII, and not subject to the other provisions of the other Parts of the Constitution. Therefore the legislative competence of Parliament and the State Legislature must be read subject to Art.301. In other words, neither Parliament nor the State Legislature can legislate so as to interfere with the freedom of trade, commerce and intercourse throughout Ind....
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....may be imposed on the use of the vehicles in regard to their speed and as to the manner of their use to prevent danger to the public. It is restrictions of this kind which Arts.302 and 304 allow when they are in public interest. Legislation imposing such restrictions would fall under Entries 42 (List I), 26 (List II) and 33 (List III). Taxation could not be regarded as excluded by Article 301 or permitted only under Arts.302 and 304 when it is in public interest. All taxation serves a public, purpose. It adds to the revenues of the State and the expenditure of the revenue is controlled by express provisions contained in the Constitution. I am finding it difficult to see how every measure of taxation could be justified on the ground that it was in public interest. As shown above, restrictions other than pecuniary imposts on the free flow of trade and commerce may be obviously in public, interest. Instances of such cases have been given above. It is also conceivable that restrictions may not be in public interest and may have the effect of restricting or prohibiting the free flow of trade. Limiting the speed of vehicles to one mile an hour may make transport economically prohibiti....
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....lative and also the taxing powers between the Union and the States give specific heads of taxation with the object of raising revenue. They give no indication that besides adding to the revenues, taxation should serve some other purpose which may be in the public interest. By giving an overriding effect to Part 13, the effect of Part 12 is whittled down considerably. The power it confers is reduced very substantially. It would shut out taxation for raising revenue under several heads which are meant to be sources of revenue only. The State cannot be run without taxation and that affords complete justification for taxation without any other subsidiary purpose. 82. Taxation under most of the heads in the three lists would impose some burden on trade, commerce and intercourse, indirectly or incidentally. If then it must be in public interest, the issue whether it is in public interest or not would be justiciable. The courts will have the power of scrutiny and veto even though the legislatures are legislating for taxation under heads under which they have the power to legislate. No such power has been conferred by the Constitution on the judiciary in express terms and I hes....
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....uthorised heads by reason of the burden that it may incidentally place on trade, commerce or intercourse. It is possible however that taxation may be resorted to with a view to abridging or preventing the free flow of traffic. Taxation also may go to such a limit that it may in effect abridge the freedom of trade and intercourse appreciably. Where taxation under authorised heads aims at or has the effect of abridging freedom or curtailing the freedom of trade, and commerce, it may be hit by the provisions contained in Art.301. Legislation in such cases would be a colourable exercise of the powers of taxation. It would not be competent, for, even taxation under authorised heads should be for purposes of raising revenue and not for killing trade, commerce or industry. It may not be permitted to trespass on the freedom reserved for trade, commerce and industry. This way the two parts of the Constitution receive full effect consistently with the requirements of each. Giving overriding effect to the one or the other would paralyse some part of the Constitution. Some provisions would be rendered ineffective or nugatory. This is a result which in my humble opinion ought to be avo....
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.... needs scarcely be said, those learned jurists meant the necessary legal effect, not the ulterior effect economically or socially." ( 43 CLR 386 at p.409 (F)). In AIR 1954 SC 119 (H), Mahajan, J., when considering the provisions of the Ordinance for taking over the management and administration of Sholapur Spinning and Weaving Co. Ltd., observed that "in order to decide these issues it is necessary to examine with some strictness the substance of the legislation for the purpose of determining what it is that the legislature has really done the Court, when such questions arise, is not over-persuaded by the mere appearance of the legislation. In relation to constitutional prohibitions binding a legislature it is clear that the legislature cannot disobey the prohibitions merely by employing indirect method of achieving exactly the same result. Therefore, in all such cases the Court has to look behind the names, forms and appearances to discover the true character and nature of the legislation." These weighty pronouncements leave no doubt as to the powers of the court when it is called upon to decide whether legislative power has been exceeded or a constitutiona....
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....I have no reason to think that the trade and commerce in this case is prohibited. It has not been contended that any appreciable volume of trade has been affected injuriously by the operation of the Act. In fact the State is taxing the sales of goods under the sale of goods act. Both tea and jute which are taxed if carried under the Act, are liable to the sales tax also if sales takes place within the province. These are the only two very important commodities (except oil) which the State produces in large quantities and the bulk of the commodities produced is exported. The market for tea and jute is at Calcutta. The commodities are exported in such a way that the bulk of the produce escapes sale tax. The commodities if sold here could yield substantial revenue to the State. When faced with this situation the State Legislature presumably decided to utilise its power under entry 53 for taxing these commodities. The intention to restrict the freedom of trade in these commodities may not be attributed to the Legislature. Stopping or restricting trade and commerce in these two commodities would be highly detrimental to the interests of the State The State Legislature could not th....
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....e Parliament by law that the control of the industry by the Union is in public interest. If power under the Constitution is to be taken away from the State Legislature, it should be necessary to amend the Constitution itself. The control of industry by the Union merely takes away the exclusive power of the State Legislature in respect of entries conferring other legislative power with respect to the industry the control of which has been taken over. 88. Mr. Iyengar relying on - Durgeshwar Dayal Seth v. Secretary, Bar Council, Allahabad, AIR 1954 All 728 (Z20), has argued that "the power of a State to make laws with respect to any of the matters enumerated in Sch.VII, List 3 is subject to the exclusive power of Parliament, if it has any, to make laws with respect to the same matters" . In this case the control of the industry was not taken over under entry 52. The present case is distinguishable on facts. On the strength of this decision it may not be said in respect of industries the control of which has been taken over under entry 52 that they are within the exclusive power of the Parliament. But even assuming that the proposition laid down in ....
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....osing tax on tea interferes with the control by the Central Government which is vested in it under S.30 of the Act. The price control is interfered with, for burdens imposed on tea must naturally affect its price level. The argument though plausible is not sound. If imposition of a tax on tea under entry 56 interferes with the control of industry by the Union, the sales tax on tea would do likewise. Enhancement of land revenue on land under tea cultivation would also have the same result. All, this power of taxation is not taken away merely because the Union has taken control of the industry for certain specified purposes. Any taxes that may be imposed under powers which the Constitution confers on the State Legislatures may have to be taken into consideration when prices are fixed. But so far as the fixation of the price is concerned that would remain the concern of the Central Government and its power to fix whatever prices it regards reasonable in view of all factors that may influence the determination, is not affected. It is worthy of note that there is no express provision in the Act which limits, controls or abridges the States power of taxation under relevant entries ....
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....ion in a particular case is a question to be determined in each case and its decision depends on its own facts. The Supreme Court of U.S.A. has been permitting a wider discretion in classification under the power of taxation, than it has done under the police power. "It (the State) is allowed to pick and choose districts, objects, persons, methods, and even rates for taxation if it does so reasonably." (Willis on Constitutional Law). In AIR 1953 SC 252 (Z8) the contention that the charging Ss.5 and 10 fixing Rs. 30,000 and Rs. 5000/- as the minimum taxable turnover for general tax and special tax respectively are discriminatory and void under Art.14 read with Art.13 of the Constitution was not accepted. It was held that no discrimination was involved in this classification which was perfectly reasonable when it was borne in mind that the State may not consider it administratively worthwhile to tax sales by small traders who had no organizational facilities for collecting the tax from their buyers and turn it over to the Government. Each State must, in imposing a tax of this nature, fix its own limits below which it does not consider it administrati....