TMI Blog1970 (9) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... as delivered by SHAH, J.- This appeal is filed with certificate granted by the High Court of Patna under article 133(1)(a) of the Constitution. The appellant Hansraj Bagrecha carries on business in jute. In the course of his business the appellant buys raw jute from producers in West Bengal, transports it to Kishanganj Railway Station (which is within the State of Bihar) and then re-exports it to purchasers in West Bengal. He also buys raw jute in Bihar and exports it to the merchants or mill owners in West Bengal by rail from Kishanganj Railway Station. The Bihar Sales Tax Act, 1959, as originally enacted did not provide for levy of purchase tax. By the Bihar Finance Act, 1966, with effect from April 1, 1967, among others the following sections were incorporated in the Bihar Sales Tax Act, 1959: Section 3A. "The State Government may from time to time, by notification, declare any goods or class of goods to be liable to purchase tax on turnover of purchases: Provided that general sales tax and special sales tax shall not be payable on the sale of goods or class of goods declared under this section." Section 5A. "The purchase tax on goods declared under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h rule 31B of the Bihar Sales Tax Rules, 1959, notifying that no person shall tender at any railway station mentioned in Schedule II, any consignment of goods mentioned in Schedule I, exceeding, the quantity specified for transport to any place outside the State of Bihar and no person shall accept such tender (sic) in accordance with the conditions prescribed in rule 31B of the Bihar Sales Tax Rules, 1959. Under Schedule I "jute" exceeding 800 Kg. could not be tendered for transport without "a despatch permit", and Kishanganj was one of the railway stations mentioned in Schedule II. In July, 1967, the Superintendent of Commercial Taxes addressed a letter prohibiting the railway authorities from loading jute goods and despatching them from any railway station within the Purnea District of Bihar, except on production of a "registration certificate". By his letter dated July 10, 1967, the Station Master, Kishanganj, called upon the Secretary, jute Merchants Association, Kishanganj, to produce a certificate as required in the letter of the Superintendent of Commercial Taxes, before "loading jute goods for despatch was commenced" and informed them that in default wagons allotted to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India: Article 303(2). Article 304 provides in so far as it is relevant: "Notwithstanding anything in article 301 or article 303, the Legislature of a State may, by law,- (a) * * * (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest: Provided that no Bill or amendment for the purpose of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President." Article 304 is in terms a restriction on the freedom guaranteed by article 301. Notwithstanding the amplitude of the freedom of trade, commerce and intercourse throughout the territory of India, the Legislature of a State may by law impose among others such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest. But the authority to impose reasonable restrictions on the freedom of trade, may only be exercised by the Legislature of a State if the Bill or am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free movement of trade without any obstructions by way of barriers, inter-State or intrastate, or other impediments operating as such barriers. The same view was expressed in Firm A.T.B. Mehtab Majid and Company v. State of Madras and Another [1963] 14 S.T.C. 355 (S.C.); [1963] Supp. 2 S.C.R. 435. by a unanimous court. It must be taken as settled law that the restrictions or impediments which directly and immediately impede or hamper the free flow of trade, commerce and intercourse fall within the prohibition imposed by article 301 and subject to the other provisions of the Constitution they may be regarded as void. But it is said that by imposing tax on sales, no restriction hampering trade is imposed. In the Atiabari Tea Company's case, [1961] 1 S.C.R. 809., Gajendragadkar, J., observed: 'Taxes may and do amount to restrictions; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of article 301. The argument that all taxes should be governed by article 301 whether or not their impact on trade is immediate or mediate, direct or remote, adopts, in our opinion, an extreme approach which cannot be upheld.' In a recent judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1956, is without substance. By section 14 of the Central Sales Tax Act, 1956, certain classes of goods are declared goods of special importance in inter-State trade or commerce. jute is one of such classes of goods. By section 15 as amended by the Central Sales Tax (Second Amendment) Act (31 of 1958) it is provided: "Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely: (a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed three per cent. of the sale or purchase price thereof, and such tax shall not be levied at more than one stage; (b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in that State." By section 15 of the Central Sales Tax Act in respect of the declared goods on trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her States in the course of inter-State transactions, no question of levy of purchase tax under the Bihar Sales Tax Act arises. Rule 31B framed by the State Government seeks to prohibit transport in pursuance of transactions which are inter-State, for in terms it prohibits transporting of goods to any place outside the State of Bihar. Again transport of goods for personal consumption or use, or of goods gifted, pledged or dealt with otherwise than by sale, falls within the prohibitory injunction contained in rule 31B. The power of the State Legislature is restricted to legislate in respect of intra-State transactions of sale and purchase and to matters ancillary or incidental thereto: it has no power to legislate for levy of tax on sales and purchases in the course of inter-State transactions. The power conferred by section 42 authorising the imposition of restriction on transport or movement of goods may only be exercised in respect of transactions which facilitate levy, collection and recovery of tax on transactions of intra-State sale or purchase. When rule 31B seeks to prohibit transport of goods to any place outside the State of Bihar unless a certificate is obtained from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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