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TMI Blog1973 (12) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... t section 8(2)(b) does not offend articles 301 and 303(1) and is valid. X X X X Extracts X X X X X X X X Extracts X X X X ..... the articles enacted for that purpose. As framed, the article sought to put restraints upon the legislative power of the States; but the language in which the article and particularly the explanation was couched, instead of clarifying the intention of the Constituent Assembly, only darkened it. The scope of article 286 was considered by this court in State of Bombay v. United Motors (India) Ltd. [1953] 4 S.T.C. 133 (S.C.); [1953] S.C.R. 1069., in an appeal to this court in which the validity of the provisions of the Bombay Sales Tax Act, 1952, was challenged. The majority of the Judges who heard the appeal held that article 286(1)(a) prohibited taxation of sales or purchases involving inter-State elements by all States except the State in which the goods were actually delivered for the purpose of consumption therein and that the effect of the explanation thereto was to convert inter- State transactions into intra-State transactions and to remove them from the operation of clause (2). This interpretation of article 286 was not accepted by a larger Bench of this Court which heard and decided Bengal Immunity Company Limited v. The State of Bihar and Others [1955] 6 S.T.C. 446 (S.C.); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to levy and collection of inter-State sales tax. By section 8, every dealer was made liable to pay tax on all sales effected by him in the course of inter-State trade or commerce. The material part of section 8 provides: "8. (1) Every dealer, who in the course of inter-State trade or commerce- (a) sells to the Government any goods; or (b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3); shall be liable to pay tax under this Act, which shall be three per cent of his turnover. (2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1)- (a) in the case of declared goods, shall be calculated at the rate applicable to the sale or purchase of such goods inside the appropriate State and (b) in the case of goods other than declared goods, shall be calculated at the rate of ten per cent or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher; and for the purpose of making any such calculation any such dealer shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly and immediately restrict or impede the free flow or movement of trade." In Automobile Transport (Rajasthan) Ltd. v. The State of Rajasthan and Others [1963] Supp. 2 S.C.R. 435 (sic); [1963] 1 S.C.R. 491., the court practically agreed with the view of the majority in Atiabari Tea Co. Ltd.'s case [1961] 1 S.C.R. 809., but added a clarification that a regulatory measure or a measure imposing a compensatory tax for the using of trading facilities would not come within the purview of restrictions contemplated by article 301. Normally, a tax on sale of goods does not directly interfere with the free flow or movement of trade. But a tax can be such that because of its rate or other features, it might operate to impede the free movement of goods. The majority judgment delivered by Shah, J., in State of Madras v. N.K. Nataraja Mudaliar [1968] 22 S.T.C. 376 (S.C.); [1968] 3 S.C.R. 829., proceeds on the basis that tax under the Central Sales Tax Act is in its essence a tax which encumbers movement of trade and commerce, but the tax imposed in the case in question was saved by the other provisions of Part XIII. The court then said that the exercise of the power to tax would normally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her words, it was to discourage inter-State sales to unregistered dealers that Parliament provided a high rate of tax, namely 10 per cent. But even that might not serve the purpose if the rate applicable to intra-State sales of such goods was more than 10 per cent. The rate of 10 per cent would then be favourable and they would be at an advantage compared to local consumers. It is because of this that Parliament provided, as a matter of legislative policy, that the rate of tax shall be 10 per cent or the rate applicable to intra-State sales whichever is higher. If prevention of evasion of tax is a measure in the public interest, there can be no doubt that Parliament is competent to make a provision for that purpose under article 302, even if the provision would impose restrictions on the inter-State trade or commerce. But quite apart from this, the majority judgment in State of Madras v. N.K. Nataraja Mudaliar [1968] 22 S.T.C. 376 (S.C.); [1968] 3 S.C.R. 829., has categorically stated that "the exercise of the power to tax may normally be presumed to be in the public interest". We do not think it necessary to go into the question whether it is open to the court to conduct an enqu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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