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PATNA HIGH COURT
K.Venkataswami and Asok Kumar Ganguly JJ.
Bihar Chamber Of Commerce
Versus
State Of Bihar
Civil Writ Jurisdiction Case No. 3224 of 1993 ;
Decided On : MARCH 2, 1995
Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 - Constitutional validity - Legislative competence - Colourable legislation - Violation of rights under Articles 301 and 304 of the Constitution - Absence of prior approval of the President of India under the proviso to Article 304 (b) of the Constitution - Challenge on the ground of Article 14.
Fact of the Case:
The petitioners challenged the constitutional validity of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Ordinance, 1993, which was later converted into the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 (the Act). The main challenge was on the ground that the Act was beyond the legislative competence of the State Legislature and was violative of the freedom of trade and commerce guaranteed under Article 301 of the Constitution.
Finding of the Court:
The Court held that the Act was not beyond the legislative competence of the State Legislature and was not a colourable legislation. However, the Court held that the Act violated the freedom of trade and commerce guaranteed under Article 301 of the Constitution as it was not a reasonable restriction in the public interest and did not satisfy the requirements of Article 304(b) of the Constitution. The Court also held that the Act was violative of Article 14 of the Constitution as it did not prescribe any guideline or criteria for the exercise of power by the executive authority and thus authorized the executive authorities with uncanalized and unguided power to exercise its discretion.
Issues: 1. Whether the Act was beyond the legislative competence of the State Legislature? 2. Whether the Act was a colourable legislation? 3. Whether the Act violated the freedom of trade and commerce guaranteed under Article 301 of the Constitution? 4. Whether the Act satisfied the requirements of Article 304(b) of the Constitution? 5. Whether the Act was violative of Article 14 of the Constitution?
Ratio Decidendi: 1. The Court held that the Act was not beyond the legislative competence of the State Legislature as Entry 52 of List II of the 7th Schedule of the Constitution authorizes the imposition of a tax on the entry of goods into local areas for consumption, use or sale therein. 2. The Court held that the Act was not a colourable legislation as it was not an attempt to do indirectly what could not be done directly. 3. The Court held that the Act violated the freedom of trade and commerce guaranteed under Article 301 of the Constitution as it was not a reasonable restriction in the public interest and did not satisfy the requirements of Article 304(b) of the Constitution. 4. The Court held that the Act did not satisfy the requirements of Article 304(b) of the Constitution as it did not impose restrictions which were reasonable and in the public interest and did not have the prior approval of the President of India. 5. The Court held that the Act was violative of Article 14 of the Constitution as it did not prescribe any guideline or criteria for the exercise of power by the executive authority and thus authorized the executive authorities with uncanalized and unguided power to exercise its discretion.
Final Decision: The Court declared that Sec. 3 of the Act was ultra vires Articles 301 and 304(b) of the Constitution of India. The Court further declared that Proviso to Sec. 3 and the provisions of Sec. 6 of the Act, are ultra vires Article 14 of the Constitution of India. The Respondent State of Bihar, be restrained from enforcing the provisions of the said Act any further.
A.K.GANGULY, J.
1. This batch of writ petitions were heard analogously and most of the questions of law are common in all these cases and as such they are dealt with and decided by this common judgment. There are of course some points which are relevant only in some particular case and those aspects have been dealt with separately.
2. The main challenge is on the constitutional validity of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Ordinance, 1993 which was later on converted into the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act, 1993 (hereinafter referred to as the said Act).
3. In C. W. J. C. No, 10084 of 1993 the petitioners have given details of manner in which they carry on business of the manufacture, production, distribution and sale of cigarette and smoking mixtures which are known as Tobacco Products. Those factual aspects relating to the nature of business carried on by the petitioners company are not disputed and are not very much at issue between the parties.
4. In exercise of powers conferred under Art. 213 of the Constitution of India, an Ordinance was promulgated and published on 22-2-1993 in the Extraordinary Gazette of Bihar. The said Ordinance is numbered as Bihar Ordinance No. 11 of 1993. By a subsequent notification being S. O. No. 37 dated 25-2-1993 the entry tax was introduced in the State of Bihar and the said notification was made effective from the date of its issue, namely, 25-2-1993. After the said Ordinance i.e. Bihar Ordinance No. 11 of 1993 lapsed, there was another Ordinance styled as The Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Second Ordinance, 1993 (Bihar Ordinance No. 19 of 1993). Thereafter the said Second Ordinance became an Act styled as The Bihar Tax in Entry of Goods into Local Areas for Consumption, Use or Sale therein Act, 1993 (Bihar Act 16 of 1993). Sec. 3 of the said Act which is the charging Section is set out below :-
"3. Notwithstanding anything contained in sub-sections (1) and (2) of this Section and subject to the provisions of this Ordinance there shall be levied and collected a tax on the entry of any motor vehicle into any local area for use or sale therein which is liable for registration in the State under the Motor Vehicles Act, 1988. The rate of tax shall be at such rate or rates as may be specified by the State Government by a notification published in the official gazette on the purchase/import value of motor vehicle but not exceeding the rate prescribed for sale tax for such Motor Vehicles under the Bihar Finance Act, 1981. Provided that no tax shall be levied and collected in respect of any motor vehicle which was registered in any other State or Union Territory under the Motor Vehicles Act, 1939 for a period of fifteen months or more before the date on which it is registered in the State under that Act. "
5. Under the Ordinance No. 11 of 1993 the following notification dated 25-2-1993 was issued certifying the rates at which and the conditions subject to which the taxes on entry of Scheduled goods shall be levied and paid on entry in any local areas of the State of Bihar from any other local areas or a place outside the State of Bihar. The said notification No. S. O. 37 dated the 25/02/1993 is also set out below :-
"S. O. 37 dated the 25/02/1993 - In exercise of the powers conferred under Sub-sec. (1) of Sec. 3 of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Ordinance, 1993 (Bihar Ordinance No. 11 of 1993) and proviso to Sub-sec. (i) of Sec. 12 of the Bihar Finance Act, 1981, the Governor of Bihar is pleased to specify the rates at which and the conditions subject to which the tax on entry of scheduled goods shall be levied and paid on Entry in any Local Areas of the State of Bihar from any other Local Areas or place outside the State of Bihar. Sl.No. Description of the Scheduled Goods Rate of
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