1960 (9) TMI 94 - SC - VAT and Sales Tax

whether the impugned Act Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act (Assam Act XIII of 1954) infringes the provision of Part XIII of the Constitution with particular reference Art. 301? Held that - On a careful review of the various Articles in my judgment by Part XIII restrictions have been imposed upon the legislative power granted by Arts. 245 246 and 248 and the lists in the seventh schedule to the Parliament and the State Legislatures and those restrictions include burdens of the nature of taxation. Therefore the power to tax commercial intercourse vested by the legislative lists in the Parliament or the State Legislatures is circumscribed by Part XIII of the Constitution and if the exercise of the power does not conform to the requirements of Part XIII it would be regarded as invalid. The Assam Taxation (on Goods carried by Roads or Inland Waters) Act 1954 must be regarded a infringe the guarantee of freedom of trade and commerce under Art. 301 because the Bill moved in the Assembly had not received the assent of the President as required under Art. 304(b) proviso and the Act has not been validated by the assent of the President under Art. 255(c). Appeal allowed.

Issues Involved:
1. Constitutionality of the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, 1954.
2. Violation of Article 301 of the Constitution.
3. Legislative competence of the Assam Legislature.
4. Whether the Act is a duty of excise.
5. Discrimination under Article 14 of the Constitution.
6. Extraterritorial operation of the Act.
7. Compliance with procedural requirements under Article 304(b).

Issue-wise Detailed Analysis:

1. Constitutionality of the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, 1954:
The appellants challenged the constitutionality of the Assam Taxation Act, 1954, arguing that it violated Article 301 of the Constitution by imposing restrictions on the free flow of trade, commerce, and intercourse. The respondents contended that the Act was within the legislative competence of the Assam Legislature under Entry 56 of List II and did not contravene Article 301.

2. Violation of Article 301 of the Constitution:
The appellants argued that the Act imposed fetters on the free flow of trade and commerce, thus violating Article 301. The respondents countered that taxation simpliciter was not within the terms of Article 301 and that the Act was a legitimate exercise of legislative power under Entry 56 of List II. The Court held that Article 301 guarantees freedom from restrictions that directly and immediately impede the free flow of trade, commerce, and intercourse. Taxes that directly affect this freedom would fall within the purview of Article 301.

3. Legislative Competence of the Assam Legislature:
The appellants questioned the legislative competence of the Assam Legislature to enact the Act, arguing that it encroached upon the Union List. The respondents maintained that the Act was within the legislative competence of the Assam Legislature under Entry 56 of List II. The Court concluded that the Act was a taxing statute simpliciter, falling within the ambit of Entry 56 of List II, and thus within the legislative competence of the Assam Legislature.

4. Whether the Act is a Duty of Excise:
The appellants contended that the tax under the Act was, in substance, a duty of excise, which falls within the Union List. The respondents argued that the tax was on the carriage of goods and not on their manufacture or production. The Court held that the tax was on the transport of goods and not on their manufacture or production, distinguishing it from a duty of excise.

5. Discrimination under Article 14 of the Constitution:
The appellants argued that the Act was discriminatory and violated Article 14 of the Constitution. The respondents contended that there was no proof of discrimination. The Court found no evidence of discrimination between persons and things, holding that the Act did not violate Article 14.

6. Extraterritorial Operation of the Act:
The appellants from West Bengal argued that the Act had extraterritorial operation as it taxed goods passing through Assam but produced and consumed in West Bengal. The respondents argued that the Act was applicable to goods traversing Assam's territory, irrespective of their origin or destination. The Court held that the Act did not suffer from the vice of extraterritoriality as it applied to goods traversing Assam's territory.

7. Compliance with Procedural Requirements under Article 304(b):
The appellants argued that the Act did not comply with the procedural requirements of Article 304(b), which mandates the previous sanction of the President for imposing reasonable restrictions on trade, commerce, and intercourse. The respondents did not provide evidence of such sanction. The Court held that the Act was invalid as it did not comply with the procedural requirements of Article 304(b).

Conclusion:
The Court concluded that the Assam Taxation Act, 1954, imposed direct restrictions on the free flow of trade, commerce, and intercourse, thus violating Article 301. The Act was also invalid due to non-compliance with the procedural requirements of Article 304(b). Consequently, the appeals and writ petitions were allowed, and the Act was declared unconstitutional.

← Previous Next →