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V. Guruviah Naidu and Brothers Vs. State of Madras Represented by the Secretary to Government, Revenue Department and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Reported inAIR1958Mad249; (1957)2MLJ469
AppellantV. Guruviah Naidu and Brothers
RespondentState of Madras Represented by the Secretary to Government, Revenue Department and anr.
Cases ReferredTasin v. Town Area Committee
Excerpt:
- orderrajagopala ayyangar, j.1. these several writ petitions which we shall presently group into various classes have been filed by dealers in several commodities who under the rules framed under the madras general sales tax act have been required to take out licences and pay the fees prescribed therefor under these rules. the common point that arises in these several petitions is the validity of the licensing provisions themselves and the objection to quantum of the licence fee prescribed by the rules, and in particular to these fees as enhanced by certain amendments made in 1955 to which we shall advert in its proper place.2. these dealers fall into several classes depending upon the commodities in which they are trading and it would be convenient to classify them even at the beginning.....
Judgment:
ORDER

Rajagopala Ayyangar, J.

1. These several writ petitions which we shall presently group into various classes have been filed by dealers in several commodities who under the rules framed under the Madras General Sales Tax Act have been required to take out licences and pay the fees prescribed therefor under these rules. The common point that arises in these several petitions is the validity of the licensing provisions themselves and the objection to quantum of the licence fee prescribed by the rules, and in particular to these fees as enhanced by certain amendments made in 1955 to which we shall advert in its proper place.

2. These dealers fall into several classes depending upon the commodities in which they are trading and it would be convenient to classify them even at the beginning so that the problems arising in regard to each trade might be dealt with in a group.

3. W.P. Nos. 85, 116, 117, 404, 457 to 459 are concerned with dealers trading in hides and skins. The petitioners in W.P. Nos. 228 to 232 and 329 are dealers in cotton while cotton yarn is the commodity in which the petitioners in W.P. Nos. 455) 590 to 596 of 1956 deal. W.P Nos. 244 and 245 of 1956 are concerned with the licensing of dealers in tobacco, while W.P. No. 385 of 1956 is by a trader in bullion and it relates to the licensing and licensing fees prescribed in regard to dealings in that class of goods. The petitioner in W.P. No. 158 of 1956 is a commission agent in hides and skins.

4. We shall first set out the problems which arise in relation to dealers engaged in each of the trades we have mentioned above and then proceed to discuss the points which are common to all the petitions.

5. Section 3 of the Madras General Sales Tax Act, 1939(which it would be convenient to refer to as the Act) made provision for the levy of a tax on every dealer on his total turnover for the year. This was a multiple point tax, that is, it was payable by every successive dealer in these goods. Section 5 of the Act however provided for certain exemptions' and for the reduction of this multi-point tax in the case of certain commodities and sold by particular dealers. As this is the section under which the licensing, which is challenged as illegal in these petitions, was provided for, it would be convenient to set out its material portions.

5. Subject to such restrictions and conditions as may be prescribed, including conditions as to licences and licence fees--

(ii) the sale of cotton (including kapas) and of cotton yarn other than handspun yarn 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 and only at the rate of one-half of one per cent. of the turnover at that point;

* * *(iv) the sale of bullion and specie 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 and only at the rate of one-fourth of one per cent. of the turnover at that point;

* * *(vi) the sale of hides and skins, whether tanned or untanned 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.

6. The classes of goods comprised in those subject to tax at a single point received an addition when Madras Act XIII of 1955 brought the sale of certain categories of tobacco and particular tobacco products within Section 5. Act XIII of 1955 amended Section 5 of the General Sales Tax Act, 1939 by introducing two new items into, Section 5. This ran:

(vii) the sale of cigars and cheroots at less than two annas per cigar or cheroot, and bidis, snuff, chewing tobacco or any other product manufactured from tobacco, shall be liable to tax under Section 3, Sub-section (1) only at the point of the first sale effected in the State of Madras by a dealer but at the rate of six pies for every rupee on this turnover;

(viii) raw tobacco, whether cured or uncured, shall be liable to tax under Section 3, Sub-section (1) only at the point of the first purchase effected in the State of Madras by a dealer but at the rate of six pies for every rupee on his turnover.

Provided that where a dealer who has paid tax in respect of his turnover relating to goods included in Clause (vii) has also paid the tax on the purchase of raw tobacco used in the manufacture of such goods under Clause (viii) he shall be entitled to a rebate to the extent of tax paid in respect of the raw tobacco so used.

Section 8 made provision for the licensing of commission agent and for exempting the licensed agent from the payment of Sales Tax under Section 3.

7. While on this point, we might also refer to Section 6-A under which the penalies incurred by a dealer, who was under an obligation under the rules to take out a licence and pay the prescribed fee therefor, failed to do so was set out.

8. Section 6-A ran:

6-A. 'If any restrictions or conditions prescribed under Section 5 or notified under Section 6 are contravened or are not observed by a dealer, or in case a condition so prescribed or notified requires that a licence shall be taken out or renewed, if a licence is not taken out or renewed by the dealer or if any of the conditions of a licence taken out or renewed by him are contravened or are not observed the sales of the dealer, with effect from the commencement of the year in which such contravention or non-observance took place may be assessed to tax or taxes under Section 3, as if the provisions of Section 5 or of the notification under Section 6, as the case may be, did not apply to such sales and .notwithstanding that a licence, if any, taken out or renewed by the dealer continued or continues to be in force during the year.

9. Section 19 of the Act enabled the State Government to make rules to carry out the purpose of the Act. Section 19(2) specifically conferred upon the Government the power to make rules in regard, inter alia, to

(a) all matters expressly required or allowed by this Act to be prescribed; (b) the licensing of persons engaged in the sale of goods and the imposing of conditions in -respect of the same for the purpose of enforcing the provisions of this Act and fees for licences.

10. Sub-section (3) of Section 19 contained the usual power enabling the Government to provide for prosecution of offenders for breach of the rules.

11. Under the powers thus conferred by Section 5 read with Section 19 the State Government framed the Madras General Sales Tax Rules, 1939. Of these those relevant for the consideration of the points arising for decision in these petitions are Rule 5(as it stood before the recent amendment in June, 1955), Rule 6 and Rule 32.

We shall set tout the material portions of these rules.

5(1) Every person who-- (a) deals in cotton and/or cotton yarn other than handspun yarn.

* * *(d) deals in bullion and/or specie or

(e) deals in hides and/or skins whether as a tanner or otherwise; or

(f) for an agreed commission or brokerage buys or sells goods of any description on behalf of known principles shall if he desires to avail himself of the exemption provided in Section 5 or 8 or of the concession of taxation only at a single point or of taxation at the rate specified in Section 6 submit an application in Form 1 for a licence in respect of each of his places of business to the authority specified in Sub-rule (2) so as to reach him not later than the 30th day of April of the year for which the licence is applied for:Provided that in the case of a business which is commenced in the course of a financial year, the dealer shall submit the application for the licence to such authority so as to reach him not later than thirty days from the date of commencement of his business.

12. 6(1) Every licence shall cover one place of business only and shall expire on the 31st day of March of the year in respect of which it is granted but may be renewed for periods not exceeding one year at a time on receipt of an application from the licensee. Sub-clause (4) of Rule 6 specified the fees for the grant or renewal of a licence, and the amount of fees chargeable was related to the turnover of the dealer's business. The Sub-rule further specified that the dealer should pay in advance along with his application for a licence the fee calculated on the basis of his estimated turnover. This was to be treated as provisional and subject to adjustment at the end of the year when the actual turnover was ascertained. Where after this final ascertainment it was found that the licensing fee paid by the dealer was not sufficient to cover that due on his actual turnover, the rules required that this amount should be paid on demand by the licensing authority. Specific provision was also made that the benefit of Section 5 or Section 8 could be claimed only after the payment of the licence fee, if any demanded. Rule 32 imposed a penalty for breach of the rules this being a prosecution and conviction by a Magistrate who was empowered to impose a fine upon the offender which might extend to Rs. 1000. It would have been seen that the commodities dealt in by the dealers who are the petitioners in these petitions other than W.P. No. 158 of 1956, are subjected to taxation at single point under Section 5, and that the section itself did not in every case specify the single point but left it to be prescribed by rules made in that behalf. The relevant rules are to be found in what are termed the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. In relation to the commodities with which several of the petitions are concerned Rule 4-A and Rule 16 fixed the single point for the levy of the tax.

4-A. Subject to the provisions of Section 5(a) the sale of cotton yarn other than handspun yarn (which was wholly exempt from taxation under Section 5 shall be liable to tax under Section 3(1) when sold by a person who in the State is the first dealer in such yarn who is not exempt from taxation under Section 3(3):Provided that the burden of proving that a transaction is not liable to taxation under this clause shall be on the dealer;

* * *(ii) the sale of bullion and specie shall be liable to tax 1 nder Section 3(1) when sold by a person who in the State is the first dealer in such bullion and specie who is not exempt from taxation under Section 3(3):

Provided that the burden of proving that a transaction is not liable to taxation under this clause shall be on the dealer.

* * *

(iv) in the case of cotton (including kapas) the tax under Section 3(1) shall be levied in accordance with the following provisions:

(a) in the case of all cotton (including kapas) sold to a spinning mill in the State the tax shall be levied from the spinning mill on the amount for which it is bought by it;

(b) in the case of all cotton (including kapas) which is exported outside the State, the tax shall be levied from the dealer who buys it in the State and is the last dealer not exempt from taxation under Section 3(3) on the amount for which the cotton is bought by him;

(c) all other sales of cotton (including kapas) by licensed dealers in cotton shall be exempt from taxation;

Provided that the burden of proving that a transaction is not liable t o. taxation under this clause shall be on the dealer.

13. The single point as regards taxation on sales of hides and skins is to be found in Rule 16 which until it was recently amended by the deletion of Sub-clause (5) ran:

16(1) In the case of hides and skins the tax payable under Section 3(1) shall be levied in accordance with the provisions of this rule.

(2) No tax shall be levied on the sale of untanned hides or skins by a licensed dealer in hides or skins except at the stage at which such hides or skins are sold to a tanner in the State or are sold for export outside the State.

(1) In the case of all untanned hides or skins sold to a tanner in the State, the tax shall be levied from the tanner on the amount for which the hides or skins are bought by him.

(ii) In the case of all untanned hides or skins which are not sold to a tanner in the State but are exported outside the State, the tax shall be levied frcm the dealer who was the last dealer not exempt from taxation under Section 3(3) who buys them in the State on the amount for which they were bought by him.

14. Sales by licensed dealers of hides or skins which have been tanned within the State shall be exempt from taxation provided that the hides or skins have been tanned in a tannery which has paid the tax leviable under the Act. If such hides or skips have been tanned in a tannery which is exempt from taxation under Section 3(3), the sale of such hides or skins shall be liable to taxation as under the next Sub-rule below dealing with hides or skins tanned outside the State.

(4) Sales by licensed dealers in hides or skins which have been tanned outside the State, shall be exempt from taxation except at the stage of sale by the dealer who is the first dealer not exempt from taxation under Section 3(3) who sells them within the State. The tax shall be levied from such dealer on the amount for which he sells such hides or skins.

(5) Sale of hides or skins by dealers other than licensed dealers in hides or skins shall, subject to the provisions of Section 3, be liable to taxation on each occasion of sale.'

15. In addition to these licensing provisions there was also a provision for the registration of dealers under Section 8-A of the Act, which ran:

8-A (1) Every dealer whose turnover in any year is not less than seven thousand five hundred rupees shall, and any other dealer may, get himself registered under this Act, and for that purpose shall submit an application for registration, to such person, in such manner, within such period, and accompanied by such fee not exceeding six rupees, as may be prescribed.

(2) ....

(3) A dealer shall, until his registration is cancelled, be liable to pay the fee prescribed as aforesaid, for every year subsequent to that in which he applied for registration.

As would be seen from the terms of the provisions this registration would apply both to dealers dealing in commodities subjected to tax at a single point as well as those dealing in goods subject to multi-point taxation.

16. We shall now revert to the scheme of licensing established under Rule 5(1) of the Madras General Sales Tax Rules. The rule which we have set out above and which was in force until it was amended by G.O. 1898, Revenue, dated 17th June, 1955 had, it would be seen left to the dealer the option of taking out a license, the rule however providing that unless the dealer exercise the option in favour of taking out a licence he could not claim the benefit of taxation at a single point for which the statute made provision in Section 5. In actual practice, however, almost the entirety of the dealers took out licences for obtaining the benefit of the single point taxation. Not much difficulty was experienced in the construction or enforcement of the provisions in relation to dealers in cotton, cotton yarn, bullion and specie. In the case of hides and skins difficult questions of construction arose in view of the single point in relation to dealers being fixed by Rules 16(2) to 16(4) of the Turnover and Assessment Rules only in the case of licensed dealers. The question which immediately arose on provisions so framed was, whether persons who had not taken out licences were liable to sales-tax, since the single point prescribed by the rules was confined to the licensed dealers. A positive provision, as to taxation of unlicensed dealers in hides and skins was to be found in Rule 16(5), which however this Court held in Syed Muhammad v. State of Madras : AIR1953Mad105 , to be beyond the rule-making power conferred on the State Government by Section 19 of the Act, a decision which was affirmed by the Supreme Court on appeal in Syed Muhammad v. State of Andhra and Ors. (1954) S.G.J. 390 : (1954) 1 M.L.J. 619 : (1954) 5 S.T.C. 108 . The question of the liability of unlicensed dealers in hides and skins came up for consideration before us in Moor Muhammad v. State of Madras : (1956)2MLJ374 , and we held that, as the rules did not prescribe any single point as required by Section 5 in the case of dealers who did not take out a licence, they were not liable to tax at all, because the tax on hides and skins under Section 5(vi) at a single point to be prescribed and there was no such prescription to make them liable . The result of this decision was that while licensed dealers were subjected to tax, unlicensed dealers escaped payment of any tax altogether on their dealings. It was to remedy this anomalous state of affairs that amendments were introduced into Rule 5, rendering the taking out of a licence not optional as it was before but making it compulsory. After the amendment Rule 5(i) ran:

Every person who deals in cotton and/or cotton yarn....deals in bullion and/or specie or deals in hides and/or skins whether tanned or untanned....shall, in case the turnover of any such person in any year in any of the said goods is not less than Rs. 7,500 and. . . . submit an application in Form 1 fora licence inrespect of each of his places of business to the authority specified in Sub-rule (2) so as to reach him not later than the 20th day of April of the year for which tile licence is applied for .

It is the change thus introduced making licensing compulsory instead of leaving it to the option of the dealer that is challenged as ultra vires and unconstitutional in these petitions. Before proceeding further we might at this stage refer to the increase in the rates of licence fees, which is also challenged as excessive. For this purpose we are extracting the matter set out in the counter affidavit filed on behalf of the State Government, since this gives the history in a convenient form.

1. Cotton and/or cotton yam.--The rate of licence fee was Rs. 25 per annum till 1st April, 1944-In G.O. No. 678, Revenue, dated 1st April, 1944, the rate of licence fee was increased to Rs. 50 if the turnover did not exceed Rs. 20,000 per annum and to Rs. 100 .if the turnover exceeded Rs. 20,000 per annum. These rates were increased from 1st April, 1948 and these increased rates were, if the turnover did not exceed Rs. 20,000, Rs. 75; if it exceeded Rs. 20,000 but did not exceed Rs. 1 lakh per annum, Rs. 150; and for every additional turnover of one lakh or a fraction thereof, Rs. 100.

2. Bullion and specie.--The rate of licence fee was Rs. 25 per annum till 1st April, 1944. At this period bullion was exempted from taxation under Section 6 of the Act. During the year 1944-45 no-licence fee was levided, but ihe exemption from taxation was removed so that it became liable to sales tax. From 1st April, 1945, the exemption from sales-tax was restored and the licensing provisions were made applicable. The fee was Rs. 50 if the annual turnover did not exceed Rs. 20,000, and it was Rs. 100 if it did. From 1st April, 1948 the licence fees were increased and were fixed on the same basis as for cotton or cotton yarn which we have set out earlier.

3. Hides and or skins.--The original rate of licence fee was Rs. 10 per year till 1st April, 1944, when it was increased to Rs. so in regard to dealers with a turnover of over Rs. 20,000, Rs. 10 however still beng continued to be paid by those whose turnover was less than Rs. 20,000. From 1st April, 1944, these rates were revised and increased, so that after the revision it was Rs. 25 if the turnover was Rs. 10,000 and above but below Rs. 20,000, Rs. 50 if the turnover was between Rs. 20,000 and Rs. one, lakh; and for every additional turnover of rupees one lakh or fraction thereof, Rs. 100.

17. In addition to these changes in the rates, we have already set out Rule 6(4)(a) of the Madras General Sales Tax Rules, under which the fees for the grant of or renewal of a licence were subject to a maximum of Rs. 1,000. This maximum was however increased to Rs. 2,000 by an amendment effected by G.O. 2044 Revenue, dated 30th June, 1955. One of the points raised by learned Counsel for the petitioners in the several petitions was that there was justification for the increase in the maximum rate of licence fees from Rs. 1,000 to Rs. 2,000 effected by the G.O. now referred to. The learned Advocate-General appearing on behalf of the State did not seek to support the validity of the increase in the maximum fees leviable on dealers. It is for this reason we refrain from canvassing the points urged in that behalf by learned Counsel for the petitioners.

18. This will be the convenient stage when the contentions urged by Mr. Venkata-subramania Ayyar, learned Counsel for the petitioners, in challenge of the validity of the licensing provisions in general and the fees imposed for such licences may be set out. The arguments of Mr. Venkatasubramania Ayyar covered a very wide field but the points on which he concentrated his attack as regards the validity of these provisions and the steps in his reasoning were mainly these : Article 19(1)(g) of the Constitution guarantees the citizens of India a right to carry on any occupation, trade or business. The petitioners were entitled to the full enjoyment of this freedom, which however the Legislature could curtail provided the restrictions or limitations imposed satisfied the requirements of Article 19(6). This latter provision sets out two conditions as prerequisite for the validity of any law imposing restrictions: (a) the restriction must be in the interests of general public and (b) the restriction must be reasonable. The licensing provisions in the present case do not satisfy either of the two conditions.

19. Elaborating the point as regards these two objections to the restrictions, learned Counsel urged that restrictions that could reasonably be imposed must be solely for the protection of the public against any ill-effects from the carrying of the trade without regulation. In other words, the need for the restrictions must spring out of the nature of the commodity dealt in by the trader, the restriction or regulation being called forth by reason of injury to public interests if the particular trade were unrestricted or without regulation. Instances of such proper and valid restrictions were he urged to be found in the regulation of trades in noxious or dangerous goods or in regard to trade in goods like milk, where in the interest of public health or sanitation restrictions are necessary to be imposed as to the manner in which the trade should be carried on or in cases like fire-arms etc., where restrictions have to be imposed on grounds of public safety. In these cases it was the nature of the commodity that justified the restriction or the regulation and licensing was the method by which such regulation was achieved. But in the case of trades with which these petitions are concerned, the licensing was not founded on any need to regulate the trade in them on grounds of morality, public health, sanitation or public safety. Any restriction imposed on the right to carry on such trade was unreasonable and was abnoxious to the freedom guaranteed by Article 19(1)(g) as the same was not covered by Article 19(6) and was therefore unconstitutional.

20. The further contention of the learned Counsel was that the license fee imposed upon a dealer by the impugned rules was not a fee but a tax. It did not satisfy the qualitative or quantitative tests laid down for the imposition to be valid as a 'fee'. The Supreme Court laid down the characteristics of a valid licence fee in the Sirur Math and other connected cases1, and this Court summarised and restated them in the Udipi Mutt Case : Sudhindra Thirtha v.lCommissioner of Hindu Religious and Charitable Endowments, Madras (1954) S.C.J. 236 : (1954) 1 M.L.J. 389 : (1954) S.C. 335. The passage relied on in the last case ran:..the following tests will have to be satisfied before the contribution levied under Section 76(1)(of the Madras Hindu Religious, etc. Act) as it now stands amended (in 1951) can be upheld as a fee, within the legislative competence of the State Legislature to enact.

(1) The levy can be justified as intra vires the State Legislature, only if it falls within the ambit of Entry 47 read with Entry 28 in List III of VII Schedule of the Constitution. (It was contended that this test was satisfied in1 the present case).

(2) There should be a quid pro quo basis to justify the levy as a fee. The co-relation between the fee levied and the services rendered should appear ex facie the legislative provision. The co-relation must exist both in the purpose of the levy and the extent of the levy, that is, the co-relation should be between the actual levy and the expense incurred by the Government for rendering the services for which the levy is made.

(3) The services rendered by the Goverrment which constitute the quid pro quo for the levy of the fee, must be incidental to a system of regulation.

(4) That regulation itself must be solely on considerations of public interest.

(5) That statutory regulation should not exceed the limits of a reasonable restriction on the fundamental rights guaranteed by the Constitution.

The contention urged by Mr. Venkatasubramania Ayyar and by Mr. Nambiar who followed him was that conditions 2 to 5 were not satisfied by the licensing provisions and the fee levied therefor in the present case.

(1) It was submitted that two tests had to be satisfied before the validity of a levy of a fee could be upheld, a qualitative and a quantitative. Dealing with the qualitative test learned Counsel urged:-Licensing necessarily implied a restriction or regulation of the trade or business which was licensed, unless the licensing were optional, and the licence could be had on a mere application without any fee being charged being employed merely for statistical purposes. If however, licensing was compulsory and was subject to the payment of a fee, such a provision could be justified only if there was necessity to regulate the trade which was subject to licensing in public interest founded on health, safety or morals. If a licence were required as a prerequisite for carrying on a trade, which it was not necessary in public interest to regulate as above understood, the licensing would be an unreasonable restriction and any fee imposed therefor would be an unconstitutional exaction.

(2) It was only if this first or the qualitative test were satisfied that the quantitative test, viz-,' the reasonableness of the amount of the fee levied would arise for consideration. This required that the quantum of the fee should bear a reasonable relation to the service performed by the State to the licensee, the fee being the quid pro quo for the service rendered. In order however to evaluate the service rendered to the licensee the exact nature of the service performed had to be ascertained and in the present case where the licensing was merely incidental to or an adjunct of the levy of the sales-tax and was designed to facilitate the levy and collection of a tax imposition, no service was rendered to the licensee and therefore no quid pro quo would be received by the licensee for the fee exacted from him. It was in this way that the quantitative test was said to shade into the qualitative.

On these grounds it was contended that conditions 2, 3 and 4 extracted from our judgment in Sudhindra Thirtha case : AIR1956Mad491 , were not satisfied by the impugned fee and that the licensing contravened condition 5.

(3) Dealing next with the quantitative test pure and simple, learned Counsel urged three circumstances as vitiating the levy. (1) That the total amount of the fee collected was out of all proportion to the expenditure involved over the licensees as such; (2) It was improper to have made the rate of the licence fee dependent on the turnover of the dealer and (3) that separate licences with separate licence fees had to be obtained in respect of each place where the trader carried on his business (vide Rule 6(1) and that this was unnecessary and excessive. It was urged that the expenditure incurred by the Government on licensing could not vary with or be proportionate to the turnover or to the number of places where a trader carried on his business, and that there was thus no , correlation between the fee levied from the individual and the service rendered to him as compared with others who paid a lesser licence fee.

(4) Lastly it was urged that whatever might be said as regards t he rate of licence fees which had been in force between 1948 and 1955, there was no justification for the increase in the maximum fee from Rs. 1,000 to Rs. 2,000 effected in June, 1955, by G.O. No. 3044, Revenue. We have already pointed out that the learned Advcate-General did not seek to sustain the validity of this last increase, and we are therefore leaving out the facts stated to us on the basis of which the validity of that increase was challenged.

21. It will be seen from the above that the most important point for determination is the validity of the system of licensing whose aim or object is not the regulation of trade.

22. We shall now proceed to summarise the submissions of the learned Advocate-General . The power to levy a fee is clearly within the legislative power of the State. This power is contained in Item 66, List II of Seventh Schedule and runs:

Fees in respect of any of the matters in this List, but not including fees taken in any Court '. The matters in regard to which there could be legislation with regard to fees, include also the entries in relation to taxes, and among these are undoubtedly taxes on the sale or purchase of goods under Entry 54 of this List, and so the levy of fees is within State legislative power. The impugned licensing provisions satisfy the requirements of Articles 19(6), namely, that the restriction must be reasonable and in the interests of general public, notwithstanding that the obtaining of the licence was made compulsory for every dealer and a prerequisite for the carrying on of the business. For the quantum of the fee to be reasonable it was no doubt necessary that it should not be of an amount which was excessive to achieve the purpose which the restriction had in view. A restriction might cease to be reasonable either because it was unrelated to the objects sought to be acheived by the restriction or because the burden that it imposed might be out of proportion to the results to be attained. It is this latter condition that is violated when the quantum of the fee imposed for the service rendered is disproprotionately large to the service rendered-to the licensee. In the present case, however, apart from the increase of the rates in June, 1955, which the State was not seeking to sustain, fees, at that previous scale had been in operation for over 7 years between 1948 and 1955 without any complaint that they were excessive. That in itself was an indication that the fees placed no undue burden upon the trade. It was reasonable because it was designed in the interest of the trader and in order that he might enjoy the benefit of the concession as to taxation at a single point; and it was also in the interst of the general public. The learned Advocate-General disputed the main contention urged by the learned Counsel for the petitioners, that for the restriction under Article 19(6) being in public interest, the regulation or restriction must be grounded on perils incidental to the trade which was the subject of regulation or to the commodities traded in and the repercussions on the public if the trade was carried on without any restrictions. He urged that the impugned licensing provisions were a necessary concomitant to any system of single point taxation. This was a benefit conferred by the Legislature by Section 5 of the Madras General Sales-Tax Act. In order to ensure that this system worked equitably so that no more than one sale was taxed--the sale that was to be taxed being determined in accordance with the Act or the Rules as the case may be--it was necesary to keep track of the dealings in goods subjected to single point taxation as they passed from dealer to dealer within the State. This was perecisely the reason for the provision in Section 5 which made the concession as to taxation at a single point 'subject to conditions as to licence and licence fees.' The goods whose sale was exempt in the hands of one dealer might be liable to tax in the hands of the next or it might be the converse case. The authorities had to have necessary information in order (1) to tax them at the point where they were liable to tax and (2) to ensure that there was no tax at any other point. If there were no system of licensing by reason of which there could be such a tracing of the dealings,there would be the danger of the single point becoming a no-point and no tax being recovered because of the inability on the part of the taxing authorities to predicate of any particular transaction of a dealer whether his dealing was the point at which tax could be levied. On the other hand, there was also the possibility that the tax might become a multipoint tax because of the inability of the trader to prove that his dealing was not one which attracted the tax or that the tax had been paid at earlier stages. A licensing system therefore was an inevitable adjunct to any system of single point taxation.

23. The ensuring of the benefit of the single point taxation to the trader dealing in commodities subject to such concession involved a beneficial service to the trader. The turnover of these dealers, quod the items subjected to single point taxation, had to be separately dealt with from the general mass of licensees in regard to whom the provision of Section 3 was attracted and multipoint tax levied.

24. Dealing with the objections to the validity of the levy based on the amount of the fee, the learned Advocate-General urged that the fee collected from these licencees was not out of proportion to the expenditure involved on the staff employed for the purpose. He also disputed the correctness of the contention, that it was unreasonable to relate the quantum of the fee to the turnover. It will be convenient to summarise his submissions on this part of the case by extracting certain passages from the counter-affidavit filed on behalf of the State.

When the turnover increases, the work of the officers of the Commercial Taxes Department also increases. The higher the turnover the larger the number of transactions involved. Each transaction has to be verified whether it is eligible or not for the concession under the licence. Making the licensing system compulsory increases the work of the officers as the number of licensees that will have to be tackled will be greater and the penal provision for the failure to take out the licence has to be enforced. In the cirumstances the work of the Commercial Tax Officers will increase with the increase in the turnover of the licensee. The licence fees levied are not accordingly in excess of the expenditure involved in granting licences and enforcing the licensing provisions....

The main work involved in dealing with licencps consists of (i) getting applications for licences, scrutinising them and issuing licences, (ii) getting annual returns, (iii) examining the accounts with a view to decide whether the exemption is admissible or not and (iv) taking steps to collect the licence fee.

The tackling of the case of a licensee and of a person dealing in exemptable goods involved more work than in that of a dealer. In the case of a dealer handling only taxable goods, all that the assessing authority has to do is to arrive at his turnover. Where the dealers issue bills for sales and keep vouchers for purchases, the work of an assessing officer is generally easy as purchases and sales can be easily verified and he can satisfy himself that the accounts are correctly maintained. In dealing with the case of a licensee, not only should the correctness of the accounts as in the case of an assessee be ascertained, but the issue whether the claim for exemption under cover of licence is admissible or not has also to be examined. In the case of bullion and specie, the rate of tax is 1/4 per cent, on the first sales in the State. In order to satisfy that one's sale is not the first sale, it is necessary to examine the person's purchases. The officer has to verify whether all purchases are from local dealers and whether tax had been paid at an earlier stage, before granting the exemption. Even in reespect of purchases from non-residents where the plea that the purchases and sales were completed in the State is raised, the department has to make further investigation before admitting or rejecting the exemption claimed....As regards cotton, the rate of tax is 1/2 per cent, on the purchase by a mill or by the last exporter. Before granting exemption it has to be verified whether one has sold to a local buyer or a non-resident and whether as a result of the sale, the goods were delivered inside or outside the State....Hides and skins tanned outside the State are taxable on the first sale. So also hides and skins tanned in tanneries which have not paid tax on purchases on the ground that the minimum turnover is below the limit laid down in Section 3(3,) are taxable on first sale. Thus the assessing of such dealers to tax and the granting of exemption is dependent on the issue whether the suppliers are the buyers or licensees. Besides the assessing officer has to verify whether the purchases were from non-residents and sales were local or export sales, and where exactly the purchase or sale took place....It is therefore submitted that the work involved in dealing with the case of a normal licensee is much more than that in the case of a normal assessee...According to the administration report for 1954-55, the total expenditure for administering the Acts under control of the Commercial Taxes Department was Rs. 43.74 lakhs and the licence fee realised under the Madras General Sales Tax Act was Rs. 24.49 laks. The increase of the maximum to Rs. a,ooo made on 22nd June, 1955, is expected to raise this amount by Rs. 3 lakhs.

25. The counter-affidavit also sought justification for the difference in the amount of fee levied in regard to dealers in the several commodities subject to single point taxation, but we do not consider it necessary to set these out or discuss them, because learned Counsel for the petitioners did not during their arguments complain of discrimination as between licensees carrying on trade in different commodities.

26. The Advocate-General next urged that the licensing was in the interest of the general public in that it tended to check evasion and thereby benefit them. The restriction or regulation contemplated by Article 19(6) was not confined to regulation of. trade in noxious and dangerous goods or to restrictions imposed on trade, in particular commodities on grounds of health, convenience or safety of the general public. Every law served a public purpose, and the effective enforcement of such law secured that public purpose and was therefore in the interests of the public. This test was satisfied in the present case, and the licensing which certainly would check evasion satisfied the test of being a reasonable regulation in the interests of general public.

27. In this connection the learned Advocate-General relied on the decision of the Supreme Court in the United Motors Case : State of Bombay v. United Motors (India) Ltd. : [1953]4SCR1069 before the Supreme Court contained provisions requiring dealers to be registered under the Act. The decision proceeded on the basis that the registration and licensing would be invalid only if the tax itself which was levied by the principal provisions of the Act were unconstiutional. Patanjali Sastri, C.J. said:

In the present case however, the appellants (State of Bombay) can have no grievances, as the respondents' allegation of infringement of their fundamental right under Article 19(1)(g) was based on their contention that the Act was ultra vires the State Legislature, and that contention having been accepted by the Court below, there would clearly be an unauthorised restriction on the respondents' right to carry on their trade, registration and licence being required only to facilitate collection of the tax imposed.

28. It was submitted that this was an indication of the converse position, that if the tax itself was intrn vires the provision as to registration and licensing could not be held to be unreasonable restriction.

29. The learned Advocate-General further submitted that the restrictions permitted to be imposed by Sub-clauses (2) to (6) of Article 19 must be read as a whole, each throwing light on the scope of the other and that the common thread running-through these several provisions was the ground of public policy understood in a comprehensive sense.

30. Contrariety to public policy as a ground for the avoidance of transaction or for the'non-enforcement of contract has been the accepted principle on which Courts have acted from the earliest times. The public policy thus enforced might be founded on the principles of the Common Law vide for instance Egerton v. Earl Brown-low (1853) 4 H.L.C. 256, where the House of Lords said:

No subject can lawfully do that which has a tendency to be injurious to the public, or against the public good .

31. Another instance was afforded by the leading case of Nordenfelt v. Nordenfelt L.R. (1894) A.C. 535, where the House of Lords had to deal with the scope of the Common Law prohibition against improper restraint of trade. This principle of public policy was not confined to that which the Common Law recognised or enforced, and it extended equally to the public policy involved in the enforcement of statutes. He urged that every public statute was enacted in the public interest, and therefore, both public policy and public interest demanded its enforcement. The public interest justifying the restriction might therefore arise from the very provisions of the enactment and might be grounded on the necessity to prevent its evasion.

32. Having considered the matter carefully we have reached the conclusion, that the view pressed upon us by learned Counsel for the petitioners, that the public interest to justify restriction of the rights conferred by Article 19(1)(g) must arise from the inherent nature of the particular trade, involves an unduly narrow interpretation of the words employed in Article 19(6) and ought to be rejected. We see considerable force in the argument of the learned Advocate-General that the restrictions permitted by Sub-clauses (2) to (6) follow a pattern, viz., that they are imposed by the Legislature for reasons of public policy. The precise aspect of public policy involved in the case of each of the several fundamental rights conferred by the several Sub-clauses of Article 19(1) might differ, but one underlying principle--the requirement of public policy--runs through the various classes of restrictions and pervades the scheme. Public policy may spring by reason of the principles of Common Law, like decency, morals or public order which are the very foundation of society. Public policy however might equally have its origin in the statute law of the country. Statutes are enacted for public benefit from which it follows that it is to the public interest that the law should be observed and enforced. The fact therefore that a command or inhibition arises not from the unwritten Common Law but from the law enacted by the Legislatureis no ground for holding that while violations of the Common Law are contrary to public policy, violations of a statute do not involve any such detriment.. On the other hand, in regard to avoidance of transactions on the ground of their being contrary to public policy, the Courts have not from the earliest times drawn any distinction between the unwritten Common Law and enacted legislation, the contravention of either always being treated as contrary to public interest. That is the whole basis upon which Section 23 of the Contract Act and similar provisions in the Transfer of Property Act rest.

33. A statute might therefore itself be the foundation for the creation and emergence of a public interest to preserve its principles and to secure that it is not evaded. To the extent that that law or other law enables this purpose to be achieved, its enforcement must be held to be in the public interest.

34. Take for instance the Industrial Disputes Act, 1947, which has open authoritatively held to be within Article 19(6). It is an enactment conceived in public interest aiming at the promotion of industrial peace. There cannot be any doubt that the Industrial Disputes Act as well as the Tribunal erected under it greatly hamper and impose restrictions on the carrying on of a trade. The restrictions so imposed are certainly not due to the fact that the trade or industry carried on required regulation because those trades or industries were noxious or dangerous to the public. It is therefore not correct to assume or postulate that a restriction or regulation imposed must flow from the inherent nature of the trade intrinsic to the commodities dealt with or the articles manufactured, and could not be founded on public interest originating in factors extrinsic to the trade.

35. In this connection we might usefully refer to Harishankar Bagla v. State of Madhya Pradesh : 1954CriLJ1322 , where the Supreme Court upheld the validity of the requirements of a permit to enable the transport of textile goods. Their Lordships said:

The requirement of a permit in this regard cannot be regarded as an unreasonable restriction on the citizen's right under Sub-clauses (1) and (g) of Article 19(1.). If transport of essential commodities by rail or other means of conveyance was left uncontrolled, it might well have seriously hampered the supply of these commodities to the public.

36. Similarly the Supreme Court in Bijay Cotton Mills, Ltd. v. The State of Ajmer (1955) S.C.J. 51 : (1955) 1 M.L.J. 10: (1955) 1 S.C.R. 753, upheld the constitutional validity of the Minimum Wages Act, after negativing the contention that it offended, the fundamental rights guaranteed under Article 19(1)(g).. It was stated at page 755:

It can scarcely be disputed that securing of living wages to labourers which ensure not only bare physical subsistence but also the maintenance of health and decency, is conducive to the general interest of the public. ...If the labourers are to be secured in the enjoyment of minimum wages....it is absolutely necessary that restraints should be imposed upon their freedom of contract and such restrictions cannot in any sense be said to be unreasonable.. . . . . . . . . . . If it is in the interest of the general public that the labourers should he secured adequate living wages, the intentions of the employers whether good or bad are really irrelevant. Individual employers might find it difficult to carry on the business on the basis of the minimum wages fixed under the Act but this must be due entirely to the economic conditions of these particular employers. That cannot be a reason for the striking down the law itself as unreasonable.

37. In our judgment the meaning which we are attributing to the expression 'public interest' in Article 19(6) is in no way different from that which Mahajan, J., placed on it when he said in Chintaman Rao v. The State of Madhya Pradesh (1950) S.C.J. 571 : : [1950]1SCR759 .

The question for decision is whether the statute under the guise of protecting public interests arbitrarily interferes with private business and imposes unreasonable and unnecessarily restrictive regulations upon lawful occupation; in other words, whether the total prohibition of carrying on the business of manufacture of bidis within the agricultural season amounts to a reasonable restriction on the fundamental rights mentioned in Article 19(1)(g) of the Constitution. Unless it is shown that there is a reasonable relation of the provisions of the Act to the purpose in view, the right of freedom of occupation and business cannot be curtailed by it.

38. The 'phrase' 'reasonable restrictions' connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interests of the public. The word ' reasonable ' implies intelligent care and deliberation, that is, the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19(1)(g) and the social control permitted by Clause (6) of Article 19, it must be held to be wanting in that quality'.

39. The legislation then before the Court was held to be unconstitutional as violative of Article 19(1)(g) because of the conclusion:

Not only are the provisions of the statute in excess of the requirements of the case but the language employed prohibits a manufacturer of bidis from employing any person in his business, no matter wherever that person may be residing. . . . Such a prohibition on the face of it is of an arbitrary nature inasmuch as it has no relation whatsoever to the object which the legislation seeks to achieve and as such cannot be said to be a reasonable restriction on the exercise of the right.

40. Applying the test there laid down, if checking evasion and securing efficient administration of a law levying sales tax at a single point required licensing as a means of keeping track of successive sales, we are unable to hold that the restriction imposed by licensing was an unreasonable restriction on the freedom of trade guaranteed by Article 19(1)(g).

41. Learned Counsel for the petitioners contended that the theory, that facility of collection or checking avoidance of evasion would justify regulation or restriction on the right guaranteed was unsound and would lead to dangerous and unknown results which the Constitution-makers who framed Article 19(6) could never have contemplated.

42. The point was put this way, Article 19(1)(g) gifted and guaranteed to the citizens of India freedom of trade. No doubt that freedom was subject to the imitation specified in Article 19(6) i.e., to be enjoyed subject to reasonable restrictions imposed by the law. The restrictions however to be reasonable should be in regard to the manner in which the business could be carried on but could not take the form of the creation of a prerequisite for the commencement of business.. Learned Counsel characterised the latter type of restriction as the imposition of a price for the enjoyment of a right gifted by the Constitution. It would be seen that on analysis the argument comes to confining the permissible restrictions to those which operate to regulate a business in existence as contrasted with a restriction which prevented a business from being started unless its conditions were fulfilled. This distinction and this restricted interpretation of the limitations permitted to be imposed by Article 19(6) cannot stand scrutiny, and we have no hesitation in rejecting it. Take for istance possesion of dangerous goods like fire-arms which might be 'property.' Merely because the right to 'acquire' property is a guaranted right, it cannot be contended that every one must need have an unfettered right to acquire and possess fire-arms, and that any law which imposed pre-requisite conditions on a person acquiring or possessing them as distinguished from a law which prescribed the manner in which the fire-arm should be used was not within Article 19(5), whose language in this regard is substantially similar to that of Article 19(6) which we have to construe. We can see no constitutional objection to the licensing being made a pre-requisite for carrying on the several trades we are concerned with in these cases.

43. The learned Advocate-General further maintained that non-selective licensing or registration was a feature of modern systems of taxation, while selective licensing was adopted for the control or regulation of industry. It was not therefore correct to regard licensing as confined to selective licensing, which would be the case if the arguments of learned Counsel for the petitioners were accepted. We consider this submission to be well-founded.

44. Instances of non-selective licensing as a method or an incident of taxation have come before the Courts on several occasions, and of these it is sufficient to refer to a few. The Fuel-oil Tax Act, 1930 of British Columbia, whose validity came up for consideration before the Privy Council in Attorney-General for British Columbia v. Kingcome Navigation Company, Limited L.R. (1934) A.C. 45, is perhaps a very good illustration. The tax was levied on every person who consumed fuel oil the amount of the tax being computed according to the quantity consumed. The machinery however for collection was by the licensing of dealers in fuel-oil who were compelled to take out licences on payment of a dollar each. The compulsion was enforced by a provision which prohibited any person from keeping for sale or selling fuel-oil within the Province unless he was the holder of a licence issued pursuant to the section in respect of each place of business at which the fuel-oil was kept for sale or sold by him. We are not very much concerned with the actual decision which turned on the point as to whether the tax was or was not a direct tax within the power of the Province to levy. Incidentally we might note that the Privy Council repelled the challenge to the validity of the tax grounded on its being 'a regulation of trade or commerce' falling within exclusive Dominion power under Section 91(2) of the British North America Act, 1867. We are referring to the decision merely to point out that licensing is a usual method of enforcing taxes on the sale of goods.

45. Atlantic Smoke Shops, Limited v. Conlon and Ors. L.R. (1943) A.C. 550, is another instance where for the imposition of a duty on sale of tobacco licensing of dealers was resorted to,. A case possibly much nearer that we are now concerned with, is Deputy Federal Commissioner of Taxation for the State of South Australia v. Ellis & Clark Limited 53 C.L.R. 85. The legislation, the precise import of which was raised before the High Court of Australia, (The Sales Tax Assessment Acts, 1930-32) imposed a tax on the last wholessale sale by a dealer within the State and required the numbers of the certificates granted to several dealers to be quoted in the purchase documents to ensure that goods were not taxed more than once. The ratio of this requirement was explained by Dixon, J., thus at pages 91 and 92.

To carry out the scheme for placing the tax as nearly as may be upon the sale of goods which immediately precedes retail distribution, for collecting it and for avoiding double taxation, it is necessary that certificates shall always be quoted by registered person on purchases which are not intended to bear tax, and never on transactions which are intended to bear tax....double taxation is avoided by means of regulations which, in effect, prescribe that no tax is to be levied on the later transaction. The whole plan of the legislation suggests that it is concerned only with the course of commercial dealing in goods between the time they first appear in Australia, either as a result of manufacture or importation and the time when they retailed. It takes them at the point of importation and manufacture and provides a scheme for following them to that point at which, in the actual course of commerce in the particular articles, they go into the retail market, and then, as nearly as possible, tax is imposed either upon the antecedent sale by wholesale or upon the immediately antecedent wholesale value which they possessed.

46. The point that has next to be considered is whether the provisions as to licensing were required to be imposed in the context of the other provisions of the Madras General Sales Tax Act. The submission on this part of the case was, that the licensing of dealers in commodities subject to taxation at a single point was not necessary in view of Section 8-A of the Act. Learned Counsel for the petitioners urged that the registration of dealers under Section 8-A and the forms of returns which they were required to submit afforded to the authorities all the information necessary to give effect to the single point taxation provided by Section 5, with the consequence that a separate licensing under Rule 5 with a special foe for it was wholly unnecessary with the consequence that the impugned fee was a vexatious burden imposed without any rational purpose, and was therefore an unreasonable restriction on the freedom guaranteed under Article 19(1)(g). The learned Advocate-General pointed out that the forms of returns submitted by dealers in commodities subject to taxation at a single point differed in certain essentials from the forms required to be submitted by dealers taxed under Section 3. Mr. Nambiar however urged that all the information required by the departmental authorities could have been gathered if dealers registered under Section 8-A were required to submit additional forms of returns appropriate to the special commodities dealt with by them. We are wholly unable to accept this argument urged on behalf of the petitioners. The question whether a single registration would suffice to cover every one of the dealers or whether an additional separate registration was necessary for dealers selected for favoured treatment by the Legislature, which concession however would be accorded only if they fulfilled particular conditions, is a matter of legislative policy and administrative convenience. The contention urged on behalf of Government' that the requirement of special forms of returns by these licensees under Rule 5 tended to administrative convenience appears to us to be well-founded. In our judgment this should suffice to uphold the validity of this provision as a reasonable restriction imposed upon the trader.

47. Before we pass on to the next point we must refer to the submission of learned Counsel for the petitioners, which sought to identify the reasonable restrictions of Article 19(6) with the limits of the police power of the State read in conjunction with due process clause of the American Courts. In particular counsel pressed upon us the observations in two decisions of the American Supreme Court. The first was that of Brown, J., in Lawton v. Steels 38 L. Edn. 385 at page 388, where dealing with the limitation to which the police power of the State was subject the learned Judge said:

To justify the State in thus interposing its authority in behalf of the public, it must appear, first that the interests of the public generally, as distinguished from those of a particular class, require such interference; and, second that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. The Legislature may not, under the guise of protecting the public interests, arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations.

48. The other was a passage in the judgment of McReynolds, J., in Panhandle Eastern Pipe Line Company v. State Highway Commission of Kansas 79 L. Edn. 1090.

The police power of a State. ...is subordinate to constitutional limitations. It springs from the obligation of the State to protect its citizens and provide for the safety and good order of society. Under it there is no unrestricted authority to accomplish whatever the public may presently desire. It is the governmental power of self-protection and permits reasonable regulation of rights and property in particulars essential to the preservation of the community from injury.

49. We are not satisfied that the licensing provisions which are impugned before us would fall outside the permissible limits of valid restriction contemplated by these decisions or the principles laid down in the passages extracted. But in any event in our judgment the restrictions imposed by the impugned provisions are well within Article 19(6) of the Constitution.

50. Thus far we have proceeded on the basis, that unless the system of licensing introduced by Rule 5 satisfied the test of reasonableness laid down by Article 19(6) the restriction imposed would be unconstitutional. There is however one other approach to this problem which we consider worth pursuing. We shall assume that learned Counsel is right in his premises, that the restrictions contemplated by Article 19(6) are those grounded on the perils incidental to the commodity traded in or on the ill effects on the public of an unrestricted or unregulated trade in such commodities. These however do not exhaust the burdens that may be imposed on a business. The Constitution vests the Union and the States with a power of taxation, which, subject to a few exceptions, (vide, e.g., Article 276), is plenary in its nature. The imposition of a tax on a trade or on the profits of a trade is undoubtedly a burden and unless the tax was validly imposed, it would be an illegal and an undue interference with the freedom of trade guaranteed by Article 19(1)(g) and so invalid. That is the ratio underlying the decision of the Supreme Court in Tasin v. Town Area Committee : [1952]1SCR572 .

51. If a tax were a restriction which could be legally imposed on a business, the right to carry on which was guaranteed by the Constitution, the validity of the tax cannot be judged by standards applicable to regulations or restrictions imposed on the manner of carrying on the business--restrictions which flow from the nature of the commodity or the repercussions of an unregulated trade on the health, morality or safety of the public. Taxation is the supreme function of the State, the exercise of a power which is necessary for the very existence and maintenance of the State. In the words of Cooley:

It is unlimited in its range, acknowledging in its very nature no limits so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax to the constituency who are to pay

51. We are not now concerned with the limitations on this plenary power but will only point out that the test of its being a reasonable restriction on the right to trade is certainly not one of these limitations. The restraints imposed by taxation are wholly beyond the scope of Article 19(6) and therefore not subject to the tests of a valid legislation under that provision. The saving in Article 31, Sub-clause (5)(b)(i), placing out of the purview of the main article the deprivation of property which taxes entail and which was put in only by way of abundant caution, is a pointer establishing the plentitude of the taxing power. It is precisely for this reason that the validity of the Sales Tax Act is not challenged, notwithstanding that it might in particular cases be so burdensome to the business or trade as to render the carrying it on not worth while. If the Sales Tax Act is valid notwithstanding its economic effect, it is because tax-laws are not to be judged by the standards of reasonableness set out in Article 19(6). If licensing was the machinery by which the Sales Tax Act is or can be enforced, this being the usual and well recognised mode in which the enactment could be worked so as to facilitate collection and check evasion, if licensing were a necessary adjunct to a tax system where only certain commodities were taxed at a single point and that point is not the same for all the commodities so taxed, the system of licensing becomes so to speak, an integral and inseparable part of the tax measures. In such a situation the tests which such licensing ought to satisfy are not those set out in Article 19(6) but would rather be ancillary to an exercise of the taxing power of the State. If the validity of such a licensing system were challenged, the enquiry would be whether or not the legislation regarding licensing is comprehended within the relevant taxation entry, which would be answered in the affirmative if licensing were the usual method employed for gathering the revenue, i.e., if it were ancillary or incidental to the taxing power. The power to levy a tax extends to the enactment of all incidental provisions for ensuring the collection or preventing the evasion of the tax, or in the case of a indirect tax for facilitating the passing on of the tax to purchasers of goods. We shall only add in passing that licensing is the usual method employed to facilitate the collection of excise duties in most jurisdictions including this country (vide, e.g., Sections 6, 7 and 7 (2)(xii) of the Central Excise Act I of 1944). In our judgment the licensing introduced by rules of the Sales-Tax Rules was within the power of the State as incidental to the power to levy taxes on the sale of goods and is not unconstitutional, even if the licensing did not satisfy the tests of reasonableness laid down by Article 19(6).

52. So far we have considered only the provisions as to registration and licensing and not the fee charged on the licenses. In this context we derive assistance from the fact, that in each of the three lists in Schedule VII the entry relating to the levy of fees, List I, Item 96, List II, Item 66 and List III, Item 47 is to be read as an adjunct to every legislative power including the entries conferring the power to levy particular taxes. We are inclined to read this as an indication that the Constitution-makers conceived of fees being leviable in the course of the levy or collection of taxes, and surely this would certainly include fees for licences. We should not be understood as saying that the fees levied for the licences which are the machinery for the enforcement and collection of a tax are not 'fees' but are virtually taxes and that they need not satisfy the test of reasonableness laid down in the cases we have quoted at the beginning of this judgment,

53. The next question that arises for consideration is as regards the reasonableness of the quantum of the fee levied from the licensees, which test has to be satisfied whatever be the basis on which the licensing provisions are upheld.

54. In this connection we shall recapitulate the four points urged by learned Counsel for the petitioners, (1) No services were rendered to the licensees and hence no fee could be levied. (2) The amount of fee was related to the turnover of each dealer and this had no reasonable Or rational relationship with the amount of work involved by the officers of the department or the precise services rendered to the licensee. (3) it was unreasonable to require a separate licence to be taken out for each place of business paying separate licence fees, when under the Sales-Tax Act the tax was computed on the basis of the total turnover. (4) The total amount of the fee collected which amounted to 23.23 lakhs during 1952-1954 was out of all proportion to the special services rendered to the single point tax payers.

55. We do not consider these objections as having much force, and we have decided to reject them. They are sufficiently answered in the counter-affidavit of the Government and the portions relevant in this context have already been extracted and do not require any further elaboration. If licensing were needed to ensure that the tax was at a single point and at no more than a single point, a keeping track of the dealings in these special commodities became essential and this necessitated a staff to check them. A dealer with a larger turnover had obviously more transactions than one with a smaller one, and therefore the former occupied more time of the departmental officers, and there was therefore nothing unreasonable in his being asked to pay more than the one with a smaller turnover and therefore normally a lesser number of transactions. Separate licences for separate business places do not appear to us as unreasonable since it would certainly facilitate checking, and separate fees being charged for each licence would be a necessary corollary to separate licences. The annual total expenditure on the staff employed was in the region of Rs. 45 lakhs, and the collection of Rs. 24 lakhs from the licensees does not appear to be so disproportionately large as to justify its invalidation. We have already referred to the fact, that the learned Advocate-General did not seek to justify the increase in the maximum rate of the fee effected in June, 1955, which if given effect to would have increased the collection of the fees to Rs. 27 lakhs. This increase will be struck down, but subject to this we hold that the licensing provisions are valid, and that the basis or quantum of the fee levied is not unreasonable.

56. The above discussion exhausts all the points raised on behalf of the petitioners in W.P. Nos. 85, 116, 117, 404 and 457 to 459 of 1956, all of which are concerned with the licensing provisions including licence fee charged on dealers in hides and skins. The only point on which these petitioners succeed is in relation to their challenge to the validity of the notification G.O. No. 2044 (Revenue) dated 30th June, 1955, which by its Clause 2(i) raised the maximum of the licence fee payable from Rs. 1,000 to Rs. 2,000. This will be struck down as an unreasonable and unjustifiable enhancement of the fee. Subject to this relief, these petitions will stand dismissed.

57. The next group of writ petitions consists of those relating to cotton and cotton yarn. Of these petitioners in W.P. Nos. 228, 229, 230 and 232 of 1956 are dealers in cotton waste. All these petitioners had taken out licences and paid the licence fee fixed as it was before its enhancement by G.O. No. 2044 dated 30th June, 1955. In their case also the increases in the maximum of the licence fee from Rs. 1,000 to Rs. 2,000 effected by the G.O. just now referred to will be set aside. Otherwise their petitions will stand dismissed.

58. The petitioner in W.P. No. 231 of 1956 is a dealer in cotton and cotton yarn. In the case of dealers of this type, G.O. 2044 dated 30th June, 1955 not only increased the maximum rate of the licence fee but also required them to take out separate licences for their dealing in cotton and cotton yarn. We have reserved for further consideration the arguments regarding the validity of this challenge to this provision, and consequently W.P. No. 231 of 1956 will be posted for further hearing on this point after the reopening of the Court.

59. The petitioner in W.P. No. 329 of 1956 is also a dealer in cotton yarn. In his case he took out a licence operative as and from 1st April, 1955, and paid the maximum fee of Rs. 1,000 as it then stood. It will be noticed that this licence was taken out at a time when licensing was voluntary and therefore this is an additional reason .why his petition challenging the validity of the amendment to Rule 5 of the General Sales Tax Rules which made licensing compulsory in the case of dealers, inter alia, in cotton yarn, ought to fail. Of course, in his case also the enhancement in the maximum rate will not be enforced as we have held that the same was not legal.

60. The petitioners in W.P. Nos. 244 and 245 of 1956 are dealers in tobacco. The contentions urged by Mr. Ramachandran their learned Counsel were two-fold, (1) as regards the enhancement of the maximum fee to Rs. 2,000 and (2) that it was unreasonable to require licensees to take out separate licences for each place of business. The first contention succeeds, but the second will be rejected for the grounds already stated. The result is that in the case of these petitions also except fix the relief effected by the striking down of the raising of the maximum rate of the licence fee from Rs. 1,000 to Rs. 2,000 the petitions will stand dismissed.

61. The petitioner in W.P. No. 385 of 1956, as already mentioned, is a bullion dealer. This petitioner took out a licence for 1955-1956 when the licensing was voluntary. For the reasons already set out in regard to W.P. No. 329 of 1956 this is an additional ground for dismissing this petition. The petitioner would be entitled of course to the relief by way of the maximum license fee payable being held to be Rs. 1,000 instead of Rs. 2,900.

62. The petitioners in W.P. Nos. 455 a'iid 590 to 596 of 1956 are dealers in cotton yarn. No special points arise in their case, and subject to the relief afforded by the striking down of the enhancement of the maximum of the licence fee, their petitions also are dismissed.

63. W.P. No. 158 of 1956 is concerned with the licence fee payable by a commission agent. In the case of these traders licensing is absolutely essential in order to find out whether they dealt with on their own account or on behalf of others. No separate arguments were addressed to us by learned Counsel appearing for the petitioner, but he adopted those of Mr. Venkatasubramania Ayyar and Mr. Nambiar who argued the general points. This petition will also stand dismissed subject to the modification we have allowed in the case of other petitioners.

There will be no order as to costs in any of these petitions.


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