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TMI Blog1995 (8) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... der article 304(b) of the Constitution. 2.. Yet another contention raised is that there is no legislative competence to pass the impugned Act and the entry 52 of List II of the Seventh Schedule is made exclusively to pass any legislation to augment the income for the local authorities and by the definition of the "local authority" given under section 2(i) of the Act the entire State is brought under its purview and, hence, it is a colourable exercise of. The contention is that the legislative power given under entry 52 of List-II of the Seventh Schedule could have been made exclusively for raising income of the local authority. 3.. The first respondent-State filed a counter-affidavit stating that the State was losing substantial income as a result of the purchase of motor vehicles from outside the State and the legislation was brought about to compensate the loss of revenue caused by such purchasers who avoided payment of sales tax which would be paid by them if the vehicles had been purchased within the State. It is contended that levy of tax under the Entry Tax Act is compensatory or regulatory in nature and the levy of tax is made for entry of vehicle into local area. The pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought about by virtue of entry 52 of List II. Entry 52 of List II of the Seventh Schedule reads as follows: "52. Taxes on the entry of goods into a local area for consumption, use or sale therein". It is contended that the definition of "local area" given under section 2(i) of the Act covers the entire State and hence this Act is not intended to augment resource for the local authorities and, therefore, it lacks legislative competence. But, it may be noticed that under entry 52 of List II, there is no indication that the State is given power to pass legislation only for the purpose of raising revenue for the local authorities. The words used in entry 52 List II are clear that the State can impose tax for entry of goods into local area. As the State Legislature was competent to pass the Act the question of motive with which the tax was imposed is immaterial. It has been observed by K.K. Mathew, J. in G.K. Krishnan v. State of Tamil Nadu AIR 1975 SC 583 thus: "...there can be no plea of a colourable exercise of power to tax if the Government had power to impose the tax and the fact that the imposition of the tax was for the purpose of eliminating competition would not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the court is considering question about validity of the Act itself". 11.. From the terms used in the entry it cannot be heard to say that there was no legislative competence. We do not think that the levy of tax upon goods entering into local area is discriminatory or bad. There is no case for the petitioners that the Legislature had no authority to impose the tax in question. 12.. The next question is whether the impugned legislation is violative of articles 301 and 304 of the Constitution. Article 301 imposes general limitation on legislative power in order to ensure freedom of trade, commerce and intercourse throughout India. This limitation of power is regularised under article 302 for making legislation in the public interest. However, article 303 further says that such legislation in respect of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule shall not be discriminatory between one State and another. 13.. Article 304(b) of the Constitution enables the State Legislature to impose a reasonable restriction on the freedom of trade, commerce or intercourse as may be required in public interest provided no bill or amendment for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 301 and was not saved by article 304(b). By a majority of 4 of 1, the Supreme Court upheld the challenge and declared the Act to be void. The majority said that it would be reasonable and proper to hold that restrictions impede the free flow or movement of trade and that taxes may and do amount to restrictions. In a subsequent decision a larger Bench was constituted to consider this question. The Bench considered this question once again. Automobiles Transport (Rajastan) Ltd. v. State of Rajastan (1963) 1 SCR 491; AIR 1962 SC 1406. The appellants in that case impugned the Rajasthan Motor Vehicles Taxation Act, 1951 as violative of article 301. The Supreme Court by a majority of 4 to 3 held that the Act was valid and dismissed the appeal filed against the decision of the Rajasthan High Court. This case practically overruled the decision in Atiabari case AIR 1961 SC 232. The interpretation which was accepted by the majority in Atiabari case [1961] SCR 809; AIR 1961 SC 232 was explained and was partly accepted and held that regulatory measures or measures imposing compensatory tax do not come within the purview of restrictions contemplated in article 301 and that such measures nee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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