1972 (9) TMI 116 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Bihar Ordinance No. 107 of 1971.
2. Whether the promulgation of successive ordinances was a bona fide act or a colorable exercise of power.
3. Whether the additional sales tax imposed by the Ordinance impeded free trade under Article 301 of the Constitution.
4. Whether the Ordinances were invalid due to lack of previous sanction from the President.

Issue-wise Detailed Analysis:

1. Validity of Bihar Ordinance No. 107 of 1971:
The petitioners challenged the virus of Ordinance No. 107 of 1971 and sought to quash the notice under annexure 2, which directed them to pay additional sales tax. The Bihar Sales Tax Act, 1959, initially exempted biri from sales tax. However, the Bihar Sales Tax (Fourth Amendment) Ordinance, 1971, introduced section 3B, imposing an additional tax on dealers. The court found that the petitioners were liable to pay additional tax under the Act and had wilfully failed to apply for registration under section 9 of the Act.

2. Whether the promulgation of successive ordinances was a bona fide act or a colorable exercise of power:
The petitioners argued that the successive promulgation of Ordinances by the Governor was not bona fide but a colorable exercise of power under Article 213 of the Constitution. The court held that it is not within the competence of courts to investigate whether the circumstances existed which justified the Governor in promulgating the Ordinances. The court relied on precedents, including the Federal Court's decision in Lakhi Narayan Das v. The Province of Bihar, which established that the Governor's satisfaction regarding the necessity of an Ordinance is not justiciable.

3. Whether the additional sales tax imposed by the Ordinance impeded free trade under Article 301 of the Constitution:
The petitioners contended that the additional sales tax impeded free trade, commerce, and intercourse, violating Article 301 of the Constitution. The court referred to several Supreme Court decisions, including Atiabari Tea Co. Ltd. v. The State of Assam and Automobile Transport Ltd. v. The State of Rajasthan, which clarified that only taxes that directly and immediately restrict trade fall within the purview of Article 301. The court concluded that the additional tax did not directly impede the free movement or transport of goods and was not violative of Article 301.

4. Whether the Ordinances were invalid due to lack of previous sanction from the President:
The petitioners argued that the Ordinances were invalid as they were promulgated without the previous sanction of the President, as required under the proviso to Article 213(1) read with the proviso to clause (b) of Article 304 of the Constitution. The court held that the imposition of additional sales tax did not infringe the right to freedom of trade, commerce, or intercourse under Article 301, and therefore, previous instructions from the President were not necessary for the promulgation of the Ordinances.

Conclusion:
The writ application was dismissed. The court upheld the validity of Bihar Ordinance No. 107 of 1971 and subsequent Ordinances, finding no merit in the contentions regarding the bona fides of the Governor's actions or the alleged infringement of Article 301. The petitioners were liable to pay additional sales tax from the date the Ordinance came into force until 31st July 1972. However, a subsequent notification exempted the sale of biris from additional sales tax from 1st August 1972 onwards.