9911796707
TMI Blog1963 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... he two writ petitions Nos. 916 of 1961 and 918 of 1961 filed by the appellants, Rai Ramkrishna and Others and M/s. Road Transport Co., Dhanbad and Others, respectively in the High Court at Patna along with 18 others under articles 226 and 227 of the Constitution had challenged the validity of the whole of the Act. The High Court has held that the Act is valid both in its prospective as well as its retrospective operation. In their appeals brought to this court by special leave against the said judgment, the appellants do not challenge the conclusion of the High Court that the Act is valid in so far as its prospective operation is concerned ; they have confined their appeals to its retrospective operation. Eighteen other petitioners who had joined the appellants in the High Court have accepted the decision of the High Court and have not come to this court in appeal. Before dealing with the points raised by the appellants, it is necessary to set out briefly the background of the present dispute : On March 30, 1950, the Bihar Legislature passed the Bihar Finance Act, 1950 (Bihar Act XVII of 1950) ; this Act levied a tax on passengers and goods carried by public service motor vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Act of 1950 had come into force. That, in brief, is the background of the present legislation. The appellants and the other petitioners who had joined by filing several petitions in the Patna High Court had challenged the validity of the Act on several grounds. The High Court has rejected all these grounds and has taken the view that the Act in its entirety is valid. The High Court has found that the provisions of the Act no doubt take it within the purview of Part XIII of the Constitution ; but it has held that the Act has been passed with the previous sanction of the President and the restrictions imposed by it are otherwise reasonable, and so it is saved under article 304(b) of the Constitution. The plea made by the respondent that the taxing provisions of the Act were compensatory in character and were, therefore, valid, was rejected by the High Court. The High Court held that the principle that a taxing statute which levies a compensatory or regulatory tax is not invalid, which has been laid down by the majority decision of this court in the case of Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, was not applicable to the provisions of the Act. The argument t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 12, and every owner of the vehicle or carrier was authorised to recover such tax from such passenger or person. In other words, whereas before the passing of the amending Act, the owners of public vehicles may have been entitled to raise their fares or freight charges in order to enable them to pay the tax levied under section of the Act of 1950, after the amending Act was passed, they became entitled to recover the specific amounts from passengers and owners of goods by way of tax payable by them under the said section. After the Act as thus amended was struck down by this court on December 12, 1960, an Ordinance was passed and its provisions were included in the impugned Act which ultimately became the law in Bihar on September 25, 1961. The Act consists of 26 sections. Section 1(3) expressly provides that the Act shall be deemed to have come into force on the first day of April, 1950. Section 2 defines, inter alia, goods, owner, passenger and public service motor vehicle. Section 3 is the charging section. Section 3(1) provides that on and from the date on which this Act is deemed to have come into force under sub-section (3) of section 1, there shall be levied and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 18 deals with offences and penalties. Section 19 deals with the compounding of offences. Section 20 prescribes the usual bar to certain proceedings, and section 21 refers to the limitation of certain suits and prosecutions. Section 22 confers power on the State Government to make rules. Section 23 is important. In effect, it provides that the acts done under Bihar Act XVII of 1950 shall be deemed to have been done under this Act. It reads thus : " Notwithstanding any judgment, decree or order of any court, tribunal or authority--- (a) any amount paid, collected or recovered or purported to have been paid, collected or recovered as tax or penalty under the provisions of Part III of the Bihar Finance Act, 1950 (Bihar Act XVII of 1950), as amended from time to time (hereinafter referred to as the " said Act "), or the rules made thereunder during the period beginning with the first day of April, 1950, and ending on the thirty-first day of July, 1961, shall be deemed to have been validly levied, paid, collected, or recovered under the provisions of this Act ; and (b) any proceeding commenced or purported to have been commenced for the assessment, collection or recovery of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be saved either under article 304(b) or article 19(5) and (6). It is these two narrow points which call for our decision in the present appeals. In dealing with this controversy, it is necessary to bear in mind some points on which there is no dispute. The entries in the Seventh Schedule conferring legislative power on the legislatures in question must receive the widest denotation. This position is not disputed. Entry 56 of the Second List refers to taxes on goods and passengers carried by road or on inland waterways. It is clear that the State Legislatures are authorised to levy taxes on goods and passengers by this entry. It is not on all goods and passengers that taxes can be imposed under this entry ; it is on goods and passengers carried by road or on inland waterways that taxes can be imposed. The expression " carried by road or on inland waterways " is an adjectival clause qualifying goods and passengers, that is to say, it is goods and passengers of the said description that have to be taxed under this entry. Nevertheless, it is obvious that the goods as such cannot pay taxes, and so, taxes levied on goods have to be recovered from some persons, and these persons must h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y it as to take it outside the limits of the entry which gives the legislature competence to enact the law ; or, it may be open to it to contend in the alternative that the restrictions imposed by the Act are so unreasonable that they should be struck down on the ground that they contravene his fundamental rights guaranteed under article 19(1)(f) and (g). This position cannot be, and has not been, disputed by Mr. Sastri who appears for the respondent : vide State of West Bengal v. Subodh Gopal Bose and Express Newspapers (Private) Ltd. v. Union of India. In view of the recent decisions of this court Mr. Sastri also concedes that taxing statutes are not beyond the pale of the constitutional limitations prescribed by articles 19 and 14, and he also concedes that the test of reasonableness prescribed by article 304(b) is justiciable. It is, of course, true that the power of taxing the people and their property is an essential attribute of the Government and Government may legitimately exercise the said power by reference to the objects to which it is applicable to the utmost extent to which Government thinks it expedient to do so. The objects to be taxed so long as they happen to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is that the tax is paid by the passenger to the owner and by the owner to the State ; and both these provisions are retroactive. However, in respect of passengers carried by the owner between April 1, 1950, and the date of the Act, how can the owner recover the tax he is now bound to pay to the State, asks Mr. Setalvad ? Prima facie, the argument appears to be attractive, but a closer examination would show that the difficulty which the owner may experience in recovering the tax from the passengers will not necessarily alter the character of the tax. If the scheme of section 3 for the levy and recovery of the tax is valid under entry 56 of List II so far as future recoveries are concerned, it is not easy to see how it can be said that the character of the tax is radically changed in the present circumstances, because it would be very difficult, if not impossible, for the owner to recover the tax from the passengers whom he has carried in the past. The tax recovered retrospectively like the one which will be recovered prospectively still continues to be a tax on passengers and it adopts the same machinery for the recovery of the tax both as to the past as well as to the fut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to the legislative power conferred on the appropriate legislatures by the respective entries in the Seventh Schedule of our Constitution, and so it is unnecessary for us to consider any argument based on the said distinction in the present case. However, this argument was urged before this court in challenging the validity of some Acts by reference to their retrospective operation. In Tata Iron and Steel Co. Ltd. v. State of Bihar, where this court was called upon to examine the validity of the Bihar Sales Tax Act, 1947, as amended by the Amendment Act of 1948, one of the points urged before this court was that whereas sales tax is an indirect tax on the consumer, inasmuch as the idea in imposing the said tax on the seller is that he should pass it on to his purchaser and collect it from him, the retrospective operation of the Act made the imposition of the said tax a direct tax on the seller and so it was invalid. This argument was rejected. A similar objection against the retrospective operation of the Madras General Sales Tax Act, 1939, as adapted to Andhra by the Sales Tax Laws Validation Act, 1956, was rejected in the case of M. P. V. Sundararamier Co. v. State of Andhra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its passage is clearly valid. The longest period of retroactivity yet sustained has been three years. In general, income taxes are valid although retroactive, if they affect prior but recent transactions. " Basing himself on those observations, Mr. Setalvad contends that since the period covered by the retroactive operation of the Act is between the 1st April, 1950, and the 25th September, 1961, it should be held that the restrictions imposed by such retroactive operation are unreasonable, and so the Act should be struck down in regard to its retrospective operation. We do not think that such a mechanical test can be applied in determining the validity of the retrospective operation of the Act. It is conceivable that cases may arise in which the retrospective operation of a taxing or other statute may introduce such an element of unreasonableness that the restrictions imposed by it may be open to serious challenge as unconstitutional ; but the test of the length of time covered by the retrospective operation cannot, by itself, necessarily be a decisive test. We may have a statute whose retrospective operation covers a comparatively short period and yet it is possible that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etrospective operation should be struck down. Similarly, it is urged that the said retrospective operation should be struck down for the period between December 12, 1960, when this court struck down the earlier Act and 1st August, 1961, when Ordinance II of 1961 was issued. We do not think it would be appropriate in the present case to examine the validity of the retrospective operation by reference to particular periods of time covered by it in the manner suggested by Mr. Setalvad ; and so we are not prepared to accept his argument that the retrospective operation of the Act is invalid so far as the period between December 12, 1960, when the earlier Act was struck down by this court, and the 1st August, 1961, when the Ordinance was issued, is concerned. It would be realised that in such a situation there would always be some time-lag between the date when a particular Act is struck down as unconstitutional, and the date on which a retrospective validating Act is passed. Besides, the circumstances under which the orders of injunction were passed by the trial court cannot be altogether ignored. Mr. Sastri contends that the two suits filed by the appellants and the passengers and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not think it worthwhile to come to this court against the decision of the High Court. Apart from that, it is not unlikely that other bus owners may have made similar payments and the appellants have, therefore, come to this court because they have made no payments and so their cases do not fall under section 23 (a), or, may be, their cases fall under section 23(b). The position, therefore, is that the retrospective operation of section 23(a) and (b) cover respectively cases of payments actually made under the provisions of the earlier Act, and cases pending inquiry, and the retrospective operation of section 3(3) read with section 1(3) only applies to cases of persons who did not pay the tax during the whole of the period, or whose cases were not pending ; and it is this limited class of persons whose interests are represented by the appellants before us. Having regard to the somewhat unusual circumstances which furnish the background for the enactment of the impugned statute, we do not think that we could accept Mr. Setalvad's argument that the retrospective operation of the Act imposes restrictions on the appellants which contravene the provisions of article 19(1)(f) and (g). In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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