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Vallabhdas Kanji (P.) Ltd. and ors. Vs. the Sales Tax Officer, Special Circle, Alleppey and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax;Constitution
CourtKerala High Court
Decided On
Case NumberO.P. Nos. 198, 1000, 3159 and 3210 of 1961 and 261 of 1962
Judge
Reported inAIR1963Ker202
ActsConstitution of India - Articles 286, 301, 304, 305 and 366(10); (Kerala) General Sales Tax Act, 1125 - Sections 5; (Kerala) General Sales Tax (Amendment) Act, 1955; (Kerala) General Sales Tax (Amendment) Act, 1957; (Kerala) General Sales Tax (Amendment) Act, 1960; Madras Sales Tax Act
AppellantVallabhdas Kanji (P.) Ltd. and ors.
RespondentThe Sales Tax Officer, Special Circle, Alleppey and ors.
Appellant Advocate V.R. Krishna Iyer and; R. Krishnaswami, Advs. O.P. No. 198 of 1961,;
Respondent AdvocateAdv. General
Cases ReferredLtd. v. State of Rajasthart
Excerpt:
sales tax - validity of levy - articles 286, 301, 304, 305 and 366 of constitution of india, section 5 of (kerala) general sales tax act, 1125, (kerala) general sales tax (amendment) act, 1955, (kerala) general sales tax (amendment) act, 1957, (kerala) general sales tax (amendment) act, 1960 and madras sales tax act - writ petition challenged assessment order passed by sales tax officers making them liable for payment of sales tax under act of 1125 as last purchaser of commodity in state - petitioner contended that imposition of levy on last purchase in state offends article 301 - general sales tax act is purely fiscal measure intended to procure revenue for state and sales tax is only a tax on sales for purpose of revenue - levy under provision of that act cannot be considered to hamper.....orderc.a. vaidialingam, j.1. the respective petitioners, in these writ petitions, challenge the orders of assessment passed by the concerned sales-tax officers, making them liable tor payment of sales-tax under the general sales-tax act, 1125, as the last purchaser of the commodity, in question, in the state. their contention is that the imposition of a levy, in the circumstances, on the last purchase in the state, offends article 301 of the constitution and is not saved by article 304(b) of the constitution. there are no doubt certain other questions arising for decision in these writ petitions. but the common question that arises is regarding the attack on these assessments, based upon articles 301 and 304(b) of the constitution; and i have heard arguments only on that aspect at.....
Judgment:
ORDER

C.A. Vaidialingam, J.

1. The respective petitioners, in these writ petitions, challenge the orders of assessment passed by the concerned Sales-tax Officers, making them liable tor payment of sales-tax under the General Sales-tax Act, 1125, as the last purchaser of the commodity, in question, in the State. Their contention is that the imposition of a levy, in the circumstances, on the last purchase in the State, offends Article 301 of the Constitution and is not saved by Article 304(b) of the Constitution. There are no doubt certain other questions arising for decision in these writ petitions. But the common question that arises is regarding the attack on these assessments, based upon Articles 301 and 304(b) of the Constitution; and I have heard arguments only on that aspect at present.

2. As Mr. K. V. Surianarayana lyer, learned counsel appearing for the petitioners, who are the same in both O. P. Nos. 3210/61 and 261/62 has advanced the leading arguments on this aspect, I will refer in the first instance, to the averments made in the affidavit filed in support of 0. P. No. 3210 of 1961, in so far as they are relevant to this aspect.

3. The petitioner therein, which is a partnership, have ing its Head Office in Bombay and branches at Cochin, Kozhikode and Alleppey, within the Kerala State, claims to be dealers in peoper, ginger, betelnuts, cardamom, tea etc. According to them, the bulk of their business consists in export of goods to the United States of America, United kingdom and Soviet Russia and other foreign countries. According to the petitioners, the head office at Bombay carries on negotiations with foreign, as well as inland buyers, and after securing orders and entering into contracts ask the branches concerned to purchase the necessary commodifies and forward them to their destinations.

4. The Sales-tax Officer concerned called upon the petitioners' branches at Alleppey and Cochin to submit returns for the months of April 1959 to March 1960. Though the 'petitioners claim that they are not liable to be assessed to sales-tax, inasmuch as the transactions, according to them, are covered by the exemption under Article 286(1)(b) of the Constitution and Section 26 of the General Sales-tax Act, nevertheless ultimately an order of assessment for the year 1-4-1959 to 31-3-1960 has been passed fixing the tax liability as against the petitioners in the sums mentioned therein.

5. The petitioners also state that they have challenged the order of the Sales-tax Officer, before the appellate authority, and prayed for stay of collection of tax pending the appeal. But no orders have been passed. The petitioners, in short, claim that the bulk of the transactions, in respect of which they have been assessed to sales-tax, have taken place in the course of export out of India and the rest in the course of inter State trade and commerce and claim that no part of the said turnover is liable for taxation. The petitioners again set out the manner in which they are carrying on their trade and commerce as and by way of export. The petitioners claim that the assessment to tax of these transactions is violative of Article 286 of the Constitution and Section 26 of the General Sales-tax Act.

6. Alternatively, the petitioners have also taken up the contention that the assessment and levy of tax on the lastpurchase, under Section 5 (vii) of the General Sales Tax Act, read with the notification issued thereunder, is violative of Articles 301 and 304(b) of th Constitution inasmuch as by such a levy, the movement and transport of goods, across the State and beyond the borders, are impeded and hampered. They also state that the last purchase in the State of any goods necessarily involves and requires the transport thereof across the State and beyond its limits except when the commodity is purchased for consumption within the State. Therefore, according to the petitioners, the imposition of tax under these circumstances is really a tax on the very movement of goods in the course of trade and commerce.

7. There is no counter-affidavit as such filed by the State, which is the 3rd respondent in this writ petition.

8. It is not seen that the petitioners in this writ petition raised the question based upon Article 301 and Article 304(b), before the assessing authority and the main contention that was taken before that officer was only that the transactions are not liable to taxation in view of Article 286 of the Constitution read with Section 26 of the General Sales Tax Act. This contention was negatived by the assessing authority.

9. Similarly, in O. P. No. 261 of 1962 the contentions taken are almost identical with those adverted to in O. P. No. 3210 of 1961. The petitioners in both these writ petitions are the same. But in this writ petition, there has been only an order of assessment to sales-tax made by the authority concerned for the year 1-4-1960 to 31-3-1961. Hero again, the petitioner does not appear to have raised the question of violation of Articles 301 and 304(b) of the Constitution. The only claim was based upon Article 286 of the Constitution and Section 26 of the General Sales Tax Act. This plea taken again was negatived and the petitioner has not filed any appeal against this order of assessment, but challenges the same in these proceedings under Article 226 of the Constitution. Here again, the same grounds of attack taken in the connected writ petition are also raised. The petitioners in O. P. Nos. 3210 of 1961 and 261 of 1962 are represented by their learned counsel Mr. K. V. Surianarayana lyer.

10. Here again, there is no counter-affidavit filed by the State, which is the second respondent in this writ petition.

11. I will also briefly indicate the circumstances under which the other three writ petitions have been filed.

12. in 0. P. No. 198 of 1961, the petitioner company is a dealer doing business in Alleppey and he buys pepper and other commodities under instructions from and on behalf of his principals in Bombay. Ha also claims that he is not the last purchaser in the State.

13. The petitioner further contends that the freedom of trade guaranteed under Article 301 of the Constitution is hampered by the last purchase tax, which works with greater hardship against traders who buy stocks when stocks appear in the market, because such dealers have to pay tax onstocks at the end of the financial year though most of the stocks may well be sold inside the State in the succeeding months.

14. The petitioner further avers that the sales inside the State is virtually prevented by the imposition of the last purchase tax on stocks held at the end of a financial year and, therefore, the levy is violative of Article 301 of the Constitution and is not saved by Article 304(b) of the Constitution. There is, no doubt, a further averment to the effect that the single point levy imposed on pepper is ata very high rats and that itself is arbitrary.

15. in this writ petition, a counter-affidavit has been filed on behalf of the respondent, the Sales-tax Officer, Special Circle, though the State Government, which is the second respondent has not, as such filed any counter-affidavit. Apart from very many other matters that are mentioned in the counter-affidavit, there is a specific plea that there is no basis for the petitioner's contention that the levy of a single point tax, at the point of last purchase in the State in the case of pepper, offends Articles 301 and 304(b) of the Constitution. It is further averred that levy of sales-tax does not in any manner interfere with the right of free trade, commerce and intercourse. The various other averments made in the affidavit are, no doubt, denied.

16. in this case also it will be seen that no plea based upon Articles 301 and 304(b) has been taken before the assessing authority and the latter has after holding that the petitioner is the last purchaser of the commodity, in question, has passed the necessary order of assessment for the year in question. The petitioner in this case is represented by learned counsel, Mr. V. B. Krishna lyer.

17. in O. P. No. 1000 of 1961, the petitioner again is a dealer in Tellicherry doing business in the purchase and sale of pepper at Tellicherry in the Cannanore Districts and he also claims to purchase pepper and send it to Bombay outside the State of Kerala, for sale at the place.

18. The petitioner also, in particular, avers that the levy of tax treating the petitioner as the last purchaser of pepper is violative of Articles 301 and 304(b) of the Constitution inasmuch as the levy hampers free trade, commerce and intercourse guaranteed under Article 301. There is also, no doubt, an averment to the effect that the tax imposed on the petitioner is more than the profits that he has made from the business, though no particulars in that regard are given in the petition. The petitioner's contention regarding non-liability of tax appears to have been overruled by the authority concerned and the petitioner seeks to have the same quashed. The petitioner herein is represented by his learned counsel Mr. T. Karunakaran Nambiar.

19. in the last petition, namely, O. P. Ho. 3159 of 1961, the petitioner claims to be a dealer doing business at Mattancherri, Cochin. According to him, the bulk of his business consists in the export out of India of pepper, ginger, turmeric and other hill produce. The nature of the dealing is set out by the petitioner, namely, that contracts are entered into with foreign and inland buyers and the commodity is purchased to fulfill the contract and the goods are sent outside the state.

20. in particular, the petitioner again raises the question that the levy of sales-tax treating the petitioner as the last purchaser in the State is violative of Articles 301 and 304(b) of the Constitution. The petitioner appears to have no doubt filed an appeal against the order of assessment, but the petitioner seeks relief at the hands of this Court in view of the constitutional questions raised by him. The petitioner herein is represented by his learned counsel, Mr. P. Subramanian Potti.

21. Here again, there is no counter-affidavit filed by the State, which is the second respondent in this writ petition.

22. From the various matters mentioned above, it will be seen that the main contentions of the petitioners in these petitions appear to he two-fold: (a) that the transactions in question are not liable to tax in view of Article. 286 of the Constitution, read with Section 26 of the General Sales Tax Act, inasmuch as they are transactions effectedin the course of export of goods out of the territory' ofIndia, and (b) that the levy and collection of sales-tax treating the petitioners, as the last purchasers of the commodities, in question, under the General Sales Tax Act, 1125, offends Article 301 of the Constitution and are not saved by Article 304(b) of the Constitution.

23. Though the contentions of the petitioners regarding the transactions being exempt under Article 286 of the Constitution read with Section 26 of the General Sales Tax Act has been negatived in cases Where such a contention has been raised. I will assume for the purpose of consumeing the attack based upon Articles 301 and 304(b) of the Constitution that the purchases have been effected in the course of export out of India because whether the transactions are intrastate or Interstate in the sense that they cross the borders of the State, the approach to be made to a consideration of the attach based upon Articles 301 and 304(b) will be the same. After adjudicating upon the question regarding the levy being violative of Article 301 and as not being saved by Article 304(b) of the Constitution, when dealing with the various points that arise for decision in the writ petitions. I will also consider the soundness or otherwise of the plea, based upon Article 286 of the Constitution, read with Section 26 of the General Sales-tax Act.

24. I win have to consider also the scheme of the General Sales-tax Act, 1125, in some detail a little later when I advert to the contentions of the learned counsel, for the petitioners and of the learned Advocate General for the respondent-State. But at this stage, it is enough if I stale that under Section 3 of the Act, every dealer shall pay for each year a lax on his total turnover for such year and the tax is to be calculated at the rates specified in column 3 of Schedule I for every rupee in the turnover relating to the goods noted against them in column 2 thereof and at the rate of 2 nP. In the rupee in the turnover relating to ail other goods.

25. Under Section 5 (vii) it is provided, that subject to such restrictions and conditions as may be prescribed, including conditions as to licence and licence fees, the sale of goods specified in Column 2 of Schedule 1 shall be liable to tax under Section 3, Sub-section (1) only at such single point to the series of sales by successive dealers as may fee specified by the Government by notification in the Gazette, it is also provided that where the taxable point so specified is a point of sale, the seller is liable for the tax on the turnover and where the taxable point specified is a point of purchase, the buyer is liable for tax for the turnover for which the goods are bought by him at such point. In schedule 1 to the Act, under Section 3 (1) (b), item 63 deals with pepper, 64 with dry ginger, 66 with turmeric, 67 with are caunt; and the rate of fax at the material time, on all these articles, was 4 per cent.

26. I have already Indicated that all the petitioners deal with a common commodity, namely, pepper, whereas the petitioner !n 0. P. Nos. 3210 of 1961 and 261 of 1962 deal also in dried ginger, turmeric and arecanut, apart from other articles which do not come into the picture at present. There is also no controversy that on the basis of a notification issued by the State, the taxable point in respect of pepper, dried ginger, turmeric and arecanut is the last purchase point in the State by a dealer, who is not exempted from taxation under Section 3(3). It is really on the basis of these provisions and the notification, that the petitioners herein, have been treated as last purchasers of the commodity in question, in the State, and taxes have been levied accordingly.

27. Mr. Surianarayana lyer, learned counsel for the petitioner, who is the same in 0. P. Nos. 3210 of 1961 and 261 of 1962, has advanced the leading arguments in these cases and his contentions have been accepted and adopted by Mr. V. R. Krishna lyer, learned counsel appearing for thepetitioner in 0. P. No. 198 of 1961, Mr. T. Karunakaran Nambiar, learned counsel for the petitioner in 0. P. No. 1000 of 1961 and Mr. P. Subramonian Potti, learned counsel for the petitioner in 0. P. No. 3159 of 1951.

28. According to Mr. Surianarayana lyer, learned counsel, the purchases are all made by the petitioners on the basis of contracts entered into by their Head Offices with the various foreign merchants and the goods were also actually sent out of the State and the levy of sales-tax on the basis that the petitioners are the last purchasers in the State hampers the freedom of trade guaranteed under Article 301 of the Constitution and it is not saved by Article 304(b): The levy, according to the learned counsel, is really a levy on the movement and transport of the goods in question across the State Border and the movement and transport are impeded and hampered. The learned counsel also urged that the last purchase in the State of any goods, necessarily in volves and requires the transport of the goods across the State and beyond its limits and, therefore, the imposition of tax under such circumstances is really a tax on the free movement of goods in the course of trade and commerce.

The learned counsel also urged that tax laws are also a subject to the provisions under Part XIII of the Constitution; considering the General Sales-tax Act, under which the assessment is made, as a tax law, the validity of the provisions treating petitioners as the last purchasers in the State and making them liable to taxation, will have to be tested in the light of the provisions contained in Part XIII of the Constitution, with special reference to the freedom guaranteed under Article 301 of tha Constitution. The learned counsel also urged that the carriage of merchandise front one State to another is not a thing incidental to inter-stats commerce but the very thing itself, is inseparable from it 'as vital motion is from vital existence'.

The learned counsel in this connection referred to the authoritative definition of the word 'commerce' given by Marshall C. J., in Gibbons v. Ogden, 1824-9 Wheat 1 'This would restrict a general term applicable to many objects to one of, its significations. Commerce, undoubtedly, is traffic, but something more -- it is intercourse'' That is, according to the learned counsel, the Imposition of the tax, in question, affects injuriously and hampers movement of goods outside the State border, as part of trade, commerce find Intercourse.

29. The learned counsel also urged that the General Sales-tax Act cannot be considered to be a compensatory or regulatory Measure and, therefore, it cannot be justified OB that score.

30. No doubt, quite fairly, the learned counsel did not attack the General Sales-tax Act, 1125, in its entirety because, according to the learned counsel, it was not really necessary for his purpose. Therefore, there was only a limited attack based upon violation pf Article 301 of tha Constitution on the levy and collection of sales-tax front the petitioner, treating him as the last purchaser in the State of the commodity in question because, according to Mr. Surianarayana lyer that hampers the movement of the goods across the State Border as the very purchases by his client were for purposes of moving the goods beyond the State, But in considering this attack, 1 cannot Ignore the statute and its scheme; and that aspect is dealt with later in this Judgment.

31. The learned counsel finally urged that for the same reasons that the Supreme Court struck down the provisions of the Assam Taxation [on Goods carried by Roads or Inland Waterways) Act, Act 30 of 1954, as hampering the freedom of trade guaranteed under Article 301 of the Constitution and not saved by Article 304(b), the relevant provisions in the statute, in question, in these proceedings, must also be struck down and the levy cancelled by this Court.

32. in this connection Mr. Surianarayana lyer has referred me to the various decisions of the High Courts and also some observations contained in certain decisions of the Supreme Court regarding the scope of Article 301 and Article 304(b) of the Constitution. The learned counsel referred me to the decision of the Bombay High Court in State of Bombay v. R. M. D. Chamarbaugwala, (S) AIR 1956 Bom 1, Bapubhai v. State of Bombay, AIR 1956 Bom 21, Parames-waran v. Sub-Magistrate, AIR 1958 Ker 398, Damodaran v. State, AIR 1960 Ker 58, Cochan Velayudhan v. State of Kerala, AIR 1961 Ker 8 (F8) and State of Bombay v. R. M. D. Chamarbaugwala, (S) AIR 1957 SC 6S9. The learned counsel also referred me to the view expressed by Mr. David P. Oerham, Professor, Melbourn University School of Law and visiting Consultant to the Indian Law institute, New Delhi in his Article on 'Some Constitutional Problems arising under Part XIII of the Indian Constitution' published in the Journal of the Indian Law Institute, Volume I, at page 623.

No doubt, the learned author at page 550 of the said. Journal expresses the view that a tax law of a State must satisfy the requirements of Articles 304 or 305 to be valid and then says that the most acute problem can be posed by reference to the most important of such State laws - those imposing sales tax; and the learned author further expressed the view that a sales-tax is a tax upon goods which operates by choosing the act of sale as the criterion for attracting liability to pay the tax, and it is therefore 3 direct burden or restriction on trade and commerce, 'sale' being a central part of the concept.

33. No doubt, these views have also been referred to in the book 'Interstate Trade Barriers and Sales-tax Laws in India' which is the result of a study undertaken by the Indian Law Institute as a project. At page 3, it is stated that as to whether sales-tax operates directly on trade and commerce, no doubt, was not considered in the 'Atiabari' case, namely, Atiabari Tea Co. Ltd. v. State of Assam, AiR1 1961 SC 232. But It is further stated that there is no doubt that sales-tax directly and immediately restricts trade and commerce and that it is likely that the Courts will take the same view, following the Supreme Court decision and in this connection the views of Professor Derham are referred to. On these passages the learned counsel, Mr. Surianarayana lyer, places considerable reliance in support of fits contention that the levy in this case, under the General Sales-tax Act, imposes a direct restriction on the freedom of trade, commerce and Intercourse guaranteed under Article 301 of the Constitution.

34. No doubt, the learned counsel also referred me to some passages in the two decisions of the Privy Council in Commonwealth of Australia v. Bank of New South Wales, 1950 AC 235 and Hughes and Vale Proprietary Ltd. v. State of New South Wales, 1955 AC 241, where the Privy Council had to consider the scope of Section '92 of the Constitution of the Commonwealth of Australia which provided '........ trade, commerce, and intercourse among theStates, whether by means of internal carriage or ocean navigation, shall be absolutely free'. Mr. Surianarayana lyer,also, referred me to the decision of the Rajasthan High Court in Surajmai Baj v. State of Rajasthan, AIR 1954 Raj 260,. where Wanchoo, C. J., as he then was, and Mr. Justice Bapna held that the levy of octroi duty in the circumstances, of the case before them offends Articles 301 and 304(b) of the Constitution.

35. Mr. V. R. Krishna lyer, learned counsel appearing for the petitioner in 0. P. No. 198 of 1961, in particular, referred me to the decision of the Andhra Pradesfi High Court of Chandra Reddy, C. J., and Mr. Justice Ramachandra Rao, reported in Venson Transports v. State of Andhra Pra-desh, AIR 1962 Andh Pra 103, where the learned Judges-had struck down the provision of the Madras Motor Vehicles. (Taxation of Passengers and Goods) (Atidhra Pradesh Amendment) Act (21 of 1959), as violative of Articles 301 and 304(b) of the Constitution. No doubt, the learned Chief Justice, who delivered the judgment on behalf of the Bench, after adverting to the decision of the Supreme Court in AIR 1961 SC 232 was of the view that the Act in question is an impediment to the freedom of trade and which directly and immediately impinges en the operator's trade inasmuch as it Impedes the free flow of business. Mr, V. R. Krishna lyer quite naturally urged for acceptance the views. expressed by the learned Judges in this decision for upholding his contention, that the levy in this case is vioiative of Articles 301 and 304(b) of the Constitution.

36. It may be stated even at this stage, that the decision of the learned Judges of the Andhra Pradesh High-Court may require reconsideration in view of the decision of the Supreme Court in SainiK Motors v. State of Rajasthan, AIR 1961 SC 1480 to which I will have to refer a little later, where their Lordships upheld the validity of an enact* merit, which was more or less analogous to the provisions, of the statute which the learned Judges of the Andhra Pradesh High Court have struck down.

37. Mr. V. R. Krishna tyer, learned counsel also relied upon the decision of the Madhya Pradesh High Court reported in M/s. Umraolaj Subalal v. State of M. P., AIR 1952 Madh Pra 2. The learned Judges, Naik and Pandey, J). had to deal with an attack of discrimination made against the Madhya Bharat Sales-tax Act, Act 30 of 1950, between imported and local goods. It will be seen that under a special schedule contained in the said enactment the imported bura sugar was liable to sales-tax, whereas the bura-sugar made from sugar imported or - manufactured in Madhya Bharat would be exempted from sales-tax and this was struck down by the learned Judges as discrimination-and incidentally as offending Article 304(b) of the Constitution. No such considerations arise in these cases and therefore, the decision in this case will not assist the learned counsel for the petitioner.

38. Mr. V. R. Krishna lyer, learned counsel for this petitioner, as well as Mr. Karunakaran Nambiar, learned1 counsel for the petitioner in O. P. No. 1000/1961, also-urged that the levy of tax at the rate of 4 per cent practically destroys or kills the trade. So far as that is tpn-cerned, excepting a bald allegation made by these petitioners, there are absolutely no further particulars given eithsr as to the volume of their business or the profits that they make in this business, and the proportion of tax to such profits. Therefore, without laying the foundation for such an attack, It is' not possible for tnls Court to investigate this aspect any further.

39. in all other respects, Mr. V. R. Krishna vyer, Mr. Karunakaran Nambiar and Mr. P. Siibramonian Potti, have adopted the contentions of Mr. Surianarayana lyer, learned counsel.

40. The learned Advocate Genera) appearing for the State urged that the Genera! Sales Tax Act, 1125, is an 'existing law' and, therefore, is saved under the first part of Article 305 of the Constitution which provides:

'Nothing in Articles 301 and 303 shall affect the provisions of any existing law except in so far as the President may by order otherwise direct .....' and therefore, the question of violation of Article 301 or 304(b) does not arise in this case. The learned Advocate General further urged that the General Sales Tax Act is essentially a regularity measure and, therefore, it does not come within the purview of the restrictions contemplated by Article 301 and it is also not necessary for such a measure to comply with the requirements of the proviso to Article 304(b) of the Constitution.

Alternatively, under this head, the learned Advocate General also urged that having due regard to the principles laid down by the Supreme Court in AIR 1961 SC 232 and the recent judgment in Civil Appeals Nos. 42 to 44 of 1959 rendered by a larger constitutional bench on 9th April 1952, for a tax to become a prohibited tax, it has to be a direct tax, the effect of which is to hinder the movement of a trade and that is not the case, when a levy is made under the Sales Tax Act and, therefore, the tax is not in any manner violative of either Article 301 or Article 304(b) of the Constitution.

41. In this connection the learned Advocate General has also referred me to certain decisions which I will advert to later.

42. But at this stage, I must mention that the learned counsel appearing for the various petitioners were not prepared to accept the stand taken by the learned Advocate-General that the General Sales Tax Act is a regulatory measure. On the other hand, their contention is that the Act is purely a fiscal statute intended to secure revenue for the State; and if it does not satisfy the requirements of Part XIII of the Constitution, the Act will have to be struck down. Mr. Surianarayana lyer was not also prepared to accept the stand taken by the learned Advocate General that the General Sales-tax Act, 1125, can be considered to be an existing law and, therefore, according to him. Article 305 of the Constitution does not come into play. I will advert straightway to these various aspects presented by learned counsel for the petitioners as well as the learned Advocate-General for the State.

43. Before I consider the attack based upon Articles 301 and 304(b) of the Constitution, in my view, it is desirable to clear the ground by considering the question raised by the learned Advocate General that the General Sales-tax Act, 1125, is 'an existing law' and, therefore, is saved by Article 305 of the Constitution. As 1 mentioned earlier, this stand is not accepted by Mr. Surianarayana lyer, and the other learned counsel appearing for the petitioners.

44. In order to consider this aspect, it is necessary to consider the statute, namely, Travancore-Cochin Act 11 of 1125, as amended from time to time and as it stands at present.

45. The Original Act was the Travancore-Cochin General Sales Tax Act, 1125, Act 11 of 1125, and there is no controversy that the Act was published in the State Gazette on 17-1-1950. Under Section 1 (3) of the Act, it was provided, that the Act was to coma into force on such date as the Government by notification in the Gazette appoint; and here again there is no controversy that the Act came into effect by virtue of the notification issued on 30-5-1950.

46. It is not really necessary to consider the various other provisions except to note that under Section 3, every dealer was made liable for each year to pay a tax on his total turnover for such year; and under Sub-section 2 of Section 3, it was provided that the sale of any goods mentioned therein was subject to a tax at the rate specified, there itself at such single point in the series of sales by successive dealers as may be prescribed. There was also a provision therein to the effect that the tax is to be paid by the dealer on his turnover in each year relating to such goods and it is to be in addition to the tax which he is liable to pay under Sub-section 1 on the total turnover for the year. The said Sub-section 2 of Section 3 gives a list of articles and there is no controversy that the commodities with which this Court is now concerned in these proceedings, do not find any place therein.

47. This Act was amended by Travancore Cochin General Sales Tax (Amendment) Act, (Act 18 of 1955). The only material amendment that is to be noted is that the following clause was inserted in the Act:

'The sale of pepper, ginger, turmeric, nuxvomica, Kacholam, Lemongrss oil, arecanut, tamarind, laurel oil,, cocoanut and copra shall be liable to tax under Section 3, Sub-section (1), only at such single point in the series of sales by successive dealers as may be prescribed'.

It will be seen that under this amendment some of the articles in question, namely, pepper, ginger, turmeric and arecanut, are made liable for taxation only at such single point in the series of sales by successive dealers as may be prescribed. The point to be noted is the tax is at the sale point.

48. The Kerala State was formed with effect from 1-11-1956 and at that time the Travancore-Cochin Act 11 of 1125 as amended, was applicable to the T. C. Area and the Malabar area which originally formed part of the Madras State and came into the Kerala State, was governed by the Madras General Sales-tax Act, 1939, (Act 9 of 1939).

49. After the formation of the Kerala State, the Kerala Legislature passed the Travancore-Cochin General Sales-tax (Amendment) Act, 1957, (Kerala Act 12 of 1957). The preamble to this Act was to the effect that it is expedient to amend the T. C. Genera! Sales Tax Act, 1125, for the purpose of extending the provisions thereof to the-whole state of Kerala. Section 2 of the Amending Act' amends the preamble to Act 11 of 1125 by substituting the words 'State of Kerala' for the words 'State of Travancore-Cochin'. Sub-section 3 of the Amending Act substitutes in Section 1 of the Principal Act the words 'General Sales-tax Act' for the words 'Travancore-Cochin General Sales-tax Act' and there was also a consequential amendment to the effect that the Act extends to the whole of the State of Kerala; and in the parts of the parent statute such consequential amendments' were also made.

50. Section 8 of the Amending Act effected certain amendments to Section 5 of Act 11 of 1125 and by that amendment Clause. 2, 4 and 5 were omitted and for Clause (vii) the following clause was substituted;

'(vii) The sale of goods specified in column (2) of Schedule I shall he liable to tax under Section 3, Sub-section (1), only at such single point In the series of sales by successive dealers as may be specified by the Government by notification in the Gazette'.

Section 15 incorporated a new Sub-section 2 to Section 27 of the original Act repealing the various statutes mentioned therein. It must be noted that one of the statutes that was repealed was the Madras General Sales-tax Act,1939, (Madras Act 9 of 1939). That was quite natural because up to the date of passing of this Act, the T. C. areaWas exclusively governed by the Travancore-Cochin General Saies tax Act, 1125, and the Malabar area was governed by the Madras General Sales-tax Act, (Act 9 of 1939). Section 16 of the Amending Act also incorporated a schedule in theoriginal Act after Section 27; and it will be seen that items 26, 27, 28 and 30 of the Schedule are pepper, ginger, turmeric, and arecanut respectively and the rate of tax on these articles is stated to be 4 per cent.

51. The salient features of this statute are that the Act is extended to the Malabar area also; the, Madras Act 9 at 1939, which was so far applicable to the said area wasrepealed; Schedule 1 is incorporated for the first time; but nevertheless even under Clause (vii) of Section 5, as newly incorporated, tax is payable only at such single point in theseries of sales by successive dealers as may be specified by the Government.

52. in pursuance of the new Clause (vii) substituted in Section 5 of Act 11 of 1125, by the Amendment Act 12 of 1957, the State Government appears to have issued a notification on 28th September 1957 specifying the last purchase in the State by a dealer who is not exempted fromtaxation under Section 3, as the point liable to tax in respect of some of the goods specified in the /schedule. Butthe validity of this notification appears to have been challenged successfully as will be seen from a Division Bench decision of this Court reported in Abu v. State of Kerala, 1960 Ker U 457.

53. This resulted in the passing of the General Sales-tax (Amendment) Act, 1960, (Kerala Act 3 of 1960), and published in the State Gazette on 30th March 1960. There appears to have been an Ordinance. By Section 2(1) of the Amending Act, in Section 5 of the General Sales Tax Act, 1125, for Clause (vii) the following clause was substituted '(vii). the sale of goods specified in Column (2) of Schedule I shall be liable to tax under Section 3, Sub-section (1), only at such single point in the series of sales by successive dealers as may be specified by the Government by notification in the Gazette; and where the taxable point so specified is a point of sale, the seller shall be liable for the tax on the turnover for which the goods are sold by him at such point, and where the taxable point so specified is a point of purchase, the buyer shall be liable for the tax on the turnover for which the goods are bought by himat such point'.

Sub-section (2) of Section 27 of the Amending Act, provided that the amendment incorporated by Sub-section (1)shall be deemed to have come into force on the 1stOctober 1957 and Sub-section (3) validates all notifications issued on or after 28th September 1957 by the Government in exercise of the powers conferred on them by clause (vii) of Section 5 and provides for certain other consequential matters. That is, practically by virtue of the 1960 Amendment Act the power to fix the point at which the tax is to be levied under Section 5 (vii) of the Acts takes effect evenfrom 1st October 1957. It is really by virtue of this Act having retrospective effect, that the various petitioners havebeen made liable as the last purchasers of the commoditiesIn question in the State.

54. According to the learned Advocate General the expression 'existing law' is defined in Article 366, clause 10 as:

' 'existing law' means any law, ordinance, order, bye-law, rule or regulation passed or made before the commencement of this Constitution by any Legislature, authority orperson having power to make such a law, ordinance, order, bye-law, rule or regulation.'

The Travancore-Cochin Act 11 of 1125 was published in the State Gazette on 17-1-1950, though no doubt, it was brought into force with effect from 30-5-1950. The Amending Act, namely, Act 12 of 1357, which came into effect from 5-8-1957 is only an Act amending the original Act and extending it to the Malabar area also and effects certain minor changes in the manner of levying tax.

55. The learned Advocate General urged that the data when the Act was passed by the Legislature is the material point to be considered as to whether a law is an existing law on the date of the coming into force of the Constitution and the date on which a statute may have actually come into force by the issue of a notification provided for in the Act itself, does not in any way alter the situation. The learned Advocate General relied upon the decision of the learned Chief Justice and Mr. justice Venkatararjia lyer, as he then was, reported in, Kutti Koya v. State of Madras, AIR 1954 Mad 621 and the Full Bench decision of this Court reported in Mohammed Abdul Kader v. Commr. of 'income-tax, AIR 1962 Ker 38 (FB), for the proposition that the date of the passing of the Act is the material date for considering as to whether a statute was 'an existing law' on the date of the coming into force of the Constitution.

So far as this proposition is concerned, Mr. Surianarayana lyer did not controvert the same and he was prepared to proceed on the basis that the decisions laying down such a proposition, referred to above are correct. But Mr. Surianarayana lyer does controvert the stand taken by the Advocate Genera) that even after all the substantial amendments effected by T. C. Act 18 of 1955, Kerala Act 12, of 1957 and Kerala Act 3 of 1960, Travancore-Cochin Act 11 of 1125 is nevertheless to be considered as an existing law.

56. According to the learned Advocate General, the amendments effected to the T. C. Act 11 of 1125 are inconsequential amendments and did not certainly alter the statute as such in any material particulars. The learned Advocate General relied upon the decision of the Supreme Court in Lila Vatl Bai v. State of Bombay, (S) AIR 1957 SC 521 in support of his contention that nevertheless T. C. Act 11 of 1125 can be considered to be an existing law.

57. The learned Advocate Genaral has also relied upon the decision of a single Judge of the Calcutta High Court in Sm. Kamsla Bala v. State of West Bengal, AIR 1962 Cal 269.

58. Mr. Surianarayana lyer, learned counsel, quits strenuously opposes the stand taken by the learned Advocate General in this regard. According to Mr. Surianarayana lyer T. C. Act 11 of 1125 may be considered to be, if at all, 'an existing law' so far as the Travancore-Cochin area is concerned. But can in no event be considered to be an existing law so far as the Malabar area is concerned nor can it be considered to be an existing law even in respect of the other areas in view' of the substantial and material amendments effected to the same by T. C. Acts 18 of 1955, Kerala Act 12 of 1957 and Kerala Act 3 of 1960, and according to Mr. Surianarayana lyer, the decision of the Supreme Court in (S) AIR 1957 SC 521 does not support the stand taken by the learned Advocate General. Mr. Surianarayana lyer also urged that the learned Judge of the Calcutta High Court whose decision is reported in AIR 1962 Cal 269, has misunderstood the scope of the decision of the Supreme Court in (S) AIR 1957 SC 521, Because the learned Judge has proceeded on the assumption that the Supreme Court has held that notwithstanding substantialamendments incorporated by a statute nevertheless the original statute can be considered to be an existing law.

59. After a due consideration of the various aspects presented before me by the learned Advocate General and Mr. K. V. Surianarayana lyer on this aspect, I am not inclined to accept the contention of the learned Advocate General that T. C. Act H of 1125 can be considered to be an existing law; and in that view I am also of the further opinion that the reliance placed upon Article 305 of the Constitution by the learned Advocate General cannot also be sustained.

60. I have already dealt with the very substantial amendments effected from time to time to T. C. Act 11 of -1125 by T. C. Act 18 of 1955, Kerala Acts 12 of 1957 and 3 of 1960 and I have also indicated the nature of the amendments effected to the original Act. In particular, , Kerala Act 12 of 1957 repeals the Madras Act 9 of 1939 and makes the provisions of the T, C. Act applicable to the Malabar area also. It is not merely an extension ot the life of a statute as urged by the learned Advocate General but really it has got the effect of passing a fresh legislation so far as the Malabar area is concerned. The original Act which was being applied to that area, namely, Madras Act 9 of 1939, has been repealed and substantial amendments to the parent Act have been made by substituting the words 'State of Kerala' for the expression 'State of Travancore-Cochin'.

61. Even apart from this, for the first time under Act 12 of 1957, a schedule is incorporated to the original Act and a power is given by notification, under Clause vii) of Section 5, to specify the single point in the series of sales ty successive dealers. This again takes in only the successive sales; whereas Kerala Act 3 of 1960 goes further and gives power to the Government to fix the taxable point in respect of the goods in question either at the point of, sale or at the point of purchase; and it is in exercise of the power so given with retrospective effect from 1st October 1957, that the authorities in this case, seek to make the petitioners liable as last purchasers of the commodities in question in the State. In view of all these circumstances, it is not possible for me to accept the contention of the learned Advocate Genera! that General Sales Tax Act 11 of 1125, should be considered to be an 'existing law' as referred to in Article 305 of the Constitution. If it is not an existing law, as 1 have found it is not, it follows that Article 305 will not assist the State in these writ petitions.

62. in the decision reported in (S) AIR 1957. SC 521 the Supreme Court had to consider the validity of two Acts passed by the Bombay Legislature, namely, Bombay Act 2 of 1950 and Bombay Act 39 of 1950. In that case, it ' will be seen that the parent Act, the Bombay Land Requisition Act, 1948, appears to have been challenged even on an earlier occasion and that challenge was negatived bythe Supreme Court in its decision reported in State of Bombay v. Bhanji Munji, (S) AIR 1955 S C 41. But by Bombay Act 2 of 1950, the life of the Bombay Land Requisition Act, 1948, was extended, up to the end of March 1952, and it was also extended later on. By Bombay Act 39 of 1950 the parent Act was again amended by substituting the words 'the purpose of the State or any other public purpose' for the words 'any purpose occurring in Section 5 of the Act.' it was also provided that the amendments made to the Act shall be deemed to have been and always made there with effect from 26th January 1950 the date of coming into force of the Constitution.

63. it appears to have been urged before their Lordships of the Supreme Court that the original Act, namely.Bombay Land Requisition Act, 1948, was as good as dead or it became invalid on 26th June 1960 as it was in conflict with Article 31(2) of the Constitution, and therefore a void or bad Act cannot be extended by Bombay Act 2 of 1950 and that as the Amending Act 2 of 1950 or Act 39 of 1950 had not received the assent of the President, they were of no legal consequence.

64. These contentions were negatived by the Supreme Court. The Supreme Court held that the parent Act, when passed on 11th April 1949 was good law and that even though there was no specific provision therein that the acquisition is to be 'for a public purpose', the Supreme Court had already held in the decision reported in (S) AIR 1955 S C 41 that the said Act was not invalid even after the commencement of the Constitution because from the terms and tenor of the Act it can be gathered that the requisition can only be for a public purpose and for the benefit of the community at large. it is the further view of their Lordships that the Amending Act 39 of I956 only made explicit what had been left to be gathered in the first instance from the whole tenor of tha Act and the Amending Act II of 1950 only extended the life of the Act' by two years and, therefore, both the amending Acts, namely. Bombay Act 2 of 1950 and Bombay Act 39 of 1950, must be considered to be merely an extension or explanatory of the substantive Act, namely, Bombay Land Requisition Act, 1948 which is 'an existing law' within the meaning of the Ccnstitution. The Supreme Court also held that if the Act was good law after the commencement of the Constitution, it follows that the amendments aforesaid made in 1950 were also equally good, though the assent of the President had not been obtained.

65. Therefore, it will be seen that it is not as if the Supreme Court held in that case that notwithstanding substantial amendments effected to the original Act, the original Act can nevertheless be held to be an existing law. On the other hand, the discussion on this aspect by the Court therein clearly shows that the two Amending Acts did not in any manner alter the material provisions of the Statute and the amending Acts only made clear and explicit what had been left to be gathered from the whole tenor of the original Act. Hence the parent Act was held to be an 'existing law'.

66. The position in the cases before me is entirely different. Kerala Act 12 of 1957 cannot by any stretch of imagination be called merely an Act extending the life of a previous Act which was in force throughout the State. On the other hand, at the time when T. C. Act 11 of 1125 was passed, the legislature which passed the said legislation had absolutely no jurisdiction over the Malabar area which was then part of the Madras State. Kerala Act 12 of 1957 repeals the Act which ,was in force in the Malabar area and though it is stated that Act 11 of 1125 is extended to the entire State, the real effect of this legislation, is of malting a new law for the Malabar area. In any event, it cannot certainly be stated that T. C. Act II of 1125 is an existing law, so far as the Malabar area is concerned. It cannot also be considered to be 'an existing law' regarding the areas comprised in T. C. State itself, because the Act as originally passed, namely, Act 11 of 1125, has undergone, not any mere minor or inconsequential changes but material and substantial alterations by T. C. Act 18 of 1955, Kerala Act 12 of 1957, and Kerala Act 3 of .1960.

Before I leave this subject, I have only to advert to the decision of the Calcutta High Court in AIR 1962 Cat 269, relied on by the learned Advocate General. The learned Judge, Mr. Justice Bose had to consider the question as towhether the West Bengal Land Requisition and Acquisition Act, Act 2 of 1948, can be considered to be 'an existing law' by reason of its life having been extended by en Ordinance and an Act of 1957. In this connection the learned Judge refers to the decision of the Supremo Court in (S) AIR 1957 SC 521 adverted to by me earlier and is of the view that the Supreme Court has held that merely by reason of the life of the original Act being extended by amending Act, passed after the coming into force of the Constitution.

'and by reason of certain substantial changes being effected in the body of the original Act, the statute of 1548 did not cease to be an existing law within the meaning of the Constitution'.

The statute of 1948 referred to above is the Bombay Act 33 of 1948. If I may say so with great respect, the Supreme Court has not laid down any such proposition that notwithstanding substantial changes being effected to the original Act it can nevertheless be an existing law within the meaning of Article 366(10) of the Constitution. I have already explained the scope of the decision of the Supreme Court and therefore the decision of the Supreme Court does not lend support to the view expressed by the learned Judge of the Calcutta High Court, if I may say so with respect, in this decision.

67. Therefore, to conclude, General Sales Tax Act is of 1125 cannot be considered to be an 'existing law' and, therefore, Article 305 does not assist the respondents in these proceedings. The question of the legality or otherwise of the levy will have to be considered independently of Article 305.

68. The learned Advocate General, as I have already mentioned, also urged that the statute, namely, the General Sales-tax Act, 1125, is a regulatory measure and, therefore, does not come within the purview of the restrictions contemplated by Article 301. This position again is very strenuously controverted by Mr. Surianarayana lyer because, according to him, the General Sales-tax Act is merely an Act enacted for the purpose of augmenting the general public revenues of the State, and in no sense can it be called a regulatory measure. It does not, according to Mr. K. V. Surianarayana lyer, regulate any trade, commerce, cr Intercourse; but on the other hand it levies a tax on the total turnover of a particular dealer and makes only appropriate provisions for the purpose of collecting the said tax at the various stages. In this connection, Mr. Surianarayana lyer, learned counsel, also urged that no decision has so far taken the view that the provisions contained in a Sales-tax Act is a regulatory measure.

69. Here again, there is considerable difficulty in accepting the contention of the learned Advocate General that the General Sales-tax Act, 1125, is a regulatory measure.

70. The preamble to the statute is to the effect that it is expedient to provide for the levy of a general tax on the sale of goods in the State. The expression 'dealer' is defined in Section 2 (d); and the expression 'registered dealer' in Section 2 (i) and 'sales' in Section 2(j).

71. Again the expression 'turnover' is defined in Section 2 00.

72. Section 3 is. the charging section and makes every dealer, liable to pay each year a tax on his total turnover for such year. As to how exactly the tax is to be collected is also mentioned in the later part of Section 3. Subsection (3) of Section 3 states that 3 dealer whose total turnover in any year is less than Rs. 10,000 shall not ba liable to pay any tax for that year and Sub-section (4) pro-vides, that the turnover' is to be determined in accordance with such rules as may be prescribed.

73. Section 4 provides that the Act shall not apply to some of the matters mentioned there.

74. Section 5 'deals with exemptions and reductions of tax in certain cases. I have already mentioned that Clause (vii) of Section 5 provides for the tax being paid in respect of the goods specified in the schedule at such-single point in the series of sales by successive dealers as may be specified by Government by Notification; and there is also a further provision to fix the taxable point either as a point of sale or as a point of purchase and the liability to pay depends upon this fixation of the taxable point.

75. Section 5-A deals with exemption of tax in respect of some of the articles. Section 6 gives power to the Government to grant general exemptions and reduction of tax. Section 6-A provides for payment of tax at compounded rates; and Section 7 deals with liability to tax of persons not observing conditions of licence. Section 8 deals with sales of goods for delivery outside the State. Section 9 deals with licensing and exemption of agents? and Section 10 deals with registration of dealers. Section 11 deals with collection of tax by dealers and Section 11-A gives power to the Government to collect tax as registered dealers. Section 12 indicates the procedure to be followed by the assessing authority and Section 13 deals with pay ment and recovery of tax. Section 14 deals with appeals and Section 15 provides for the authorities competent to pass orders in revision. Section 15-A relates to appeals to the Appellate Tribunal and Section 15-B provides for a revision by the High Court.

Section 15-C provides for an appeal to the High Court under the circumstances mentioned therein and Section 15-D provides for the manner of hearing of the matters by the High Court. Section 16-A relates to the establishment of Checkpost or barriers and inspection of goods in transit with a view to prevent or check evasion of tax. Section 17 relates to the powers of the officers concerned to order production of account books etc. Section 18 makes the Act applicable to non-resident dealers with the modifications Indicated therein and Section 19 deals with offences and penalties. Section 24 gives power to the Government to make rules for carrying out the purposes of the Act. 1 do not think that the other sections are necessary to be noted. Schedule I to the Act gives the various articles under Section 3 (1) (b) as well as the late of tax payable on the same. There are rules framed providing for various matters; and even under the notification fixing the taxable point, it will be seen that in respect of some of the articles, the taxable point has been fixed as the first sale fn the State by a dealer who is not exempted from taxation under Section 3 (3); and in respect of certain other articles, in which-are included the commodities in question before me, the taxable peint has been fxed as the last purchase in the-State, by a dealer who is not exempted from taxation-under Section 3.

76. I have given a broad Indication of the scheme of the statute, and so far as I could see, there is absolutely nothing in the statute which can be said to regulate trade, commerce, or intercourse. On the other hand, it is purely a fiscal statute, for the purpose of augmenting the revenues of the State; and this taxation law will come under the present Entry 54 in List II of the Vllth Schedule. After making the transaction liable for tax, the Act only makes regulations,. If they can be so called, for the purpose of enforcing the tax liability. It does not in any manner purport to regulate-trade, commerce or intercourse; nor does it claim to do any such thing. A very useful reference regarding the history of levy of sales-tax, the world over, may be made to the Prefatory Note printed in the Civil Courts Manual (Madras Acts) Vol. I, page 740 (M. L. J., 6th Edition), dealing with the Madras General Sales-tax Act, IX of 1939). It will be seen therefrom that the General Sales-tax is the largest source of public revenue that has been adopted by any State Government in India.

77. in this connection, the observations of the Federal Court in in the matter of C. P. and Berar Sales of Motor Spirit and Lubricants Taxation Act 1938, AIR 1939 FC 1 that the principal object of sales-tax isto recover revenue on sales irrespective of the origin of the goods and that it is a tax truly imposed in respect of the Transaction of sale, may be noted. Similarly, the observation of Chief Justice Gwyer in the decision in Province of Madras v. Boddu Paidanna and Sons AIR 1942 FC 33 that in the case of sales-tax, the liability to tax arises on the occasion of a sale is also apposite. No doubt, the learned Advocate General has also relied upon these observations in support of his contention that the sales-tax is only a tax on sale of goods and it does not purport to tax, the movement of the goods as such.

78. Again, the Andhra Pradesh High Court in the decision in Government of Andhra v. Nagendrappa, AIR 1957 Andh Pra 297 rendered by Subba Rao, C. J. as he then was, and Mr. justice Viswanatha Sastri, has expressed the view that sales-tax is a tax levied on the occasion of the sale of goods and is a tax on the proceeds thereof, whether taken individually or collectively.

79. Therefore, to conclude on this aspect, it is not possible for me to accept the contention of the learned Advocate General that the Sales-tax Act is a regulatory measure. No doubt, there is this aspect, namely, that the sales-tax is a tax on sale and it is not a tax on the movement of the goods.

80. The controversy regarding the levy being vlolative of Articles 301 and 304(b) of the Constitution will have to be considered, in my view, in the light of the two recent decisions of the Supreme Court in AIR 1961 SC 232 as well as in Automobile Transport (RajJ Ltd. v. State of Rajasthart, Civil Appeals Nos. 42 to 44 of 1959 : (AIR 1962 SC 1406) the judgment, in which is available in Blue print.

81. Though Mr. Surianarayana lyer, learned counsel has referred to certain passages in certain Articles and also to certain other decisions, which I have referred to earlier, in support of his contention that the levy, in the circumstances of this case, must be considered to hamper trade, commerce and intercourse, in my view, it is not really necessary for me to consider those decisions because they were all rendered prior to the two decisions of the Supreme Court referred to by me. If I may say so with great respect, the Supreme Court in the two recent decisions, has considered the scope of the various Articles contained in Part XIII of the Constitution very exhaustively; and it is on an application of the principles so laid down by their Lordships, that a decision has to be arrived at in these cases, as to whether the contentions of the learned counsel Tor the petitioners, based upon Articles 304 and 304(b) of the Constitution are to be accepted or not.

82. Therefore, I am not adverting to the varlous other decisions relied upon by Mr. Surianarayana lyer excepting to stale that the actual decision in (S) AIR 1956 Bom 1, which is one of the decisions referred, has not been accepted on appeal by the Supreme Court in the decision reported in (S) AIR 1957 SC 699.

83. According to Mr. Surianarayana lyer, even on the basis of the principles laid down by their Lordships of the Supreme Court in the two decisions to which reference will be made immediately, it must be held in these cases that; the levy hampers the freedom guaranteed under Article 301, is not saved under Article 304(b) of the Constitution-According to Mr. Surianarayana lyer, after the purchases by the petitioners the goods have to move out of the State territory and it is that movement that is really taxed by treating them as the last purchasers in the State. The levy. of tax in these cases directly and immediately restricts that movement and, therefore, that restriction will fall within the purview of Article 301 of the Constitution.

84. On the other hand, the learned Advocate General has urged that the levy in these cases, has absolutely no effect of placing any restriction which can be stated to operate directly or immediately on trade or its movement. The-learned Advocate General has further urged that in the two decisions, the Supreme Court has held that it is the very movement or the transport of goods from one part of the country to the other that is intended to be saved; and in these cases it cannot certainly be held that such a free movement or transport of goods has in any manner been directly or immediately affected by the levy of tax, in the circumstances of these cases.

85. Ultimately, in my view, the question narrows down to this, namely, as to whether the collection of sales-tax-, treating the various petitioners as the last purchasers of the commodities in question in the State, can be stated to be a restriction operating directly or immediately on trade or its movement. According to Mr. Surianarayana lyer, the answer must be 'yes', and according to the learned Advocate General, the answer must be 'no'.

86. Articles 301 and 304 which are the subject of controversy in these proceedings are as follows:

'301. Subject to the other provisions of this Part, trade, commerce and Intercourse throughout the territory of India shall be free'.

'304. Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law -

(a) Impose on goods imported from other states or the Union territories, any tax to which similar goods manufactur--ed or produced in that State are subject, so, however, as not to' discriminate between goods so imported, and goods so manufactured or produced; and

(b) impose such reasonable restrictions on the freedom' of trade, commerce or intercourse with or within that Stater as may be required in the public interest; Provided that no Bill or amendment for the purposes of Clause (b) shall be introduced or moved in the Legislature of a State without' the previous sanction of the President.

87. Their Lordships of the Supreme Court have, if I may say so with great respect, very elaborately considered in the two decisions, the scheme of the Constitution as. well as the scope of the various Articles comprised in Part XIII of the Constitution and also the freedom that is guarante deed under Article 301 of the Constitution.

88. in the decision reported in AIR 1961 SC 232, their Lordships had to consider the validity of the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, Assam Act 13 of 1954, with special reference to the question as to whether the said tax law has the effect of placing restrictions on movement of goods and traffic in the State and as to whether it violates the freedom of trade guaranteed under Article 301 of the Constitution.

The following propositions emerge from the decision of the Supreme Court in this case:

(1) the main object of Article 301 is to allow free flow of the stream of trade, commerce and intercourse the territory of India;

(2) though the power of levying tax is essential for very existence of Government, its exercise must inevitably be controlled by the Constitutional provisions made in that behalf and it cannot be said that the power of taxation per se is outside the purview of any constitutional limitations;

(3) the power of Parliament and the Legislatures of the State to wake laws including law imposing taxes, is Subject to toe provisions of the Constitution, which brings in necessarily the application of the previsions of Part XIII also;

(4) the Broad and unambiguous words used in Article 301 are intended to emphasise that the freedom of trade, commence and intercourse guaranteed is richer and wider in content than was the case under Section 297 of the Government of India Act, 1935;

(5) freedom of trade guaranteed under Article 301 is freedom from all restrictions except those which are provided other Articles in Part XIII;

(6) freedom provided for by Article 301 whatever else it may not include, certainly includes movement of trade which is of the very essence of trade and is its integral part; if the transport or the movement of goods is isuued solely on the basis that the goods are thus carried or transported, that will directly affect the freedom of trade by Article 301. When Article 301 provides that trade shall be free throughout the territory of India, it is the movement part of trade that it has in mind end the movement or the transport part of the trade must, therefore he subject to the limitations and exceptions provided by the Articles under Part XIII. It is reasonable and purpose to hold that restrictions, freedom from which is Article 301, would be such restrictions as and immediately restrict or impede the free flow or movement of the trade. Taxes may amount to restrictions; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of Article 301. The view that all taxes should be governed by Article 301 whether or not their impact on trade is immediate or mediate, direct or remote, cannot be accepted;

(7) When Article 301 provides that trade shall be free throughout the territory of India, it means that the flow of trade shall run smooth and unhampered by any restric-at the boundaries of the State or at any point inside the State itself. It is the free movement or transport of the goods from one part of the country to the other (SIC) is intended to be saved and if any law Imposes any direct restrictions on the free movement of such goods it attracts the provisions of Article 301 and its validity can be sustained only if it satisfies the requirements of Article 302 or Article 304 of Part XIII.

(8) Freedom of movement of trade can be subject to restrictions in the form of taxes imposed on the carriage of goods thier movement but such restrictions can (SIC) by the State Legislatures only after satisfying the of Article 304(b). These are the bread proposition laid down by their Lordships of the Supreme Court is the above decision.

(9) It is in the light of the principles laid down by their Lordhsips in the above case that the levy in the eases on land will have to be decided. It will slso be seen that their Lordships have held that taxes may and do amount to restrictions. But is only such taxes as directly and immediately that would fall within the purview of Article 301 and if the impact on trade by such taxation is not immediate or direct but is only mediate or remote, it is not possible to hold that there is any violation of Article 301.

90. Another aspect that has been emphasised by their Lordships is that the freedom guaranteed under Article 301 includes movement of trade which is of the very essence of all trade and is its integral part and before a levy can be struck down, it must be held that the transport or movement of the goods is taxed solely on the basis that the goods are thus carried or transported, because in such a case it will directly affect the freedom of trade as contemplated in Article 301. That is, the movement or the transport cr the carrying of the goods must be taxed as such.

91. After laying down the various propositions indicated above, the Supreme Court was of the view that the Assam Act, with which they had to deal with, directly imposed a restriction In the form of a taxation on the carriage or movement of goods and in this view the Act was struck down as the procedure indicated in Article 304(b) had notbeen followed.

92. The Supreme Court has also considered the two decisions of the Privy Council regarding the scope of- S. 92 of the Australian Constitution.

93. As it was felt that the decision of the majority view in AIR 1951. SC 232, may require reconsideration, when an identical question was raised the matter was dealt with by a larger constitutional Beach of the Supreme Court, whose judgments have been rendered in Civil Appeals Ncs. 42 to 44 of 1959 on 94-1962 ; [AIR 1962 SC 1405). It will be seen that the later judgment has accepttd the majority view In the earlier decision referred to above as correct, but subject to one clarification, namely, that regulatory measures or measures imposing compensatory tax for use of trading facilities do not come within the purview of restrictions contemplated, under Article 301 and such measures need not comply with the requirements of the proviso to Article 304(b) of the Constitution.

94. Before I consider the latest decision of the Supreme Court, it is necessary to advert to one other decision of the Supreme Court reported in AIR 1961 SC 1480, which was rendered after the decision in Atiabari's case, AIR 1961 SC 232. The Supreme Court in this case had to consider the validity of the Rajasthan Passengers and Goods Taxation Act (18 of 1959). One of the contentions that appears to have been raised was that the said Act is violative of Article 301 and Article 304 of the Constitution as being a restriction upon trade, commerce and intercourse. This contention was rejected by the learned Judges, after examining the scheme of the statute on the ground that there has been no interference with trade, commerce or intercourse and that the tax is for the general Revenue purpose of the State and falls upon passengers and goods carried by motor vehicles within the State; end ultimately iheir Lordships came to the conclusion that the levy of tax cannot be said to offend Articles 301 and 304 of the Constitution.

95. That is even why at an earlier stage I have indicated when considering the decision of the Andhra Pradesh High Court relied upon by Mr. V. R. Krishna lyer in AIR 1962.Andh Pra 103 that the sard decision may require reconsideration in view of this decision of the Supreme Court.

96. Coming to the recent decision of the Supreme Court in Civil Appeals Nos. 42 to 44 of 1959 : (AIR 1962 SC 1406), their Lordships had to consider the attack based upon Articles 301 and 304 of the Constitution on theRajasthan Motor Vehicles Taxation Act, 1951 (Rajasthan Act XI of 1951).

97. Mr. Justice S. K. Das delivering the majority judgment has, if I may say so with great respect, after a very elaborate consideration of these matters, ultimately accepted the majority view in Atiabari's case, AIR 19S1 SC 232, as correct. Mr. Justice Subba Rao who has, no doubt, delivered a separate judgment, has also ultimately agreed with the concisions arrived at by Mr. justice Das, on behalf of the majority.

98. The learned Judges consider the three views that have been expressed in Atiabari's case, AIR 1961 SC 232, and they consider very exhaustively the historical background and after referring to the Australian and American decisions, the Supreme Court has considered the scheme of 'our Constitution, with spacial reference to the Articles contained in Part XIII. The Supreme Court in this case was not prepared to accept the wide view expressed by Mr. Justice Shah in the Atiabari's case, AIR 1961 SC 232, nor were they prepared tg accept the narrow view that was placed before them that taxation laws simpliciter' should be outside the purview of Part XIII of the Constitution. Mr. Justice Das observes:

'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 the tax remains compensatory or regulatory it cannot operate as a hindrance.'

99. The learned Judge, after observing that if the widest view is accepted there would be for all practical purposes an end to State autonomy even within the fields allotted to them under the distribution of powers envisaged by the Constitution, observes:

'An examination of the entries in the lists of the Seventh Schedule to the Constitution would show that there are a large number of entries in the State List (List II) and the Concurrent List (List 111) under which, a State Legislature has power to make laws. Under some of these entries the State Legislature may impose different kinds of taxes and duties, such as property tax, profession tax, sales tax, excise duty etc; and legislation in respect of any one of these items may have an indirect effect on trade and commerce. Even laws other than taxation laws, made under different entries in the lists referred to above, may indirectly or remotely affect trade and commerce. If it be held that every law made by the Legislature of a State which has a repercussion on tariffs, licensing, marketing regulations, price-control etc., must have the previous sanction of the President, then the Constitution in so far as it gives plenary power to the States and State Legislatures in the fields allocated to them will be meaningless. In our view, the concept of freedom of trade, commerce and intercourse postulated by Article 301 must be understood in the context of an orderly society and as part of a Constitution which envisages a distribution of powers between the States and the Union, and if so understood, the concept must recognise the nee.d and the legitimacy cf some degree of regulatory control, whether by the Union or the States ........'

100. The contention that taxation 'simpliciter' is not within the terms of Article 301 and that Article 301 must take colour from the provisions of Article 303 which is restricted to legislation with respect to entries relating to trade and commerce of any of the lists in the Seventh Schedule/ is rejected by the learned Judgo by stating:

'In Atiabari Tea Co. case, AIR 1961 SC 232, this Court dealt with the correctness or otherwise of this narrowInterpretation and by the majority decision held against it the majority judgment in the Atiabar! Tea Co. Case; AIR 1961 SC 232 deals with the arguments advanced in of the interpretation in detail and as we are in agreement with the reasons given in that judgment, we do not think that any useful purpose would be served by repeating them. It is enough to point out that thought the power of levying lax- is essentially for the very existence of Government, its exercise may be controlled by constituted provisions made in that behalf. It cannot be laid down a general preposition that the power to tax is outsisde the purview of any constitutional limitations.'

Ultimately the learned Judges rejectee' the contention that the restrictions in Part XIII of the Constitution do not apply to taxation laws, The learned Judges after considering the scope of Article 301 accepted the view of the majority in Atiabari's case, AIR 1961 SC 232 that Article 301 was at the movement aspect of, trade, commerce and (SIC) Ultimately, the learned Judges, after considering the varopis provisions of the Rajasthan Act, in question, are of the view that taxes imposed under the said Act are (SIC) taxes which did not hinder the freedom of trade (SIC) or intercourse assured by Article 301.

101 . Mr. Justice Subba Rao, if 1 may say so with great respect, makes a slightly different approach to the problem, though agreeing with the conclusions arrived at by the majority. The learned Judge refers to the commerce clause in the Constitution of the United States of Amercia as well as trade, commerce and intercourse clause in the Australian Constitution. The learned Judge then considers the scope of the expression 'shall be free' occuring in Article 301 and is of the view that the essential idea is that barrier is an obstacle put across trade in motion at a particular point or different points and that the expression shall be free be free' declares in a mandatory form a freedom of such transport or movement from such barriers.

102. The learned Judge then considers the content of the concept of freedom and states:

. 'Before a particular law can be said to infringe the said freedom, it must be ascertained whether impugned provision operates as a restriction impeding the free movement of trade or only as a regulation facilitating the same. Restriction obstruct the freedom whereas regulations promote it'.

103. Then the learned Judge again observes:

'The Constitution confers on the Parliament and the State Legislature extensive powers to make laws in respect of various matters. A glance at the entries in the Lists of the Seventh Schedule to the Constitution would show that every taw so made may have some repercussion on the declared freedom. Property tax, profession tax, sales-tax, excise duty and other taxes may all have an indirect effect on the free flow of trade. So too, laws, other than those of taxation tion, made by virtue of different entries in the Lists, May remotely affect trade. Should it be held that any law which may have such repercussion must either be passed by Parliament or by the State Legislature with the provisons consent of the President, there would he an end of provincial cial autonomy, for in that event, with some exceptions, all the said laws should either be made by the Parliament or by the State Legislature with the consent of the Central Executive Government. By so construing, we would be making the Legislature of a State elected on adult (sic) the hand-maid of the Central Executive',

and winds up the discussion on this point, by observing:

'If a law directly and immediately imposes a tax for general reverue purposes on the movement of tade, of it would be violating the freedom. On the other hand, if the impact is indirect and remote, it would be unobjectionable. The Court will have to ascertain whether the impugned law in a given case affects directly the said movement or indirectly and remotely affects it.'

104. The learned Judge further pointedly states: 'Of all the doctrines evolved, in my view, the doctrine of 'direct and immediate effect' on the freedom would be A reasonable solvent to the difficult situation that might arise under our Constitution. If a law, whatever may have been its source, directly and immediately affects the free movement of trade, it would be restriction on the said free-dom. But a law which may have only indirect and remote repercussions on the said freedom cannot be considered to be a restriction on it.'

105. From the foregoing principles laid down by the Supreme Court in the two decisions referred to, it will be clear that unless the law imposing a taxation, directly andImmediately affects the free movement of trade, it cannot be said to be a restriction on the freedom guaranteed under Article 301.

106. I have already examined the scheme of the Sales-tax Act and it is only a tax on the Sales and the incidence of tax is levied at different stages. In some transactions the levy is absolute and in certain transactions, I have already Indicated that it is the first purchaser, who is made Mabie and in respect of other transactions relating to the commodities in question before me, it is the last purchaser in the State, who is made liable for the payment of tax. The Sales-tax Act does not concern itself whether the last pur* eraser in the State with whom we are concerned in these proceedings intends to take away the goods from the State or they are only for local consumption. In fact even the last purchaser for house consumption, has to pay the same like the last purchaser, who takes the goods outside the State. It may be that in these cases the object of the petitioners in purchasing the goods in question is for taking them outside the State borders. But, for accepting the contention of the learned counsel for the petitioners, they must be able to establish that the tax has the effect of directly and immediately restricting or Impeding, the trade or the free movement of trade.

In the discussion of this aspect in both the decisions their lordships of the Supreme Court have emphasised that the levy must operate directly and immediately on the freemovement of trade. Only in such cases can it be said thatthe levy puts a restriction on the freedom guaranteed under Article 301. Their Lordships have also stated that if a (particular levy has got only an indirect and remote reper-cusstom on that freedom, it cannot be said that there is any restricition imposed upon the trade under Article 301. Ihave also referred to the particular passages where bothMr. Justice Das and Mr. Justice Subba Rao refer to the powers of the State Legislature to impose different kinds of taxes and duties such as property tax, profession tax,sales-tax, excise duty etc., and both the learned Judges have also stated that the legislation in respect of any one ofthese items may have an indirect effect on trade and -commerce.

Though, no doubt, their Lordships had no occasion directly to consider a Sales-tax Act as such, nevertheless the manner in which that typa of legislation 'along with property tax, profession tax, etc. has been considered and the further observation that such taxation may have an Indirect effect on trade or commerce will clearly show, that the levy under the Sales-tax Act, as in this case, can if at all, be considered only to have an indirect effect ortrade and commerce, t am not satisfied that there is any levy under this Act, and in particular when the petitioners are treated as the last purchasers of the commodity in question in the State, which can be stated to restrict or impede the trade or the free movement of trade, which should be the result before an attack based upon Article 301 of the Constitution can be entertained. The measure in question is purely a fiscal measure for augmenting the public revenues of the State; and as observed by the Supreme Court, any payment of tax and duties must have certainly an indirect effect on trade and commerce and that by itself cannot be held to hamper the free movement of trade, commerce or Intercourse.

107. Therefore, ultimately, my conclusions are as follows. The contention of the learned Advocate General that the General Sales-tax Act, 1125 is 'an existing law' cannot be accepted. On that point I agree with the contentions of the learned counsel for the petitioners, Mr. Surianarayana lyer, that the General Sales-tax Act, 1125, is not an existing law and, therefore, Article 305 is out of the picture.

The further contention of the learned Advocate General that the General Sales-tax Act is a regulatory measure cannot also be accepted. On the other hand, I am in agreement with the contentions of Mr. Surianarayana lyer that the said Act is a purely fiscal measure Intended to procure revenue for the State. The Sales-tax is only a tax on sales for purposes of revenue.

But I am in agreement with the contention of the learned Advocate General that the levy in these cases, under the provisions of that Act cannot be considered to hamper trade, commerce or intercourse; nor can it be stated that the levy is one restricting or impeding the trade, or the free movement of trade. The Sales-tax Act when making the levy in question, does not concern itself as to whether the goods are moved outside the State or purchased only for consumption within the State itself. It is only concerned in these cases with the transaction of sale and so far as that is concerned, the point of .last purchase in the State has been fixed as the taxable point by virtue of the notification issued under Section 5 (vii) of the General Sales-tax Act.

On these findings, the contention of Mr. Surianarayana lyer and the other learned counsel for-the petitioners that the levy is vlolative of Articles 301 and 304(b) has to be rejected.

108. Before I close, I should state that I am well aware of the observations of Lord Porter in 1950 AC 235, that whether a restriction is direct or only remote or Incidental, there cannot fail to be differences of opinion.

109. I will now proceed to consider the ether points that arise for decision in these writ petitions.


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