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PETITIONER: STATE OF BIHAR & ORS.

       Vs.

RESPONDENT: HARIHAR PRASAD DEBUKA ETC.

DATE OF JUDGMENT21/02/1989

BENCH: SAIKIA, K.N. (J) BENCH: SAIKIA, K.N. (J) OZA, G.L. (J)

CITATION:  1989 AIR 1119            1989 SCR  (1) 796  1989 SCC  (2) 192        JT 1989  Supl.     34  1989 SCALE  (1)464

ACT:     Constitution of India: Articles 301 and 304---Freedom of trade, commerce and intercourse--Not absolute--Is subject to reasonable,  regulatory and compensatory measures in  public interest.     Reasonable  restrictions--Whether  can  be  imposed   by executive action--Reasonability of restrictions--How  deter- mined.     Legislature--Power of--To make laws--Also has  ancillary and incidental power to make that law effective.     Bihar Finance Act, 1981: Section 31(2-a) (As substituted by  Bihar  Finance Act, 1984)--Notification  No.  S.O.  1432 dated  28.12.85-Adopting permits in Form XXVIII A or  XXVIII B--Validity of-Whether violative of Articles 301 and 304.     Words and Phrases:  ’Free Trade’--’Trade and  Business’" Throughout  the Territory of India"--’De Minimis  Non  Curat Lex’-Meaning of.

HEADNOTE:     In exercise of the powers conferred by sub-section (2-a) of section 31 of the Bihar Finance Act, 1981 the Commission- er  of Commercial Taxes, Bihar issued a  Notification  dated 28th December, 1985 adopting Forms XXVIII A and XXVIII B  as the declaration for the purposes of verification and assess- ment of the sales-tax payable. Clause 1 of the  Notification provided  that  a person transporting goods,  exceeding  the quantity notified under section 35, on a goods carrier or  a vessel shall carry Form XXVIII A or XXVIII B duly filled  up in  respect of goods being brought into the State  or  being sent out of the State. Clause 2 of the Notification provided that in case a form is found blank or not containing all the particulars,  it  shall be deemed to be a violation  of  the provisions of sub-section (2-a) of section 31 of the Act.     The  respondent,  a registered dealer  under  the  Bihar Sales  Tax Act and the Central Sales Tax Act  purchased  165 bags of mustard in the State of Rajasthan and was transport- ing the same therefrom to  797 Jamshedpur in the State of Bihar. The officers of the Inves- tigation Bureau Jamshedpur Division seized the vehicle along with  the  goods on the ground that in the road  permit  the

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bill  number had not been mentioned in column No. 9 in  Form XXVIII  B. On a representation by the Singhbhum  Chamber  of Commerce  and  Industry the truck along with the  goods  was released.  The Inspecting Officer issued a demand notice  to the  respondent imposing a penalty of Rs.8,330 and  rejected the  contention of the respondent that no permit was  neces- sary because it was violative of the respondent’s  Constitu- tional right of freedom of inter-State trade and commerce.     The  appellant filed a writ petition in the  Patna  High Court  challenging the validity of the Notification  on  the ground  of its being violative of Articles 301 and  304  and also the demand notice imposing penalty.     The High Court held that the Notification imposed unwar- ranted  restrictions on the inter-State trade  and  commerce and  accordingly  quashed the Notification as  violative  of Articles  301 and 304 and set aside the penalty  order  with demand notice.     In this appeal by special leave on the question  whether the impugned Notification and the adoption of Forms XXVIII A and  XXVIII  B, for the purposes of  preventing  evasion  of sales-tax,  was  violative of Articles 301 and  304  of  the Constitution.      Allowing the appeals and setting aside the judgment  of the High Court,      HELD: 1. Article 301 mandates free trade, commerce  and intercourse-throughout  the  territory of India.  The  words "throughout the territory of India" extends the freedom  not only to inter-State but also to inter-State transactions and movements. The mobility of goods throughout the territory of India has to be free. Free trade throughout the territory of India  would be one with no tariffs and no  restrictions  or disadvantages of any kind of importing or exporting from the different  States.  Free  trade means  complete  freedom  of inter-State  trade without any restrictions on the  movement of  goods between the States. Anyone aggrieved by  infringe- ment  of the provisions of Article 301 can seek  his  remedy from  the Court against the offending legislative or  execu- tive action. [808C-E] 2. The word ’trade’ has been used synonymously with the word  798 ’business’. Trade or business would mean some real  substan- tial  and  systematic  or organised course  of  activity  or conduct with a set purpose. [808E]     State of Bombay v. R.M.D. Chamarbaug-wala, [1957] S.C.R. 874, applied.     3.  Freedom  under Article 301 does  not  mean  absolute freedom  but  freedom  from all  restrictions  and  barriers except  those which are provided in other Articles  of  Part XIII  as well as regulatory and compensatory  measures.  The object  of Part XIII is not to make inter-State trade,  com- merce  or intercourse absolutely free.  Reasonable  restric- tions  in  public interest are permissible.  The  reasonable restrictions contemplated in Part XIII have to be backed  by law and not by executive action provided the same are within the  limitations prescribed under the scheme of  Part  XIII. The  power of the Union or the State to exercise  legitimate regulatory  control is independent of the  restrictions  im- posed by Articles 302-305. [808F; 81 IG; 812B] State of Madras v. Nataraja, [1968] 3 S.C.R. 829, applied.     4.  While examining whether there is a violation of  the freedom  guaranteed  by Article 301, one has  to  scrutinise whether  the impugned legislative or executive act  operates to  restrict  or barricade trade,  commerce  or  intercourse directly  and  immediately, as distinct from  creating  some indirect or inconsequential impediment which may be regarded

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as remote. In other words, regulatory or compensory measures cannot  be regarded as violative of the freedom. Such  meas- ures  cannot be challenged as interfering with  the  freedom guaranteed  by Article 301 unless they are shown to  be  co- lourable  measures to restrict the free flow of trade,  com- merce and intercourse. [808H; 809A-B]     5. Measures impeding the freedom of trade, commerce  and intercourse  may  be  legislative or executive  and  may  be fiscal  or non-fiscal. Taxing laws could be restrictions  on trade, commerce and intercourse, if they hamper the flow  of trade  and if they were not what could be termed to be  com- pensatory taxes or regulatory measures. He who assails  such a  measure  has  to show that it is not  regulatory  but  it directly  and immediately interferes with the free  flow  of inter-State  trade  or business. Freedom may be  impeded  by impediments  on the individuals carrying on trade  or  busi- ness,  on the business itself or on the vehicles,  carriers, instruments  and  labour  used in  the  trade  or  business. [809B-C]  799     Atiabari  Tea  Co. Ltd. v. State of  Assam  and  others, [1961]  1 S.C.R. 809; Automobile Transport (Rajasthan)  Ltd. v.  State  of  Rajasthan and others, [1963]  1  S.C.R.  491; Western  Electronics v. State of Gujarat, A.I.R.  1988  S.C. 2038  and Indian Cement v. State of Andhra  Pradesh,  A.I.R. 1988 S.C. 567 applied.     6. When the legislature had the power to make a law with respect to any subject it had all the ancillary and inciden- tal  power to make that law effective. In the  instant  case the  notification  ex facie shows the  purpose,  namely,  to prevent evasion and facilitate assessment of sales tax.  The permits  will  indirectly help  assessment  by  ascertaining whether tax would be payable or not. The permit would enable the carrier to cross the State territory by producing it  if and  when needed and thus would promote rather  than  impede inter-State  trade. A declaration may also serve the  public purpose  by  finding out unauthorised trade or  business  to which  freedom of trade, commerce and intercourse would  not apply.  Thus,  the  impugned notification is  a  measure  in exercise of a power incidental to the levy of sales tax  and it  could not be said to have been a colourable exercise  of power to impede, restrict or barricade inter-State trade  in respect  of  which Bihar State Legislature has no  power  to legislate. [813B-E]     6.1 Article 304(b) clearly permits the State Legislature to  impose such a reasonable restriction on the  freedom  of trade, commerce and intercourse with or within that State as may  be  required in the public interest.  The  word  ’with’ involves  an element having its situs in another  State.  It cannot  be,  therefore,  said ’that the  insistence  on  the disclosure  in respect of goods entering Bihar from  another State  if  otherwise legitimate would not  be  protected  by Article 304(b). [815C]     6.2  To decide whether the notification  impeded  inter- State trade, the concept of inter-State trade and its conti- nuity  has also to be taken into consideration. In  the  in- stant case the notification clearly states that the declara- tion in the permit is indeed for the purpose of verification and assessment of tax payable and there is no imposition  of any  tax. The notification only prescribed  the  declaration forms to be carried on a goods carrier or vessel for  trans- porting  goods through the State of Bihar. It does not  pro- hibit  transportation of the goods. Therefore, there  is  no direct  and  immediate  restriction  of  inter-State  trade, commerce  or intercourse as a result of the  requirement  to

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fill up and carry the forms. In other words, the  continuity of  the  transport will not be  obstructed  or  interrupted. Therefore,  the notification and the adoption of  the  forms are  reasonable and in public interest and not  ultra  vires the  Articles  301  and 304 of the  Constitution  of  India. [815F, 816F]  800     Hans Raj Bagrecha v. State of Bihar and others, [1971] 2 SCR 412; 1971 1 SCC 59, distinguished.     Sodhi Transport Co. v. State of U. P., [1986] 1  SCR939, held applicable.

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal Nos.  346347 of 1988.     From  the  Judgment and Order dated  18.11.1986  of  the Patna High Court in C.W.J.C. Nos. 990 and 991 of 1986 (R).     G.  Ramaswamy, Additional Solicitor General  and  Ranjit Kumar for the Appellants. Nemo for the Respondents. The Judgment of the Court was delivered by     K.N. SAIKIA, J. These appeals by special leave are  from a  full bench judgment of the Patna High Court in  two  writ petitions under Articles 226 and 227 of the Constitution  of India allowing the petitions and quashing the Bihar  Govern- ment’s  Notification No. S.O. 1432 dated 28th December  1985 as violative of Articles 301 and 304 of the Constitution  of India.     Sub-section  (2-a)  of section 31 of the  Bihar  Finance Act,  1981  was substituted by Bihar Finance  Act,  1984  as follows:               "(2-a) A person transporting goods shall carry               a  declaration  in such form as  may  be  pre-               scribed  by  the  commissioner  supported   by               either a cash memo, bill or a challan, in case               the movement is otherwise than as a result  of               sale,  in  respect  of goods  which  is  being               transported  on a goods carrier, or  a  vessel               and  shall produce such challan, cash memo  or               bill along with the aforesaid form of declara-               tion on demand before the prescribed  authori-               ty:               Provided  that the Commissioner, by  notifica-               tion in this respect, may prescribe a form  of               declaration or adopt a form of declaration  or               permit prescribed for the purpose of  Sections               34  & 35 of this part, and, he may  also  pre-               scribe in the said notification, the manner in               which such declaration                801               or  permit shall be utilised for  verification               and assessment of tax payable under this part.               Provided  further  that the  Commissioner  may               exempt any person or dealer or class of regis-               tered  dealers  from the requirement  of  this               sub-section."     Under  the  aforesaid amended  provision  the  following Notification was issued:               The 28th December, 1985.               S.O.  1432.--In  exercise of the  powers  con-               ferred  by subsection (2-a) of section  31  of               the  Bihar Finance Act, 1981 (Bihar Act  5  of               1981)  Part I, the Commissioner  adopts  Forms

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             XXVIII  A and XXVIII B as the declaration  for               the purpose of the aforesaid sub-section which               a person shall carry in respect of goods being               transported  for the purposes of  verification               and  assessment of tax payable and  prescribes               the  following  manners in which  such  permit               shall be utilised for verification and assess-               ment  of tax payable under Part I of the  said               Act:               (i) A person transporting goods, exceeding the               quantity notified under section 35, on a goods               carrier or a vessel shall carry Form XXVIII  A               or XXVIH B duly filled up in respect of  goods               being brought into the State or being sent out               of the State;               (ii)  In  case a form is found blank,  or  not               containing  all the particulars, it  shall  be               deemed to be a violation of the provisions  of               sub-section  (2-a) of section 31 of  the  said               Act.               (iii) The prescribed authority, after  verifi-               cation  of the consignment, shall make  appro-               priate endorsement in respect of the result of               verification  on both the  copies/counterfoils               of Form  XXVIII A or XXVIII B, as the case may               be,  and retain one copy of original  counter-               foil  and return the other copy  or  duplicate               counterfoil  to  the person  transporting  the               goods;               (iv)  The  copy of  the  original  counterfoil               retained by                802               the  inspecting authority shall  be  forwarded               for verification and for assessment of tax  to               the  circle in which the dealer is  registered               or has his place of business.               (v)  ,The concerned dealer shall preserve  the               other  copy or duplicate counterfoil  of  Form               XXVIII A or XXVIII B, as the case may be,  for               production before the assessing ’authority  or               for inspection at any time before or after the               assessment.     This notification shall come into force with effect from the 1st January, 1986.                               /Bikrikar/vividh/12 1-308/85                          By order of the Governor of Bihar                                              MUKUND PRASAD                           Commissioner of Commercial Taxes                      and Special Secretary to Government."     The respondent as proprietor of M/s Jai Durga Industries of  Jamshedpur  town, which was registered under  the  Bihar Sales  Tax Act and the Central Sales Tax Act, purchased  165 bags  of mustard (sarso) from M/s Kanpur Chand Girish  Chand Jain at Dhaulpur, in the State of Rajasthan, and was  trans- porting  the  same therefrom to Jamshedpur in the  State  of Bihar  in Truck No. RSG 533. On the 13th of February,  1986, the  officers of the Investigation Bureau  Jamshedpur  Divi- sion,  inspected  the said truck and  all  necessary  papers including a road permit in Form XXVIII B for the 165 bags of mustard (sarso) were produced at the time of inspection.  In the  road permit the bill number had not been  mentioned  in Column  No. 9 in Form No. XXVIII B. On that ground  the  In- specting  Officers seized the goods loaded in the  aforesaid truck  and detained it at Mango Mufassil Police  Station  at Jamshedpur.  A notice was issued to the petitioner  to  show

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cause as to why penalty should not be imposed under  section 31(3)  of  the  Act. He was directed to  appear  before  the Inspecting Officer on the 14th February, 1986. The Petition- er  being a member of the Singhbhum Chamber of Commerce  and Industry, moved the said organisation to agitate the  matter before  the  authority and on a representation by  the  said Chamber  the truck with the goods therein were  released  on the  15th February 1986. In reply to the show  cause  notice the appellant took the stand that no permit in the  required Form  was necessary and in any case it was violative of  the petitioner’s Constitutional right of freedom of  inter-State trade and commerce. The contention was re-  803 jected and a penalty of Rs.8,330 was imposed by Order  dated 29th  May  1986;  and thereafter  the  consequential  demand notice  No. 986 dated 2nd June 1986 was  issued.  Aggrieved, the appellant filed a writ petition in the Patna High  Court under  Articles  226 and 227 of the  Constitution  of  India challenging,  inter  alia, the Notification  No.  S.O,  1432 dated  28th December 1985 as ultra vires the Articles  30  1 and  304  of the Constitution of India, and also  the  order imposing penalty and the consequential demand notice.     The  High  Court  held, inter alia,  that  the  impugned Notification imposed unwarranted restrictions on inter-State trade  and  commerce the freedom whereof  stood  guaranteed; that  the  decision of this Court in Hans  Raj  Bagrecha  v. State of Bihar & Ors., reported in [1971] 2 S.C.R.  412:1971 1  S.C.R. 59 squarely covered this case; that  the  impugned Notification  was not of regulatory character; and that  the decision  in Sodhi Transport Co. v. State of U.P.,  reported in [1986] 1 S.C.R. 939 did not apply as that case dealt with the  question  of transit pass only.  The  Notification  was accordingly quashed and the penalty order with demand notice set aside.     Mr.  Ranjit Kumar the learned counsel for the  appellant State  submits  that the amendment of sub-section  (2-a)  of section 31, the impugned Notification No. S.O. 1432, herein- after referred to as ’the Notification’, and the adoption of Forms XXVIII A and XXVIII B thereby were made with a view to preventing evasion of Sales Tax and in pith and substance it is a regulatory measure which in no way affected freedom  of inter-State trade; and that the High Court erroneously  held the Notification to be violative of Articles 301 and 304  of the Constitution of India. Counsel further submits that  the particulars to be disclosed in the prescribed Forms XXVIII A and  XXVIII B and the carrying of the Forms by the  carriers would  promote  rather than hinder  freedom  of  inter-State trade.      It may be noted that the vires of sub-section (2-a)  of Section 31 of the Bihar Finance Act, hereinafter referred to as ’the Act’, whereunder the Notification was issued and the Forms  were adopted by the Commissioner and of the  relevant Rules  referred to in the Forms, namely, Rule 41  and  42(2) were  not  challenged before the High Court or  before  this Court.      To  decide  the question whether the  Notification  and adoption  of  the two aforesaid Forms would be  ultra  vires Articles 301 and 304 of the Constitution of India, it  would be relevant to refer to the Forms  804  and the Articles. The following are the Forms:                       FORM XXVIII A                          Permit                       (See Rule 41) NO.

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I  hereby permit the transport of the  consignment  detailed overleaf.  This permit will be valid for one month from  the date of issue. Place  .................             Signature Date  ..................             Designation        Details OF Consignment Permitted to be Transported Description                    Dated signature of the of goods         quantity      issuing the permit 1                   2                  3               Result of Checking on the Route Designation and   Description  Quantity of  Dated signature head quarters of  of goods     the goods    of the authority the authority by               actually     mentioned in by whom transport              transported  column-1. of consignment was checked. 1                   2              3             4                           FORM  XXVIII  B                           Form  of Permit        (See Rule 42(2) of the Bihar Sales Tax Rules 1983)                    (Original--Not transferable)                                              Serial No. (To  be filled in by the permit-holder before  transport  of goods).   1.  Name  of  dealer to whom the permit  is  granted  with registration certificate numbers. 805 2. Name and address of the consignor. 3. Name and address of the consignee. 4. Place of despatch. 5. Destination. 6. Name of notified railway station/other places from  where delivery is to be taken. 7. Number and date of: (i) Railway receipt (ii) Other document. 8. Description of consignment: Name of goods     Value      Quantity. 9. Seller’s invoice, forwarding note, number and date. 10. Mode of transport (vehicle No.)     I/We  hereby declare that the above statements are  cor- rect  and complete in the best of my/our knowledge  and  be- lief.                      Signature of dealer/declared Manager.                                           Date  ..........                  Result of Checking on the Route Designation and    Description   Quantity  Dated signature headquarters of    of goods.     of the    of the authority the authority by                 goods     mentioned in whom the trans-                  actually  column-1 and port of the                     transported  place of check-                                              ing.  806                    Note:  (1) Separate form should  be  used               for each consignment.                        (2)  (a) In case of transport  across               or beyond checkpost, a copy of the form should               accompany the consignment.               (b)  In case of delivery of  consignment  from               any notified railway station/other such  place               the original copy of the form shall  accompany               the  consignment  in  transit  and  thereafter               shall be sent to the appropriate authority  of               the Commercial Taxes.     Article 301 which deals with freedom of trade,  commerce

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and intercourse provides:               "Subject to the other provisions of this Part,               trade, commerce and intercourse throughout the               territory of India shall be free."      Article  304  which deals with restrictions  on  trade, commerce and intercourse among States provides:               "Notwithstanding  anything in Article  301  or               Article 303, the Legislature of a State may by               law;                    (a)  impose on goods imported from  other               States  or  the Union Territories any  tax  to               which  similar goods manufactured or  produced               in that State are subject, so, however, as not               to discriminate between goods so imported  and               goods so manufactured or produced; and                    (b)  impose such reasonable  restrictions               on  the freedom of trade, commerce  or  inter-               course  with  or within that State as  may  be               required in the public interest:               Provided  that  no Bill or amendment  for  the               purposes of clause (b) shall be introduced  or               moved  in the Legislature of a  State  without               the previous sanction of the President." The  right  to carry on any occupation,  trade  or  business conferred 807 by  Article  19(1)(g) on citizens is subject  to  reasonable restrictions,  and in so far as trade or  commerce  involves the  buying and selling of goods, restrictions on the  right to  trade can be put in the public interest. As regards  the right of free movement, the power to legislate on the  free- dom  of  trade, commerce and intercourse  is  restricted  by Article 19(1)(g) and the provisions of Articles 302 to  306. Under Article 302 Parliament may by law impose such restric- tions  on  the  freedom of trade,  commerce  or  intercourse between  one  State and another or within any  part  of  the territory  of India as may be required in the public  inter- est.  Article 303(1) provides that notwithstanding  anything in  Article 302 neither Parliament nor the Legislature of  a State shall have power to make any law giving, or  authoris- ing the giving of, any preference to one State over another, or making, or authorising the making of, any  discrimination between one State and another, by virtue of any entry relat- ing to trade and commerce in any of the Lists in the Seventh Schedule.  Under  clause  (2) nothing in  clause  (1)  shall prevent  Parliament from making any law, or authorising  the giving  of,  any preference or making,  or  authorising  the making of, any discrimination if it is declared by such  law that  it  is necessary to do so for the purpose  of  dealing with a situation arising from scarcity of goods in any  part of  the  territory of India. Thus Article  303(1)  expressly forbids discrimination relating to trade and commerce  apart from  Article  14. Trade, commerce and  intercourse  may  be domestic  or  foreign  or international. Part  XIII  of  the Constitution  deals  with trade,  commerce  and  intercourse within  the  territory of India i.e. domestic  or  internal. This  again  is sub-divided into trade, commerce  or  inter- course  between one State and another i.e.  inter-state  and within the same State i.e. intraState.     In Atiabari Tea Co. Ltd. v. The State of Assam and  Ors. [1961]  1  S.C.R. 809 it has been held that the  freedom  of trade,  commerce and intercourse guaranteed by  Article  301 was wider than that contained in Section 297 of the  Govern- ment  of India Act, 1935, and it included freedom  from  tax laws also. Article 301 provides that the flow of trade shall

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run  smooth and unhampered by any restriction either at  the boundaries  of the State or at any other points  inside  the States  themselves;  and if any Act imposes any  direct  re- strictions  on  the movement of the goods  it  attracts  the provisions of Article 301 and its validity can be  sustained only  if  it satisfies the requirements of  Article  302  or Article 304. Further the operation of Article 301 cannot  be restricted  to  legislation under entries dealing  with  the trade  and commerce. Gajendragadkar, J., as he then was,  in the  majority  judgment,  observed that  free  movement  and exchange of goods throughout the  808 territory of India was essential for sustaining the  economy and  improving  living  standards of the  country  and  that Article  301 guaranteeing freedom of trade and commerce  and intercourse embodied and enshrined a principle of  paramount importance  that  the economic unity of  the  country  would provide  the  main sustaining force for  the  stability  and progress of the political and cultural unity of the  country and  it  was  based on the theory that the  peoples  of  the several  States may sink or swim together It was  also  held that  though  the power of levying tax was  essentially  for existence  of the Government, its exercise’ must  inevitably be controlled by the Constitutional provisions and the power was  not outside the purview of any  constitutional  limita- tions.     Article  301  mandates free trade, commerce  and  inter- course throughout the territory of India. Inter-State  trade has, therefore, to be free from trade barriers. The mobility of  goods throughout the territory of India has to be  free. Free  trade throughout the territory of India would  be  one with no tariffs and no restrictions or disadvantages of  any kind  of importing or exporting from the  different  States. Free  trade  means  complete freedom  of  inter-State  trade without  any restrictions on the movement of  goods  between the  States. Anyone aggrieved by infringement of the  provi- sions  of  Article 301 can seek his remedy  from  the  court against  the offending legislative or executive action.  The word ’trade’ has been used synonymously with the word  ’bus- iness’.  Trade or business would mean some real  substantial and  systematic or organised course of activity  or  conduct with  a set purpose. In State of Bombay  v.  Chamarbaugwala, [1957]  S.C.R. 874 this Court has held that  the  protection afforded  by Article 301 is confined to such  activities  as may  be  regarded as lawful trading activity  and  does  not extend  to  activity which is ’res  extra  commerciurm’  and cannot be said to be trade. The words "throughout the terri- tory  of India" extends the freedom not only to  inter-State but  also to intraState transactions and movements.  Freedom under Article 301 does not mean absolute freedom but freedom from  all restrictions and barriers except those  which  are provided in other Articles of Part XIII as well as regulato- ry and compensatory measures. The power of the Union or  the State to exercise legitimate regulatory control is independ- ent  of the restrictions imposed by Articles 302-305 as  was held in State of Madras v. Natraja, [1968] 3 S.C.R. 829.     While  examining  whether there is a  violation  of  the freedom  guaranteed  by Article 301, one has  to  scrutinise whether  the impugned legislative or executive act  operates to  restrict  or barricade trade,  commerce  or  intercourse directly and immediately, as distinct from 809 creating  some indirect or inconsequential impediment  which may  be  regarded as remote. In other words,  regulatory  or compensatory measure cannot be regarded as violative of  the

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freedom.  Such measures may be of diverse nature or  various kinds such as traffic regulation, making of declarations and filing  of returns within reasonable limits.  Such  measures cannot be challenged as interfering with the freedom guaran- teed  by Article 301 unless they are shown to be  colourable measures  to restrict the free flow of trade,  commerce  and intercourse.  Measures impeding the freedom of  trade,  com- merce  and intercourse may be legislative or  executive  and may  be fiscal or non-fiscal. He who assails such a  measure has  to show that it is not regulatory but it  directly  and immediately  interferes  with the free flow  of  inter-State trade or business. Freedom may be impeded by impediments  on the individuals carrying on trade or business, on the  busi- ness  itself or on the vehicles, carriers,  instruments  and labour  used in the trade or business. In  Atiabari  (supra) tax on goods carried by roads outside State was struck down. In  the  Automobile Transport (Rajasthan) Ltd. v.  State  of Rajasthan  &  Ors., [1963] 1 S.C.R. 491 sub-section  (1)  of Section 4 of the Rajasthan Motor Vehicles Taxation Act which provided that no motor vehicle should be used in any  public place or kept for use in Rajasthan unless the owner  thereof had  paid  in respect of it, a tax at the  appropriate  rate specified in the Schedule to the Act within the time allowed was  challenged on the ground that it constituted  a  direct and  immediate  restriction  on the movement  of  trade  and commerce  with and within Rajasthan inasmuch as motor  vehi- cles  which carried passengers and goods within  or  through Rajasthan  had  to  pay the tax which  imposed  a  pecuniary burden  on a commercial activity and was, therefore, hit  by Article  301 of the Constitution of India and was not  saved by  Article 304(b). The Rajasthan High Court  dismissed  the Writ  Petition  and the appeals were  dismissed  by  Supreme Court  in accordance with the opinion of the majority.  Thus both  Atiabari  (supra) and Automobile  (supra)  dealt  with fiscal measures.     In  Hansraj Bagrecha v. State of Bihar &  Ors.,  (supra) under section 5A of the Bihar Sales Tax Act 1959 as  amended by  the  Bihar Finance Act, 1966 the purchase tax  on  goods declared  under section 3A was to be levied at the point  of purchase made from a person other than a registered  dealer. By  a Notification dated September 14, 1966 the Governor  of Bihar declared jute as a commodity liable to purchase tax at the  rate specified in the Notification. The appellant  car- ried  on business in jute. In the course of his business  he purchased raw jute from producers in West Bengal, transport- ed  it to Kishenganj Railway Station in Bihar and  then  re- exported it to purchasers in West Bengal.  810 He  also  bought raw jute in Bihar and exported it  to  mer- chants  and mill owners in West Bengal by rail from  Kishen- ganj  Railway Station. After the enactment of Ss. 3A and  5A the  State Government issued a Notification  dated  December 26,  1967  purporting to exercise power under s. 42  of  the Bihar  Sales  Tax Act, 1959 read with R. 31 B of  the  Bihar Sales Tax Rules, 1959 notifying that no person shall  tender at any railway station mentioned in Sch. II any  consignment of  goods mentioned in Sch. 1 exceeding the quantity  speci- fied  for transport to any place inside the State  of  Bihar and  no person shall accept such tender in  accordance  with the  conditions laid down in the said R. 31B. Under  Sch.  I jute  exceeding 800 kg could not be tendered  for  transport without  a  despatch permit and Kishenganj was  one  of  the railway  stations  mentioned  in Sch.II. In  July  1967  The Superintendent  of Commercial Taxes prohibited  the  railway authorities from loading and despatching jute goods from any

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station  in  Purnea  District without the  production  of  a registration certificate. For non-production of such certif- icate  the  railway  authorities refused  to  despatch  from kishenganj  the  jute  goods booked by  the  appellant.  The appellant  moved a writ petition in the High Court of  Patna challenging,  inter alia, the validity of Ss. 3A and  5A  of the  Bihar Sales Tax Act and of R. 3lB. The High Court  dis- missed the petition. With certificate the appeal was  filed. In support of the petition it was urged (i) that Ss. 3A  and 5A infringed the guarantee of freedom of trade under Article 301  of  the  Constitution and since the  amendment  by  the Finance Act, 1966 introducing these sections did not receive the assent of the President under Art. 304(b) the  amendment was not save; (ii) that Ss. 3A and 5A were contrary to s. 15 of  the Central Sales Tax, 1956 and accordingly void;  (iii) that R. 31B framed by the State Government and the Notifica- tion issued on December 26, 1967 was unauthorised and liable to be struck down. While striking down Rule 31B of the Bihar Sales Tax Rules 1959 and the Notification issued on December 26,  1967 as ultra vires, their Lordships observed that  the Bihar  Sales Tax Act was enacted by the legislature to  con- solidate  and amend the law relating to the levy of  tax  on the sales and purchase of goods in Bihar. The State legisla- ture was competent in enacting sales tax legislation to make a provision which was ancillary or incidental to any  provi- sion relating to levy, collection and recovery of Sales  tax and  Purchase tax. A provision which was made by the Act  or by the rules which sought to prevent evasion of liability of tax  on  intrastate sale or purchase  would,  therefore,  be within  the competence of the legislature or  the  authority competent  to make the rules. But the State legislature  had no  power to legislate for the levy of tax  on  transactions which were carried on in the course of inter-State trade  or commerce or in the course of export. 811 Section  42 of the Bihar Sales Tax Act, 1949  prevented  any person from transporting from any railway stations,  steamer station,  airport, post office or any other place  any  con- signment of such goods exceeding the quantity specified with a view to ensuring that there was no evasion of tax  payable under the Act. But the power under section 42 could only  be exercised  in  respect of levy, collection and  recovery  of intrastate  Sales or Purchase tax. It could not be  utilised for  the purpose of ensuring effective levy  on  inter-State Sales or Purchase Tax. When rule 3lB prohibited transport of goods  to  any  place outside the State of  Bihar  unless  a certificate was obtained from the appropriate authority,  it sought  to prohibit transport of goods pursuant to  transac- tions  which  might  not even be of the nature  of  sale  or purchase  transaction; in any case it  restricted  transport pursuant to transactions in the course of inter-State  trade and  commerce. The operation of the rule was not  restricted only  to transactions in the course of intrastate trade  and commerce  but  it  authorised  restrictions  on  inter-State transactions  and  on that account it was  ultra  vires  and consequently  the Notification issued on December  26,  1967 was  also declared ultra vires. It would thus be  seen  that rule 3 lB and the Notification issued thereunder were struck down  on  the ground that they  impeded  inter-State  trade, commerce  and intercourse. It would also be clear  that  the Notification issued was shown to be a measure for preventing evasion  of Sales Tax. In the instant case the  Notification dated  28th December, 1985 clearly states that the  declara- tion in the permit is indeed for the purpose of verification and assessment of tax payable.

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   In Indian Cement v. State of A.P., A.I.R. 1988 S.C.  567 it was held that the restriction provided for in Article 301 can  within the ambit be limited by law made by the  Parlia- ment  and the State legislature and that no power is  vested in  the executive authority to act in any manner  which  af- fects  or  hinders the essence-and thesis contained  in  the scheme  of  Part XIII of the Constitution which  is  against creation  of  economic barriers and/or pockets  which  would stand  against the free flow of trade, commerce  and  inter- course. There could be no dispute that taxation was a deter- rent against free flow. The reasonable restrictions  contem- plated  in  Part XIII have to be backed by law  and  not  by executive  action provided the same are within  the  limita- tions  prescribed under the scheme of Part XIII.  In  Weston Electronics  v. State of Gujarat, A.I.R. 1988 S.C.  2038  it was  reiterated that while a State legislature may  enact  a law imposing a tax on goods imported from other States as is levied  on  similar  goods manufactured in  that  State  the imposition must not be such as to discriminate between goods so  imported and goods so manufactured and that taxing  laws could be  812 restrictions  on  trade, commerce and intercourse,  if  they hamper the flow of trade and if they were not what could  be termed to be compensatory taxes or regulatory measures.     It is by now settled law that the object of Part XIII is not  to  make  inter-State trade,  commerce  or  intercourse absolutely free. Reasonable restrictions in public  interest are permissible. Mandate against discrimination dictates the placing of inter-State trade, commerce and intercourse under no greater disadvantage than that borne by intraState trade, commerce  and  intercourse. The primary object is  to  avoid barriers around the State borders. Fractionalisation of  the country’s trade, commerce and intercourse is to be  avoided. However,  this could not mean supporting trader’s  hostility towards regulations.     Coming to the impugned Notification and the two  adopted Forms, namely Form XXVIII A and XXVIII B we find that  there is  no  imposition  of any tax by them.  It  is,  therefore, pertinent  to ask what this measure actually does.  Does  it directly  and immediately restrain inter-State  trade,  com- merce and intercourse? Does it place the intraState  carrier in  a superior or advantageous position to that occupied  by inter-State  carrier?  Does it restrict  inter-State  trade, commerce  and intercourse? What are the direct and  indirect effects of this measure and whether it amounts to a prohibi- tion  or a mere regulation? If it is a mere regulation  then only  the motive, purpose or policy of the State  Government would  be relevant. However, if it amounts to a  prohibition that  would not be relevant. If it has any effect on  inter- State  trade, we have to ascertain the essence or  incidence thereof.     The  Notification only prescribed the declaration  Forms to be carried on a goods carrier or vessel for  transporting goods  through  the  State of Bihar. It  does  not  prohibit transportation  of the goods. Before the High Court  it  was not  disputed that the Notification and the Forms  were  ap- plicable  in respect of goods being brought into  the  State and  being sent out of the State in excess of  the  quantity notified under section 35 of the Act on every goods  carrier or vessel. Thus, it would be applicable to the transport  of all  goods carried intra-State in Bihar, and inter-State  to and through the State of Bihar. Further, clause (ii) of  the Notification  states  that if the prescribed Form  is  found blank  or does not contain all the required  particulars  it

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would be deemed to be a violation of the provisions of  sub- section  (2-a) of section 31 of the Act entailing  penalties for  the infraction thereof. Counsel for the  State  submits that  Form XXVIII A (Permit) is meant for those who are  not registered as dealers and it has to be obtained from office, while Form  813 XXVIII B (Permit) can be filled up by the registered  dealer himself. It is further submitted that the particulars are to be  furnished by the persons and this would not  affect  the freedom of movement of the goods carried, and that it  would facilitate transportation across and throughout the State of Bihar  by  showing the permit wherever  required  and  thus, instead  of hindering, it will promote free movement of  the goods. We find no reason to disbelieve these statements.  We are  of the view that the permits will indirectly  help  as- sessment  by  ascertaining whether tax would be  payable  or not. The permit would enable the carrier to cross the  State territory by producing it if and when needed and thus  would promote rather than impede inter-State trade. A  declaration may  also serve the public purpose by finding  out  unautho- rised trade or business to which freedom of trade,  commerce and intercourse would not apply. Thus, the impugned  Notifi- cation has to be held to be a measure in exercise of a power incidental to the levy of Sales Tax and it could not be said to  have  been  a colourable exercise of  power  to  impede, restrict or barricade inter-State trade in respect of  which Bihar  State legislature has no power to legislate., It  is, to  our  mind,  clearly distinguishable from  the  facts  in Bagrecha’s  case (supra). The commonness between the two  is in  insistence  of despatch certificate in  Bagrecha  and  a permit  in the instant case, But there the similarity  ends. While there was an ex facie purpose disclosed in the  Bagre- cha prohibitory Notification, in the instant case the  Noti- fication  ex  facie shows the purpose,  namely,  to  prevent evasion and facilitate assessment of Sales Tax. The  insist- ence  on a permit in respect of goods entering the State  in course  of  inter-State trade Could also  be  necessary.  to distinguish  the goods that would be transported across  the territory of State and those which would reach the  consump- tion  point within the State, and to ascertain  whether  tax would be payable in the latter category. We are,  therefore, of  the view that the ratio decidendi of the  Bagrecha  case would not be applicable to the facts of the instant case. We are also of the view that the facts in Sodi Transport Co. v. State  of U.P. & Ant., (supra) would be nearer to the  facts of  the instant case. In this case Section 28 of  the  Uttar Pradesh Sales Tax Act,. 1948 authorised the State Government to  establish check-posts and barriers with a view  to  pre- venting  evasion of tax or other dues payable under the  Act in  respect  of sale of goods in the  State.  Section  28-B, added  by  the U.P. Act 1 of 1973, makes provision  for  the procedure to be followed by persons who intend to  transport goods  from outside the State by road through the  State  to destinations  outside  the State. It provides  that  when  a vehicle  coming from any place outside the State  and  bound for  any  other place outside the State passes  through  the State,  the  driver or the other person  in-charge  of  such vehicle shall 814 obtain  in  the prescribed manner a transit  pass  from  the officer  in charge of the first check post or barrier  after his  entry into the State and deliver it to the  officer  in charge  of  the check post or barrier before exit  from  the State.  If he fails to do so it shall be presumed  that  the

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goods carried thereby have been sold within the State by the owner  or  person in-charge of the vehicle. Rule 87  of  the Uttar  Pradesh  Sales Tax Rules 1948, inserted by  the  U.P. Sales  Tax  (First Amendment) Rules, 1977  provides  that  a person  who  wishes to obtain a transit pass shall  make  an application in the prescribed form to the officer in  charge of the check post concerned. It also provides for the  issue of  private  pass in triplicate and for  inspection  of  the documents, consignments and goods to ensure that the  state- ments are true.     The appellants who claimed to be engaged in the business of  transport of goods belonging to others for hire and  who in the course of their business had to carry goods from  one State  to  another State along roads lying in the  State  of Uttar Pradesh, questioned the validity of section 28B of the Act and Rule 87 of the Rules by filing writ petitions before the High Court. Their contentions were (i) that section  28B and  Rule 87 were outside the scope of entry 54 of the  Sev- enth Schedule of the Constitution; (ii) that they  infringed freedom of trade, commerce and intercourse guaranteed  under Article  30 1 of the Constitution; and (iii) that  they  im- posed  unreasonable  restrictions on the  freedom  of  trade guaranteed  under Article 19(1)(g) of the Constitution.  The High Court having upheld the constitutional validity of  the impugned provisions appeals were preferred to this court  by special leave.     In  the writ petition under Article 32 of the  Constitu- tion  in  addition  to the contentions raised  in  the  High Court,  it was submitted that the rule of  presumption  con- tained  in section 28B of the Act virtually made  a  person, who had not actually sold the goods liable to pay Sales Tax, and that a transporter being just a transporter could not be treated as a dealer within the meaning of that expression as it was defined in the Act at its commencement.     It was held, that the decision of the High Court uphold- ing  the constitutionality of section 28B of the U.P.  Sales Tax Act, 1948 and rule 87 of the U.P. Sales Tax Rules,  1948 did not call for any interference. It was observed that  the Act  was  traceable to entry 54 in List II  of  the  Seventh Schedule  to  the Constitution. Section 28B of the  Act  and Rule  87 of the rules were enacted to make the law  workable and  to prevent evasion of tax. They fell within  the  ambit and scope of the 815 power  to levy the tax itself. When the legislature had  the power  to make a law with respect to any subject it had  all the  ancillary and incidental power to make that law  effec- tive.     We  have seen that in Bagrecha what was insisted  was  a despatch  certificate; in Sodhi Transport what was  insisted was  a transit pass while in the instant case what is  being insisted is a permit disclosing particulars of the goods  to be  transported. While in Bagrecha it was not  protected  by 304(b)  in  Sodhi Transport it was. Article  304(b)  clearly permits  the State legislature to impose such  a  reasonable restriction  on  the freedom of trade, commerce  and  inter- course  with or within that State as may be required in  the public interest. The word ’with’ involves an element  having its situs in another State. It cannot be therefore said that the insistence on the disclosure in respect of goods  enter- ing  Bihar from another State if otherwise legitimate  would not be protected by Article 304(b). The question, therefore, arises whether the insistence on the permit in Forms  XXVIII A or XXVIII B, as the case may be, pursuant to the  impugned Notification can be said to be a reasonable measure  adopted

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by the State legislature for the express purpose of prevent- ing evasion and facilitating assessment of tax. The reasona- bility has to be considered in the context of the effective- ness  of the State’s powers and the erosion, if any, of  the powers  of the Parliament in respect of  inter-State  trade, commerce  and  intercourse. In so far as carriage  of  goods vis-a-vis Sales Tax, it has also to be considered keeping in mind the fact that at some point goods imported from outside shall  become assimilated with the general mass of  property in a State and be subject to State taxation and the  problem of determination as to when and where that point is reached. The  motive  of State regulation in exercise  of  incidental power to tax has to be scrutinised and laissez faire hostil- ity  towards  trade regulations or taxation has to  be  kept within  limits. The peculiarity of the local situation of  a State  may not also be entirely ignored. To  decide  whether the  Notification impeded inter-State trade we have also  to take into consideration the concept of inter-State trade and its continuity.     The  High Court has taken the view that an importer  has to  send  the form in advance to the consignor  so  that  it could  be  filled up to accompany the goods and  that  would amount to a blockade placed on the free movement of goods in inter-State commerce. It should, however, be noted that  the Notification has been issued and the Forms have been adopted by  the State of Bihar and would be enforced in that  State. There  is  nothing  to indicate that the  carrier  would  be penalised for not having filled up Forms XXVIII A or  XXVIII B, as the case may  816 be, while the goods were being carried through other States. They are to be tilled up only when the carrier is within the territory  of the State of Bihar. There is no  provision  to the effect that those who had not filled up the  appropriate form  at  the  earlier stages of the transit  would  not  be allowed to fill up with the State. The particulars  required are  not  such as would be impossible or difficult  for  the cartier  to furnish. There is no prohibition on  transporta- tion of the goods themselves. We are accordingly of the view that there is no direct and immediate restriction of  inter- State  trade,  commerce or intercourse as a  result  of  the requirement to fill up and carry the Forms. In other  words, the  continuity of the transport will not be  obstructed  or interrupted.  Stoppage of the transporting vehicle  for  the purpose  of  obtaining and filling in the  appropriate  Form would, in our opinion, not amount to interruption but only a stoppage.  A  mere stoppage of the movement of  the  vehicle will  not have any direct or immediate effect on the  trade. The  checking of documents or the filling in and  submission of  Forms and returns, detour to a public  weigh-bridge  and the like may be an inconvenience, and unless they are  shown to be unreasonable and not in public interest the court  may apply  the maxim ’de minimise non curat lex’. A stoppage  of the  vehicle  for roadside repair, for  taking  petrol,  for allowing  the  driver to take rest or his  meals  would  not naturally  amount  to interruptions of trade,  commerce  and intercourse.  Public  interest also will not  allow  transit regulations and allied measures to be violated, thwarted  or evaded  through the channel of inter-State  trade,  commerce and intercourse, unless of course the measures are shown  to be unreasonable. In this view of the matter this case  would squarely be covered by the decision in Sodhi Transport  Co., (supra).  We accordingly hold the Notification and  adoption of the Forms to have been validly made in exercise of powers incidental to the power of levying Sales Tax, and that  they

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are  reasonable and in public interest, and not ultra  vires the Articles 30 1 & 304 of the Constitution of India.     In  the result, the impugned judgment of the High  Court is  set aside, and the appeals are allowed, but without  any orders as to costs. Learned counsel for the appellant states that  the State in these appeals was interested in  the  law being laid down, and that even if the validity of the  Noti- fication  is  upheld  it will  not  revive  the  proceedings against  the respondent to realise the penalty. We  have  no doubt that the State will abide by it. T.N.A.                               Appeals allowed. 817