KHYERBARI TEA CO. LTD. &ANR. v. THE STATE OF ASSAM
Citation: [1964] 5 S.C.R. 975; 1963 INSC 255
Court: Supreme Court of India
Bench: P.B. GAJENDRAGADKAR , A.K. SARKAR , K.N. WANCHOO, K.C. DAS GUPTA, N. RAJAGOPALA AYYANGAR
Judgment date:
Case summary
1963 INSC 255. Supreme Court of India judgment dated 1963-12-13. KHYERBARI TEA CO. LTD. &ANR. v. THE STATE OF ASSAM. Read the judgment and case details on...
Judgment text
• 5 S. C. R. SUPREME COURT REPORTS 975 KHYERBARI TEA CO. LTD. &ANR. v. THE STATE OF ASSAM (P. B. GAJENDRAGADKAR, A. K. SARKAR, K. N. WANCHOO, K. C. DAs GUPTA AND N. RAJAGOPA1'A AYYANGAR, JJ. ) Constitution of India, 1950, Arts. 301, 304(b) and Seventh Schedule, List JI, Entry 56-Assam Taxation (on Goods carried by Road or on Inland Water-ways) Act (Assam Act X of 1961)- Constitutional validity. This petition challenges the constitutional validity of the Assam Taxation (on Goods carried by Road or on Inland Water- ways) Act, 1961. The previous Act of 1954 having been declared constitutionally invalid by this Court in Atiabari Tea Co. Ltd. v. State of Assam [1961] I S. C. R. 809, the Assam Legislature with the previous sanction of the President of India under Art. 304(b) of the Constitution, passed the impugned Act with retrospective effect from the date on which the Act of 1954 had been promulgated and its provisions were except for certain additional provisions substantially the same.
The Assam High Court which was moved under Art. 226 of the Constitution held that the Act was constitu- tionally invalid. The State of Assam applied for and obtained certificates to appeal to this Court. The present petitioners moved this Court under Art. 32 of the Constitution. Since petitioner No. I was a company and as such its petition was incompetent, petitioner No. 2, the Manager of the company, was heard and some of the respondents in the appeals to be preferred by the State of Assam were allowed to intervene in the present proceedings. The case of petitioner No. 2 was that the company exported tea grown and manufactured in its own garden from Goalpara in Jalpaiguri District to Calcutta. The booking station and the destination were both in West Bengal, the total distance between them being 689 miles of which only It to 2 miles of inland water- ways Jay in the State of Assam.
The tea was carried by railway from Goalpara to Dhubrighat and thereafter by ferries on inland waterways and transhipped to steamers at the said Ghat. It was contended that ss. 3 and 34, which were the material provisions of the Act, were invalid and that the Assam Legislature was in- competent to enact the said provisions which constituted unreason- able restrictions on the freedom of trade guaranteed by Art. 301 and infringed Art. 19(1)(g) of the Constitution. Held. (per Gajendragadkar, Wanchoo, Das Gupta and Ayyangar JJ . ), As the impugned Act was not found to be com- pensatory by the High Court nor was it claimed to be so by the State the only question that fell to be decided in this petition was whether the restrictions imposed by the impugned Act were 1963 December 13 976 SUPREME COURT REPORTS [1964] 1963 reasonable and in the public interest within the meaning of Art. 304(b) of the Constitution. Khyerbari Tea Atiabari Tea Co. Ltd. v. State of Assam, [1961] I S. C. R. 809, Co.
Ltd. &Anr. and Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, v. [1963] I S. C. R. 491, explained. The State of The entries in the three lists In the Seventh Schedule must Assam be given the widest possible interpretation. Power conferred on the Legislature to levy tax must be widely construed so as to include the power to select the taxable articles, to fix the rates, to prescribe the machinery for recovery, to prevent evasion and to prescribe the procedure for determining the amount payable by any individual. It could not be assumed that Entry 56 of List II, in giving the Legislature the power to enact the impugned Act, required that the tax must be levied only against the owner of the goods that were carried or against persons who carried them_. If the tax was really levied on goods carried, the Legislature was free to prescribe the machinery for its recovery. R. C. Jail v. Unfrm of India. [1962] Supp. 3 S. C. R. 436, Sardar Ba/dev Singh v.
Commissioner of Income-tax, Delhi & Ajmer. [1961] l S. C. R. 482 and Orient Paper Mills Ltd. v. State of Orissa. [1962] I S. C. R. 549, referred to. Section 3(1) of the impugned Act which imposed the tax and s. 3(2) which made the producer liable to pay it could not therefore be impugned on the ground of legislative incompetence. M' Cullock v. Maryland, (1819)4 L. Ed. 579, considered. But the machinery set up for recovery of the tax should have a rational connection with the tax. The absence of such a nexus between them would make the tax liable to attack as being un- justified under Entry 56. Article 304(b), properly construed, does not require that laws passed under it must always be prospective. It was not correct to say that once the State Legislature passed e. n Act without recourse to that Article and it was struck down, it could not re-enact that Act under the Article and give it retrospective effect.
That Article contemplates restrictions and not prohibitions and the rule that prohibitory legislation cannot have retrospective operation can have no application. Punjab· Province v. Dau/at Singh. , L. R. 73 I. A. 59, held inapplicable. M. P. V. Sundararamier & Co. v. State of Andhra Pradesh [1958j S. C. R. 1422, applied. M/s. West Ramanand Electric Distribution Co. Ltd. v. State of Madras. [1963] 2 S. C. R. 747, referred to. Nor could it be said that a restrictive statute passed under Art. 304(b) with retrospective operation must necessarily defeat the scheme of Part XIII of the Constitution.. • ' - • - > 5 S. C. R. SUPREME COURT REPORTS 977 The mere fact that a validating taxing statute has retrospective 1963 operation does not necessarily change the character of the tax sought to be recovered by such retrospective operation. The Khyerbari Tea proviso to s. 3(2) of the impugned Act was not retrospective in Co Ltd & A r character and did not change the character of the tax.
· · n · v. Rai Ramkrishna v. State of Bihar [1964] 1 S. C. R. 897 The State of referred to. Assam A law enacted under Art. 304(b) with the previous sanction of the President, does not necessarily take away the jurisdiction of the Court to consider whether the restrictions imposed by it arc reasonable and in the public interest. The observation in Atiabari Tea Co. 's case in this regard should not be taken as conclusive on the point. Although there is a presumption in favour of the constitution- ality of a statute, if it is proved that it invades fundamental rights under Art. 19(1), the onus shifts on to the State and it must justify its validity under Art. 19(6). Onus under Art. 304(b) is still more in favour of the citizen as it clearly purports to restrict the freedom of trade. Saghir Ahmad v. State of U. P. (1955] 1 S. C. R. 707, applied. Hamdard Dawakhana. (Wakf) Lal Kuan, Delhi v. Union of India. [1960] 2 S. C. R. 671, referred to.
The impugned Act by making the producer liable for the tax under s. 3(2) proviso or by assessing the tax on a fiat rate on weight instead of by the ton and mileage method, could not be said to have imposed unreasonable restrictions. The law of taxation is a balance of complex considerations and if the Legislature thought that a fiat rate was just and fair to the tea trade as a whole no exception could be taken to it. It was not correct to say that s. 34 of the impunged Act was discriminatory or infringed Art. 19(1) (g). It was not discrimi- natory in that it selected only tea and jute for taxation. The Legislature had full freedom to determine which articles it should tax, in what manner and at what rate. Raja Jagannath Baksh Singh v. State of U. P. [1963] 1 S. C. R· 220 and East India Tobacco Co. v. State of Andhra Pradesh, [1963] 1 S. C. R. 404, referred to. The power of this Court to strike down a taxing statute for contravention of Arts.
14, 19 or 301 must be exercised with cir- cumspection. It is only in cases of such statutes as are clearly confiscatory in character that the power of this Court can be invok- ed or exercised. K. T. Moopi/ Nair v. State of Kera/a, [1963] 3 S. C. R. 77, referred to. The impugned Act was not colourable legislation in any sense. The power of legislation carried with it the power to make the law I SCI/64-62 1963 978 SUPREME COlJRT REPORTS [1964] retrospective and the passing of a validating Act is essentially subsidiary to that power conferred by the relevant legislative List. Khyerbari Tea Not was the Act extra-territorial in its application. Whether Co. Ltd. & Anr. the goods are carried for a long or a short distance had no bearing v. on legislative competence under Entry 56 List II under which the The' State. of impugned Act was enacted.
Since the goods were carried, although over a very small part of inland waterways in Assam, the doctrine -Assam of nexus, applicable to such cases, was satisfied. . Tata Iron & Steel Co. Ltd. v. State of Bihar, [1958] S. C. R. 13~5, referred to. The word 'carried' in Entry 56, List II is of wider denotation than 'import' and the Act could not be impugned on the ground that the goods carried and taxed did not join the mass of goods in the State of Assam itself. Central India Spinning and Weaving and Manufacturing Co. Ltd. v. Municipal Committee, Wardha, [1958] S. C. R. 1! 02, held inapplicable. The power to levy the tax conferred by Entry 56, List II, was not controlled by the Tea Act, 1953, passed by the Parliament under List I. Nor was it correct to say that the River Boards Act, 1956, imposed a bar on the Assam Legislature to pass the impugned Act. Per Sarkar, J. -Entries in the Legislative Lists have to be read in their widest amplitude.
So road there could be no doubt that the Assam Legislature was competent under Entry 56 of List II to provide for the realisation of the tax in the manner most suitable to it. The words of the Entry were wide enough to enable the Legislature to realise the tax either from the producer, even though he did not carry it, or from the person who actually carried it. Under the proviso to s. 3(2) of the Act, a notification could not be issued with retrospective effect. That proviso made the producer liable for realisation of the tax from the purchaser from the date appointed by the notification. If the notification appoint- . ed a past date, it would be incompetent. . It was not correct to say that a statute contemplated by Art. 304(b) cannot be retrospective. A legislature competent to pass a law can pass it with retrospective effect. If the flow of the trade could be restricted prospectively, it could be restricted retrospec- tively as well. The restrictions imposed by Art.
304(b) stand ·on the same footing as those under Art. 19(6). There is no prohibition in Art. 304 and, therefore, it could not be said that it did not contemplate retrospective operation. It provides for reasonable restrictions on the freedom of trade and therefore permits and does not prohibit. 'J • - Punjab Province v. Dau/at Singh L. R. 73 I. A. 59, held inapplicable. ~ I ~ 5S. C. R. SUPREME COURT REPORTS 979 Entry 56 of List II does not require that the tax imposed mnst 1963 be measured according to the distance they are carried. A fiat rate is not wanting in reasonableness. It would not be wrong Khyerbari Tea to say that since a tax is collected in public interest and for public Co Ltd & Anr good the burden imposed by it on trade would prima facie be · · · reasonable in the public interest. v. The State of The legislature has the power to pick, and choose the articles on which to impose the tax and such choosing cannot by itself Assam amount to discrimination.
The Act applies to all who are concerned with the carriage of tea and jute. Raja Jagannath Baksh Singh v. State of Bihar, [1963] l S. C. R. 220, referred to. Section 34 of the impugned Act did not violate Art. 14 of the Constitution, nor could it be said that it was a colourable legislation. A validating Act, passed under the same legislative power under which the invalid Act was passed, would not amount to colourable legislation. Gajapati Narayan Deo v. State of Orissa, [1954] S. C. R. 1, referred to. Since the Assam Legislature had the power· to impose the tax on carriage of goods, however short the distance over which they were carried, the impugned Act could not be said to be bad for extra-territoriality. Quaere as to on whom the onus of proving the reasonable- ness of a restriction imposed by a statute on which its constitu- tionality depends lies. ORIGINAb JURISDICTION : Writ Petiton No. 134 of 1962 . • Petition under Art. 32 of the Constitution of .
India for the enforcement of Fundamental Rights. S. K. Niyogi and S. C. Mazumdar, for the peti- tioners. B. C. Barua, Advocate-General, Assam, M. C. Setalvad, R. B. Datar and Naunit Lal, for the res- pondents. G. S. Pathak, A. N. Sinha and B. N. Ghosh, for the interveners. December 13, 1963. The Judgment of P. B. Gajendragadkar, K. N. Wanchoo, K. C. Das Gupta and N. Rajagopala Ayyangar JJ. was delivered by Gajendragadkar '}. A. K. Sarkar J. delivered a separate Opinion. I 980 SUPREME COURT REPORTS ,. ,,... [1964] ~ 1963 GAJENDRAGADKAR J. -The present writ petition by which the two petitioners Khyerbari Tea Co. Khyerbari Tea Ltd. , ~. nd M:·. Sudhir Chandra Guha, Manager of Co. Ltd. &. Anr. the said Company, seek to challenge the validity of the v. , Assam Taxation (On Goods Carried by Road or The State of on Inland Waterways) Act, 1961 (No. 10 of 1961) Assam (hereinafter called 'the Act'), is a sequel to the decision . - of this Court in the case of Atiabari Tea Co. , Ltd.
Ga;endragadkarv. The State of Assam( 1 ). To this petition have J. been impleaded three respondents, the State of Assam, the Commissioner of Taxes, the taxing authority appointed under s. 6 of the Act, and the Superinten- dent of Taxes, Dhubri Division. We will refer to the State of Assam as the respondent hereafter. The respondent had passed a similar Act No. 13 of 1954 which had received the assent of the Governor on the 9th April, 1954. The validity of the said Act was challenged by the petitioners and certain other producers of tea by filing writ petitions before the Assam High Court. The Assam High Court dismissed the writ petitions and held that the impugned Act of 1954 was valid. The said judgment was pronoun- ced by the High Court on the 6th of June, 1955. The petitioners whose writ petitions had been dis- missed, then preferred appeals to this Court by special leave, and they also moved this Court by writ peti- tions under Art. 32 of the Constitution.
These matters were heard by this Court in the case of Atiabari Tea Co. Ltd. C 1 l and by its judgment delivered on the 26th September, 1960, the said impugned Act was struck down as being unconstitutional. Thereafter, the Act with which we are concerned in the present proceedings was passed by the Assam Assembly. It received the assent of the President on the 6th April, 1961. The relevant terms of the Act are, on the whole, substantially similar to the terms of the earlier Act which was struck down. The Act has made certain additional provisions to which we will refer later. The petitioners contend that the operative provisions of the Act are invalid, and so, they pray for issue of an appropriate writ (I) [19611 I s. c. R. 809. : ' _J - j 5 S. C. R. SUPREME COURT REPORTS 981 or order directing the respondent not to enforce i963 the operative provisions against them. Petitioner - No. l is a company and as such, it has no right to Khyerbari Tea move this Court under Art. 32.
This position is Co. Ltd. &Anr. conceded by Mr. Mazumdar for the petitioners. v .. Petitioner No. 2 who is the Manager of Petitioner The State of No. l is, however, a citizen of India and as such, Assam he is entitled to challenge the validity of the Act -~ inasmuch as the respondent threatens to take action Gajendragadkar in pursuance of the material provisions of the Act J. against the company of which he is the Manager. Mr. Setalvad does not dispute the right of peti_ti9ner No. 2 to move this Court by a petition under Art. 32. After the Act was passed and it came into force, the question about the scope and effect of the pro~ visions contained in Part XIII of the Constitution which had been dealt with by this Court in the case of Atiabari Tea Co. by providing that regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the pur- view of the restrictions contemplated by Art.
301, and such measures need not comply with the require- ments of the provisions of Art. 304(b). Subba Rao J. , who delivered a separate judg- ment concurring with the conclusion reached by Das J. , preferred to emphasise that taxing statutes which would escape the mischief of Art. 301 could be appropriately described as regulatory. He, there- fore, held that the Rajasthan Motor Vehicles Taxa- tion Act (No. 11 of 1951) with which the Bench was dealing, was regulatory in character and as such, not· unconstitutional. In other words, whereas Das, Kapur and Sarkar JJ. , upheld the validity of the Act on the ground that it was either compensatory or regulatory, Subba Rao J. , preferred to base his decision mainly on the ground that it was regulatory. 0) [1963] I S. C. R. 491. (2) [1961] I S. C. R. 809. 986 SUPREME COURT REPORTS [1964] 1963 The minority view which has been expressed by Hidayatullah J. , on behalf of himself and Ayyangar Khyerbari Tea and Madholkar JJ.
, assumed that though regulatory Co. Ltd. & Anr. taxing statutes may be said to fall outside Art. 30, com- v. pensatory taxing statutes cannot make the same claim. The State of According to this view, if a taxing statute was sought Assam to be justified on the ground that the tax imposed by . - it was compensatory in character, that could be done Ga;endragadkar only by adopting the procedure prescribed by Art. J. 304(b). It may be noticed that the scope of the regu- latory statutes as discussed by Hidayatullah J. , is much narrower than the scope of the regulatory statutes as considered by Subba Rao J. In the result, the majority view expressed in the case of the Atiabari Tea Co. ell, was substantia! 1y accepted by the majority of the learned Judges consti- tuting the larger Bench which heard the Automobile Transport (Rajasthan) Ltd. c•l case, but a corollary was added to the said view as we have just indicated.
The majority view in the Atiabari case substantially agreed with the majority decision in the case of Atiabari Tea Co. , there would be a clear difference between the said two views in relation to the scope and effect of the provisions of Art. 304 (b). According to the majority view in the case of Atiabari Tea Co. , if an Act is passed under Art. 304(b) and its validity is impeached, then the State may seek, to justify the Act on the ground that the restrictions imposed by it are reasonable and in the public interest, and in doing so, it may, for instance, rely on the fact that the taxes levied by the impugned Act are compen- satory in character. On the other hand, according to the majority decision in the Automobile Transport (Rajasthan) case, compensatory taxation would be outside Art. 301 and cannot therefore, fall under Art. 304(b).
If in the present case it had been urged before us that the tax levied by the Act is compensatory in character, it would have been necessary to consider the question once again by constituting a larger Bench. It will be recalled that the Act with which we are concerned has been passed by the Assam Legislature directly as a result of the decision of this Court in Atiabari Tea Co. 's caseCl>; that decision was that if the tax imposed by the Act was compensatory in character then the Act could be sustained only if it was passed after complying with the provisions of Art. 304(b). The Assam Legislature has accordingly adopted the said procedure and passed the Act. If the Act had been compensatory in character, it would have become necessary for us to consider the (1) [1961] 1 S. C. R 809. (2) [1963] 1 S. C. R. 491.
988 SUPREME COURT REPORTS [1964] 1963 whole position once again, because it would obviously be unfair and unjust that the earlier Act should have Khyerbari Tea been struck down though it was compensatory in Co. Ltd. & Anr. character and in testing the validity of the present v. Act, it should be open to the petitioners to contend The State of that its compensatory character is irrelevant to the Assam enquiry under Art. 304(b ). In the present case, the Assam High Court which dealt with the 487 writ Gajendragadkar petitions has found that the Act is not compensatory, J. and Mr. Setalvad has not urged before us that the Act is in fact compensatory. That is why we are proceeding to deal with the merits of the dispute between the parties in the present case on that basis.
The main question, therefore, would be that the tax imposed by the Act not being compensatory in charac- ter, are there any reasons to justify the respondent's contention that the restrictions imposed by it are reasonable and in the public interest? · Let us then consider the broad features of the Act and its material provisions before dealing with the several points urged before us. The Act consists of 34 sections. As we have already noticed, the Bill was introduced after obtaining the previous sanction of the President, and the Act has been passed in accordance with the provisions of Art. 304(b). The preamble to the Act provides that the Act has been passed to provide for the levy of a tax on certain goods carried by road or on inland water-ways in the State of Assam and to validate certain taxes im- posed on goods carried by road or on inland water- ways and for certain other connected matters.
Section 1(3) provides that the Act shall be deemed to have had effect as from the 24th April, 1954, and shall remain in force till the 31st March, 1962. In other words, the Act takes effect from the date when the earlier Act was to have taken effect, and its life con- tinues for one year after it received the assent of the President and became effective. Section 2, inter alia, defines a producer as meaning "a producer of tea and includes the person in charge of the garden where tea is produced. " The Act is concerned with - . .. • •···· > ~ 5 S. C. R. SUPREME COURT REPORTS 989 tea and jute, but in the present proceedings, we are 1963 dealing with the petitioners whose interest lies in tea. Section 3 of the Act deals with the liability to tax, Khyerbari Tea and since its validity is seriously impugned by the Co. Ltd. & Anr · petitioners, it is necessary to read it: v. "(l) S b' h · · f h' A The State of u ~ect to t e prov1S1ons o t 1s ct, A .
d ssam there shall be lev1e a tax on (a) manufactured __ _ tea and (b) jute in bales carried by motor vehicle, Gajendragadkar cart, trolley, boat, animal and human agency J . or any other means except railways and airways in such manner and in respect of such period and at such rate as specified in the Schedule. (2) Such tax levied on manufactured tea shall be realised from the producer and· that levied on jute shall be realised from the dealer; Provided that where tea is sold at the factory premises, the producer shall be liable for realisa- tion of tax from the purchaser with effect from such date as the Government may, by notifica- tion, appoint, for the carriage of such tea as provided in this section and the producer shall be liable for the payment of such tax notwith- standing the fact that the tea is not carried by the producer; Provided further that no tax shall be levied under this Act on any jute or tea in respect of which such tax has already been paid.
" Section 4 provides that the tax shall be charged on the total net weight carried during a return period. Section 5 deals with the problem of determining the weight. Section 6 prescribes the taxing authorities. Section 7 requires the return to be submitted by the producer and makes appropriate provisions in that behalf. Section 8 deals with licensing; s. 9 covers the problem of assessment and it provides that the Commissioner may, by an order in writing, assess the producer and determine the tax payable by him on the basis of his return. Section l 0 deals with cancellation of assessment; s. 11 makes a provision 990 SUPREME COURT REPORTS [1964] 1963 for assessment in cases of evasion and escape and authorises the Commissioner within two years of the Khyerbari Tea expiry of the period in question to serve on the pro- Co. Ltd. & Anr. ducer a notice requiring him to furnish a return, v. and empowers him to proceed to assess or re-assess The State of the producer as provided by it.
Section 12 deals Assam with rectification. Section 13 provides for penalty -- for non-submission of returns and evasion of taxes. Gajendragadkar Under s. 14 it is provided that assessment is no bar J. to prosecutions and penalties. Section 15 makes the tax payable by the representative of a deceased producer. Sections 16 and 17 deal with appeals and revision, while s. 18 prescribes for the computa- tion of the period of limitation for the said two re- medies. The notice of demand is provided for by s. 19, and the period when the tax is to be paid is laid down by s. 20. Section 22 prescribes the mode of recovery; s. 23 provides for refunds; and s. 24 for employers' prosecution for failure to furnish returns. Section 25 provides that no court shall take cognizance of any offence under the Act or under the rules made under it, except with the previous sanction of the Commissioner. Section 26 permits composition of offences.
·section 27 imposes an obligation on the producer to maintain and preserve account books; s. 28 confers power on appropriate authorities to require the production of accounts. Section 29 bars civil suits. Section 30 empowers the appropriate authority to take evidence; s. 31 deals with the delega- tion of powers; s. 32 confers power on the Govern- ment to make rules; s. 33 repeals the earlier Act of 1954 and s. 34 makes provisions by way of validation. Since this last section has also been challenged, it is necessary to read it: "34. (1) Any rule made, any liability incurred, any tax levied or realised, any returns furnished, any proceedings commenced, any notification published, any action taken or anything what- soever done under the provisions of the Act repealed, shall be deemed to have been made, incurred, levied, realised, furnished, commenced, .... - • - a)' 5 S. C. R. SUPREME COURT REPORTS 991 published, taken or done under the corresponding 1963 provisions of this Act. (2) N .
h t di h' . d . Khyerbari Tea otw1t s an ng anyt mg contame m any c Ltd & A judgment, decree or order of any court, all taxes o. · nr. imposed or realised or purporting to have been Th ;· 1 if imposed or realised under the Act repealed e a e 0 Assam shall for all purposes be deemed to be, and to have been, validly imposed or realised and Gajendragadkar accordingly- J . (a) no suit or other proceeding shall be main- tained or continued in any court against the Government or any person or authority whatsoever for the refund of any taxes so paid; and (b) no court shall enforce any decree or order directing the refund of any taxes so paid. " The Schedule to the Act gives the rates for respective periods and these rates correspond to the rates pres- cribed by the earlier Act for the period covered by it and prescribes new rates for the period there- after. Rules have been made under s. 32(1) and Forms prescribed for the making of returns. That, in brief, is the scheme of the Act.
It has been urged before us by Mr. Pathak that s. 3 which is the charging section, is outside the legis- lative competence of the Assam Legislature. The Act purports to have been passed by virtue of the legislative power conferred on the State Legislature under Entry 56 in List II of the Seventh Schedule. This Entry reads thus: "Taxes on goods and passen- gers carried by road or on inland waterways. " It will be recalled that Entry 30 in List I deals with carriage of passengers and goods by railway, sea or air, or by national waterways in mechanically propelled vessels, and so, Entry 56 in List II does not cover cases falling under Entry 30 in List I. It is only in regard to goods and passengers carried by road or inland waterways that the State Legislature can pass a law imposing taxes. Mr. Pathak's contention is thatis.
3 read with the proviso to sub-section (2) 992 SUPREME COURT REPORTS [1964] 1963 clearly contemplates that the primary and the sole -- liability to pay the tax on tea has been placed on the Khyerbari Tea producer even in cases where the tea in question Co. Ltd. & Anr. may have been sold at the tea garden before it is carried. v. In other words, the contention is that in cases where The State of tea is carried by the purchaser, it is only the purchaser Assam of the tea which is carried who can be taxed, and . -- since the producer is taxed even in such cases, the Ga;endragadkar taxation itself is beyond the legislative competence J. of the State Legislature. This argument proceeds on the assumption that the proviso lends colour to the construction of s. 3(2). Section 3(1) is enacted in terms of Entry 56 and it purports to indicate what the taxable event is. Section 3(2) makes the producer · liable to pay the tax and the proviso to s.
3(2) enables the producer to recover the tax from the purchaser with effect from such date as the Government may, by notification, appoint; this date was notified as 1st May, 1961. It is clear that the proviso is prospective, but Mr. Pathak suggests that the proviso can be explained only on the basis that s. 3(2) includes cases where tea has been sold by the producer before it is carried, and in that sense the producer has been made liable to pay the tax even in regard to tea which has been sold by him. before it is carried. On the other hand, Mr. Setalvad argues that s. 3(2) is confined to cases where the producer him~ self carries tea and his suggestion is that the proviso which has been added by the present Act and which was not included in the earlier Act seeks to make the purchaser liable to pay the tax in case tea which is carried has been purchased by him before it leaves the garden.
He wants us to read the proviso as creating an obligation on the purchaser to pay the tax and as making the producer liable to recover the tax from the purchaser as the Agent of the State. In support of his argument that s. 3(2) cannot be read to include cases where tea has been sold before it is carried, Mr. Setalvad has referred us to the fact that when the corresponding provision in the earlier Act was construed by the Assam High Court, it was ' - J \A . . I" f"' ...... • - 5S. C. R. SUPREME COURT REPORTS 993 held that where tea is sold before it is carried, the pro- 1963 ducer is not liable and no tax can be recovered from him, vide H. P. Barua v. State of Assam(! ). He Khyerbari Tea also emphasises the fact that the proviso is pros- Co. Ltd. & Anr. pective in operation, and so, it indicates that it cannot v. lend colour to the construction of section 3(2). The State of . Assam It 1s, however, not easy to accept Mr. Setalvad's _ construction.
The words used in the proviso show Gajendragadkar that the producer has been made liable for realisa- J tion of the tax from the purchaser, but there are no · words imposing a liability on the purchaser to pay the tax and no penalty is prescribed in case he fails to pay the tax to the producer. The relevant forms prescribed for making returns, also continue to be the same as under the old Act and do not contemplate cases where the purchaser may have to make returns. In the present proceedings, we are not concerned with the case of any purchaser, and so, it is unnecessary for us to pronounce a definite opinion on the construc- tion of s. 3. We would, therefore, proceed to deal with Mr. Pathak's argument on the basis that s. 3(2) makes the producer liable even in cases where tea has been sold by him to a purchaser before it is carried away from the garden.
This argument of legislative incompetence seems to assume that Entry 56 requires that the tax must be levied by the State legislature on goods which are carried only against the owner of the goods that are carried, or against the persons who carry ·them. We do not see any justification for introducing such limitations in the said Entry. It is hardly necessary to emphasise that Entries in the three Lists in the Seventh Schedule which . confer legislative competence on the respective Legislatures to deal with the topics covered by them must receive the widest possible interpretation; and so, it would be unreasonable to read in the Entry any limitation of the kind which Mr. Pathak's argument seems to postulate. Besides, it is well-settled that when a power is conferred on the Legislature to levy a tax, that power itself must (1) A. LR. 1955 Assam 249.
· 1 SCI/64··-63 994 SUPREME COURT REPORTS [1964] 1963 be widely construed; it must include the power to impose a tax and select the ariticles or commodities Khyerbari Tea for the exercise of such power; it must likewise include Co. Ltd. & Anr. the power to fix the rate and prescribe the machinery v. for the recovery of the tax. This power also gives The State of jurisdiction to the Legislature to make such provisions Assam as, in its opinion, would be necessary to prevent -. the evasion of the tax. In imposing taxes, the legis- Gafendragadkar lature can also appoint authorities for collecting taxes J. · and may prescribe the procedure for determining the amount of taxes payable . by any individual; all these provisions are subsidiary to the main power to levy a tax and, therefore, once it is shown that the tax in question has been levied on goods carried, it would be open to the legislature to prescribe the machinery · for recovering the said tax.
As was observed by Chief Justice Marshall in M'Culloch v. Maryland( 1 > "the power of taxing the people and their property is essential to the very existence of Govern- ment, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the Government may choose to carry it". This statement of the law must, however, be read subject to the condition that even tax statutes have to satisfy the test of reasonableness prescribed by clause (6) of Art. 19, and the fundamental right of equality before law guaranteed by Art. 14 as well as the test prescribed by Art. 301. Reverting then . to s. 3(1), we ought to add that the said section in terms expressly makes the carriage of goods the taxable event, and s. 3(2) makes the producer liable to pay the tax only on goods carried. If the goods produced in the tea garden are not carried, there is no occasion to pay the tax.
That being so, the fact that the Legislature has adopted the machinery of making the producer responsible for the payment of the tax and liable for it in that sense cannot introduce any element of legislative incompetence which would vitiate the statute. It may be conceded that when the legislature constructs a machinery for the recovery of the taxes (1) [1819] 4 L. ed. 579, 607. I - - - 5S. C. R. SUPREME COURT REPORTS 995 - - which it is within its competence to impose, the said 1963 machinery should have some rational or intelligent connection with the tax. In the absence of a rational Khyerbari Tea nexus between the producer and the tax on goods Co. Ltd. & Anr. carried, it may be open to a citizen to contend that v. the tax is not one justified by Entry 56. But can we The State of say that between the producer of tea and the tax Assam which is levied on the tea carried from his garden, . - there is no rational nexus?
Considerations of admi- Ga1endragadkar nistrative convenience as well as considerations of J. facility in recovering the tax cannot be treated as irrelevant in this context. The tea which is taxed has been produced by the producer and even when he sells it to a purchaser, it is obvious that it would be carried away and not left with the producer, and so, the legislature may have thought that it would be appropriate to make the producer liable to pay the tax. It may also be relevant to bear in mind that the cases of sale of tea before it is carried cannot be too many. As we have already seen, the earlier Act did not include the proviso and that seems to suggest that usually, it is the producers who produce the tea in their gardens and carry it to Calcutta either for sale, or for home consumption, or for export.
In fact, the petitioners before us are producers who have carried· their own product from their tea gardens to Calcutta, and we were told that amongst the 487 persons who movedl,,the Assam High Court by their writ petitions, not one was a purchaser; everyone was a producer who carried his own goods. Apart from these facts, however, it is impossible to sustain the argument that it is not competent to the legislature to devise a proper and appropriate machinery to recover a tax which it is competent to the legislature to levy. This question has been frequently considered by this Court and the power of the Legislature to create appropriate machinery to recover a tax, or to prevent the evasion of the payment of the tax has been consi- 996 SUPREME COURT REPORTS [1964] ~ '1963 stently recongised. In R. C. Jail v. Union of Indiac 1 > while dealing with the question · about the power of the Khyerbari·Tea legislature to decide at what stage and from whom ·Co. Ltd. & Anr.
excise duty should be recovered, this Court held that Y. · subject always to the legislative competence of the The State of taxing authority, the tax can be levied at a convenient Assam stage so long as the character of the impost is not --~ lost. The method of collection does not effect the Gajendragadkar essence of the duty but only relates to the machinery J. of collection for administrative convenience. While enunciating this principle, this Court, however, took the preeaution of adding that "whether in a particular case the tax ceases to be in essence an excise duty and the rational connection between the duty and the person on whom it is imposed ceased to exist, is to be decided on. a fair construction of the provisions of a particular Act". Jn Sardar Baldev Singh v. Commissioner of lncome"tax, Delhi & Ajmerc•>, this Court was called upon to consider the validity of s. 23A of the Indian Income-tax Act, 1922.
At the relevant time, the said section gave power to the appropriate authority to make an order that the undistributed portion of the assessable income of the company shall be deemed to have been distributed as dividends and provided that thereupon the proportionate ~hare thereof of each shareholder shall be included in his income for assessment. The argument which was urged before this Court was that the Companj"'and its shareholders are different persons and, therefore, s. 23A was in- valid inasmuch as under entry 54 of List I a law· could be passed imposing a tax on a person on his own income. This argument was, however, rejected because this Court took the view th~t the Entries in the Lists should be read in a very wide manner so as to include all subsidiary and ancillary matters. That is why Entry 54 was held to. authorise not only the imposi- tion of a tax, but also an enactment which prevents the . tax being evaded . . (! ) [1962] Supp. _3 S. C. R. 436. (2) [1961] . l S. C. R.
482. - 5 S. C. R. SUPREME1\'COURT REPORTS 997 1963 Similarly, in the Orient Paper Mills Ltd. v. The State of Orissa . In that case, the Privy Council had occasion to deal Khyerbari Tea withs. 5 of the Punjab Alienation of Land Act (Indian Co. Ltd. & Anr. Ac~ XIII of 1900) considered in the light of the pro- v. visibns of s. 298 of the Government of India Act, 1963 The State of 1935. Section 298(2) provides that nothing in this Assam section shall affect the operation of any law which . - (a) prohibits, either absolutely or subject to excep- Ga1endragadkar tions, the sale or mortgage of agricultural land there- /. in described. The Privy Council held that s. 5 of ·• the.
impugned Act which created such a prohibition could not operate retrospectively because the word "prohibits" can only mean the forbidding of a transac- tio~, and such a direction is appropriate only in res- pect of transactions to take place subsequently to the'date of the direction, and cannot include an attempt • to reopen or set aside transactions already completed, or to vacate titles already acquired. It would thus be seen that this decision turned essentially upon the use of the word "prohibits" in s. 298(2) , and so, it would be unreasonable to extend the said decision to the cases falling under Art. 304(b) particularly · when the restriction imposed is not of such a character as to amount to prohibition. · A similar argument was in fact rejected by this Court in the case of M . P. V. Sundararamier & Co. v. The State of Andhra Pradesh .
What was urged before this Court in that case was that the principle laid down by the Privy Council in the case of Punjab Province should be extended to a Jaw to which Art. 286(2) of the Constitution applied. In reject- ing! this contention this Court observed that the Privy Council's decision proceeded solely on the connotation of the word "prohibits" in s. 298(2) of the Government of India Act, 1935, and can be of no assistance in the construction of Art. 286(2) wherein the word does not occur. What this Court has observed about Art. 286(2) as it formerly stood in the Constitution applies with greater force to Art. 304(b }. It is true that there are some provisions (1)173 I. A. 59. (2) [1958] S. C. R. 1422. I - 5 S. C. R. SUPREME COURT REPORTS 999 in the Constitution which prohibit retrospective 1963 legislation as, for instance, Art. 20(1) & (2) vide M/s West Ramnand Electric Distribution Co. Ltd. v. Khyerbari Tea State of Madras .. But Art. 304(b) cannot be Co. Ltd. & Anr.
construed to mean that a Jaw passed under it must v. in every case be prospective. If a Statute is passed The State of under Art. 304(b) retrospectively, its reasonable- Assam ness may, of course, fall to be considered on the merits . -- in a given case but that is not to say that in no case Ga1endragadkar can a statute be passed under the sain Articles to J. operate retrospectively. Then as to the argument about the scheme of Part XIII, we do not see how a statute passed under Art. 304(b) would always and necessarily defeat the said scheme if its provisions are made retrospective. It is not disputed by Mr. Pathak that a taxing statute can be passed retrospectively, and it is conceded that if such a statute is passed, it would not be possible for any person to challenge its validity on the ground that it affects the citizens' fundamental right under Art. 19(1)(g).
If such a challenge is made, it would be easily met by the plea that a taxing statute, though retrospective in its operation, can be reasonable and in the public interest within the meaning of clause (6) of Art. 19. Therefore, if a taxing statute can, in a given case, operate retrospectively and its validity cannot be successfully challenged under Art. 19, we do not see how a similar challenge could be sus- tained agains. t a taxing statute which has been passed under Art. 304(b). The freedom of trade guaranteed by Art. 301 is no doubt of very great importance to the political and economic unity of the country; but the freedom guaranteed to the individual is no less important; just as in the case of a challenge to the validity of a statute under Art. 19 the court has to consider whether the restrictions imposed by the statute are reasonable and in the interests of the general public, so in dealing with a challenge to the validity of a statute passed under Art.
304( b) the court has to consider whether the restrictions (1) (1963J 2 s. c. R. 747 p. 761. 1000 SUPREME COURT REPORTS [1964] 1963 impdsed by it are reasonable and are required in the public interest. The impact of the restrictions on Khyerbari Tea the individual's right has to be judged in one case, Co. Ltd. & Anr. whereas the impact of the restrictions on the freedom v. of trade has to be judged in the other; but basically, The State of it is jthe invasion of a guaranteed right whose validity Assam is being examined in either case; and so, if the law -- can be retrospective in one case, there is no reason Gajendragadkar why it cannot be retrospective in the other. We J. are, ,therefore, satisfied that there is no substance in the plea raised by Mr. Pathak that the Act is invalid solely because it operates retrospectively. It is then faintly suggested that the retrospective operation of s. 3, in substance, changes the character of the tax. The argument is that the proviso to s.
3(2) enables the producer to recover the tax from the pur- chaser in case the goods are sold to a purchaser before they' are carried, whereas such a provision did not exist in the past and in that sense, the retrospective operation changes the character of the tax. We have already noticed that the proviso in question is not 'retrospective in operation, and so, this argument has to be tested by reference to the remaining portion of s. 3(2). Thus tested, it is difficult to accept it as sound. In this connection, we may refer to the recent decision of this Court in Rai Ramkrishna v. State of Bihar in regard to the fundamental right under Art. 19(1 )(g) as soon as the invasion of the right is proved, it is for the State to prove its case that the impugned legislation falls within clause (6) of Art. 19. · The position may be different when we are dealing with Art.
14, because under that Article the initial presumption of constitutionality may have a larger sway inasmuch as it may place the burden on the petitioner to show that the impugned law denied equality before the law, or equal protection of the laws. We may in this connection refer to the observations made by this Court in the case of Hamdard (I) [1955) I. S. C. R. 707, 726. 1004 I SUPREME COURT REPORTS [1964] I 1963 Dawal~hana (Wakf) Lal Kuan, Delhi v. Union of Indid 1 1 • Another principle which has to be borne Khyerbari Tea in mind in examining the constitutionality of a statute, Co. Ltd. & Anr. it was observed, is that it must be assumed that the v.
legislature understands and appreciates the needs The State of of the' people and the laws it enacts are directed to Assam problems which are made manifest by experience - and that the elected representatives assembled in Gajendragadkar a Iegi~lature enact laws which they consider to be reasonable for the purpose for which they are enacted. Presumption is, therefore, in favour of the constitu- tionality of an enactment. It is significant that all the decisions to which reference is made in support of this statement of the law are decisions under Art. 14 of the Constitution. Mr. Setalvad has fairly conceded that in view of the decision of this Court in the: case of Saghir Ahmad( 2 >, it would not be open to him to contend that even after the invasion of the fundamental right of a citizen is proved under Art. 19(I)(g), the onus would not shift to the State.
In our opinion, the said decision is a clear authority for the proposition that once the invasion of the funda- mental right under Art. 19(1) is proved, the State rirnst justify its case under cl. (6) which is in the nature of an exception to the main provisions contained in Art. 19(1). The position with regard to the onus woulp be the same in dealing with the law passed unde~ Art. 304(b ). In fact, in the case of such a law, 1the position is somewhat stronger in favour of the citizen, because the very fact that a law is passed under Art. 304(b) means clearly that it pur- ports 1 to restrict the freedom of trade. That being so, we think that as soon as it is shown that the Act invad'es the right of freedom of trade, it is necessary to enquire whether the State has proved that the restri~tions imposed by it by way of taxation are reasonable and in the public interest within the mean- ing of Art. 304(b). This enquiry would be of a similar character in regard to cl. ( 6) of Art. 19.
That naturally takes us to the question as to whether the respondent has shown that the restric- (1) [1960] 2 S. C. R. 671, 679. (2) [1955] I S. C. R. 707, 726. ' - 5 S. C. R. SUPREME COURT REPORTS 1005 tions imposed by the Act by levying a tax on the 1963 movement of tea can be said to be reasonable and in the public interest. The decision of this question will Khyerbari Tea inevitably involve the balancing of the importance Co. Ltd. & Anr. of freedon of trade as against the requirements of v. public interest. Art. 304(b) necessarily postulates The State of that considerations of public . interest may require Assam and justify the imposition of restrictions on the freedom of trade, provided they are reasonable. In deter- Gajendragadkar mining the reasonableness of the restrictions we will J. have to bear in mind again the importance of freedom of trade and the requirements of public in- terest.
It is a question of weighing one relevant consi- deration against another and harmonisii:ig both the competing interests so as to serve the public interest in the end. This process of assessment may not always be easy, but, nevertheless, we must try to weigh the pros and cons urged before us by both the parties and decide whether the tax levied by the Act satisfies the requirement prescribed by Art. 304l b). In support of his case, Mr. Pathak has emphasised the fact that the producer has been made liable for goods even when they are sold before they are carried. In other words, the argument which he urged in support of his case that the Act was beyond the legislative competence of the State Legislature, has been again pressed by him into service in support of the plea that the restriction is unreasonable. We are not impressed by this plea. It is then urged that the serious infirmity in the Act is that it levies a flat rate in respect of goods carried.
Normally, the method which should have been adopted by the Act is what is sometimes des- cribed as the ton-mileage method, i. e. , levy the tax according to the weight of the goods carried and the distance over which they are carried. Since the Act imposes a flat rate merely on the weight, the burden imposed by it is unreasonable. On the other hand, Mr. Setalvad strongly urges that the tax constitutes a reasonable restriction in the public interest, because it purports to raise revenue 1006 SlJPREME COURT REPORTS [ 1964] 1963 for public purposes. As we have already seen, tax laws have to stand the scrutiny of Art. 19. That be-· Khyerbari Tea ing so, as soon as the validity of a tax law is challenged. Co. Ltd. & Anr. under Art. 19, the State would be entitled to rely v. on the fact that the revenue raised by the tax law The State of serves public purpose and that is its basic justi- Assam fl.
cation for being treated as a reasonable restriction on -- the individual's fundamental right under Art. I 9(1 )(g). Gajendragadkar It would, therefore, follow that the consideration J. on which Mr. Setalvad relies is not irrelevant, though its significance and importance cannot be over-rated. In this context, it may, however, be legitimate to bear in mind that the revenue is required by the State to raise money in order to carry on the function of government and to sustain the manifold welfare activities undertaken by it. Similarly, the fact that the President has given previous sanction to the: introduction of the Bill may conceivably be relevant, because the Constitution seems to contem-· plate that the sanction of the President would indicate that the Central Government had applied its mind to the problem and had come to the conclu- sion that the proposed tax is reasonable and in the pub- lic interest. But we must hasten to add that the signi..
ficance of his consideration cannot also be exaggerated. Mr. Setalvad urges that evidence in the case: shows that the State has levied the tax on the goods carried because it wants to utilise the income for the: purpose of keeping the roads in order and to meet the huge expenses incurrred in maintaining the waterways in the State. In the affidavit filed on behalf of the respondent, details have been given about the expenditure incurred by the State on roads and waterways from year to year, and the revenue received by it form the carriage tax during the same period. The affidavit points out that tea and the jute are the main products of the State of Assam and in order to have a regular and easy flow of trade, the State has to maintain the roads. The trade in these commodities through waterways is cheaper and, therefore, the State has also to incur large sums on maintaining the waterways The statement filed in ··t~ '-CJ ' ·- - •' . ; 5 S. C. R.
SUPREME COURT REPORTS 1007 the affidavit clearly shows that every year the ex- 1963 penditure incurred is very much more than the revenue received from carriage tax. It may perhaps Khyerbari Tea be that since the ton-mileage method has not been Co. Ltd. & Anr· adopted in imposing the tax, the State may not be v. able to claim that the tax is compensatory in character. The State of Usually, compensatory character may be claimed for Assam a tax of this kind, provided the extent of the service -- rendered by the State by raising the tax is shown and Gajendragadkar it is also proved that the recovery of the tax has some J. relation to the rendering of the said service. That is why Mr. Setalvad has not argued that the tax in question is compensatory in character. He, however, suggests that under Art.
304(b) it would be open to hitn to sustain the restriction imposed by the tax on the ground that the tax is levied not merely to raise general revenue for the State which itself is a public purpose, but that the tax is raised and utilised for keeping the waterways and the roads in good condition in the State. In our opinion, there is considerable force in these contentions. Then we turn to the main point urged by Mr. Pathak that the flat rate introduces an element of unreasonableness in the levy of the tax. It is necessary to bear in mind that having regard to the interests of the trade as a whole, a flat rate may in some cases be reasonable. If different rates are levied by reference to the distance over which the tea is carried before it reaches the Calcutta Port, it would obviously mean that some producers of tea would have to pay more taxes than others and that would. introduce an ele- ment of unfair competition between the producers of tea considered as a class.
We are referring to this aspect of the matter to emphasise the fact that the legislature has to consider several relevant factors before deciding how a particular tax should be levied. The law of taxation is in the ultimate analysis the result of the balancing of several complex considera- tions, and so, it would be unreasonable to insist upon ·the application of a general rule that if a tax is levied at a flat rate, it must be treated as unreasonable. 1008 SUPREME COURT REPORTS [1964] 1963 In the present case, the legislature may have c:onsidered the requirements of the trade carried on by the pro- Khyerbari Tea ducers of tea and may have thought that a flat rate Co. Ltd. & Anr. would be just and fair to the trade as a whole. These v. are questions which must normally be left to the The State of legislature to decide. Therefore, we do not think Assam that the main ground on which the reasonableness . -- of the tax levied by s. 3 was impeached by Mr.
Pathak, Ga1endragadkar can be sustained. J. Mr. Pathak further contended that s. 34 of the Act is unconstitutional inasmuch as it is discrimina- tory and imposes an unreasonable restriction on the citizens' fundamental right to trade under Art. 19(l)(g). We have already cited s. 34. The argument that the restriction imposed by s. 34 is unreasonable, proceeds on the assumption that sub-section (2) prohibits a producer from ventilating his grievance against irregu- lar, excessive, or illegal levy of the tax before any forum, and such a prohibition, it is urged, is patently unreasonable. We are satisfied that the assumption on which the argument is founded is completely misplaced. What s. 34(2)(a) prohibits is merely a suit or the other proceeding in any court. It does not prohibit the remedy of an appeal or revision speci- fically provided by sections 16 & 17 of the Act. Then it is urged that s.
34(1) makes an invidious distinction between producers who had been ordered to pay the tax under the earlier Act and who took no steps to challenge the said levy either by an appeal or revision, and those who had adopted the remedy of an appeal or revision under the said Act. In the case of the latter category of producers the appeals and revisions would be continued and dealt with as though the said proceedings had been adopted under the relevant provisions of the Act, whereas assess- ments which had been closed under the earlier Act cannot be reopened by the producers by filing an appeal or revision after the Act was passed. We do not think there is any substance in this argument. Persons who had taken proceedings by way of appeal or revision under the earlier Act are, on this argu- . ,, j - - . _ 5 S. C. R.
SUPREME COURT REPORTS 1009 1963 - ) ment, treated as of the same class as persons who had taken no such proceedings, and that, in our opinion, is not justified because the two categories Khyerbari Tea are not same or similar in character. Besides, an Co. Ltd. &Anr. argument of this kind is purely hypothetical and not v. based on any material facts. It is very difficult to The State of assume that producers who were taxed under the Assam earlier Act paid the tax without preferring an appeal or revision though they had a grievance against the Gajendragadkar ':. validity or regularity of the assessment order. There- J. ' fore, we do not think the challenge to the validity of s. 34 can be sustained. A similar challenge has been made against the validity of s. 24 which prescribes punishment for the three categories of offences specified by it under clauses (I), (2) & (3).
The argument is that since the earlier Act was struck down as unconstitutional, • if any producer had knowingly submitted false returns or had knowingly produced incorrect account, or had contravened the relevant provision of s. 8(1), it could not be said that he was guilty of any offence, • · and so, he could not have been prosecuted under the corresponding provision of the earlier Act which also was s. 24, that being so, s. 24, of the present Act which purports to operate retrospectively would be invalid. There may be some force in this con- ,,. tention; but we do not see how the petitioners can be permitted to challenge the validity of s. 24 when it is not alleged by them that any action is proposed ~ to be taken against them under the said section. In dealing with petitions under Art.
32, this Court would naturally confine the petitioners to the pro- visions of the impugned Act by which their funda- mental rights are either affected or threatened, That is why we are not satisfied that it is necessary to decide · the question about the validity of s. 24 in the present proceedings. That takes us to the question whether the tax . levied by the Act can be said to be discriminatory . · ,\ and as such, unconstitutional because it has selected _, only tea and jute as objects of taxation. The argument 1/SCI/64-64 1010 SUPREME COURT REPORTS [1964] 1963 appears to be that the legislature should have taxed ( ·- other commodities along with tea and jute and in Khyerbari Tea so far as only tea and jute have been selected for Co. Ltd. &Anr. the purpose of taxation, Art. 14 has been contravened. v. This argument is entirely fallacious. It is not dis- The State of puted that tea and jute are the main products of the Assam State of Assam and it is not surprising that the Assam ..
-- Legislature, therefore, levied tax on the said two Gajendragadkar articles. Besides, the legislature which is competent J. ·· to levy a tax must inevitably be given full freedom ( to determine which articles should be taxed, in what manner and at what rate, vide Raja Jagannath Baksh Singh v. The State of U. P. . It would be idle to . contend that a State must tax everything in order to tJ' tax something. In tax matters, "the State is allowed ·. _ ··. to pick and choose districts, objects, persons, methods · and even rates for taxation if it does so reasonably. The Supreme Court of the United States of America . , has been practical and has permitted a very wide latitude in classification for taxation" . This approach has been approved by this Court in the case of East India Tobacco Co. v. State of Andhra Pradesh. . It is, of coursl';, true that the validity of tax laws can be questioned in the light of the provisions of Arts. 14, 19; andArt.
301 if the said tax directly and immediately imposes a restriction on the fre:edom ~ of trade; but the power conferred on this Court to strike down a taxing statute if it contravenes the provisions of Arts. 14, 19 or 301 has to be exercised with circumspection, bearing in mind that the power ~ of the State to levy taxes for the purpose of govern- ance and for carrying out its welfare activities is a necessary attribute of sovereignty and in that sense it is a power of paramount character. In what cases a taxing statute can be struck down as being unconsti- tutional is illustrated by the decision of this Court in K. T. Moopil Nair v. The State of Kera! a . In that case, a careful examination of the scheme of the relevant provisions of the Travancore-Cochin (I) ·[1963] I S. C. R 22. 0. (2) Willis on 'Constitutional Law' p. 587. L . In that case, this Court was considering the scope and effect of s. 66(1)(c) of the C. P.
and Berar Municipalities Act, 1922, and the decision turned upon the true interpretation of the words "imported into''. In that connection, the legislative history of the octroi duty was examined and it was held that the concept of import requires that the goods which are brought into must mix up with the mass of the property in the local area where the goods are alleged to have been imported. If the gqods are just carried and not mixed with the mass of the property in the area through which they are can;ied, they cannot be said to have been imported into that (I) [1958] S. C. R. 1102. 1014 SUPREME COURT REPORTS [1964] 1963 area. We do not see how this decision which turned essentially upon the true significance of the concept Khyerbari Tea of import can have any relevance where the tax with Co. Ltd. & Anr. which we are concerned is a tax on goods carried. v. The word "carried" is of much wider denotation, and The State of it would be unreasonable to limit its scope b)!
intro- Assam ducing considerations which are relevant in dealing . . - with the question of import. Therefore, we do not Ga;endragadkar think that the attempt to challenge the validity of J. the Act on the ground that the carried goods which are taxed do not join the mass of goods in the State of Assam, can succeed, Mr. Mazumdar has also urged that so far as the petitioners' goods are concerned, they are substan- tially carried by the railway and should, therefore, be held to be outside the purview of s. 3 of the Act. We have already seen that the operation of the Act is confined to the goods carried by road or by an in- land waterways and the goods carried entirely by the railway are outside its scope. The question which Mr. Mazumdar has raised before us is that having regard to the long distance which the tea chests have travelled between the tea gardens and the Calcutta Port, it should be held that a short distance of 1 !
to 2 miles which they travelled by inland waterways does not alter the character of their journey; it is, on the whole, a journey made by the railway, and so, the goods must be deemed to have been carried by railway throughout. This argument also is miscon- ceived. As we have just indicated, the length of the distance over which the goods are carried has no relevance to the point. It is the physical fact of carriage of goods through a part of Assam that attracts the levy of the tax imposed by s. 3. Besides, the definition of railway to which Mr. Mazumdar invited our atten- tion contained in s. 3 of the Indian Railways Act (No. 9 of 1890) itself shows that the carriage of the goods over the inland waterways cannot be brought within the scope of the definition. Section 3( 4) :iefines the railway as meaning a railway, or any por- tion of a railway, for the public carriage of passengers, ( 't - ~ I I _ ) 5 S. C. R.
SUPREME COURT REPORTS 1015 1963 animals or goods, and includes, inter alia, all ferries, ships, boats and rafts which are used on inland waters for the purposes of the traffic of a railway Khyerbari Tea and belong to or are hired or worked by the authority Co. Ltd. &Anr. administering the railway. It is common ground v. that the ferries by which tea chests of the petitioners The State of are carried over the inland waterways in Assam do Assam not belong to the railway, nor are they hired or worked by the authority of the railway to which the goods Gajendragadkar ) were consigned for carriage. In fact, s. 74E of the J. Railway Act which, after amendment, has become s.
76D in 1961, clearly brings out the fact that when any goods arc: tendered to a railway admini~tration for carriage by railway and have been booked thwugh over a railway or any other transport system not belonging to the railway administration, the person who tenders the goods shall be deemed to have con- tracted with the railway and the said other transpl>rt system separately. Therefore, the argument based . ' j ' on the fact that the goods have been entrusted to the railway for through carriage, and so, the carriage of the goods should be held to be outside the purview of s. 3 of the Act, cannot be sustained. That leaves only one more point urged by Mr. Mazumdar to be considered. Mr. Mazumdar con- tends that the tax is invalid for the' reason that tea which is one of the objects taxed has been covered by the O! ntral Tea Act (Act No.
29 of 1953) and he argues that since the Central Act has been passed by reference to the relevant Entry in List I in the Seventh Schedule, it is not open to the State Legislature to pass a taxing statute in respect of tea. It is true that the Tea Act has made several provisi6ns in regard to tea and has constituted a Board to deal with the problems enumerated in the other provisions of the said Act; but one has merely to glance through the relevant provisions of the Tea Act to realise that the scope and purpose of the said Act is entirely different from the scope and purpose of the taxing Act with which we are concerned. The pith and substance of the taxing statute is the levy of a tax ( 1016 SUPREME COURT REPORTS [1964] ( . '. _ on tea which is carried in the State of Assam and the right to levy such a tax cannot be said to have been Khyerbari Tea taken away merely by the fact that a Tea Act had been Co. Ltd. & Anr.
passed by the ·Central Legislature which is referable 1963 11 • to the relevant Entry in List I of the 7th Schedule. The State of The power to levy a tax which has been conferred Assam on the State Legislature by Entry 56 cannot, therefore, . - be said to be controlled by the Tea Act in question. Ga;endragadkarlt would be noticed that List I does not contain any ( 1 · Entry by which the Central Legislature can pass an Act levying a tax on goods carried which can be said (I to control Entry 56 in List II. That being so, we, must hold that there is no substance in the argu- t ment that the State Legislature has no power to levy \ _ a tax on tea which is carried over a part of the area Sarkar J. of the State of Assam. A similar argument was urged by Mr. Mazumdar on the strength of the provisions contained in the River Boards Act, 1956 (No. 49 of 1956). Mr.
Mazumdar suggested that the Brahmaputra River over a part of whose stream the tea chests are carried is governed by the provisions of the River Boards Act and that imposes a ban on the power of the Assam Legislature to pass an Act in respect of goods carried over the Brahmaputra River. What we have said about the objection raised by Mr. Mazumdar on the strength of the' Tea Act applies with equal force to the present argument. The result is, the petition fails and is dismissed with costs. SARKAR J. -1 agree that the petition fails but I wish to say a few words of my own. The petition challenges the validity of the Assam Taxation (on Goods Carried by Road or on Inland Water-ways) Act, 1961. (Act 10 of 1961), passed by the Legislature of the 'State of Assam. There are two petitioners, one of whom is a limited company and cannot, therefore, admittedly maintain the peti- tion which is under Art. 32. It is conceded that the petition is maintainable by the other petitioner, an .
, ',' i, ·- i > / 5 S. C. R. SUPREME COURT REPORTS 1017 officer of the Company, as he is interested in the 1963 rights of the Company. No question of the -- competency of the petition was, therefore, raised on Khyerbari Tea behalf of the respondents who are the State of Assam Co. Ltd. &Anr. and two of its officers concerned with the collection v. of the tax under the Act. The State of The petitioner Company is the owner of a tea estate in Jalpaiguri in the State of West Bengal. One of the grounds on which the validity of the Act is challenged is that the Act imposes an unreasonable restriction on the trade of the Company. The res- pondents contend that the Act is valid in view of the provisions of Art. 304(b) and also cl. (6) of Art. 19 of the Constitution. They say that the restriction impo8ed by the Act is reasonable.
Article 301 of the Constitution provides that subject to the other provisions of Part XIII, trade, commerce and inter- course throughout the territory of India shall be free, and the relevant part of Art. 304 is in these terms: "Notwithstanding anything in article 301 ......... 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 Stat~ as may be required in the public interest: Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President. " It is not in dispute that the sanction of the President contemplated in the proviso to Art. 304(b) had been obtained in connection with the impugned Act. That Act had, however, a predecessor which bore the same title and was Assam Act 13 of 1954 but for which no sanction of the President under Art.
304(b) had been obtained. In Atiabari Tea Co. Ltd. v. The State of Assam( 1 ), this Court by a majonty held that as Act 13 of 1954 imposed a tax on the carriage of (1) [1961] l S. C. R. 809. Assam Sarkar J. 1018 SUPREME COURT REPORTS [1964] 1963 goods it constituted a direct restriction on the free movement of trade and as no sanction of the President Khyerbari Tea had been obtained in respect of it, it was void. No Co. Ltd. & Anr · question arose there as to the reasonableness of the v. restriction imposed by the Act. The other members The State of of the Court who constituted the minority expressed Assam dissenting opinions but no useful purpose will be served by referring to them. As a result of the opinion Sarkar J. of the majority Act 13 of 1954 became void. Article 301 and the succeeding articles in Part XIII, including Art. 304, were again considered by another and a larger bench of this Court in The Auto- mobile Transport (Rajasthan) Ltd. v. The State of RajasthanPl Das J.
, with whose judgment Kapur J. , and myself were associated, accepted the inter- pretation of Art. 301 by the majority in the Atiabari Tea Co. case( 2 ) as correct, but stated that regulatory measures such as rules laying down speed limit or lights to be carried by, vehicles and other rules of the road as also measures imposing compensatory taxes such as, taxes collected for maintaining the roads or bridges, were not restrictions within Art. 301 as such measures really facilitated trade rather than restrict it. It was, therefore, said by Das J. , that such measures need not comply with the re- quirements of the proviso to Art. 304(b) of the Con- stitution. As I apprehend the judgment of Subba Rao J. , in that case, he seems to have taken the same view though he used the description 'regulatory measure' to include measures laying down the rule of the road as also measures intended to raise funds for construction and maintenance of roads.
This was the opinion of the majority of the Court in that case. It is unnecessary to refer to the other opinion expressed in it. Neither of these cases, however, has any bearing on the case in hand for it is not contended by the respondents that the impugned Act was a compensa- tory measure. It was of course not a regulatory measure as laying down a rule of the road. Indeed (1) [1963] l S. C. R. 491. (2) f1961] 1 S. C. R. 809· ( ' - 1 •• • - ) _. , - -4 5 S. C. R. SUPREME COURT REPORTS 1019 it was not contended that the impugned Act did not J 963 impose restrictions on the movement of trade. In . - view of the sanction of the President which had been Khyerbari Tea obtained in the present case, the only question con- Co. Ltd. & Anr. cerning the freedom guaranteed by Art. 301 was v. whether the restriction imposed by the Act was reason- The State of ably required in the public interest.
It· was said Assam that the impugned Act (Act 10 of 1961) is practically in the same terms as the predecessor Act of 1954 Sarkar J. but that by itself would not bring the impugned Act within the mischief of the decision in the Atiabari Tea CoP l case for that case held the earlier Act invahd only on the ground that the sanction of the President had not been obtained. No question was canvassed there as to the reasonableness of any restric- tion imposed by the Act. The sanction of the Presi- dent, as already stated, was obtained for the impugned Act. I should however state here that apart from the point about the reasonableness of the restrictions imposed on trade by the Act, there were other attacks on it. These will be mentioned later. The impugned Act came into force on April 15, 1961, and imposed a tax on manufactured tea and jute carried by any means other than railway and airways. This case is not, however, concerned with any carriage of jute.
The Act was given a retrospective operation as it was to be deemed to have effect from April 24, 1954, being the date on which the predecessor Act, (Act 13 of 1954), came into force. Further, the Act was to remain in force till March 31, 1962, that is, for about a year only; see s. 1(3\ It has since been replaced by another Act, namely, Act 16 of 1962. It may be that as this last mentioned Act was in contemplation, the impugned Act was given a short term of life. This Act further stated that the tax collected under Act 13 of 1954 would be deemed to have been collected under the corresponding provisions contained in it. There is one other matter to which I would like to refer before I proceed to consider the points argued (I) [1961] l S. C. R. 809. 1020 SUPREME COURT REPORTS [1964] 1963 at the bar. I have said that the tea estate of the peti- tioner Company was in West Bengal and not in Khyerbari Tea Assam. Its practice was to book its tea from a Co. Ltd. & Anr.
railway station in West Bengal for carriage to Calcutta v. for sale there. Now what the railway did was to The State of carry the tea to another of its stations called Dhubri Assam Ghat on the river Brahmputra situate in Assam. The railway had arranged for the trans-shipment Sarkar J. of the tea there from its wagons to steamers belonging to a carrier company atDhubri Ghat and these steamers carried the tea by inland waterways to Calcutta. The steamers in the course of their journey passed through one and a half mile or two miles of Assam waterways, about 572 miles of Pakistan waterways and 165 miles of West Bengal waterways, before reaching Calcutta. The tax was levied in respect of the carriage of the tea for about two miles on Assam waterways. At the hearing in this Court learned counsel appearing in support of the petition really attacked only two sections of the impugned Act, namely, ss. 3 and 34. Section 3, which is the charging section, is in these terms: S. 3.
(I) Subject to the provisions of this Act, there shall be levied a tax on (a) manufactured tea and (b) Jute in bales carried by motor vehicle, cart, trolley, boat, animal and human agency or any other means except railways and airways in such manner and in respect of such period and at such rate as specified in the Schedule. (2) Such tax levied on manufactured tea shall be realised from the producer and that levied on jute shall be realised from the dealer: Provided that where tea is sold at the factory premises, the producer shall be liable for realisa- tion of tax from the purchaser with effect from such date as the Government, by notification, appoint, for the carriage of such tea as provided in this section and the producer shall be liable for the payment of such tax notwithstanding ·- 5 S. C. R. SUPREME COURT REPORTS 1021 the fact that the tea is not carried by the pro- ducer: 1963 x x x x Khyerbari Tea X Co. Ltd. & Anr.
The first contention was that the section was beyond the legislative competence of the State Legisla- ture. It is not in dispute that the Act had been passed under the powers contained in Item 56 of List II in the Seventh Schedule to the Constitution which authorised a State Legislature to pass laws imposing "taxes on goods and passengers carried on roads or on inland waterways". It was said that under this entry a tax could be levied only on the person who carried the goods but the proviso to s. 3(2) showed that even where a producer was not himself carry- ing the tea, he was liable for the tax and, therefore, the Act levied the tax not really on goods carried by road or waterways and was for that reason, ultra vires the State Legislature and void. It may be that there is nothing in s. 3 imposing directly a tax on the purchaser of the tea even when he is the person carrying it.
It seems to me however that under Item 56 of List II it was competent for the legislature to provide for the tax being realised from the producer m the way it has been done in the Act. It is well- known that the entries in the legislative lists have to be read with all possible width and amplitude. An entry authorising the levy of a tax of a particular kind would justify that levy in the manner best suited for collecting it. The purchasers of tea would be mostly parties in Calcutta. The State of Assam may find it difficult to realise the tax from them. It may, therefore, legitimately provide that the tax may be realised from the producer even where he does not carry the tea for otherwise the tax may be evaded. Then again, under s. 3 tax is leviable only when tea has been carried by road or inland water- ways.
It is clear, however, that it was the action of the producer, namely, the sale by him, which alone caused the carriage of the tea; without the sale there would have been no occasion for the purchaser to carry the tea. If he did not actually v. The State of Assam Sarkar J. 1022. SUPREME COURT REPORTS [1964] carry the tea himself, he certainly brought about its carriage. Therefore, he might under Item 56 Khyerbari Tea of List II be made liable for the carriage of the tea Co. Ltd. & Anr. just as much as tht. : person actually carr;:ing it. I v. am unable to see why the words of Item 56 of List 1963 The State of II would not cover both. Assam Sarkar J. I do not think it necessary to decide the question raised at the bar whether the producer mentioned in sub-s. (2) of s. 3 refers only to a producer who himself carries the tea produced by him. Even if the word 'producer' in that sub-section includes one who does not himself carry t
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