TMI Blog1960 (9) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... the assent of the President as required under Art. 304(b) proviso, and the Act has not been validated by the assent of the President under Art. 255(c). Appeal allowed. - W.P.(C) 246 OF 1956 - - - Dated:- 26-9-1960 - B S Shah, K Dasgupta, K Wanchoo and P Gajendragadkar, JJ. JUDGMENT Sinha, C.J. 1. These appeals on certificates granted under Art. 132 of the Constitution by the High Court of Judicature in Assam and Writ Petitions under Art. 32 of the Constitution impugn the constitutionality of the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, (Assam Act XIII of 1954), which hereinafter will be referred to as the Act. The appellants moved the High Court under Art. 226 of the Constitution challenging the validity of the Act. The High Court by its judgment and order dated June 6, 1955, dismissed the writ petitions. Thereupon, the appellants obtained the certificates that the cases involved substantial questions of law as to the interpretation of the Constitution. The petitions under Art. 32 of the Constitution were moved in this Court for the same purpose of challenging the vires of the Act. The appellants and the petitioners will, in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raying for the issue of a writ of mandamus directing the respondents to forbear from giving effect to the provisions of the Act and the notification issued under the Act and/or a writ of prohibition or any other appropriate writ restraining them from taking steps under the provisions of the Act. The appellants challenged the validity of the Act mainly on the grounds that (1) the Act, rules and the notifications under the Act were ultra vires the Constitution, because the Act was repugnant to the provisions of Art. 301 of the Constitution as the tax on carriage of tea through the State of Assam had the effect of interfering with the freedom of trade, commerce and intercourse; (2) that tea being a controlled industry under the provisions of the Tea Act XXIX of 1953, the Union Government alone had the power to regulate the manufacture, production, distribution or transport of tea and the jurisdiction of the Assam legislature was thus completely ousted; (3) that the tax under the Act was nothing but a duty of excise, in substance, though not in form, and was thus an encroachment on the Central legislative field within the meaning of entry 84 of the Union List. The impugned Act Was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail and came to the conclusion that the element of carriage was expressly made a condition of liability to tax under the impugned Act and it was, therefore, distinguishable from a duty of excise and came directly under entry 56 of List II. On the crucial question arising in this case, his conclusion was that taxation per se has not the effect of abridging or curtailing the freedom contemplated by Art. 301; that Arts. 302 and 304 restrict the powers of Parliament and the State Legislatures in the matter of legislation under entries 42 of List I, 26 of List II and 33 of List III and that restrictions properly so called on the movement of goods and traffic must find their justification from the provisions of Part XIII of the Constitution; that the impugned Act made provision for taxation which did not directly impinge upon that freedom of trade, commerce and intercourse within the meaning of Art. 301. His view also was that in some cases taxation may have the effect of placing restriction on movement of goods and traffic, and if it has that effect, it comes within the mischief of Art. 301. In the result, his conclusion was that the impugned Act in its pith and substance fell within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if erected by a legislature, may be justiciable, but not legislation simply imposing a tax for purposes of revenue. He further contended that Part XII of the Constitution is a self contained part dealing with finance etc., even as Part XIII is a self contained part dealing with trade, commerce and intercourse within the territory of India. He emphasis that the American and Australian decision are no guide the decision of the points in controversy in the present case, was the framework of their respective constitutions was entirely different from the Indian Constitution. Particularly, the Australia Constitution did not contain anything corresponding to Parts III and XII of our Constitution. According to his contention freedom in Part XIII meant freedom from discriminatory taxation and freedom from trade barriers. The Advocate-General of the several States who appeared in this case supported the view point stressed by the Learned Attorney-General. 8. The most important question that falls to be determined in this batch of cases is whether the impugned Act infringes the provision of Part XIII of the Constitution, with particular reference Art. 301. Part XIII is headed Trade, Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and distribution of commodities, have power to pass any law or take any executive action prohibiting or restricting the entry into, or export from the province of goods of any class or description; or (b) by virtue of anything in this Act have power to impose any tax, cess, toll or due which, as between, goods manufactured or produced in the Province and similar goods not so manufactured or produced, discriminates in favour of the former, or which, in the case of goods manufactured or produced outside the province, discriminates between goods manufactured or produced in one locality and similar goods manufactured or produced another locality. (2) Any law passed in contravention of this Section shall, to the extent of the contravention, be invalid. 11. It will be noticed that prohibited contained in the section quoted above applied only to Provincial Governments and Provincial Legislature with reference to entries in the Provincial Legislative List relating to trade an commerce within the Province and to production, supply and distribution commodities. That section dealt with prohibitions or restrictions in respect of import into or export from a Province, of goods genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose Native States, big or small, had their own taxes, cases, tolls and others imposts and duties meant not only for raising revenue, but also as trade barriers and tariff walls. It was in the back ground of these factors and circumstances that the Constitution by Art. 301 provided for the abolition of all those trade barriers and tariff walls. When for the first time in the history of India the entire territory within the geographical boundaries of India, minus what became Pakistan, was knit into one political unit, it was necessary to abolish all those trade barriers and custom posts in the interest of national solidarity, economic and cultural unity as also of freedom of trade, commerce intercourse. 13. It is in the background of those facts an circumstances that we have to determine the ambit of the freedom contemplated by Art. 301. That Article envisages freedom of trade and commerce with reference to different parts of India as also freedom of movement of individuals in relation to their trade and other activities. Hence, Art. 301 has reference not only to trade an commerce, a ordinarily understood in common parlance, by also in relation to individuals who have to over with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustments (ignoring the provisions in Chapter 2 of that pay relating to borrowing and Chapter 3 relating to property contracts etc.). Likes Part XIII, Part XII also is not expressed to be subject to the other provisions of the Constitution. Hence, both Parts XII and XIII are meant to be self contained in their respective fields. It cannot, therefore, be said that the one is subject to the other. But it has been argued on behalf of the appellants that the provisions of Art. 304 indicate that taxation is within the purviews of the overriding provisions, as they have been characterised, of Art. 301. But a close examination of the provisions of Art. 304 would show that it is divided into two parts, viz., (1) dealing with imposition of discriminatory taxes by a state Legislature; and (2) relating to imposition of reasonable restrictions, thus showing that imposition of taxes, discriminatory or otherwise, is a class part from, imposition of reasonable restrictions on freedom of trade, commerce and intercourse. The second part of Art. 304 dealing with imposition of reasonable restrictions on freedom of trade, commence and intercourse by a States Legislature is on a line with the imposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Seventh Schedule. Here, no reference is made to intercourse. But as the present controversy is not concerned with the freedom of inter course, a distinguished from the freedom of trade and commerce, no more need be said about that omission. 14. Learned counsel for the appellants vehemently argued that the freedom, contemplated by Art. 301 must be construed in its most comprehensive sense of freedom from all kinds of impediments, restraints and trade barriers, including freedom from all taxation. In my opinion, there is no warrant for such an extreme position. It has to be remembered that trade, commerce an intercourse include individual freedom of movement of every citizen of India from State to State, which is also guaranteed by Art. 19(1)(d) of the Constitution. The three terms used in Art. 301 include not only free buying and selling, but also the freedom of bargain and contract and transmission of information relating to such bargains and contract as also transport of goods and commodities for the purposes of production, distribution and consumption in all their aspects, that is to say, transportation by land, air or water. They must also include commerce not only in g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very case must mean an impediment or restraint against free flow of trade and commerce. Similarly, for the facility of passengers and goods by motor transport or by railway, a surcharge on usual fares or freights is levied, or may be levied in future. But for such a surcharge, improvement in the means of communication may not be available at all. Hence, in my opinion, it is not correct to characterise a tax on movement of goods or passengers as necessarily connoting an impediment, or a restraint, in the matter of trade and commerce. That is another good reason in support of the conclusion that taxation is not ordinarily included within the terms of Art. 301 of the Constitution. 17. In my opinion, another very cogent reason for holding that taxation simpliciter is not within the terms of Art. 301 of the Constitution is that the very connotation of taxation is the power of the State to raise money for public purposes by compelling the payment by persons, both natural and juristic, of monies earned or possessed by them, by virtue of the facilities and protection afforded by the State. Such burdens or imposts, either direct or indirect, are in the ultimate analysis meant as a contri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Governments to impose certain taxations with reference to movements of goods and passengers would be rendered ineffective, if not otiose, if it were held that taxation simpliciter is within the terms of Art. 301. (3) If the argument on behalf of the appellants were accepted, many taxes, for example, sales tax by the Union and by the States, would have to go through the gamut prescribed in Arts. 303 and 304, thus very much detracting from the limited sovereignty of the States, as envisaged by the Constitution. (4) Laws relating to taxation, which is essentially a legislative function of the State, will become justiciable and every time a taxation law is challenged as unconstitutional, the State will have to satisfy the courts - a course which will seriously affect the division of powers on which modern constitutions, including ours, are based. (5) Taxation on movement of goods and passengers is not necessarily an impediment. 18. That conclusion leads to a discussion of the other extreme position that taxation is wholly out of the purview of Art. 301. That extreme position is equally untenable in view of the fact that Art. 304 contains, and Art. 306, before it was repealed in 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese entries in terms speak of taxation in relation to different aspects of trade, commerce and intercourse. The Union and State Legislature, therefore, have the power to legislate by way of taxation in respect of trade, commerce and intercourse, so as to erect trade barriers, tariff walls or imposts, which have a deleterious effect on the free flow of trade, commerce and intercourse. That freedom has further been circumscribed by the power vested in Parliament or in the Legislature of a state to impose restrictions in the public interest. Parliament has further been authorised to legislate in the way of giving preference or making discrimination in certain strictly limited circumstances indicated in clause (2) of Art. 303. Thus, on a fair construction of the provisions of Part XIII, the following propositions emerge : (1) trade, commerce, and intercourse throughout the territory of India are not absolutely free, but are subject to certain powers of legislation by Parliament or the Legislature of a State; (2) the freedom declared by Art. 301 does not mean freedom from taxation simpliciter, but does mean freedom from taxation which has the effect of directly pending the free flow of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the effect that they were oppressive or excessive. The tax on manufactured tea in chests is to be paid by the producer, which term includes the person in charge of the garden where tea is produced. This provision has occasioned the argument that it is an excise duty in the garb of a tax and will be dealt with later in the course of this judgment. The tax on jute carried in basis made realisable from the dealer which means person who owns the jute in bales. Section 6 lays down the taxing authorities. Section 7 requires every producer and dealer to furnish returns of such tea or such jute as have been made liable to tax under s. 3, as aforesaid. Section 8 makes provision for licensing of balers, which means persons who own or possess a pressing machine for the compression of jute into bales. Section 9 lays down the procedure of assessment and s. 10 the procedure for cancellation of assessment in certain circumstances. Section 11 lays down the procedure for assessment in such cases as have escaped assessment or there has been an evasion of the tax. It is not necessary to refer to the other provisions of the Act, because they are not relevant to the arguments advanced at the Bar. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the meaning of entry 84 in List I of the Seventh Schedule, but, in my opinion, there is no substance in this contention for the simple reason that so long as jute or tea is not sought to be transported from one place to another, within the State or outside the State, no tax is sought to be levied by the Act. It is only when those goods are put on a motor truck or a boat or a steamer or other modes of transport contemplated by the Act, that the occasion for the payment of tax arises. A similar argument was advanced in the case of The Tata Iron Steel Co. Ltd. v. The State of Bihar ([1958] S.C.R. 1355), and Das, C.J., delivering the majority judgment of the Court, disposed of the argument that the tax in that case was not on sale of goods, but was, in substance, a duty of excise, in these terms : This argument, however, overlooks the fact that under clause (ii) the producer or manufacturer became liable to pay the tax not because he produced or manufactured the goods, but because he sold the goods. In other words the tax was laid on the producer or manufacturer only qua seller and not qua manufacturer or producer as pointed out in Boddu Paidanna's case (1942 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds of the cess thus levied have to be credited to the Consolidated Fund of India. Out of that Fund, called the Tea Fund, the expenses of the establishment created by the Tea Act have to be met. The rest of the provisions of the Act are meant to implement the main provisions of the Act. There are no provisions of the Tea Act which can be said to come into conflict with the provisions of the impugned Act. In our opinion, therefore, this ground of attack also fails. 26. A third line of argument against the constitutionality of the Act was that it is extra-territorial in its operation in so far as it purports to tax producers and dealers who may not be residents of the State of Assam. This argument has been advanced in the interest of the appellants and petitioners from West Bengal, who have to carry their goods by road or on waterways passing through the territory of Assam, from one part of West Bengal to another. So far as this group of cases is concerned, the main grievance of the appellants is that no doubt their goods have to pass through a portion of the territory of Assam, but the goods have been produced, packed and transported as merchandise from one part of West Bengal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation in question. The Legislature has chosen to tax the transport over land or over waterways of those commodities, in chests or in bales, apparently because those are the most convenient and usually employed methods of packing for carriage of those goods to long distances. Hence, it is not a case of choosing for the purposes of taxation one class of goods in preference to another class of the same variety. The Legislature was out to tax the transport of those commodities and must be presumed to have selected the most convenient way of doing it. It has not been suggested that any large amount of such commodities is transported over long distances, otherwise than in chests or bales. Furthermore, if the Legislature has to tax something, it is not bound to tax that thing in all its forms and varieties. It may pick and choose with a view to raising such amount of revenue as it sets out to do. It is not for the courts to say that there were other ways of doing the thing or that all forms and varieties should have been brought under the scope of the taxation. It is open to the Legislature to impose a tax in a form and in a way which it deems most convenient for the purposes of colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oad or by inland waterways and as such it becomes liable to pay the tax leviable under the Assam Taxation (on goods carried by Roads or Inland Waterways) Act, 1954 (Act XIII of 1954) (hereafter called the Act). The Act has been passed by the Assam Legislature in order to provide for the levy of a tax on certain goods carried by road or inland waterways in the State of Assam and it has received the assent of the governor on April 9, 1954. On behalf of the State of Assam, which will be described hereafter as respondent, its officers required the appellants to comply with the several requirements imposed by the Act, and made tax demands on them in respect of the tea carried by them. The tax thus demanded was paid by the appellants under protest, and soon thereafter petitions were filed in the Assam High Court under Art. 226 challenging the validity of the Act as well as the tax demands made by the officers of the respondent. By their respective petitions the appellants prayed that a writ of mandamus should issue directing the respondent and its officers to forbear from giving effect to the provisions of the Act and from otherwise enforcing it against the appellants. The petitioners al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Art. 32 raise substantially the same question. The petitioners are tea companies which carry on the trade of growing and manufacturing tea in Jalpaiguri in West Bengal. The respondent has attempted to subject the petitioners to the provisions of the Act, and the petitioners have challenged the authority of the respondent to levy a tax against them under the Act on the ground that the Act is ultra vires. Since the principal question raised in these appeals appeared to be of considerable importance in which other States may also be interested we directed that notice should be issued to the Attorney-General of India and the Advocates-General in all the States of India. Accordingly the Attorney General appeared before us and the States of Bihar, Madras, Punjab, Rajasthan and Uttar Pradesh have also been heard. 36. The challenge to the vires of the Act on the ground that it contravenes Art. 301 necessarily raises the question about the construction of the relevant provisions is the said Part. Art. 301 with which Part XIII begins provides that subject to the other provisions of this Part trade, commerce and intercourse throughout the territory of India shall be free . The appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e erection of customs barriers between themselves an the rest of India. In the matter of such barriers British India was governed by the provisions of s. 297 of the Constitution Act, 1935. To the provisions of this section we will have occasion later to refer during the course of this judgment. Thus, prior to 1950 the flow of trade an commerce was impeded at several points which constituted the boundaries of Indian States. After India attained political freedom in 1947 and before the Constitution was adopted the process of the merger and integration of the several Indian states with the rest of the country was speedily accomplished with the result that when the Constitution was first passed the territories of India can State of Part A States which broadly stated represented the provinces in British India, and Part B states which were made up of Indian States. This merger or integration of Indian States with the Union of India was preceded by the merger and consolidation of some of the States interests between themselves. It is with the knowledge of the trade barriers which had been raised by the Indian States in exercise of their legislative powers that the Constitution-makers fram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was framed upon the theory that the peoples of the several states must sink or swim together and that in the long fun prosperity and salvation are in union and not division . 39. There is another general consideration which has been pressed before us by the learned Attorney General and the States to which reference must be made. It is argued that in determining the scope and reach of the freedom embodied in Art. 301 we should bear in mind the fact that to the extend to which the frontiers of this freedom are widened to that extent is the legislative power of the States curtailed or limited. The Legislatures of the States have plenary powers to legislate in respect of topics covered by the legislative entries in parts II and III. If the words used in Art. 301 receive the widest interpretation as contended by the appellants it would obviously mean that the states Legislature would not be able to legislate on several entries in the said Lists without adopting the procedure prescribed by Art. 304(b). In fact it would be unreasonable to impose such a limitation on the legislation power of the State Legislatures and thereby affect their freedom of action. Whilst appreciating this ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance, the same author has observed It is also believed that that provision in the Constitution of the United States which declares that the citizens of each states shall be entitled to all the privileges and immunities of the citizens of the several states will preclude any state from imposing upon the property which citizens of other states may own, or the business which they may carry on within its limits, any higher burdens by way of taxation than are imposed upon corresponding property or business of its own citizens (p. 1016). Putting the same propositions in terms of our Constitution it cannot be suggested that the power of taxation can, for instance, violate the equality before the law guaranteed by Art. 14 of the constitution. Therefore the true position appears to be that, though the power of levying tax is essential for the very existence of the government, its exercise must inevitably be controlled by the constitutional provisions made in that behalf. It cannot be said that the power of taxation per se is outside the purview of any constitutional limitations. 41. It is true that in Ramjilal v. Income-tax Officer, Mohindargarh ([1951] S.C.R. 127) it has been held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Legislatures of the States to make laws including laws imposing taxes is subject to the provisions of this Constitution and that must bring in the application of the provisions of Part XIII. Therefore the argument based on the theory that tax laws are governed by the provisions of Part XII alone cannot be accept. The power to levy taxes is ultimately based on Art. 245, and said power in terms subject to the provision of the Constitution. 43. On the other hand, the opening words of Art. 301 are very significant. The doctrine of the freedom of trade, commerce and intercourse enunciated by Art. 301 is not subject to the other provisions of the Constitution but is made subject only to the other provisions of Part XIII; that means that once the width and amplitude of the freedom enshrined in Art. 301 are determined they cannot be controlled by any provision outside Part XIII. This position incidentally brings out in bold relief the important part which the Constitution-makers wanted the doctrine of freedom of trade to play in the future of the country. It is obvious that whatever may be the content of the said freedom it is not intended to be an also freedom; absolute freedom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provincial Legislatures and did not apply to the Central Government or Central Legislature. It is also true that he said prohibition had reference to the entries in the Provincial Legislature list relating to trade and commerce, and to production, supply and distribution, of commodities. The section also deals with prohibitions and restrictions in respect of import of goods into, or their export from a Province. Likewise discrimination against goods manufactured or produced outside the Province or goods produced in other localities is also prohibited. The argument is that when the Constitution adopted Art. 301 it had s. 297 in view and the only substantial change which it intended to make was to extend the application of the principles enunciated in the said section to the Union Government and the Union parliament, and to apply it to the territory which had subsequently become a part of India as indicated by the relevant Articles; the essential content of freedom of trade and commerce as prescribed by the said section, however, continues to be the same. 46. In support of this argument reliance has been placed on the observations made by Venkatarama Aiyar, J., in the case of M.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04(a) cannot throw any light on the scope of Art. 301 with reference to the question of taxation; but it is clear that the question of construing the said Articles did not fall to be considered, and was not obviously argued before the Court. With respect, it may be pointed out that in the happy phraseology adopted by the learned judge itself, in the setting of Part XIII and particularly in the light of the wide words used in Art. 301, the reach and complexion of Art. 304(a) is wider than s. 297(1)(b) and does include reference to taxation. 47. Then as to the merits of the argument that s. 297 of the constitution Act of 1935 should virtually determine the scope of Art. 301, we are reluctant to accept the assumption that the only change which the Constitution makers intended to make by adopting Art. 301 was to extend the application of s. 297 to the Union Government and the parliament. Just as the Constitution-makers had before them the said section they were also similar with corresponding clauses included in the Federal Constitutions of other countries. The history of judicial decisions interpreting s. 92 of the Australian Constitution must have been present to their minds as al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a narrow sense would include all activities in relation to buying and selling, or the interchange or exchange of commodities and that movement from place to place is the very soul of such trading activates. When Art. 301 refers to the freedom of trade it is necessary to enquire what freedom means. Freedom from what ? is the obvious question which falls to be determined in the content. At this stage we would content ourselves with the statement that the freedom of trade guaranteed by Art. 301 is freedom from all restriction except those which are provided by the other Articles in Part XIII. What these restrictions denote may raise a larger issue, but in the present case were will confine our decision to that aspect of the matter which arises from the provisions of the Art under scrutiny. It is hardly necessary to emphasise that in dealing with constitutional questions courts should be slow to embark upon unnecessarily wide or general enquiry and should confine their decision as far as may be reasonably practicable within the narrow limits of the controversy arising between the parties in that particular case. We will come back again to Art. 301 after examining the other Articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence to the Legislature of the State in this clause cannot be reconciled with the non-obstante clause; but the object of including the Legislature of a state appears to be to emphasise that like Parliament even the Legislature of a state cannot give any preference or make any discrimination. 52. Sub-Article (2) is an exception to sub-Art. (1) of Art. 303. It empowers the Parliament to make a law giving or authorising to give any preference or making any discrimination, but this power can be exercised only if it is declared by law made by the Parliament that it is necessary so to do for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India; in other words, it is only the parliament is faced with the task of meeting on emergency created by the scarcity of goods in any particular part of India that it is authorised to make a law making discrimination, or giving preference, in favour the part thus affected. 53. On behalf of the states strong reliance is placed on the fact that Art. 303(1) expressly refers to the entries relating to trade and commerce in any of the list in the Seventh Schedule, and it is urged that this give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods in the manner and to the same extent and may believed on goods manufactured or produced inside the State. We ought to add that this sub-Article assumes that taxation can be levied by the State Legislature on goods manufactured or produced within its territory and it provides that outside goods cannot be treated any worse. How a tax can be levied on internal goods is, however, provided by Art. 304(b). The non-obstante clause referring to Art. 301 would go with Art. 304(a), and that indicates that tax on goods would not have been permissible but for Art. 304(a) with the non-obstante clause. This incidentally helps to determine the scope and width of the freedom guaranteed under Art. 301; in other words Art. 304(a) is another exception to Art. 301. 56. Article 304(b) empower the State Legislature to impose reasonable restrictions on the freedom trade with other States or within its own territory. Again, the reference to the territory within the State supports the conclusion that Art. 301 covers the movement of trade both inter-State. Article 304(b) is to be read with the non-obstante clause relating to Art. 301 as well as Art. 303, and in substance it gives power to the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art B of the First Schedule which before the commencement of this Constitution was levying any tax or duty on the import of goods into the State from other States or on the export of goods from the State to other States may, if an agreement in that behalf has been entered into between the Government of India and the Government of that State, continue to levy and collect such tax or duty subject to the terms of such agreement and for such period not exceeding ten years from the commencement of this Constitution as may be specified in the agreement : Provided that the President may at any time after the expiration of five years from such commencement terminate or modify any such agreement if, after consideration of the report of the Finance Commission constituted under article 280, he thinks it necessary to do so. 58. This Article has been subsequently deleted by s. 29 and Schedule to the Constitution (Seventh Amendment) Act, 1956, but its initial inclusion in Part XIII throws some light on the scope of Art. 301. Laws made by any State specified in Part B of the First Schedule levying any tax or duty on the import of goods into the State from other States or the export of good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in interpreting the provisions of the Constitution we must always bear in mind that the relevant provision has to be read not in vacuo but as occurring in a single complex instrument in which one part may throw light on another . (Vide : James v. Commonwealth of Australia ((1936) A.C. 578, 613)). In construing Art. 301 we must, therefore, have regard to the general scheme of our Constitution as well as the particular provisions in regard to taxing laws. The construction of Art. 301 should not be determined on a purely academic or doctrinaire considerations; in construing the said Article we must adopt a realistic approach and bear in mind the essential features of the separation of powers on which our constitution rests. It is a federal constitution which we are interpreting, and so the impact of Art. 301 must be judged accordingly. Besides, it is not irrelevant to remember in this connection that the Article we are construing imposes a constitutional limitation on the power of the Parliament and State Legislatures to levy taxes, and generally, but for such limitation, the power of taxation would be presumed to be for public good and would not be subject to judicial review or scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is said that the freedom of the movement of trade cannot be subject to any restrictions in the form of taxes imposed on the carriage of goods or their movement all that is meant is that the said restrictions can be imposed by the State Legislatures only after satisfying the requirements of Art. 304(b). It is not as if no restrictions at all can be imposed on the free movement of trade. 62. Incidentally we may observe that the difference in the provisions contained in Art. 302 and Art. 304(b) would prima facie seem to suggest that where Parliament exercises its power under Art. 302 and passes a law imposing restrictions on the freedom of trade in the public interest, whether or not the given law is in the public interest may not be justiciable, and in that sense Parliament is given the sole power to decide what restrictions can be imposed in public interest as authorised by Art. 302. On the other hand Art. 304(b) requires not only that the law should be in the public interest and should have received the previous sanction of the President but that the restrictions imposed by it should also be reasonable. Prima facie the requirement of public interest can be said to be not justici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to enable the State Government to raise money to keep its roads and waterways in repairs; but that object may and can be effectively achieved by adopting another course of legislation; if the said object is intended to be achieved by levying a tax on the carriage of goods it can be so done only by satisfying the requirements of Art. 304(b). It is common ground that before the bill was introduced or moved in the State Legislature the previous sanction of the President has not been obtained; nor has the said infirmity been cured by recourse to Art. 255 of the Constitution. Therefore we do not see how the validity of the tax can be sustained. In our opinion the High Court was in error in putting an unduly restricted meaning on the relevant words in Art. 301. It is clear that in putting that narrow construction on Art. 301 the High Court was partly, if not substantially, influenced by what it thought would be the inevitable consequence of a wider construction of Art. 301. As we have made it clear during the course of this judgment we do not propose to express any opinion as to the possible consequence of the view which we are taking in the present proceedings. We are dealing in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sustained. In support of his argument he has relied on the observations made by Das, C.J., in the case of The State of Bombay v. R. M..D. Chamarbaugwala ([1957] S.C.R. 874). In that case the Court was called upon called upon to consider the validity of the Bombay Lotteries and Prize Competitions Control and Tax (Amendment) Act, 1952. The challenge to the Act proceeded on two grounds, (1) that it violated the fundamental right guaranteed under Art. 19(1)(g) and (2) that it offended against that provisions of Art. 301. The challenge on the first ground was repelled because it was held that gambling cannot be treated as trade or business under Art. 19(1)(g). This conclusion was sufficient to repel also the other ground on which the validity of the Act was challenged because, if gambling was not trade or business under Art. 19(1)(g), it was also not trade or commerce under Art. 301. On the conclusion reached by this Court that gambling is not a trade this position would be obvious. Even so, the Learned Chief Justice incidentally applied the test of pith and substance, and observed that the impugned act was in pith and substance an act in respect of betting and gambling, and since be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otors (India) Ltd. ([1953] S.C.R. 1069), Patanjali Sastri, C.J., observed that the freedom of State trade and commerce declared in Art. 301 is expressly subordinated to the State power of taxing goods imported from sister Stated provided only no discrimination is made in favour of similar goods of local origin. According to the Learned Chief Justice the commercial unity of India is made to give way before the State power of imposing any non-discriminatory tax on goods imported from sister States. This observation would suggest that Art. 304(a) and (b) deal with taxes and to that extent it is inconsistent with the argument that tax laws are outside Part XIII. 67. The next case in which this question has been incidentally discussed is in Saghir Ahmed v. The State of U. P. . (In that case the impugned provisions of the U.P. Road Transport Act, 1951 (U.P. Act II of 1951), were declared to be unconstitutional on two other grounds which had no direct connection with the challenge under Part XIII of the Constitution. Even so Mukherjea, J., as he then was, who spoke for the Court, has referred to the problem raised by Part XIII as not quite free from difficulty and has indicated its p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed in The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 A.I.R. 1939 F.C. 1, 5) there are few subjects on which the decisions of other Courts require to be treated with greater caution than that of federal and provincial powers, for in the last analysis the decision must depend upon the words of the Constitution which the Court is interpreting; and since no two Constitutions are in identical terms it is extremely usage to assume that a decision on one of them can be applied without qualification to another. This may be so even where the words or expressions used are the same in both cases, for a word or a phrase may take a colour from its context and bear different senses accordingly . Even so the reported decisions of this Court show that in dealing with constitutional problems reference has not infrequently been made to Australian and American decisions; and that, we think, brings out the characteristic feature of the working of the judicial process. When you are dealing with the problem of construing a constitutional provision which is none-too-clear or lucid you feel inclined to inquire how other judicial minds have responded to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and so forth might impede the freedom of trade contemplated by s. 92, which in other words supports our conclusion that a tax may amount to a restriction under Art. 301. 70. In the case of Commonwealth of Australia v. Bank of New South Wales ((1927) 40 C.L.R. 1) to which reference has already been made in connection with the test of pith and substance the Privy Council was examining the validity of s. 46 of Banking Act (Commonwealth) (No. 57 of 1947) in the light of the provisions of s. 92 of the Australian Constitution. In deciding the said would one of the tested which was applied by Lord Porter was : Does the act not remotely or incidentally (as to which they will say something later) but directly restrict the inter State business of Banking , and he concluded that two general propositions may be accepted, (1) that regulation of trade, commerce and intercourse among the States is compatible with its absolute freedom, and (2) that s. 92 is violated only when a legislative or executive act operates to restrict such trade, commerce and intercourse directly and immediately as distinct from creating some indirect or consequential impediment which may fairly be regarded as remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forms prescribed and failure to maintain registers is penalised. 73. In exercise of the powers conferred by s. 7, sub-s. (3), the Commissioner of Taxes issued a notification in the Assam Government Gazette notifying for general information that returns under the Act and the Rules thereunder for the period between June 1, 1954 and September 30, 1954, shall be furnished on for before October 30, 1954, and for the subsequent quarters on or before the dates specified therein. Three producers who transported their tea by road or by in Inland waterways to Calcutta in the State of West Bengal challenged by petitions under Art. 226 of the Constitution filed in the High Court of Assam, the authority of the Legislature of the State of Assam to enact the Act on the plea that the Act violated the guarantee of freedom of trade, commerce and intercourse under Art. 301 of the Constitution. The High Court rejected the plea raised by the petitioners, and against the orders passed, three appeals with certificates of fitness under Art. 132 of the Constitution have been referred. Two other producers have challenged the vires of the Act by petitioner under Art. 32 of the Constitution presented to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It incorporates a restriction on the exercise of power by Governmental agency - legislative as well as executive. Besides placing an irremovable ban on the executive authority, it restricts the legislative power of the parliament and the State legislatures conferred by Arts. 245, 246 and 248 and the relevant items in the legislative lists relating to trade, commerce and intercourse. On the exercise of the legislative power to tax trade, commerce and intercourse, restrictions are prescribed by certain provisions contained in Part XII, e.g., Arts. 276, 286, 287, 288 and 289 : but these restrictions do not exhaustively delimit the periphery of that power. The legislative power to tax is restricted also by the fundamental freedoms contained in Part III, e.g., Arts. 14, 15(1), 19(1)(g) and 31(1) and is further restricted by Part XIII. Article 245, clause (1), of the Constitution expressly provides that the legislative powers of the parliament and the State Legislatures to make laws are subject to the provisions of the Constitution; and Art. 301 is undoubtedly one of the provisions to which the legislative powers are subject. 75. The power of taxation is essentially an attribute of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , commerce and intercourse. What is guaranteed is freedom in its widest amplitude - freedom from prohibition, control, burden or impediment in commercial intercourse. Not merely discriminative tariffs restricting movement of goods are included in the restrictions which are hit by Art. 301, but all taxation on commercial intercourse, even imposed as a measure for collection of revenue is so hit. Between discriminatory tariffs and trade barriers on the one hand and taxation for raising revenue on commercial intercourse, the difference is one of purpose an not of quality; both these forms of burden on commercial intercourse trench upon the freedom guaranteed by Art. 301. 77. The guarantee of freedom is again not merely against burdens or impediments on inter-State movement : nor does the language of Art. 301 guarantee freedom merely from restrictions on trade, commerce and intercourse as such. Articles 302, 303, 304 and 306, which I will presently advert to, make it abundantly clear that the freedom contemplated was freedom of trade, commerce and intercourse in all their varied aspects inclusive of all activities which constitute commercial intercourse and not merely from restricti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. 627-628 observed : Free' in s. 92 cannot be limited to freedom in the last mentioned sense (freedom from tariffs). There may at first sight appear to be some plausibility in that idea, because of the starting point in time specified in the section, because of the sections which surround s. 92, and because proviso to s. 92 relates to customs duties. But it is clear that much more is included in the term; customs duties and other like matters constitute a merely pecuniary burden; there may be different and perhaps more drastic ways of interfering with freedom, as by restriction or partial or complete prohibition of passing into or out of the State. Nor does free necessarily connote absence of discrimination between inter-State and intra-State trade. No doubt conditions restrictive of freedom of trade among the States will frequently involve and discrimination; but that is not essential or decisive .......... A compulsory seizure of goods ......... may include indifferently goods intended for intra-State trade and goods intended for trade among the States. Nor can freedom be limited to freedom from legislative control; it must equally include executive contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse by the imposition of taxes. The courts will normally upon the wisdom of the Parliament and presume that taxes are generally imposed in the public interest : but that does not exclude the jurisdiction of the court in a given case to enter upon an enquiry whether an impugned legislation satisfied that constitutional test. If an enquiry into the validity of a burden or impediment imposed on the freedom of trade, commerce and intercourse imposed otherwise than by levying a tax is within the competence of the court, the restraint which the courts put upon their own functions by raising a presumption of constitutionality in dealing with a burden imposed by a taxing statute cannot be forged into a fetter upon the jurisdiction. By clause (b) of Art. 304, the State Legislature are invested with similar authority to impose restrictions on the freedom of trade, commerce and intercourse with or within the state as may be required in the public interest. The territorial extent of the operation of the laws which may be made under Arts. 302 and 304(b) may not from the very nature of the jurisdiction exercised by the Legislature be co-extensive, but subject thereto, the Parliament and the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling within clause (b) of Art. 304, the Act still would not be invalid if the President has signified his assent to the Act enacted by the Legislature. 82. Article 303(1) is an exception to Art. 302 as well as Art. 304(b). Notwithstanding the wide sweep of the legislative power restored by Arts. 302 and 304(b) to the Parliament and the State Legislatures to make laws imposing restrictions on the freedom of trade, commerce and intercourse, prohibition is imposed on the exercise of the power in making laws giving or authorising the giving of, any preference to one State over another or making, or authorising the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the seventh schedule. Clause (1) of Art. 303 emphasises the object of the Constitution, makers to safeguard the economic unity of the nation and to prevent dissemination between the constituent States in the matter of trade and commerce. It is true that under clause (1) of Art. 302, the discrimination which is prohibited is under a law made by virtue of an entry relating to trade and commerce in the seventh schedule. But thereby, dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of the restrictions from the imposition of which by the guarantee of Art. 301, trade, commerce and intercourse are declared free. 84. Clause (b) of Art. 304 is subject to the proviso prescribing that previous sanction of the President shall be obtained to the moving or introduction of a bill or amendment imposing restrictions on the freedom of trade, commerce and intercourse. There is however no such condition imposed in the matter of enactment of laws imposing non-discriminative tariffs under clause (a). But on that account, the nature of the restrictions contemplated by cls. (a) and (b) is not in any manner different. Clause (b) deals with a general restriction which includes a restriction by the imposition of a burden in the nature of tax. Clause (a) deals with a specific burden of taxation in a limited field. 85. Article 305 protects existing laws except in so far as the President may by order or otherwise direct, and it also validates certain enactments made before the commencement of the Constitution (Fourth Amendment) Act, 1955, and authorises the Parliament and the State Legislatures in future to make laws relating to matters referred to in sub-clause (2) of clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in my view, little force. Even a cursory review of our constitutional provisions clearly shows that the primary object of the Constituent Assembly was to erect a Governmental machinery with a strong Central Government, with the object of building up a healthy economy, and unifying the various component State, consisting of the former British Indian Provinces and the merged Indian States, by subordinating local on parochial interest to the wider national interest. In any event, in adjudging the vires of a statue, the impact of the view which the interpretation placed by the court may produce on some cherished notion of sovereign of the component States must be ignored. 88. In that view, the Assam Taxation (on Goods carried by Roads or Inland Waters) Act, 1954, must be regarded a infringe the guarantee of freedom of trade and commerce under Art. 301, because the Bill moved in the Assembly had not received the assent of the President as required under Art. 304(b) proviso, and the Act has not been validated by the assent of the President under Art. 255(c). 89. In the view expressed by me, I do not deem it necessary to enter upon certain subsidiary contentions such as the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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