1. This opinion will also govern the opinion in Civil revision No. 178 of 1961.
2. These two references by our learned Brother Krishnan J. are under Chapter I, Rule 9, Sub-rule (2) of the High Court Rule s. They arise out of two revision petitions under section 25 of the Small Cause Courts Act directed against two decisions of the Court of Small Causes, Indore, dismissing two suits filed by the petitionersfor refund of octroi duty said to have been paid by the petitioners to the Municipal Corporation of Indore, in respect of certain goods brought within the limits of the Indore Municipal Corporation. As the references are under Chapter I, Rule 9, Sub-rule (2) of the High Court Rules, we can only express an opinion on the questions on the basis of which a reference can be made to a large Bench under that rule. Under Sub-rule (2) of Rule 9, a reference is permissible if the case involves a question as to the interpretation of the Government of India Act or of any order in Council made thereunder, the Constitution or any order of the President made thereunder, or if the judge making the reference considers that the decision in the proceeding involves reconsideration of decision of a Judge sitting alone reported in the Central Provinces Law Reports, the Nagpur Law Reports or the Indian Law Reports, Nagpur Series. [n these references, there is no question of reconsideration of any such decision.
The only question that arises under the reference is as to the interpretation of Article 304(b) of the Constitution. The petitioners contended in the trial Court and before the learned Single Judge that the provisions contained in Section, 132 (f) of the Madhya Bharat Municipal Corporation Act, 1956, empowering the Corporation to impose an octroi on animals or goods brought within the city for sale, consumption or use therein was ultra vires as the levy of octroi duty on goods restricted the freedom of trade and commerce; and that this restriction was invalid inasmuch as the Madhya Bharat Municipal corporation Bill, 1956, was introduced and moved in the Madhya Bharat Legislature without obtaining the previous sanction of the President as required by the proviso to Article 304. Clause (b) of Article 304 and the proviso run as follows :--
'Notwithstanding anything in Article 301 or Article 303, the legislature of a State may by law -
X X X X (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest;
Provided that no Bill or amendment for the purposesof Clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President'.
The main question, therefore, that arises for determination in these references is whether by the imposition ofan octroi duty by the respondent corporation on goods andanimals brought within the city for sale, consumption oruse therein, any restriction on the freedom of trade hasbeen put. If the imposition does not amount to restricting freedom of trade in any way, then it would not benecessary to consider whether the Madhya Bharat Municipal Corporation Bill, 1956 was introduced in theLegislature after satisfying the requirement of the provisoto Clause (b) of Article 304.
3. It was argued by Shri Mathur, learned counsel appearing for the petitioners, that the imposition of octroi duty on goods or animals brought within the Corporation limits in reality hampered or burdened trade and commerce with in the Indore Corporation limits and thus within the limits of the State; that the imposition was a tax on trade; that it was not a regulatory tax in the sense of one imposed for regulating any particular matter; that It was also not a compensatory tax In the sense of one levied for providing any facilities for the promotion of trade and commerce; and that the octroi tax was thus an impost on trade and restricted the freedom of trade. Learned counsel placedreliance on Atiabarl Tea Co. Ltd. v. State of Assam, AIR1961 SC 232, Automobile Transport (Rajasthan) Ltd. etc. v. State of Rajasthan, AIR 1962 SC 1406 and Patna Zilla Truck Owners Association v. State of Bihar, AIR 1963 Pat 16.
4. We are unable to accede to the contention advanced on behalf of the petitioners that the octroi duty imposed by the Indore Municipal Corporation is a tax on trade or that it restricts the freedom of trade. The pronouncements of the Supreme Court in AIR 1961 SC 232 (supra), AIR 1962 SC 1406 (supra), and Firm A.T.B. Mehtab Majid and Co. v. State of Madras, WP No. 147 of 1959 D/- 22-11-1962 : (AIR 1963 S C 928) leave no doubt that taxing laws can be regarded as restrictions on trade, commerce and intercourse if they hamper the flow of trade and if they are not what can be termed to be compensatory taxes, or regulatory measures. In the case of AIR 1962 SC 1406 (supra) the Supreme Court, approving the majority view expressed in AIR 1961 SC 232 (supra) said:--
'that which in reality facilitates trade and commerce is not a restriction, and that which in reality hampers or burdens trade and commerce is a restriction. It is the reality or substance of the matter that has to be determined. It is not possible a priori to draw a dividing line between that which would really be a charge for a facility provided and that which would really be a deterrent to a trade but the distinction, if it has to be drawn, is real and clear. For the tax to become a prohibited tax-it has to be a direct tax the effect of which is to hinder the movement part of trade. So long as a tax remains compensatory or regulatory it cannot operate as a hindrance.''
Unless, therefore, a tax is a direct tax having the effect of hindaring the movement of trade, it cannot be regarded as a tax restricting the freedom of trade for the purposes of Article 304(b).
4a. That the tax must impede or hamper the movement or transport of goods before it can be regarded as one; restricting the freedom of trade was emphasized by Gajendragadkar J. who delivered the majority judgment in AIR 1961 SC 232 (supra) by making the following observations:
'Let us now revert to Article 301 and ascertain the width and amplitude of its scope. On a careful examination of the relevant provisions of Part XIII as a whole as-well as the principle of economic unity which it is intended to safeguard by making the said provisions, the conclusion appears to us to be inevitable that the content of freedom provided for by Article 301 was larger than the freedom contemplated by Section 297 of the Constitution Act of 1935, and whatever else it may or may not include, it certainly includes movement of trade which is of the very essence of all trade and is its integral part, if the transport or the movement of goods is taxed solely on the basis that the goods are thus carried or transported that, in our opinion, directly affects the freedom of trade PS contemplated by Article 301. If the movement, transport or the carrying of goods is allowed to be impeded, obstructed or hampered by taxation without satisfying the requirements of Part XIII the freedom of trade on which so much emphasis is laid by Article 301 would turn to be illusory. When Article 301 provides that trade shall be free throughout the territory of India primarily it is the movement part of the trade that it has in mind and the movement or the transport part of trade must be free subject of course to the limitations and exceptions provides by the other Articles of Part XIII. That we think is theresult of Article 301 read with the other Articles in Part XIII.'
These observations make it very clear that the freedom of trade spoken of by Article 304 is directly affected if the basis of taxation is the movement, carriage or transport of the goods.
5. Now, as pointed out by Hidayatullah J. in AIR 19G2 SC 1406 (supra), there is a material difference between a tax which burdens a trader directly and immediately and a tax which being general is paid by a trader in common with others. The first is an impost on trade as such and may be said to restrict it; but the second, though it may burden the trader, is not a 'restriction' of the trade. It is true that Hidayatullah J. did not agree with the majority view that a compensatory or regulatory tax cannot be treated as a tax restricting the freedom of trade. According to him, if a tax imposed operates on trade and commerce directly and hampers the flow of trade, then even if it is regulatory or compensatory, it would offense Article 301. But the distinction which he drew between a tax placed upon a trade directly and immediately and a general tax which a trader has to pay in common with others, is in no way in conflict with the majority view taken in AIR 1962 SC 1406 (supra) that for the tax to become a prohibited tax, it has to be a direct tax the effect of which is to hinder the movement part of trade.
6. Now, in the references before us, the octroi duty imposed by opponent Corporation is clearly not a tax on any trade. It is a general impost which not only the traders but all others who bring animals or goods within the city for sale, consumption or use therein, are required to pay. The tax is again not on the movement of any goods. It is levied when goods and animals are brought within the city for the specified purposes, namely, for sale, consumption or use therein.
The tax is thus on the entry of goods in the Corporation area for sale, consumption or use therein under a provision enacted in terms of entry No. 52 of the State List. The provision empowering the Corporation to impose an octroi tax on goods and animals brought within the Corporation limits for sale, consumption or use therein was not enacted with reference to entry No. 56 of the State List which deals with taxes on goods and passengers carried by road of on Inland waterways. It is thus plain that the basis of the impugned Octroi duty is not the movement or transport or the carriage of goods. That being so, it cannot be regarded as a tax restricting the freedom of trade as expounded by the Supreme Court In AIR 1961 SC 232 (supra), AIR 1962 SC 1406 (supra), and AIR 1963 SC 928 (supra), The question, therefore, whether the Madhya Bharat Municipal Corporation Bin, 1956, was introduced in the Legislature without obtaining the previous sanction of the President does not arise for consideration.
7. In regard to the decision of the Patna High Court in AIR 1963 Pat 16 (supra) relied on by the learned counsel for the petitioner it is sufficient to say that in that case the tax imposed under the Bihar Taxation on Passengers and Goods (carried by Public Service Motor Vehicles) Act, 1961, was a tax on the movement, transport or carriage of goods and the learned Judges of the Patna High court held that the tax levied under that Act was not based upon any theory of recompense and was neither regulatory nor compensatory but put direct restriction on trade and commerce. The Patna decision is thus with reference to a legislation made under entry No. 56 of the State List and isclearly ditinguishable by that fact as also on the provisions of the Bihar Act.
8. For these reasons, we are of the opinion that the petitioners' contention that Section 132(f) of the Madhya Bharat Municipal Corporation Act, 1956, empowering the Corporation to impose an octroi tax on animals or goods brought within the city for sale, consumption or use therein is ultra vires Article 304 (b), must be rejected.
9. The revision petitions shall now be placed before the learned Single Judge making these references for final disposal according to the view he may adopt with regard to the other grounds on which the petitioners had challenged the validity of the imposition of octroi duty.