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TMI Blog1972 (9) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 3 of the Bihar Sales Tax Act, 1959, hereinafter to be called "the Act", every dealer was made liable to pay general sales tax, special sales tax as also purchase tax subject to the other provisions of the Act. Under sub-section (3) of section 4 of the Act, the State Government was authorised by notification to exempt from the levy of general sales tax or special sales tax or both, sales of any goods or class or description of goods, sales of any goods or class or description of goods to or by any class of dealers, and any sale or category or description of sales. By notification dated 1st July, 1959, issued by the Governor of Bihar in exercise of the powers conferred by clause (a) of subsection (3) of section 4 of the Act, exemptions were made in respect of sales of goods specified in the schedule to the notification. Under the notification biri was one of the goods in respect of which exemption was made both with regard to general and special sales tax. It appears that the notification dated 1st July, 1959, was superseded and substituted by Notification No. STGL/68-12570 F.T. dated 27th December, 1968, which was published in the Bihar Gazette (Extraordinary) on 28th Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants' Association (petitioner No. 1), hereinafter to be called "the Association% and asked them to get themselves registered under the Act. They were further informed by him that they would be liable to pay a sum of 25 paise on the sale of every hundred rupees of biris. On getting that information the secretary of the association wrote a letter to the Superintendent, Commercial Taxes, Chaibassa, making enquiries about the matter and asked for copies of the Ordinance, notifications, etc. A copy of that letter has been marked as annexure 1 to the application. It is alleged that no reply to that letter was received by petitioner No. 1. Subsequently petitioners 2 and 3 and other merchants of biri, who are members of petitioner No. 1, received from the Superintendent of Commercial Taxes, Chaibassa Circle, Chaibassa, a notice dated 19th February, 1972, under section 14 and various other sections of the Act on 22nd February, 1972. A copy of the notice which was sent to respondent No. 2 has been made annexure 2 to the application. It is said that petitioner No. 1 thereupon wrote to the Financial Commissioner and ex-officio Secretary to Government of Bihar on 28th February, 1972, protesting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th April, 1972. The Bihar Legislative Council was prorogued on 3rd May, 1972. It appears that Ordinance No. 28 of 1972 was promulgated by the Governor on 22nd April, 1972, and was published in the Bihar Gazette dated 25th April, 1972. By this Ordinance, Ordinance No. 107 of 1971 was repealed. On 29th April, 1972, the Bihar Legislative Assembly was summoned to meet on 17th May, 1972. The session of the Bihar Legislative Assembly commenced from 17th May, 1972, and that of the Bihar Legislative Council commenced from 24th May, 1972. The Assembly was adjourned on 29th June, 1972, and the Council was adjourned on 30th June, 1972. The Bihar Legislative Assembly was prorogued on 30th June, 1972, and the Bihar Legislative Council was prorogued on 5th July, 1972 (these dates have also been supplied by Mr. Ghose and accepted on behalf of the State). Ordinance No. 77 of 1972 was promulgated by the Governor on 30th June, 1972, and it was published in the Bihar Gazette dated 3rd July, 1972. By this Ordinance, Ordinance No. 28 of 1972 was repealed. It is clear that before the expiry of Ordinance No. 107 of 1971 another Ordinance, namely, Ordinance No. 28 of 1972 was promulgated by the Governor w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bihar and Orissa General Clauses Act. The Bihar Legislative Assembly having been prorogued on 30th June, 1972, and the Bihar Legislative Council having been prorogued subsequently on 5th July, 1972, on the midnight of 29th June, 1972, both the Houses of the Legislature were in session. That being the position, it should be held that Ordinance No. 77 of 1972 came into operation at a time when both the Houses of the Legislature were in session. There is absolutely no merit in this contention. Section 6 of the Bihar and Orissa General Clauses Act reads thus: "(1) Where any Bihar and Orissa Act is not expressed to come into operation on a particular day, then it shall come into operation on the day on which the assent thereto of the Governor-General is first published in the Official Gazette in pursuance of section 81 of the Government of India Act, 1915. (1a) Where any Bihar Act is not expressed to come into operation on a particular day,- (i) in the case of a Bihar Act made before the commencement of the Constitution, it shall come into operation, if it is an Act of the Legislature, on the day on which the assent thereto of the Governor, the GovernorGeneral or His Majesty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resident." The preamble of Ordinance No. 107 of 1971 reads as under: "Whereas the Legislature of the State of Bihar is not in session And whereas the Governor of Bihar is satisfied that circumstances exist which render it necessary for him to take immediate action to amend the Bihar Sales Tax Act, 1959 (Bihar Act 19 of 1959), in the manner hereinafter appearing; Now, therefore, in exercise of the powers conferred by clause (1) of article 213 of the Constitution of India, the Governor is pleased to promulgate the following Ordinance." The preambles of the other Ordinances, namely, Ordinance No. 28 of 1972 and Ordinance No. 77 of 1972, are in similar terms. It was submitted by the learned Advocate-General on behalf of the State that it is not within the competence of courts to investigate whether the circumstances, as contemplated by article 213(1) of the Constitution, existed which could justify the Governor in promulgating the Ordinances. The court is not competent to go into that question and to determine whether the circumstances existed for promulgating the Ordinances by applying the objective test. The learned Advocate-General further submitted that the court cannot also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy Council in King Emperor v. Benoarilal Sarma(1945) 72 I.A. 57; A.I.R. 1945 P.C. 48; 46 Cr. L.J. 589. that whether an emergency existed at the time an Ordinance was made and promulgated was a matter of which the Governor-General was the sole judge. His view that there was an emergency justified and authorised the Ordinance. In this case, their Lordships followed an earlier decision of the Privy Council, Bhagat Singh v. King Emperor(1931) 58 I.A. 169; A.I.R. 1931 P.C. 111; 32 Cr. L.J. 727. In my view, these cases apply with equal force to section 88(1), Government of India Act, and, therefore, whether circumstances existed requiring immediate action was a matter upon which the Governor was the sole judge." The learned Chief justice further observed as follows: "It was contended however that even if in ordinary cases the court could not question the satisfaction of the Governor, nevertheless it could do so if the Governor himself had stated his reasons. If the matter is one for the Governor and the Governor alone, I do not think that this court could hold that there were no sufficient reasons for pro. mulgating an Ordinance even if the Governor stated the reasons which satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances, and the preamble to the Ordinance expresses in clear terms that this condition has been fulfilled. The first contention of the appellants must, therefore, be rejected." Mr. B.C. Ghose when confronted with the two decisions urged that the decisions in the two cases, referred to above, are no longer good law and binding in view of the decision of the Supreme Court in the case of Barium Chemicals Ltd. v. Company Law Board[1966] 36 Comp. Cas. 639 (S.C.); A.I.R. 1967 S.C. 295. In that case, the Secretary of the Company Law Board had issued an order on behalf of the Company Law Board made under section 237(b) of the Companies Act, 1956, appointing four persons as inspectors for investigation of the affairs of the Barium Chemicals Ltd., since its incorporation in the year 1961 and to report to the Company Law Board, inter alia, "all the irregularities and contraventions in respect of the provisions of the Companies Act, 1956, or of any other law for the time being in force and the person or persons responsible for such irregularities and contraventions". The order of the Board was challenged on certain grounds, one of the grounds being that the order was made mala fide and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an opinion, the existence of the circumstances, if questioned, has to be proved at least prima facie. It is not sufficient to assert that the circumstances exist and give no clue to what they are because the circumstances must be such as to lead to conclusions of certain definiteness. The conclusions must relate to an intent to defraud, a fraudulent or unlawful purpose, fraud or misconduct or the withholding of information of a particular kind." Shelat, J., in paragraph 60 of the judgment observed as follows: "Though an order passed in exercise of power under a statute cannot be challenged on the ground of propriety or sufficiency, it is liable to be quashed on the ground of mala fides, dishonesty or corrupt purpose. Even if it is passed in good faith and with the best of intention to further the purpose of the legislation, which confers the powers, since the authority has to act in accordance with and within the limits of that legislation, its order can also be challenged if it is beyond those limits or is passed on grounds extraneous to the legislation or if there are no grounds at all for passing it or if the grounds are such that no one can reasonably arrive at the opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Barium Chemicals Ltd.[1966] 36 Comp. Cas. 639 (S.C.); A.I.R. 1967 S.C. 295. has not impliedly overruled the decision of the Federal Court in the case reported in Lakhi Narayan Das v. The Province of BiharA.I.R. 1950 F.C. 59., and it must be held that it is not open to the court to go into the question whether the circumstances existed or not necessitating promulgation of an Ordinance. As a court is not concerned with the motives of a Legislature in passing an enactment, the court is not concerned with the motives of a Governor in making and promulgating an Ordinance. For the foregoing reasons, the contention which has been raised by Mr. Ghose must be overruled. 8.. Mr. Ghose also raised a contention to the effect that promulgation of successive Ordinances is nothing but a fraud on the constitutional power of the Governor to promulgate an Ordinance. According to Mr. Ghose, there is a distinction between the expression "fraudulent exercise of power' and the expression "colourable exercise of power". He submitted that a court can go into the question of fraudulent exercise of power. In my opinion, there is no real distinction between the two expressions and both the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be such restrictions as directly and immediately restrict or impede the free flow or movement of trade. Taxes may and do amount to restrictions; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of article 301. The argument that all taxes should be governed by article 301 whether or not their impact on trade is immediate or mediate, direct or remote, adopts, in our opinion, an extreme approach which cannot be upheld. If the said argument is accepted it would mean, for instance, that even a legislative enactment prescribing the minimum wages to industrial employees may fall under Part XIII because in an economic sense an additional wage bill may indirecly affect trade or commerce. We are, therefore, satisfied that in determining the limits of the width and amplitude of the freedom guaranteed by article 301 a rational and workable test to apply would be: Does the impugned restriction operate directly or immediately on trade or its movement?" He further observed as follows: "Our conclusion, therefore, is that when article 301 provides that trade shall be free throughout the territory of India it means that the flow of trade sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulations creating conditions for the free movement of trade, such as, police regulations. provision for services, maintenance of roads, provision for aerodromes, wharfs, etc., with or without compensation." In the case of Andhra Sugars Ltd. v. State of Andhra Pradesh[1968] 21 S.T.C. 212 (S.C.); A.I.R. 1968 S.C. 599., the validity of section 21 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961, was challenged. One of the grounds of attack was that section 21 impeded free trade, commerce and intercourse and offended article 301 of the Constitution. In that case, it was held that section 21 did not impede the free movement or transport of goods and was not violative of article 301. Bachawat, J., in that case observed as follows: "Under section 21, the same rate of tax is levied on purchases of all cane required for use, consumption or sale in a factory. There is no discrimination between cane grown in the State and cane imported from outside. As a matter of fact, under the Act the factory can normally buy only cane grown in the factory zone. A non-discriminatory tax on goods does not offend article 301 unless it directly impedes the free movement or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 3A by providing for the levy of purchase tax imposed a restriction on the freedom of trade, commerce and intercourse and on that account violated the freedom of trade guaranteed by article 301, it could be saved only if it was a legislation of the nature contemplated by article 304(b) and the Bill which was enacted into the Act received the previous assent of the President. It was observed by the Supreme Court as follows: "12. Imposition of tax of the nature of purchase tax does not by itself restrict freedom of trade, commerce or intercourse. Imposition of tax may in certain circumstances impede free flow of trade, commerce or intercourse. But every tax does not have that effect. Imposition of a purchase tax by the State does not by itself infringe the guarantee of freedom under article 301. 13.. The argument that imposition of sales or purchase tax must be regarded in all cases as infringing the guarantee of freedom under article 301 cannot be accepted as correct." Thus, it is well-settled (1) that the freedom of trade declared in article 301 is against the imposition of barriers or obstructions within the State as well as inter-State; (2) that the restrictions or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Under the notification issued under section 42(1) of the Act there has been a ban not on the free movement of biris but on the free movement of biri leaves. The petitioners are not dealers in biri leaves and as such they are not affected by the notification. Secondly, the notification has been issued under section 42 of the Act which has been enacted with the assent of the President. 12.. Mr. Ghose referred to a notification dated 1st January, 1972, under which an excise duty has been levied on unmanufactured tobacco. According to Mr. Ghose, since a regulatory duty of excise has already been imposed by the Central Government, the imposition of additional tax would be an additional burden and would attract the provisions of article 301 of the Constitution. There is no substance in this contention also. I have already expressed the view that the imposition of additional tax does not amount to restriction on freedom of trade, commerce and intercourse and it does not infringe article 301 of the Constitution. Merely because the Central Government has imposed some excise duty on unmanufactured tobacco would not make any change in the legal position. 13.. Now remains to consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnor of Bihar is pleased to exempt from the levy of additional tax the turnover of cotton fabrics, rayon or artificial silk fabrics, woollen fabrics, sugar and tobacco, as defined in the Additional Duties of Excise (Goods of Special Importance) Act, 1957, and hand-loom cloth including pure silk fabrics manufactured in mills and power-looms. 2.. This notification shall come into force with effect from 1st August, 1972." It was fairly conceded on behalf of the State that in view of the decision in Singhbhum Tobacco and Biri Merchants' Association v. The Assistant Superintendent of Sales Tax(1), hand-made biris would come within the definition of "tobacco" as used in the notification and as such the petitioners and other dealers in biris would not be liable to pay additional sales tax with effect from 1st August, 1972. Thus, it is the admitted position that exemptions have been made from the levy of additional sales tax with regard to the sale of biris from 1st August, 1972. Consequently the petitioners and other dealers in biris will not be liable to pay additional sales tax on the sale of biris from 1st August, 1972, till the notification remains in force. Their liability to pay a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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