1986 (11) TMI 365 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of Notification No. S.O. 1432 dated 28th December 1985.
2. Violation of Articles 301 and 304 of the Constitution of India.
3. Competence of the State Legislature under Article 269(1) and Entry 92B of List I of the Seventh Schedule.
4. Judicial conflict within the Court regarding the requirement of a permit for inter-State trade.

Detailed Analysis:

1. Constitutionality of Notification No. S.O. 1432 dated 28th December 1985:
The primary issue for adjudication was whether Notification No. S.O. 1432, which mandated a declaration form to be carried on goods carriers or vessels transporting goods through Bihar during inter-State trade, violated the freedom of trade guaranteed by Articles 301 and 304 of the Constitution of India. The petitioner argued that this notification imposed unwarranted restrictions on inter-State trade, making it unconstitutional. The court found that the notification and the forms prescribed therein imposed harsh and stringent conditions on the inter-State movement of goods, thereby impeding the free flow of trade and commerce across State borders.

2. Violation of Articles 301 and 304 of the Constitution of India:
The court held that the notification was violative of Articles 301 and 304, which guarantee the freedom of trade, commerce, and intercourse throughout the territory of India. The notification required transporters to carry detailed forms (XXVIII-A and XXVIII-B) filled out before the transport of goods, which was deemed impractical and restrictive. The court referenced the precedent set in Hansraj Bagrecha v. State of Bihar, which struck down similar provisions under the Bihar Sales Tax Act for imposing restrictions on inter-State trade.

3. Competence of the State Legislature under Article 269(1) and Entry 92B of List I of the Seventh Schedule:
The petitioner initially argued that the notification was beyond the competence of the State Legislature under Article 269(1) and Entry 92B of List I of the Seventh Schedule, which pertain to the imposition of taxes on inter-State trade. However, the court dismissed this argument, clarifying that the notification did not levy any tax but merely imposed a penalty for non-compliance with the declaration form requirement. The court emphasized that the penalty was a sanction for enforcement and not a tax on goods in inter-State trade.

4. Judicial conflict within the Court regarding the requirement of a permit for inter-State trade:
The case highlighted a minor cleavage of judicial opinion within the court regarding the necessity of carrying a permit for inter-State trade. Previous judgments had conflicting views on whether such permits were required. The court resolved this conflict by overruling the decision in Madan Mohan Tiwary v. State of Bihar, which upheld the requirement of a permit, and affirming the earlier view in Bhagwan Prasad v. Officer-in-Charge, Hathidih Check Post, Mokameh, which did not mandate such permits for inter-State trade.

Conclusion:
The court concluded that Notification No. S.O. 1432 dated 28th December 1985, prescribing the declaration form to be carried on goods carriers or vessels for transporting goods through Bihar during inter-State trade, was violative of Articles 301 and 304 of the Constitution of India. Consequently, the notification was quashed, and the impugned orders imposing penalties and demand notices were set aside. The writ petitions were allowed, with the parties bearing their own costs due to the complex legal issues and judicial conflict involved.