Skip to content


Amrit Banaspati Company Limited Vs. the Union of India - Court Judgment

LegalCrystal Citation
SubjectOther Taxes
CourtDelhi High Court
Decided On
Case NumberCivil Writ Petition Appeal No. 144 of 1972
Judge
Reported inILR1973Delhi237
ActsConstitution of India - Articles 301, 305 and 309; Delhi Municipal Corporation Act, 1957 - Sections 178
AppellantAmrit Banaspati Company Limited
RespondentThe Union of India
Advocates: B.N. Sen,; Leela Seth,; N. Khetan,;
Cases ReferredState of Mysore v. H. Sanjeeviah
Excerpt:
(i) constitution of india - articles 301, 302 & 303--respective scope of--levy of terminal tax under section 178, delhi municipal corporation act--validity of. ;that though section 178 of the delhi municipal corporation act, 1956 contravenes article 301, it is saved by article 302. the provision contained in article 301 embodies and enshrines a principle of paramount importance that the economic unity of the country will provide the main sustaining force for the stability and progress of the political and cultural unity of the country, and the object of the freedom declared by the article is thus to ensure that the economic unity of the country may not be broken up by internal barriers. the freedom envisaged by article 301 does not mean absolute freedom but means freedom from all.....t.v.r. tatachari, j. (1) this writ petition has been filed by ami-it banaspati company limited praying for a declaration that the provision in section 178 of the delhi municipal corporation act no. 66 of 1957 (hereinafter referred to as 'the corporation act'), for levy of terminal tax is ultra virus the constitution of india, and for the issuance of a writ of prohibitation or other suitable writ or direction directing the respondents to forbear from realizing any terminal tax from the petitioner under the provision in the said section. the petitioner also prayed for a direction to the respondents to refund a sum of rs. 2,95,396.01 which was alleged to have been realised by the respondents as terminal tax from the petitioner. the respondents are (1) the union of india through the.....
Judgment:

T.V.R. Tatachari, J.

(1) This writ Petition has been filed by Ami-it Banaspati Company Limited praying for a declaration that the provision in section 178 of the Delhi Municipal Corporation Act No. 66 of 1957 (hereinafter referred to as 'the Corporation Act'), for levy of terminal tax is ultra virus the Constitution of India, and for the issuance of a writ of prohibitation or other suitable writ or direction directing the respondents to forbear from Realizing any terminal tax from the petitioner under the provision in the said section. The petitioner also prayed for a direction to the respondents to refund a sum of Rs. 2,95,396.01 which was alleged to have been realised by the respondents as terminal tax from the petitioner. The respondents are (1) The Union of India through the Secretary, Ministry of Home Affairs ; (2) The Lt. Governor, Delhi ; (3) The Commissioner Municipal Corporation of Delhi ; and (4) The Delhi Terminal Tax Agency.

(2) The petitioner-company was incorporated under the Companies Act, 1956, and it was its registered office at G. T. Road, Ghaziabad, in the State of Uttar Pradesh. It carried on and still carries on the business of manufacturing and dealing in Vanaspati, also known as Vegetable Ghee and Vegetable Solidified Oil (hereinafter referred to as 'Vansapati products'). It has a factory, inter aha, at Ghaziabad for manufacturing the said Vanaspati products. In the course of its business, the company carried and still carries its products by railway and/or road into the Union Territory of Delhi from Ghaziabad for the purpose of sale at Delhi.

(3) The Corporation Act was enacted by the Parliament and it came into force on December 28, 1957. Section 178 of the said Act provides for the levy of terminal tax at the rates specified in the Tenth Scheduled to the Corporation Act on all goods carried by railway or road into the Union Territory of Delhi from any place outside thereof. Under the provision in the said section, respondent 4 realised various amounts from time to time from the petitioner by way of terminal tax on Vanaspati products carried by the petitioner by railway and/or road into the Union Territory of Delhi. The amounts said to have been so realised are: Year Amount Rs. 1969 ..... 68,620.09 1970 ..... 90,137.54 1971 ..... 1,36,638.38 According to the petitioner, the provision in section 178 of the Corporation Act directly and immediately impedes the movement of goods from one place to another and thus restricts trade, commerce and intercourse, and also discriminates between goods manufactured within the Union Territory of Delhi and the goods manufactured outside the said Territory. Further, according to the petitioner, the terminal tax chargeable under section 178 is not referable to any service rendered or to be rendered by any railway or road transport organization. Thus, according to the petitioner, section 178 of the Act violates the freedom guaranteed under Article 301, and is not protected by Articles 302, 303 and 304 of the Constitution of India, and as such is ultra virus the Constitution. The petitioner, thereforee, wrote a letter on November 18, 1971, requesting the respondents to refrain from levying and/or collecting any terminal tax under section 178 and lo refund the tax already collected. As there was no reply to the said letter, the petitioner sent another letter, dated December 20, 1971. but there was no reply even to that letter. The petitioner thereupon filed the present Writ Petition praying (a) that section 178 be declared ultra virus the Constitution of India ; (b) that a writ of prohibition or other suitable writ or direction be issued directing the respondents to forbear from Realizing any terminal tax from the petitioner under section 178 of the Act, and (c) for the issuance of a direction to the respondents to relund the sum of Rs. 2,95,396.01 which was realised from the petitioner by way of terminal tax in the years 1969, 1970 and 1971.

(4) In opposition to the Writ Petition, respondents 3 and 4 filed a reply, dated March, 20, 1972 in which they contended, infer aha, that section 178 of the Corporation Act is not ultra virus for the reasons mentioned in the Writ Petition, and that the petitioner is not entitled to any relief. The petitioner filed a rejoinder, dated April 1, 1972, reiterating his contentions in the Writ Petition. A further affidavit, dated April 12, 1972, was filed on behalf of respondents 3 and 4, and the petitioner did not file any rejoinder to it. On behalf of respondent 1, an affidavit of Shri R. C. Jain, Deputy Secretary, Ministry of Home Affairs, Delhi Section, dated July 26, 1972, was filed in opposition to the Writ Petition contending that section 178 of the Corporation Act is not ultra virus the Constitution and the petitioner is a not entitled to any relief. The petitioner filed a rejoinder to the said affidavit reiterating his contentions in the Writ Petition.

(5) Shri B. Sen, learned counsel for the petitioner, contended that the provision in section 178 of the Corporation Act imposes terminal tax solely on the basis that the goods are carried or transported into the Union Territory of Delhi from any place outside the said Territory, that the provision directly and immediately impedes the movement of goods from one place to another and thus restricts trade, commerce intercourse in general, and in particular the trade, commerce and intercourse of the petitioner, that the provision thus violates the freedom guaranteed under Article 301 of the Constitution of India and is not protected by Articles 302, 303 and 304, and that the provision in section 178 of the Corporation Act is, thereforee, ultra virus the provision in Article 301 of the Constitution of India.

(6) Sections 178 to 183 of the Corporations Act contain provisions regarding terminal taxes on goods. Section 178 is the charging section and is as follows :-

'178(1)On and from the date of the establishment of the Corporation under section 3. there shall be levied on all goods carried by railway or road into the Union Territory of Delhi from any place outside thereof, a terminal tax at the rates specified in the Tenth Schedule. (2) The Central Government may, by notification in the Official Gazette vary from time to time, the rates specified in that Schedule, in relation to any goods or classes of goods so, however, that where the rates are increased, the increased rates shall not be more than treble the rates so specified. (2) The Central Government may by like notification declare that with effect from such date as may be specified in the notification, the terminal tax levied in relation to any goods or class of goods shall, for reasons specified in the notification, cease to be levied.'

(7) The words 'shall be levied on all goods carried by railway or road' in sub-section (1) show clearly that the section imposes terminal tax on the carriage or movement of goods from outside the Union Territory of Delhi into the said Territory. In other words, the taxable event is the carriage or movement of goods into the Union Territory of Delhi. The question is whether this provision contravenes the provision in Article 301 of the Constitution of India.

(8) The said Article provides as follows :-

'SUBJECT to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.'

(9) As observed by the Supreme Court in Atiabari Tea C. Ltd. v. State of Assam and others, : [1961]1SCR809 , the provision contained in Article 301 'embodies and enshrines a principle of paramount importance that the economic unity of the country will provide the main sustaining force for the stability and progress of the political and cultural unity of the country', and the object of the freedom declared by the Article is thus to ensure that the economic unity of the country may not be broken up by internal barriers. However, as pointed out by the Supreme Court in the aforesaid case of Atiabari Tea Co. Ltd. (supra) at page 253 and in Automobile Transport (Rajasthan) v. State of Rajasthan A. I. R. 1962 SC 1405 . the freedom envisaged by Article 301 does not mean absolute freedom but means freedom from all restrictions except those provided in the other Articles of Part Xiii as stated in Article 301 itself.

(10) In this context, it has to be noted that there is a distinction between measures which restrict the freedom of trade, commerce and intercourse and measures which are regulatory or compensatory in character. As explained by the Supreme Court in the case of Automobile Transport (supra) at pages 1419, 1420, 1424 and 1430, while restrictive measures impede or obstruct the free movement of trade, commerce or intercourse, regulatory or compensatory measures facilitate the freedom of movement rather than retard it. thereforee, regulatory or compensatory measured do not come within the category of restrictions on the freedom envisaged by Article 301 and do not violate the provision in the said Article.

(11) Further, as held by the Supreme Court in the Clisc of Atiabari Tea Co. Ltd. (supra) at page 254 and in State of Madras, v. NatrJa Mudalier, A. I. R. 1969 SC 147 'restrictions, freedom from which is guaranteed by Article 301, would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade'. It follows from this also that regulatory or compensatory measures cannot be regarded as vocative of the freedom guaradteed by Article 301 of the Constitution.

(12) As regards taxation, it is now settled that tax laws are not outside the purview of Part Xiii of the Constitution. As observed by Gajendragadkar J. (as his Lordship then was) in the case of Atiabari Tea Co. Ltd. (Supra) at page 254 , 'taxes may and do amount to restrictions ; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of Article 301'. As further observed by the learned judge at page 253, '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 provided by the other Articles of Part XIII'. thereforee, in determining whether a taxing provision or tax directly and immediately restricts trade, commerce or intercourse, and thus offends Article 301, it is the 'movement' of the goods which are the subject of the trade or commerce that has to be borne in mind. In the case of Atiabari Tea Co. (supra) the Act in question was the Assam Taxation (on Goods carried by Roads or Inland Waterways) Act No. 13 of 1954. Section 3 of the Act, which was the relevant charging section, provided that manufactured tea in chests carried by motor vehicles etc., except railways and airways, shall be liable to tax at the specified rate per lb., of such tea, and that the said tax shall be realised from the producer. The Act was passed by the Assam Legislature under Entry 56 in List Ii of the Seventh Schedule to the Constitution, and so the levy was of tax on goods carried by road or/inland waterways. Referring to the said provisions, Ganjendragadkar J. observed at page 255 as under :-

'IT is thus obvious that the purpose and object of the Act is to collect taxes on goods solely on the ground that they are carried by road or by inland waterways within the area of the State. That being so, the restriction placed by the Act on the free movement of the goods is writ large on its face. It may be that one of the objects in passing the Act was to enable the State Government to raise money to keep its roads and waterways in repairs ; but that object may and can be effectively achieved by adopting another course of legislation ; if the said object is in tended to be achieved by levying a tax on the carriage of goods it can be so done only by satisfying the requirements of Article 304(b).'

(13) The learned Judge further observed that-

'THE effect of the Act on the movement of trade is direct and immediate; it is not indirect or remote ; and so the legislation under the said Entry must be held to fall directly under Article 301 as legislation in respect of trade and commerce.'

(14) In the present case, section 178 of the Corporation Act provides for levy of terminal tax on all goods carried by railway or road into the Union Territory of Delhi from any place outside thereof. The very language of the section shows that the levy of the tax is on the carriage of the goods into the Union Territory by railway or road. The taxable event is the carriage of the goods into the Union Territory. The effect of the provision is obviously on the movement or transport part of the goods, and is direct and immediate. The levy of the tax is thus a direct and immediate restriction on trade. It has, thereforee, to be held that the provisions is prima facie within the purview of Article 301 of the Constitution of India.

(15) However, as stated earlier in this judgment, the provision would be outside the purview of Article 301, if it is regulatory or compensatory in character. It has, thereforee, to be seen whether the provision is a regulatory or compensatory measure. Section 179 of the Corporation Act provides that the terminal tax is to be Colletcted by the Central Government, and that the Central Government is empowered to determine what portion of the total proceeds of the terminal tax is to be deducted to meet the cost of collection of the tax, and deduct the same accordingly. Section 180 of the said Act provides that the terminal tax collected under the Act shall form part of the Consolidated Fund of India, and that the same reduced by the cost of collection shall, if Parliament by appropriation made by law in this behalf so provides, be paid by the Central Government to Delhi Municipal Corporation and to other local authorities within the Union Territory of Delhi in such proportion as may from time to time be determined by the Central Government. Section 181 empowers the Central Government to exempt either wholly or in part from the payment of terminal tax imposed by the Corporation Act any class of goods. Section 182 deals with the powers and liabilities of persons authorised under the provisions of the Corporation Act and the rules made there under to collect the terminal tax. Section 183 confers power on the Central Government to make rules in relation to the levy, assessment and collection of terminal tax under the Corporation Act. All these provisions show that it is mainly the Central Government that is empowered under the Corporation Act to levy, assess, collect and disburse the terminal tax. The terminal tax forms part of the Consolidated Fund of India, and there is no indication of rendering of any service in any of the sections. There is nothing to show that the levy is a quid pro quo for services rendered or that the levy is to enable the concerned authority to meet the cost of administration. The levy is thus clearly a tax for raising revenue and not a fee.

(16) But, the question is whether the levy of the terminal tax is a regulatory or compensatory measure. There is no provision in any of the sections 178 to 183 of the Corporation Act which can. be regarded as regulatory of trade, commerce or intercourse. We are, thereforee, unable to hold that the levy of terminal tax under section 178 is regulatory incharacter. As to whether it is compensatory, no such plea has been taken in the counter affidavits filed on behalf of the respondents. On the other hand, it was averred that 'the question, of giving grading facility in lieu of the realisation of terminal tax does not arise at all. Such type of facility is usually provided when some 'fee' is imposed. Since terminal tax is not a fee, the qusstion of the said facility does not arise. In the case of Automobile Transport (Rajasthan) Ltd., (Supra) S. K. Das J. observed at page 1425 as follows :-

'IT seems to us that a working tesi for deciding whather a tax is compensatory or not is to examine whether the trades people are having the use of certain facilities forthe better conduct of their business and paying not patently much more than what is required for providing the facilities. It would be impossible to judge the compensatory nature of a tax by a meticulous test, and in the nature of things that cannot be done.'

(17) Under section 178, the terminal tax is levied at the rates specified in the Tenth Schedule to the Corporation Act. A persual ofthe said Schedule shows that articles are divided into various classes and for most of the articles of all the classes varying rates of terminal tax have been prescribed as payable 'per maund of gross weight'. It is true that section 178 refers to levy of terminal tax on goods carried by railway or road. But, the section read with the Schedule levies merely a lump sum terminal tax calculated at different rates for differnt goods, and the rates are in. no way connected with or related to the use of the railway or road by which there are carried. The terminal tax cannot, thereforee, be regarded as payment by the trades people like the petitioner for the use of the facilities of railway and road. No data or particulars have been furnished either as regards the amount of tax realised in respect of a particular kind of goods or all the kinds of goods for which terminal tax is being levied and collected, or as regards the amount required for providing the facilities of railway and roads. In the absence of such data or particulars, it is not possible to apply the test suggested by the Supreme Court and enquire and determine whether the trades people like the petitioner are paying patently much more than what is required for providing the facilities. In fact no attempt has been made by respondents to make out such a case. It has, thereforee, to be held that the levy of terminal tax under section 178 of the Corporation Act has not been shown to be a regulatory or compensatory measure.

(18) Once it is held that the. levy under section 178 is not regulatory or compensatory, but that it directly and immsdiatly interfers with the movement of interstate trade or commerce, it would follow that it offends against the freedom guaranteed by Article 301 whether the terminal tax is imposed at the frontier of the Union Territory of Delhi or at any stage prior or subsequent.

(19) But, as pointed out by Gajendragadkar, J. at page 254 (para 52) in his Lordship's judgment in the case of Atiabari Tea Co. Ltd. (supra), even though the terminal tax offends against the freedom of trade, commerce and intercourse guaranteed by Article 301, its validity can still be sustained if it satisfies the requirements of any of the Articles 302 to 305. Articles 302 provides :

'PARLIAMENT may by law impose such restrictions en the freedom of trade, commerce and intercourse between one State and another on within any part ofthe territory of India as may be required in Public interest'.'

(20) Thus, while Article 301 imposes a general limitation or restriction on the exercise of legislative power, whether by the Parliament or the State Legislatures, Article 302 relaxes the restriction in favor of Parliament. In the present case, the Corporation Act was enacted by the Parliament, and consequently Article 302 is attracted. The only requirement under Article 302 is that the law imposing a restriction on the freedom of trade, commerce or intercourse should be in public interest. In the case of Atiabari Tea Co. Ltd. (supra) Gajendragadkar J. observed at page 254 (para 53) that 'whether or not the given law is in the public interest may not be justiciable, and in that sense Parliament is given the sole power to decide what restrictions can be imposed in public interest as authorised by Article 302.' In State of Madras v. Natrja Mudaliar (supra) Shah J. (as his Lordship then was) observed at page 155 (para 10) that 'there is also no doubt that exercise of the power to tax may normally be presumed to be in the public interest'. We may add that nothing has been placed before us in the present case to show that the levy is not in the public interest. It is thus clear that the provisions in section 178 of the Corporation Act falls within Article 302 and has to be held to be intra virus the Constitution and valid.

(21) We may refer here to a contention sought to be urged by Mr. B. Sen, learned counsel for the petitioner, that the words 'in the public interest' occur also in Article 304(b) and the same meaning should be given to the said words in both Article 302 and Article 304(b), and that since Article 304(b) requires the imposition of reasonable restrictions in the public interest, the restrictions under Article 302 also should be required to be reasonable restrictions in the public interest. The argument cannot be accepted . The word 'reasonable' has not been used in Article 302 and cannot, thereforee, be read into the Article, Further, Article 304 deals with State Legislatures while Article 302 deals with Parliament. As pointed out by Gajendragadkar, J. in the case of Atiabari Tea Co. Ltd. (supra) at page 252 (para 48) , the provisions in the two Articles 302 and 304 are not similar, and 'there are, however, obvious differences in the powers of the Parliament and State Legislatures'. The learned Judge contrasted the two Articles in these words:

'IN regard to an Act which the State Legislature intends to pass under Article 304(b) no Bill can be introduced without the previous sanction of the President, and this requirement has obviously been inserted in order that regional economic pressures which may inspire legislation under the said clause should be duly examined in the light of the interest of national economy : such legislation must also be in the public interest which feature is common with the provisions contained in Article 302 ; such legislation must also satisfy the further test that the restrictions imposed by it are reasonable. That is another additional restriction imposed on the powers of the State Legislatures'.

(22) It is thus clear that provisions contained in Articles 302 and 304(b) are intended to confer different powers and impose different restrictions on the Parliament and the State Legislation. Even though the expression 'public interest' has been used in both the Articles 302 and 304(b), since the word 'reasonable' has not been used in Article 302, it cannot be read into Article 302 and the overall scope and effect of Article 302 cannot be the same as that of Article 304(b). thereforee, the question of harmonising the provisions or giving the same meaning to the words used in the two Articles does not arise.

(23) Mr. Sen also sought to contend that Article 302 does not include a restriction by imposition of tax. But, he did not pursue the contention and fairly stated that the observations of the Supreme Court in State of Madras v. Natraja Mudaliar (supra) at page 155 (para 10) and page 161 (para 33) are against his contention.

(24) Mr. Sen then sought to contend that if Article 302 is held to be appliacable to the provision in section 178 of the Corporation Act, the applicability of Article 303 has also to be considered. Article 303 reads thus :-

'303(1) Not with standing anything in Article 302, neither Parliament nor the Legislature of a State shall have power to make any law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule. (2) Nothing in clause (1) shall prevent Parliament from making any law giving, or authorising the giving of, any preference or making or authorising the making of, any discrimination if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India.'

(25) SUB-ARTICLE (1) is in the nature of a proviso or exception to Article 302. It prohibits the Parliament from making any law which would give any preference to one State over another or would make any discrimination between one State and another by virtue of any entry relating to trade and commerce in any of the three Lists in the Seventh Schedule to the Constitution. Sub-article (2) is in its turn a proviso or exception to Sub-article. (1). It withdraws or removes the prohibitions in Sub-article (2) to an extent and empowers the Parliament (and not a State) to make a law giving preference to one State over another or making a discrimination between one State and another, but this power can be exercised by the Parliament only if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scracity of goods in any part of the terriotry of India. There is no such declaration in the present case, and we are, thereforee, not concerned with sub-Article (2).

(26) The argument of Mr. Sen regarding Article 303(1) was that if Article 302 includes a restriction on trade, commerce and intercourse by imposition of tax, Article 303(1) also should be held to include such a restriction by imposition of tax, and, thereforee, there is, by virtue of Article 303(1), a prohibition against the Parliament exercising power under Article 302 to make such a law, infer alia, making a discrimination between one State and another, and that the provision in section 178 of the Corporation Act imposing terminal tax on goods carried by railway or road into the Union Territory or Delhi from outside thereof amounts to discrimination between one State and another within the meaning of Article 303(1). and is, thereforee, hit by Article 303(1) in the sense that Article 303(1) is attracted and consequently the applicability of Article 302 is excluded. On the other hand, Mr. Tara Chand Brij Mohan Lal, learned counsel for the Municipal Corporation contended that Article 303(1) is not applicable for the reasons (1) the Union Territory of Delhi is not a 'State' within the meaning of Article 303(1); (2) Article 303(1) refers to discrimination between one State and another other than the State for which the legislation has been made ; and (3) the words 'an entry relating to trade and commerce in any of the Lists in the Seventh Schedule' used in Article 303(1) were restricted to the entries in the Seventh Schedule which expressly deal with the power to legislate in respect of trade and commerce, i.e. entries 41 and 42 of List 1, entries 26 and 27 of List Ii and entry 33 of List Iii in the Seventh Schedule, and extended to no other entries, and, thereforee. Article 303(1) is not applicable to a law made by virtue of an entry with respect to the levy of 'tax on trade and commerce' as distinguished from an entry relating to 'trade and commerce', or to a law like section 178 of the Corporation Act made by virtue of an entry with respect to 'terminal tax'. We shall deal with each of these contentions.

(27) As regards the contention of Mr. Tara Chand Brij Mohan Lal that the Union Territoty of Delhi is not a 'State', the said contention is now covered by the decision of a Division Bench of this Court (Hardyal Hardy and V. S. Deshpande JJ.) in H. L. Rodhey v. Delhi Administration, : AIR1969Delhi246 and the decision of the Supreme Court in S. K. Singh v. V. V. Giri, : [1971]2SCR197 , In H. L. Rodhey's case, the Division Bench held on a consideration of the relevant provisions that the Union Territory of Delhi is not a 'State', and consequently the President has power under Article 309 of the Constitution to make rules for central services in Delhi. In S. K. Singh's , case, the Supreme Court held to the same effect viz., that Union Territory cannot be treated as included in the word 'State' as used in the Constitution. Article 303(1) clearly refers to a discrimination between a State and another State, and is not, thereforee, attracted in the present case.

(28) The second contention of Mr. Tara Chand Brij Mohan Lal was that Article 303(1) refers to law making discrimination between one State and another other than the State for which the law has been made, and that, even if Article 303(1) applies to the Union Territory of Delhi the Corpoation Act enacted for the Union Territory of Delhi cannot be regarded as the kind of law contemplated by the Sub-article, and, thereforee, Article 303(1) is not attracted so far as the Corporation Act is concerned. In other words, the argument of the learned counsel was that the words 'between one State and another' mean 'between one State and another other than the State for which the law has been made'. The learned counsel pointed out that the words 'one State' and not the words 'the State itself' have been used and, thereforee, the State for which the law has been made is to be regarded as excluded from the scope of Article 303. It seems to us that the words 'one State' are prima fade wide enough to include the State for which the law has been made. However, in the view taken by us on the first contention of Mr. Tara Chand Brij Mohan Lal that the Union Territory of Delhi is not 'State' and, thereforee, Article 303(1) is not applicable to the Corporation Act, we consider that it is not necessary to express any final view on the contention of the learned counsel.

(29) As regards the third contention of Mr. Tara Chand Brij Mohan Lal and the contention of Mr. B. Sen regarding the applicability of Article 303, it has to be noted that in State of Madras v. Natraja Mudaliar (supra) it was contended, inter alia, before the Supreme Court firstly that

'THE power under Article 303 could only be exercised so as to restrict the authority of the Parliament which arises by virtue of an entry relating to trade and commerce in the legislative Lists and an entry with respect to the levy of tax on trade and commerce is not an entry relating to trade and commerce and, thereforee, there is no prohibition against the Parliament exercising power or authorising the giving of any preference to one State over another or making or authorising the making of any discrimination between one State and another by the exercise of taxing power';

and secondly that

'THE expression 'an entry relating to trade and commerce in any of the Lists in the Seventh Schedule' was restricted to the entries which expressly deal with the power to legislate in respect of trade and commerce, i.e. entries 41 and 42 of List I, entries 26a and 27 of List Ii and entry 33 of List Iii in the Seventh Schedule, and extended to no others.'

It was also contended that

'ALL legislative entries which directly affect trade and commerce are also within the expression 'entry relating to trade and commerce', (vide paragrap 12 at pages 155 and 156).

These questions were, however, left open and no opinion was expressed on them as the Supreme Court considered that there was no need to do so in that case, in the view taken by it that

'AN Act which is merely enacted for the purpose of imposing tax which is to be collected and to be retained by the State does not amount to law giving, or authorising the making of, any discrimination between one State and another, merely because varying rates of tax prevail in different States', (vide paragraph 13 at page 156).

(30) In the present case, for the reason given above, i.e. in the view taken by us regarding the first contention of Mr. Tara Chand Brij Mohan Lal that the Union Territory of Delhi is not 'State' and, thereforee. Article 303(1) is not applicable to the Corporation Act, we consider that the aforesaid contentions of Mr. B. Sen and Mr. Tara Chand Brij Mohan Lal need not be considered for the purposes of the disposal of this Writ Petition.

(31) Article 304 of the Constitution deals with legislation by a State and since the Corporation Act has been enacted by the Parliament, the said Article is not applicable to the Corporation Act, and Mr. Tara Chand Brij Mohan Lal stated that he does not rely upon it.

(32) Mr. Tara Chand Brij Mohan Lal, however, relied upon Article 305 and contended that the Corporation Act is an 'existing law' within the meaning of the said Article. Article 305, as amended by the Constitution (Fourth Amendment) Act, 1955, reads as follows :-

'305. Nothing in Articles 301 and 303 shall affect the provisions of any existing law except in so far as the Parliament may by order otherwise direct, and nothing in Article 301 shall affect the operation of any law made before commencement of the Constitution (Fourth Amendment) Act, 1955, in so far as it relates to, or prevent Parliament or the Legislature of a State from making any law relating to, any such matter as is referred to in sub-clause (ii) of clause (6) of Article 19.'

(33) Thus, the Article saves 'existing laws' which are repugnant to Articles 301 and 303, subject to orders of the President. An 'existing law' has been defined in Article 366(10) as meaning 'any law, ordinance, order, by-law, rule or regulation passed or made before the commencement of this Constitution by any legislature, authority or person having power to make such a law, ordinance, order, by-law, rule or regulation.' The question for consideration is whether the Corporation Act is an 'existing law' within the meaning of Article 305.

(34) The Punjab Municipal Act No. 3 of 1911, came into force in 1911. It applied to Delhi. Section 61 of the said Act provided for imposition of taxes. Section 62 laid down the procedure. At that time, there was no entry regarding terminal tax in the then Constitution Act. However, octroi was being collected at that time. On February 28, 1916, the Chief Commissioner of Delhi issued a notification No. 1183 under the provision in Section 62(7) of the Punjab Municipal Act whereby it was declared that with effect from June 1, 1916, the rates of terminal tax mentioned in the notification shall be levied in the Municipality of Delhi on the articles mentioned in the Schedule attached to the notificaton in lieu of the then existing octroi. The rate of terminal tax for 'ghee' was fixed (item 18 in the Schedule) at Rs. 1-8-0 per maund. The said notification was superseded by another notification, dated April 7, 1940, by which the rates of terminal tax for the various articles were modified. On January 26, 1950, the Constitution of India came into force. Terminal taxes on goods or passengers, carried by railway, sea or air were included as item 89 in List I of the Seventh Schedule to the Constitution.

(35) The Punjab Municipal Act continued to be applied to Delhi till April 1, 1958, when the Delhi Municipal Corporation Act, No. 66 of 1957, came into force. Chapter Viii of the Corporation Act deals with taxation and section 178 of the Act provides for levy of trerminal tax on goods carried by railway or road into the Union Territory of Delhi from any place outside thereof at the rates specified in the Tenth Schedule to the Act. In that Schedule, the rate fixed for vegetable ghee was Rs. 1.75 per maund, and the said rate was increased in 1969 to Rs. 7.00 per quintal (2 1/2 maunds). The argument of Mr. Tara Chand Brij Mohan Lal was that terminal tax was being levied in Delhi even before the Constitution came into force, that the same continued to be levied after the Constitution for some time under the Punjab Municipal Act and thereafter under the present Corporation Act. and that the provision in section 178 of the Corporation Act is, thereforee, an 'existing law' which is saved by Article 305. There is no force in the said contention. It is true that the terminal tax was being levied by virtue of a notification issued under the Punjab Municipal Act before the Constitution came into force and the same continued to be levied under the same notification till April, 1958, after the Constitution came into force. But, from and after the said date the Corporation Act came into force, the Punjab Municipal Act was repealed by section 516 of the new Act, and the terminal tax came to be levied under the said new Act. It has to be noted that up to April 1, 1958, the levy was by the Municipality under the Punjab Municipal Act, while the levy after the said date under the new Corporation Act is by the Central Government. Thus, the present levy at the relevant time is by a new authority under a new Act which came into force on April 1, 1958. The provision in section 178 of the Corporation Act cannot, thereforee, be regarded as an 'existing law'. In Kalyani Stores v. State of Orissa and others, : [1966]1SCR865 , a pre-Constitution Act continued to be in force after the Constitution came into force, and a new notification was issued in 1961 enhancing the tax. The Supreme Court held that the notification was not an 'existing law'. The said decision was followed in State of Mysore v. H. Sanjeeviah, : [1967]2SCR673 . In the latter case also, a pre-Constitution Act continued to be in force subsquent to the coming into force of the Constitution, and a rule was framed after the Constitution came into force in exercise of the power to make rules conferred by a section of that Act. The said rule was held to be not an 'existing law'. In the present case, the new Corporation Act was passed and the old Punjab Act was repealed in 1958. The provision in section 178 of the new Act was not a continuation of the law which existed prior to the Constitution. It is a fresh law and not an 'existing law' as defined in Article 366(10). It is, thereforee, clear that the learn- ed counsel cannot derive any assistance from Article 305 of the Constitution.

(36) In the view taken by us that though section 178 of the Corporation Act contravenes Article 301, it is saved by Article 302, the Writ Petition must be held to have failed. The Writ Petition is accordingly dismissed. In the circumstances of the case, we direct the parties to bear their own costs in the Writ Petition.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //