2004 (4) TMI 544 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether condition No. 1 in the tender notice is violative of Article 19(1)(g) of the Constitution.
2. Whether condition No. 1 in the tender notice is hit by Articles 301 and 304 of the Constitution.

Issue-Wise Detailed Analysis:

1. Violation of Article 19(1)(g):
The petitioners argued that the mandatory condition of registration under the Bihar Finance Act for manufacturing units located outside Bihar imposes unreasonable restrictions on their right to trade, thus violating Article 19(1)(g) of the Constitution. The court noted that Article 19(1)(g) guarantees the right to practice any profession or to carry on any occupation, trade, or business, but this right is not absolute and can be subjected to reasonable restrictions in the interests of the general public as per Article 19(6). The court emphasized that "in the interest of general public" can mean the interest of a smaller group and not necessarily the entire nation. It was concluded that the restriction imposed by condition No. 1 does not amount to a total prohibition and is reasonable, aiming to protect local industries and ensure uniform tax compliance. Therefore, the condition does not violate Article 19(1)(g).

2. Violation of Articles 301 and 304:
The petitioners contended that the condition impedes the free flow of inter-State trade and commerce, violating Article 301, and is not saved by Article 304(a), which allows non-discriminatory taxes on imported goods. The court explained that Article 301 ensures the freedom of trade, commerce, and intercourse throughout India, subject to other provisions in Part XIII of the Constitution. Article 304(a) permits the imposition of non-discriminatory taxes on goods imported from other States. The court referenced the Supreme Court's judgment in Video Electronics Pvt. Ltd. v. State of Punjab, emphasizing that sales tax generally does not directly impede trade and commerce and is excluded from the ambit of Article 301 unless it directly restricts the free flow of trade. The court found that the condition ensures a uniform tax rate for goods manufactured inside and outside Bihar, preventing discrimination against local manufacturers. Thus, the condition does not violate Articles 301 and 304(a).

Conclusion:
The court concluded that the condition in the tender notice is not violative of Articles 19(1)(g), 301, or 304(a) of the Constitution. It serves the public interest by protecting local industries and ensuring uniform tax compliance. The writ application was dismissed, affirming that the condition is reasonable and lawful.