http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 35  

PETITIONER: KHYERBARI TEA CO.  LTD. & ANR.

       Vs.

RESPONDENT: THE STATE OF ASSAM

DATE OF JUDGMENT: 13/12/1963

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. SARKAR, A.K. WANCHOO, K.N. GUPTA, K.C. DAS AYYANGAR, N. RAJAGOPALA

CITATION:  1964 AIR  925            1964 SCR  (5) 975  CITATOR INFO :  R          1970 SC 129  (10)  E          1970 SC1864  (5)  R          1971 SC1737  (47)  RF         1972 SC1804  (11)  F          1975 SC 583  (13)  RF         1975 SC1443  (21)  MV         1975 SC2065  (35,60)  RF         1975 SC2299  (606)  F          1976 SC 182  (18)  R          1977 SC1686  (5)  RF         1980 SC 898  (64)  RF         1981 SC 463  (16,26,34)  RF         1981 SC 991  (13)  E&R        1982 SC 902  (19)  MV         1982 SC1325  (31,32)  R          1983 SC1155  (13,20,23,25)  RF         1990 SC 313  (24)  E          1990 SC 772  (1,3)  RF         1990 SC 781  (13)

ACT: Constitution  of India, 1950, Arts. 301, 304(b) and  Seventh Schedule,List II, Entry 56-Assam Taxation (on Goods  carried by Road or on Inland Water-ways) Act (Assam Act X of  1961)- Constitutional validity.

HEADNOTE: This petition challenges the constitutional validity of  the Assam Taxation (on Goods carried by Road or on Inland Water- ways)  Act,  1961.   The previous Act of  1954  having  been declared constitutionally invalid by this Court in  Atiabari Tea  Co.  Ltd. v. State of Assam [1961] 1  S.C.R.  809,  the Assam   Legislature  with  the  previous  sanction  of   the President  of India under Art. 304(b) of  the  Constitution, passed  the impugned Act with retrospective effect from  the date  on which the Act of 1954 had been promulgated and  its provisions  were  except for certain  additional  provisions substantially  the  same.  The Assam High  Court  which  was moved  under Art. 226 of the Constitution held that the  Act

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 35  

was  constitutionally invalid.  The State of  Assam  applied for and obtained certificates to appeal to this Court.   The present  petitioners moved this Court under Art. 32  of  the Constitution.   Since petitioner No. 1 was a company and  as such  its  petition was incompetent, petitioner No.  2,  the Manager   of  the  company,  was  heard  and  some  of   the respondents  in the appeals to be preferred by the State  of Assam were allowed to intervene in the present  proceedings. The  case of petitioner No. 2 was that the company  exported tea  grown and manufactured in its own garden from  Goalpara in Jalpaiguri District to Calcutta.  The booking station and the destination were both in West Bengal, the total distance between them being 689 miles of which only 1-1/2 to 2  miles of inland waterways lay in the State of Assam.  The tea  was carried   by  railway  from  Goalpara  to   Dhubrighat   and thereafter by ferries on inland waterways and transhipped to steamers at the said Ghat.  It was contended that ss. 3  and 34,  which  were the material provisions of  the  Act,  were invalid  and that the Assam Legislature was  incompetent  to enact  the  said provisions which  constituted  unreasonable restrictions on the freedom of trade guaranteed by Art.  301 and infringed Art. 19(1)(g) of the Constitution. Held.  (per Gajendragadkar, Wanchoo, Das Gupta and  Ayyangar JJ.),  As the impugned Act was not found to be  compensatory by  the High Court nor was it claimed to be so by the  State the  only question that fell to be decided in this  petition was  whether  the restrictions imposed by the  impugned  Act were 976 reasonable and in the public interest within the meaning  of Art. 304(b) of the Constitution. Atiabari  Tea  Co. Ltd. v. State of Assam, [1961]  1  S.C.R. 809,  and Automobile Transport (Rajasthan) Ltd. v. State  of Rajasthan, [1963] 1 S.C.R. 491, explained. The entries in the three lists in the Seventh Schedule  must be   given  the  widest  possible   interpretation.    Power conferred  on  the Legislature to levy tax  must  be  widely construed  so as to include the power to select the  taxable articles,  to fix the rates, to prescribe the machinery  for recovery, to prevent evasion and to prescribe the  procedure for  determining the amount payable by any  individual.   It could not be assumed that Entry 56 of List II, in giving the Legislature  the power to enact the impugned  Act,  required that  the tax must be levied only against the owner  of  the goods  that  were  carried or against  persons  who  carried them,,  If the tax was really levied on goods  carried,  the Legislature  was  free to prescribe the  machinery  for  its recovery. R.C.  Jall  v. Union of India. [1962] Supp.  3  S.C.R.  436, Sardar  Baldev Singh v. Commissioner of Income-tax, Delhi  & Ajmer. [1961) 1 S.C.R. 482 and Orient Paper.  Mills Ltd.  v. State of Orissa. [1962] 1 S.C.R. 549, referred to. Section  3(1) of the impugned Act which imposed the tax  and s.   3(2) which made the producer liable to pay it could not therefore be   impugned   on  the  ground   of   legislative incompetence. M’ Cullock v. Maryland, (1819)4 L. Ed. 579, considered. But the machinery set up for recovery of the tax should have a  rational connection with the tax.  The absence of such  a nexus  between them would make the tax liable to  attack  as being unjustified under Entry 56. Article  304(b), properly construed, does not  require  that laws passed under it must always be prospective.  It was not correct to say that once the State Legislature passed an Act without recourse to that Article and it was struck down,  it

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 35  

could  not  reenact that Act under the Article and  give  it retrospective    effect.     That    Article    contemplates restrictions   and-not  prohibitions  and  the   rule   that prohibitory legislation cannot have retrospective  operation can have no application. Punjab  Province  v. Daulat Singh., L.R. 73  I.A.  59,  held inapplicable. M.P.  V.  Sundararamier  & Co. v. State  of  Andhra  Pradesh [1958] S.C.R. 1422, applied. M/s.  West Ramanand Electric Distribution Co. Ltd. v.  State of Madras. [1963] 2 S.C.R. 747, referred to. Nor could it be said that a restrictive statute passed under Art.  304(b) with retrospective operation  must  necessarily defeat the scheme of Part XIII of the Constitution. 977 The   mere  fact  that  a  validating  taxing  statute   has retrospective  operation  does not  necessarily  change  the character  of  the  tax  sought  to  be  recovered  by  such retrospective  operation.   The proviso to s.  3(2)  of  the impugned Act was not retrospective in character and did  not change the character of the tax. Rai  Ramkrishna  v.  State  of Bihar  [1964]  1  S.C.R.  897 referred to. A  law enacted under Art. 304(b) with the previous  sanction of  the  President,  does  not  necessarily  take  away  the jurisdiction   of   the  Court  to  consider   whether   the restrictions imposed by it are reasonable and in the  public interest.   The  observation in Atiabari Tea Co.’s  case  in this regard should not be taken as conclusive on the point. Although   there   is  a  presumption  in  favour   of   the constitutionality  of  a statute, if it is  proved  that  it invades fundamental rights under Art. 19(1), the onus shifts on to the State and it must justify its validity under  Art. 19(6).   Onus under Art. 304(b) is still more in  favour  of the  citizen as it clearly purports to restrict the  freedom of trade. Saghir Ahmad v. State of U.P. [1955] 1 S.C.R. 707, applied. Hamdard Dawakhana. (Wakf) Lal Kuan, Delhi v. Union of India. (1960] 2 S.C.R. 671, referred to. The  impugned Act by making the producer liable for the  tax under s. 3(2) proviso or by assessing the tax on a flat rate on  weight instead of by the ton and mileage  method,  could not be said to have imposed unreasonable restrictions.   The law  of taxation is a balance of complex considerations  and if  the  Legislature thought that a flat rate was  just  and fair to the tea trade as a whole no exception could be taken to it. It was not correct to say that s. 34 of the impunged Act was discriminatory  or  infringed Art. 19(1) (g).   It  was  not discriminatory  in that it selected- only tea and  jute  for taxation.   The  Legislature had full freedom  to  determine which  articles  it should tax, in what manner and  at  what rate. Raja Jagannath Baksh Singh v. State of U.P. [1963] 1  S.C.R. 220  and East India Tobacco Co. v. State of Andhra  Pradesh, [1963] 1 S.C.R. 404, referred to. The power of this Court to strike down a taxing statute  for contravention of Arts. 14, 19 or 301 must be exercised  with circumspection.  It is only in cases of such statutes as are clearly  confiscatory  in character that the power  of  this Court can be invoked or exercised. K.T.Moopil  Nair  v. State of Kerala, [1963]  3  S.C.R.  77, referred to. The  impugned  Act  was not colourable  legislation  in  any sense.The power of legislation carried with it the power  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 35  

make the, law 1 SCI/64-62 978 retrospective  And  the  passing  of  a  validating  Act  is essentially  subsidiary  to  that  power  conferred  by  the relevant legislative List. Nor  was  the  Act  extra-territorial  in  its  application. Whether the goods are carried for a long or a short distance had no bearing on legislative competence under Entry 56 List 11  under  which the impugned Act was  enacted.   Since  the goods  were  carried,  although over a very  small  part  of inland waterways in Assam, the doctrine of nexus, applicable to such cases, was satisfied. Tata Iron & Steel Co. Ltd. v. State of Bihar, [1958]  S.C.R. 1355, referred to. The  word  ’carried’  in  Entry 56,  List  11  is  of  wider denotation  than ’import’ and the Act could not be  impugned on the ground that the goods carried and taxed did not  join the mass of goods in the State of Assam itself. Central  India  Spinning and Weaving and  Manufacturing  Co. Ltd. v. Munkipal Committee, Wardha, [1958] S.C.R. 1102, held inapplicable. The  power to levy the tax conferred by Entry 56,  List  11, was  not  controlled  by the Tea Act, 1953,  passed  by  the Parliament under List I. Nor was it correct to say that  the River  Boards  Act,  1956,  imposed  a  bar  on  the   Assam Legislature to pass the impugned Act. Per  Sarkar, J.-Entries in the Legislative Lists have to  be read  in their widest amplitude.  So read there could be  no doubt  that the Assam Legislature was competent under  Entry 56  of List II to provide for the realisation of the tax  in the manner most suitable to it.  The words of the Entry were wide  enough  to enable the Legislature to realise  the  tax either  from the producer, even though he did not carry  it, or from the person who actually carried it. Under  the  proviso to s. 3(2) of the  Act,  a  notification could not be issued with retrospective effect.  That proviso made the producer liable for realisation of the tax from the purchaser  from the date appointed by the notification.   If the  notification  appointed  a  past  date,  it  would   be incompetent. It  was  not correct to say that a statute  contemplated  by Art.   304(b)  cannot  be  retrospective.    A   legislature competent  to  pass  a law can pass  it  with  retrospective effect.   If  the  flow of the  trade  could  be  restricted prospectively,  it  could be restricted  retrospectively  as well.  The restrictions imposed by Art. 304(b) stand on  the same footing as those under Art. 19(6). There is no prohibition in Art. 304 and, therefore, it could not  be  said  that it  did  not  contemplate  retrospective operation.   It provides for reasonable restrictions on  the freedom  of  trade  and  therefore  permits  and  does   not prohibit. Punjab  Province  v.  Daulat Singh L.R.  73  I.A.  59,  held inapplicable. 979 Entry  56 of List II does not require that the  tax  imposed must be measured according to the distance they are carried. A flat rate is not wanting in reasonableness.  It would  not be  wrong  to say that since a tax is  collected  in  public interest  and  for public good the burden imposed by  it  on trade  would  prima  facie  be  reasonable  in  the   public interest. The  legislature  has  the power to  pick,  and  choose  the articles on which to impose the tax and such choosing cannot

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 35  

by itself amount to discrimination.  The Act applies to  all who are concerned with the carriage of tea and jute. Raja  Jagannath  Baksh  Singh v. State of  Bihar,  [1963]  1 S.C.R. 220, referred to. Section  34 of the impugned Act did not violate Art.  14  of the  Constitution,  nor  could  it be said  that  it  was  a colourable legislation. A  validating Act, passed under the same  legislative  power under which the invalid Act was passed, would not amount  to colourable legislation. Gajapati  Narayan Deo v. State of Orissa, [1954]  S.C.R.  1, referred to. Since the Assam Legislature had the power to impose the  tax on carriage of goods, however short the distance over  which they were carried, the impugned Act could not be said to  be bad for extra-territoriality. Quaere as to on whom the onus of proving the  reasonableness of a restriction imposed by a statute on which its constitu- tionality depends lies.

JUDGMENT: ORIGINAL,  JURISDICTION : Writ Petiton No. 134 of 1962. Petition under Art. 32 of the Constitution of India for  the enforcement of Fundamental Rights. S.K. Niyogi and S.C. Mazumdar, for the petitioners. B.C.  Barua,  Advocate-General, Assam, M.C.  Setalvad,  R.B. Datar and Naunit Lal, for the respondents. G.S. Pathak, A.N. Sinha and B.N. Ghosh, for the interveners. December  13,  1963.  The Judgment of  P.B.  Gajendragadkar, K.N. Wanchoo, K.C. Das Gupta and N. Rajagopala Ayyangar  JJ. was  delivered  by  Gajendragadkar  J.   A.  K.  Sarkar   J. delivered a separate Opinion. 980 GAJENDRAGADKAR J.-The present writ petition by which the two petitioners  Khyerbari Tea Co. Ltd., and M.  Sudhir  Chandra Guha,  Manager  of the said Company, seek to  challenge  the validity of the Assam ; Taxation (On Goods, Carried by  Road or  on  Inland  Waterways)  Act,  1961  (No.  10  of   1961) (hereinafter called ’the Act’), is a sequel to the  decision of  this Court in the case of Atiabari Tea Co., Ltd. v.  The State  of  Assam(1).  To this petition have  been  impleaded three  respondents, the State of Assam, the Commissioner  of Taxes, the taxing authority appointed under s. 6 of the Act, and  the Superintendent of Taxes, Dhubri Division.  We  will refer  to  the State of Assam as the  respondent  hereafter. The  respondent  had, passed a similar Act No.  13  of  1954 which  had  received the assent of the Governor on  the  9th April,,  1954.  The validity of the said Act was  challenged by  the  petitioners and certain other producers of  tea  by filing  writ  petitions before the Assam  High  Court.   The Assam High Court dismissed the writ petitions and held  that the  impugned Act of 1954 was valid.  The said judgment  was pronounced by the High Court on the 6th of June, 1955.   The petitioners  whose writ petitions had been  dismissed,  then preferred  appeals to this Court by special leave, and  they also,  moved this Court by writ petitions under Art.  32  of the Constitution.  These matters were heard by this Court in the  case  of Atiabari Tea Co. Ltd.(1) and by  its  judgment delivered on the 26th September, 1960, the said impugned Act was struck down as being unconstitutional.  Thereafter,  the Act  with  which  we  are  concerned  in,  ’the  ,   present proceedings  was passed by the Assam Assembly.  It  received the  assent  of the President on the 6th April,  1961.   The

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 35  

relevant  terms of the Act are, on the whole,  substantially similar  to  the terms of the earlier Act which  was  struck down,  The  Act has made certain  additional  provisions  to which we will refer later.  The petitioners contend that the operative  provisions of the Act are invalid, and  so,  they pray for issue of an appropriate writ (1)  (1061] 1 S.C.R. 809. 981 or  order  directing  the  respondent  not  to  enforce  the operative  provisions, against them.  Petitioner No. 1 is  a company  and  as such," it has no right to move  this  Court under  Art. 32.  This position is conceded by  Mr.  Mazumdar for the petitioners.  Petitioner No. 2 who is the Manager of Petitioner  No.  1 is, however, a citizen of  India  and  as such,  he is entitled to challenge the validity of  the  Act inasmuch  as  the  respondent threatens to  take  action  in pursuance of the material provisions of the Act’ against the company  of which he is the Manager.  Mr. Setalvad does  not dispute the right of petitioner No. 2 to move this Court  by a petition under Art. 32. After  the  Act  was  passed and it  came  into  force,  the question  about  the  scope and  effect  of  the  provisions contained  in Part XIII of the Constitution which  had  been dealt with by this Court in the case of Atiabari Tea  Co.(1) came to be considered. by a larger Bench in the case of  the Automobile  Transport  (Rajasthan)  Ltd.  v.  The  State  of Rajasthan(2),  and  the decision of this  larger  Bench  was -pronounced on the 9th April, 1962.  Since the Act has  been passed  by the Assam Legislature with the previous  sanction of  the President directly as a result of the  decision.  of this  Court  in  the case of Atiabari Tea  Co,  the  present proceedings can be appropriately described as an  after-math of the said decision. It  appears that 487 persons moved the Assam High  Court  by writ petitions under Art. 226 of the Constitution impeaching the  validity  of  the  Act.   These  writ  petitions   were considered.by  a Division Bench of the said High  Court  and they were allowed on the 1st August, 1963.  The two  learned Judges  who  constituted the Division Bench  have  delivered concurring judgments and held that,, the Act is invalid.  On some of the points urged by the petitioners before them, the two learned Judges have differed, in the result, they agreed in  taking  the view operative provisions of  the  Act  were unconstitu- (1)  [1961] 1 S.C.R. 809. (2) [1963] 1 S.C.R.491. 982 tional.   The respondent State of Assam then moved the  High Court for certificates to enable it to come to this Court in appeal  against the decision of the High Court in  the  said 487   writ   petitions.    The  High   Court   has   granted certificates, but the said appeals will take long to  become ready; and so, 12 of the petitioners who are respondents  in some  of the said appeals were allowed to intervene  in  the present   proceedings.   In  fact  by  arrangement   between Mr.Mazumdar  who appeared for the petitioners before us  and Mr.pathak  who  represents the  interveners,  the  principal argument  has  been  urged before us by Mr.  Pathak  and  we expressly  told  Mr. Pathak that since our decision  on  the present  writ  petition  would govern the  decision  of  the appeals which the respondent is going to bring to this Court against  the  decision  of the Assam High  Court,  we  would permit him to raise all points in support of the view  taken by  the  Assam High Court and would not confine him  to  the points  which  have been taken by the petitioners  in  their

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 35  

petition  before  us.   In  fact,  the  Assam  Judgments  in question have been filed by the Interveners, and Mr.  Pathak has  invited our attention to the main findings recorded  in those  judgments.  Normally, counsel for interveners is  not allowed a right of reply, but having regard to the fact that Mr.Mazumdar requested us to allow Mr. Pathak to lead him  in the present proceedings, we have allowed both Mr. Pathak and Mr.  Mazumdar to open the case,, and have heard both of them in reply. Petitioner  No.  25  case  is that  petitioner  No.  1,  the company, carries on the business of manufacturers  wholesale dealers and exporters of tea at Jalpaiguri in the State,  of West Bengal.  The business of the said garden is managed  by petitioner No. 2 and is subject to the control and direction of the company.  Naturally, the remuneration ’and  prospects of  petitioner-No.  2 depend upon the  good  and  economical management  and  the  prosperity  of  the  business  of  the Company.  The petition avers that at all material 983 times the company exported the tea grown and manufactured by it  in  its  tea garden by  Railway  from  Garopara  Railway Station in the district of Jalpaiguri to the Calcutta  port. It is common ground that Calcutta Port is the principal  tea market  in the country for sale for consumption at  home  as well  as for export overseas.  According to  the.  petition, the tea was delivered packed in chests to the North  Eastern Railway  Administration  at Garopara Rly.  Station  and  the rate  charged by the said Administration was paid to it  for carrying  the goods to Calcutta.  It is clear that both  the booking  station and the station of destination are  in  the State  of  West  Bengal.  When the  tea  thus  travels  from Garopara to Calcutta, it hag to traverse a short distance of about 67 miles through Assam to Dhubri Ghat, on the bank  of the  River Brahmaputra.  It appears that by  an  arrangement between the Railway and the I.G.N. and R.S.N. Co. Ltd. these goods.  are taken over by ferries on inland  waterways  and’ are transshipped to steamers at the said Ghat.  The steamers ,hen carry the goods through the Brahmaputra in Assam up  to Mankind;  the distance between Dhubri Ghat and Mankachar  is about  1  1/2 to 2 miles.  In their  journey,  the  steamers cover  a distance of about 572 miles in Pakistan  territory, and  then they reach the Calcutta Port.  The total  distance covered  by  the journey of the goods is  about  689  miles. Petitioner  No. 2 contends that the material  provisions  of the  Act are invalid, because the Assam Legislature was  not competent  to enact the said provisions.  It is  also  urged that  the said provisions are unconstitutional because  they constitute  an  unreasonable restriction on the  freedom  of trade guaran teed by Art. 301, as-well-as petitioner No. 2’s run  mental  right guaranteed by Art. 19(1)(g) of  the  Con- stitution.   The validity of the Act is also  challenged  on some other grounds which Would be dealt with later. These pleas are denied by the respondent and it is urged  on its behalf that the Act is constitutional, that it has  been passed under Art. 304(b) after obtain- 984 ing  the  previous  sanction  of  the  President;  that  its material  provisions are in no sense unreasonable  and  that the restrictions imposed by them on the freedom of trade are reasonable  restrictions  and are required  in  the  ’public interest.  It is also alleged that the said restrictions are reasonable and in the interests of the general public and as such, they are saved by clause (6) of Art. 19. Before  dealing with these contentions, it is  necessary  to indicate  at the outset the effect of the two  judgments  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 35  

which we have already referred.  In the case of the Atiabari Tea  Co. Ltd.(1), three views were expressed.   Sinha  C.J., held  that  the freedom conferred by Art. 301 did  not  mean freedom from taxation simpliciter but only from the erection of  trade  barriers, tariff walls and imposts  which  had  a deleterious  effect on the free flow of trade, commerce  and intercourse.   According to his view, the earlier Assam  Act did not contravene Art. 301 and was valid.  This view put  a somewhat narrow construction on the scope and effect of  the provisions contained in Art. 301. Shah J., on the other hand, placed a very wide  construction on  the  said provision and held that the freedom  of  trade guaranteed  by  the said Article included not  only  freedom from discriminative tariffs and trade barriers but also from all  taxation on commercial intercourse.  As such,  he  held that the said Act was unconstitutional. The  majority view was that the freedom of trade  guaranteed by Art. 301 was wider than that contained in s.. 297 of  the Government of India Act, 1935, which meant that taxes  which directly and immediately impeded: the freedom of trade would come  within  the mischief of Art. 301.  According  to  this view,  Art.  301 provides that the flow of trade  shall  run smooth  and  unhampered  by any restriction  either  at  the boundaries  of the States or at any other points inside  the States  themselves;  and  if  any  Act  imposes  any  direct restrictions on the movement of goods, (1) [1961] 1 S.C.R. 809. 985 it  attracts  the provisions of Art. 301.  On  the  majority view,  if  the  impugned tax imposes a  restriction  on  the movement of trade, the Act could be sustained if it complied with  the provisions of Art. 304(b).  In regard to  the  Act with  which  the  Court was  then  concerned,  the  majority judgment observed that it may be that one of the objects  in passing the Act was to enable the State Government to  raise money  to keep its roads and waterways in repairs; but  that object  may  and  can be effectively  achieved  by  adopting another  course  of  legislation;  if  the  said  object  is intended to be achieved by levying a tax on the carriage  of goods, it can be so done only by satisfying the requirements of Art. 304(b). In  the Automobile Transport (Rajasthan) Ltd.  case(1),  the majority  view expressed by Das J. on behalf of himself  and Kapur  &  Sarkar  JJ was that if a tax  is  compensatory  in character, it cannot be said to fall within the mischief  of Art. 301.  According to this view, a clarificatory rider was added  to  the majority view expressed in the  case  of  the Atiabari  Tea  Co.  Ltd. (2) by  providing  that  regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of  the restrictions  contemplated  by Art. 301, and  such  measures need  not comply with the requirements of the provisions  of Art. 304(b). Subba  Rao J., who delivered a separate judgment  concurring with  the  conclusion  reached  by  Das  J.,  preferred   to emphasise  that  taxing  statutes  which  would  escape  the mischief  of  Art. 301 could be appropriately  described  as regulatory.   He, therefore, held that the  Rajasthan  Motor Vehicles  Taxation Act (No.11 of 1951) with which the  Bench was  dealing, was regulatory in character and as  such,  not unconstitutional.   In other words, whereas Das,  Kapur  and Sarkar  JJ.,  upheld the validity of the Act on  the  ground that it was either compensatory or regulatory, Subba Rao J., preferred to base his decision mainly on the ground that  it was regulatory.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 35  

(1) [1963] 1 S.C.R. 491. (2) [1961] 1 S.C.R. 809. 986 The  minority view which has been expressed by  Hidayatullah J.,  on  behalf of himself and Ayyangar and  Madholkar  JJ., assumed  that though regulatory taxing statutes may be  said to  fall outside Art.30,compensatory taxing statutes  cannot make  the same claim.  According to this view, if  a  taxing statute  was sought to be justified on the ground  that  the tax imposed by it was compensatory in character, that  could be  done only by adopting the procedure prescribed  by  Art. 304(b).  It may be noticed that the scope of the  regulatory statutes  as discussed by Hidayatullah J., is much  narrower than  the scope of the regulatory statutes as considered  by Subba Rao J. In  the result, the majority view expressed in the  case  of the  Atiabari Tea Co.(1), was substantially accepted by  the majority of the learned Judges constituting the larger Bench which  heard the Automobile Transport (Rajasthan)  Ltd.  (2) case, but a corollary was added to the said view as we  have just indicated. The  majority view in the Atiabari case("’ proceeded on  the basis  that  the Australian decisions which dealt  with  the scope  and  effect of s. 92 of the  Australian  Constitution would  be of no assistance in constraing the effect  of  the provisions  in  part XIII of our Constitution,  because  the legislative,   historical  and  political  background,   the structure   and  the  effect  of  the  relevant   provisions contained   in  Part  XIII  were  in  material   particulars different   from   those  of  s.  92   of   the   Australian Constitution; s. 92 is absolute in terms and on its  literal construction,  admits  of  no  exceptions.   The  Australian decisions, therefore, had to introduce distinctions, such as compensatory  or regulatory tax laws in order to  take  laws answering the said description out of the purview of s.  92. In  our  Constitution, however, though Art.  301  is  worded substantially  in  the same way as s. 92, Art. 302  and  304 provide  for  reasonable restrictions being imposed  on  the freedom of trade subject to the requirements of the said two Articles,  and so, the problem facing judicial decisions  in Australia and in this country (1)[1611] 1 S.C.R. 809. (2) [1963] 1 S.C.R. 491. 987 in ragard to the freedom of trade and the restrictions which it  may be permissible to impose on it, is not  exactly  the same.   The minority view expressed by Hidayatullah J.,  has pointedly  referred to this aspect of the matter.  That,  in brief, is the position of the two decisions of this Court in Atiabari   Tea   Co.  Ltd.(1)   and   Automobile   Transport (Rajasthan) Ltd. (2) cases respectively. It  would  immediately be noticed that though  the  majority view   in  the  Automobile  Transport  (Rajasthan)   case(2) Substantially agreed with the majority decision in the  case of  Atiabari Tea Co.(1), there would be a  clear  difference between  the  said two views in relation to  the  scope  and effect of the provisions of Art. 304 (b).  According to  the majority view in the case of Atiabari Tea Co., if an Act  is passed under Art. 304(b) and its validity is impeached, then the  State may seek, to justify the, Act on the ground  that the  restrictions  imposed by it are reasonable and  in  the public interest, and in doing so, it may, for instance, rely on  the fact that the taxes levied by the impugned  Act  are compensatory in character.  On the other hand, according  to the   majority   decision  in   the   Automobile   Transport

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 35  

(Rajasthan) (2) case, compensatory taxation would be outside Art.  301 and cannot therefore, fall under Art. 304(b).   If in the present case it had been urged before us that the tax levied  by  the Act is compensatory in character,  it  would have  been necessary to consider the question once again  by constituting  a larger Bench.  It will be recalled that  the Act with which we are concerned has been passed by the Assam Legislature  directly  as a result of the decision  of  this Court in Atiabari Tea Co.’s case(1); that decision was  that if the tax imposed by the Act was compensatory in  character then the Act could be sustained only if it was passed  after complying  with the provisions of Art. 30-4(b).   The  Assam Legislature  has accordingly adopted the said procedure  and passed  the  Act.   If  the Act  had  been  compensatory  in character, it would have become necessary for us to consider the (1) [1961] 1 S.C.R 809. (2) [1963] 1 S.C.R. 491. 988 whole  position  once again, because it would  obviously  be unfair  and  unjust that the earlier Act  should  have  been struck  down though it was compensatory in character and  in testing  the validity of the present Act, it should be  open to   the  petitioners  to  contend  that  its   compensatory character  is irrelevant to the enquiry under  Art.  304(b). In  the present case, the Assam High Court which dealt  with the  487  writ  petitions  has found that  the  Act  is  not compensatory, and Mr. Setalvad has not urged before us  that the  Act  is  in  fact compensatory.  That  is  why  we  are proceeding  to deal with the merits of the  dispute  between the  parties  in the present case on that basis.   The  main question,  therefore, would be that the tax imposed  by  the Act  not  being  compensatory in character,  are  there  any reasons  to  justify the respondent’s  contention  that  the restrictions imposed by it are reasonable and in the  public interest? Let  us then consider the broad features of the Act and  its material  provisions before dealing with the several  points urged  before us.  The Act consists of 34 sections.   As  we have   already  noticed,  the  Bill  was  introduced   after obtaining  the previous sanction of the President,  and  the Act  has  been passed in accordance with the  provisions  of Art. 304(b).  The preamble to the Act provides that the  Act has been passed to provide for the levy of a tax on  certain goods  carried by road or on inland water-ways in the  State of  Assam  and to validate certain taxes  imposed  on  goods carried by road or on inland waterways and for certain other connected matters.  Section 1(3) provides that the Act shall be  deemed to have had effect as from the 24th April,  1954, and  shall  remain in force till the 31st March,  1962.   In other  words,  the Act takes effect from the date  when  the earlier Act was to have taken effect, and its life continues for  one year after it received the assent of the  President and  became  effective.  Section 2, inter  alia,  defines  a producer  as  meaning "a producer of tea  and  includes  the person  in charge of the garden where tea is produced."  The Act is concerned with 989 tea and jute, but in the present proceedings, we are dealing with the petitioners whose interest lies in tea.  Section  3 of  the Act deals with the liability to tax, and  since  its validity  is  seriously impugned by the petitioners,  it  is necessary to read it:               "(1)  Subject to the provisions of  this  Act,               there   shall   be  levied  a   tax   on   (a)

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 35  

             manufactured tea and (b) jute in bales carried               by  motor  vehicle,  ,  cart,  trolley,  boat,               animal  and  human agency or any  other  means               except railways and airways in such manner and               in respect of such period and at such rate  as               specified in the Schedule.               (2)   Such  tax  levied  on  manufactured  tea               shall  be realised from the producer and  that               levied  on  jute shall be  realised  from  the               dealer;               Provided that where tea is sold at the factory               premises,  the  producer shall be  liable  for               realisation  of  tax from the  purchaser  with               effect  from such date as the Government  may,               by notification, appoint, for the carriage  of               such  tea as provided in this section and  the               producer  shall be liable for the  payment  of               such tax notwithstanding the fact that the tea               is not carried by the producer;               Provided  further that no tax shall be  levied               under  this Act on any jute or tea in  respect               of which such tax has already been paid." Section  4  provides that the tax shall be  charged  on  the total net weight carried during a return period.  Section  5 deals with the problem of determining the weight.  Section 6 prescribes  the taxing authorities.  Section 7 requires  the return to be submitted by the producer and makes appropriate provisions in that behalf.  Section 8 deals with  licensing; s.  9 covers the problem of assessment and it provides  that the  Commissioner  may, by an order in writing,  assess  the producer  and determine the tax payable by him on the  basis of  his  return.   Section 10  deals  with  cancellation  of assessment; s. 11 makes a provision 990 for assessment in cases of evasion and escape and authorises the  Commissioner  within  two years of the  expiry  of  the period  in  question  to  serve on  the  producer  a  notice requiring  him  to  furnish a return, and  empowers  him  to proceed  to assess or reassess the producer as  provided  by it.   Section  12  deals  with  rectification.   Section  13 provides  for  penalty  for non-submission  of  returns  and evasion  of  taxes.   Under  s.  14  it  is  provided   that assessment is no bar to prosecutions and penalties.  Section 15 makes the tax payable by the representative of a deceased producer.   Sections  16  and  17  deal  with  appeals   and revision, while s. 18 prescribes for the computation of  the period of limitation for the said two remedies.  The  notice of demand is provided for by s. 19, and the period when  the tax  is  to  be  paid is laid down by  s.  20.   Section  22 prescribes the mode of recovery; s. 23 provides for refunds; and s. 24 for employers’ prosecution for failure to  furnish returns.   Section  25  provides that no  court  shall  take cognizance  of any offence under the Act or under the  rules made  under  it, except with the previous  sanction  of  the Commissioner.   Section 26 permits composition of  offenses. Section 27 imposes an obligation on the producer to maintain and   preserve  account  books;  s.  28  confers  power   on appropriate   authorities  to  require  the  production   of accounts.  Section 29 bars civil suits.  Section 30 empowers the appropriate authority to take evidence; s. 31 deals with the delegation of powers; s. 32 confers power on the Govern- ment  to make rules; s. 3 3 repeals the earlier Act of  1954 and s. 34 makes provisions by way of validation.  Since this last  section has also been challenged, it is  necessary  to read it:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 35  

             "34.   (1)  Any  rule  made,   any   liability               incurred,  any  tax levied  or  realised,  any               returns furnished, any proceedings  commenced,               any  notification published, any action  taken               or   anything   whatsoever  done   under   the               provisions  of  the  Act  repealed,  shall  be               deemed  to have been made,  incurred,  levied,               realised, furnished, commenced,               991               published,    taken   or   done   under    the               corresponding provisions of this Act.               (2)   Notwithstanding  anything  contained  in               any  judgment, decree or order of  any  court,               all taxes imposed or realised or purporting to               have  been imposed or realised under  the  Act               repealed  shall for all purposes be deemed  to               be,  and  to  have been,  validly  imposed  or               realised and accordingly-               (a)   no  suit  or other proceeding  shall  be               maintained  or continued in any court  against               the  Government  or any  person  or  authority               whatsoever  for  the refund of  any  taxes  so               paid; and               (b)   no  court  shall enforce any  decree  or               order  directing  the refund of any  taxes  so               paid." The  Schedule  to  the Act gives the  rates  for  respective periods  and these rates correspond to the rates  prescribed by  the  earlier  Act  for the  period  covered  by  it  and prescribes new rates for the period thereafter.  Rules  have been made under s. 32(1) and Forms prescribed for the making of returns.  That, in    brief, is the scheme of the Act. It has been urged before us by Mr. Pathak that s. 3 which is the charging section, is outside the legislative  competence of  the  Assam Legislature.  The Act purports to  have  been passed  by virtue of the legislative power conferred on  the State  Legislature under Entry 56 in List 11 of the  Seventh Schedule.   This  Entry  reads thus:  "Taxes  on  goods  and passengers carried by road or on inland waterways." It  will be  recalled that Entry 30 in List 1 deals with carriage  of passengers and goods by railway, sea or air, or by  national waterways  in mechanically propelled vessels, and so,  Entry 56 in List II does not cover cases falling under Entry 30 in List 1. It is only in regard to goods and passengers carried by  road or inland waterways that the State Legislature  can pass a law imposing taxes.  Mr. Pathak’s contention is  that s. 3 read with the proviso to sub-section (2) 992 clearly contemplates that the primary and the sole liability to  pay the tax on tea has been placed on the producer  even in cases where the tea in question may have been sold at the tea  garden  before  it is carried.   In  other  words,  the contention  is  that in cases where tea is  carried  by  the purchaser,  it  is only the purchaser of the  tea  which  is carried  who can be taxed, and since the producer  is  taxed even  in  such  cases, the taxation  itself  is  beyond  the legislative  competence  of  the  State  Legislature.   This argument  proceeds on the assumption that the proviso  lends colour  to  the construction of s. 3(2).   Section  3(1)  is enacted  in  terms of Entry 56 and it purports  to  indicate what the taxable event is.  Section 3(2) makes the  producer liable to pay the tax and the proviso to s. 3(2) enables the -producer to recover the tax from the purchaser with  effect from  such  date  as the Government  may,  by  notification, appoint;  this  date was notified as 1St May, 1961.   It  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 35  

clear  that  the  proviso is  prospective,  but  Mr.  Pathak suggests that the proviso can be explained only on the basis that s. 3(2) includes cases where tea, has been sold by  the producer  before  it  is  carried, and  in  that  sense  the producer has been made liable to pay the tax even in  regard to tea which has been sold by him before it is carried. On  the  other  hand, Mr. Setalvad argues that  s.  3(2)  is confined to cases where the producer himself carries tea and his  suggestion is that the proviso which has been added  by the  present Act and which was not included in  the  earlier Act  seeks  to make the purchaser liable to pay the  tax  in case  tea which is carried has been purchased by him  before it  leaves the garden.  He wants us to read the  proviso  as creating  an obligation on the purchaser to pay the tax  and as  making the producer liable to recover the tax  from  the purchaser  as  the Agent of the State.  In  support  of  his argument that s. 3(2) cannot be read to include cases  where tea  has  been sold before it is carried, Mr.  Setalvad  has referred  us  to  the  fact  that  when  the   corresponding provision in the earlier Act was construed by the Assam High Court, it was 993 held  that where tea is sold before it is carried, the  pro- ducer  is not liable and no tax can be recovered  from  him, vide  H. P. Barua v. State of Assam(1).  He also  emphasises the  fact that the proviso is prospective in operation,  and so,  it  indicates  that  it  cannot  lend  colour  to   the construction of section 3(2). It   is,  however,  not  easy  to  accept   Mr.   Setalvad’s construction.  The words used in the proviso show( that  the producer  has  been made liable for realisation of  the  tax from  the  purchaser,  but there are  no  words  imposing  a liability on the purchaser to pay the tax and no penalty  is prescribed in case he fails to pay the tax to the  producer. The  relevant  forms  prescribed for  making  returns,  also continue  to  be the same as under the old Act  and  do  not contemplate  cases  where  the purchaser may  have  to  make returns.   In the present proceedings, we are not  concerned with  the case of any purchaser, and so, it  is  unnecessary for  us to pronounce a definite opinion on the  construction of  s.  3.  We would, therefore, proceed to  deal  with  Mr. Pathak’s  argument  on  the basis that  s.  3(2)  makes  the producer  liable even in. cases where tea has been  sold  by him  to  a  purchaser before it is  carried  away  from  the garden. This  argument of legislative incompetence seems  to  assume that  Entry 56 requires that the tax must be levied  by  the State  legislature on goods which are carried  only  against the  owner  of the goods that are carried,  or  against  the persons who carry them.  We do not see any Justification for introducing  such  limitations  in the said  Entry.   It  is hardly  necessary  to emphasise that Entries  in  the  three Lists  in  the  Seventh Schedule  which  confer  legislative competence  on the respective Legislatures to deal with  the topics  covered  by them must receive  the  widest  possible interpretation; and so, it would be unreasonable to read  in the  Entry  any limitation of the kind  which  Mr.  Pathak’s argument  seems to postulate.  Besides, it  is  well-settled that when a power is conferred on the Legislature to levy  a tax, that power itself must (1)SCI.R. 1955 Assam 249. 1 SCI/64 --- 63 994 be  widely construed; it must include the power to impose  a tax and select the articles or commodities for the  exercise

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 35  

of such power; it must likewise include the power to fix the rate  and  prescribe the machinery for the recovery  of  the tax.  This power also gives jurisdiction to the  Legislature to  make  such  provisions  as, in  its  opinion,  would  be necessary  to prevent the evasion of the tax.   In  imposing taxes,  the  legislature can also  appoint  authorities  for collecting  taxes  and  may  prescribe  the  procedure   for determining  the amount of taxes payable by any  individual; all  these  provisions are subsidiary to the main  power  to levy a tax and, therefore, once it is shown that the tax  in question has been levied on goods carried, it would be  open to the legislature to prescribe the machinery for recovering the said tax.  As was observed by Chief Justice Marshall  in M’Culloch v. Maryland(" "the power of taxing the people  and their property is essential to the very existence of Govern- ment,  and may be legitimately exercised on the  objects  to which  it  is applicable to the utmost extent to  which  the Government  may choose to carry it".  This statement of  the law  must,  however, be read subject to the  condition  that even tax statutes have to satisfy the test of reasonableness prescribed  by  clause (6) of Art. 19, and  the  fundamental right  of equality before law guaranteed by Art. 14 as  well as the test prescribed by Art. 301. Reverting  then  to s. 3(1), we ought to add that  the  said section  in terms expressly makes the carriage of goods  the taxable event, and s. 3(2) makes the producer liable to  pay the tax only on goods carried.  If the goods produced in the tea garden are not carried, there is no occasion to pay  the tax.   That  being  so, the fact that  the  Legislature  has adopted the machinery of making the producer responsible for the  payment  of  the tax and liable for it  in  that  sense cannot  introduce  any element of  legislative  incompetence which would vitiate the statute. It  may be conceded that when the legislature  constructs  a machinery for the recovery of the taxes (1)  [1819] 4 L. ed. 579, 607 995 which  it  is  within its competence  to  impose,  the  said machinery   should   have  some  rational   or   intelligent connection with the tax.  In the absence of a rational nexus between the producer and the tax on goods carried, it may be open  to  a  citizen  to contend that the  tax  is  not  one justified  by  Entry 56.  But can we say  that  between  the producer  of  tea  and the tax which is levied  on  the  tea carried  from  his  garden,  there  is  no  rational  nexus? Considerations  of  administrative convenience  as  well  as considerations  of facility in recovering the tax cannot  be treated  as  irrelevant in this context.  The tea  which  is taxed  has  been produced by the producer and even  when  he sells  it  to a purchaser, it is obvious that  it  would  be carried  away  and not left with the producer, and  so,  the legislature may have thought that it would be appropriate to make the producer liable to pay the tax. It  may also be relevant to bear in mind that the  cases  of sale of tea before it is carried cannot be too many.  As  we have  already  seen,  the earlier Act did  not  include  the proviso  and that seems to suggest that usually, it  is  the producers who produce the tea in their gardens and carry  it to Calcutta either for sale, or for home consumption, or for export.   In fact, the petitioners before us  are  producers who have carried their own product from their tea gardens to Calcutta, and we were told that amongst the 487 persons  who moved the Assam High Court by their writ petitions, not  one was a purchaser; everyone was a producer who carried his own goods.  Apart from these facts, however, it is impossible to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 35  

sustain  the  argument  that  it is  not  competent  to  the legislature to devise a proper and appropriate machinery  to recover  a tax which it is competent to the  legislature  to levy. This  question has been frequently considered by this  Court and  the  power  of the Legislature  to  create  appropriate machinery to recover a tax, or to prevent the evasion of the payment of the tax has been consi- 996 stently  recongised.   In R. C. Jall v.  Union  of  India(1) while  dealing  with  the question about the  power  of  the legislature  to decide at what ’stage and from  whom  excise duty  should  be  recovered, this Court  held  that  subject always   to  the  legislative  competence  of   the   taxing authority,  the tax can be levied at a convenient  stage  so long as the character of the impost is not lost.  The method of  collection does not effect the essence of the  duty  but only   relates   to   the  machinery   of   collection   for administrative   convenience.    While   enunciating    this principle,  this  Court,  however, took  the  precaution  of adding that "whether in a particular case the tax ceases  to be  in  essence an excise duty and the  rational  connection between the duty and the person on whom it is imposed ceased to  exist,  is to be decided on a fair construction  of  the provisions of a particular Act". In Sardar Baldel, Singh v. Commissioner of Income-tax, Delhi &  Ajmer(2)  , this Court was called upon  to  consider  the validity  of s. 23A of the Indian Income-tax Act, 1922.   At the  relevant  time,  the said section  gave  power  to  the appropriate   authority   to   make  an   order   that   the undistributed  portion  of  the  assessable  income  of  the company  shall  be  deemed  to  have  been  distributed   as dividends  and  provided that  thereupon  the  proportionate share  thereof of each shareholder shall be included in  his income for assessment.  The argument which was urged  before this  Court  was that the Company and its  shareholders  are different  persons  and,  therefore,  s.  23A  was   invalid inasmuch  as under entry 54 of List 1 a law could be  passed imposing a tax on a person on his own income.  This argument was, however, rejected because this Court took the view that the  Entries  in  the Lists should be read in  a  very  wide manner  so  as  to  include  all  subsidiary  and  ancillary matters.   That  is why Entry 54 was held to  authorise  not only  the imposition of a tax, but also an  enactment  which prevents the tax being evaded. (1)  [1962] Supp. 3 S.R. 436. (2) [1961] 1 S.C.R. 482. 997 Similarly,  in the Orient Paper Mills Ltd. v. The  State  of Orissa(1),  this  Court  has  observed  that  the  power  to legislate  with  respect to a tax comprehends the  power  to impose  the tax, to prescribe machinery for  collecting  the tax, to designate the officers by whom the liability may  be enforced  and  to prescribe the authority,  obligations  and indemnity of those officers.  Therefore, we do not think Mr. Pathak  is right in contending that merely because in a  few cases  where  tea  may be sold at the garden  before  it  is carried,  the producer is made liable to pay the tax,  s.  3 itself  is outside the legislative competence of  the  Assam Legislature. Then,  Mr. Pathak argues that the Act which has been  passed under Art. 304(b) cannot act retrospectively.  The  argument is  that  when  an Act is passed  under  Art.  304(b)  after introducing  the  Bill with the previous  sanction’  of  the President,  it  must  always  and  in  every  case   operate

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 35  

prospectively.   The  scheme of Part XIII according  to  Mr. Pathak, clearly shows that if the State Legislature wants to avail  itself  of the provisions of Art. 304(b),  it  cannot purport to pass an Act in the first instance without  taking recourse to Art. 304(b) and if the said Act is struck  down, then  take  recourse to the said Article and  make  the  law retrospective.  If the State Legislature makes a law without taking  recourse to Art. 304(b) and the law is struck  down, the matter must end there and the provisions of the said law cannot  be  revived by a subsequent law  passed  under  Art. 304(b)  by  making its operation retrospective.  If  such  a process   is  allowed,  it  would  materially   affect   the significance  and the validity of the provisions.  contained in Art. 301; that is one aspect of the matter. The other aspect of the argument is that a law passed  under Art.   304(b)  really  imposes  restrictions  and  so,   the principle that a law creating prohibitions can operate  only prospectively, must govern the present case.  In support  of this argument, Mr. Pathak has relied on the decision of  the Privy Council (1)  [1962] 1 S.C.R. 549. 998 in  the case of Punjab Province v. Daulat Singh"’.  In  that case,  the Privy Council had occasion to deal with s.  5  of the Pujab Alienation of Land Act (Indian  Act XIII of  1900) considered  in the light of the provisions of s. 298 of  the Government of India Act, 1935.  Section 298(2) provides that nothing  in this section shall affect the operation  of  any law  which (a) prohibits, either absolutely or  subject’  to exceptions, the sale or mortgage of agricultural land there- in  described.   The  Privy Council held that s.  5  of  the impugned  Act  which created such a  prohibition  could  not operate  retrospectively because the word "   prohibits" can only  mean  the  forbidding of a  transaction,  and  such  a direction is appropriate only in respect of transactions  to take  place subsequently to the date of the  direction,  and cannot   include   an  attempt  to  reopen  or   set   aside transactions already completed, or to vacate titles  already acquired.   It would thus be seen that this decision  turned essentially  upon  the  use of the word  "prohibits"  in  s. 298(2) , and so, it would be unreasonable to extend the said decision to the cases falling under Art. 304(b) particularly when  the restriction imposed is not of such a character  as to amount to prohibition.  A  similar argument was in fact rejected by this  Court  in the  case  of  M.P.V. Sundararamier & Co. v.  The  State  of Andhra Pradesh(2).  What was urged before this Court in that case  was that the principle laid down by the Privy  Council in  the case of Punjab Province(1) should be extended  to  a law  to which Art. 286(2) of the Constitution  applied.   In rejecting this contention this Court observed that the Privy Council’s  decision proceeded solely on the  connotation  of the word "prohibits" in s. 2982’ of the Government of  India Act,  1935, and can be of no assistance in the  construction of  Art. 286(2) wherein the word does not occur.  What  this Court has observed about Art. 286(2) as it formerly stood in the Constitution applies with greater force to Art.  304(b). It is true that there are some provisions (1) 73 I. A. 59. (2) [1958] S.C.R. 1422. 999 in the Constitution which prohibit retrospective legislation as,  for  instance, Art. 20(1) & (2) vide M/s  West  Ramnand Electric  Distribution Co. Ltd. v. State of Madras(1).   But Art.  304(b) cannot be construed to mean that a  law  passed

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 35  

under it must in every case be prospective.  If a Statute is passed under Art. 304(b) retrospectively, its reasonableness may,  of  course, fall to be considered on the merits  in  a given  case  but that is not to say that in no  case  can  a statute  be  passed  under  the  sain  Articles  to  operate retrospectively. Then as to the argument about the scheme of Part XIII, we do not see how a statute passed under Art. 304(b) would  always and necessarily defeat the said scheme if its provisions are made retrospective.  It is not disputed by Mr. Pathak that a taxing  statute  can be passed retrospectively,  and  it  is conceded  that if such a statute is passed, it would not  be possible  for  any person to challenge its validity  on  the ground that it affects the citizens’ fundamental right under Art.  19(1)(g).   If such a challenge is made, it  would  be easily  met  by  the  plea that  a  taxing  statute,  though retrospective in its operation. can be reasonable and in the public interest within the meaning of clause (6) of Art. 19. Therefore, if a taxing statute can, in a given case, operate retrospectively  and  its validity  cannot  be  successfully challenged  under  Art,  19, we do not  see  how  a  similar challenge could be sustained against a taxing statute  which has  been  passed under Art. 304(b).  The freedom  of  trade guaranteed by Art. 301 is no doubt of very great  importance to the political and economic unity of the country; but  the freedom  guaranteed to the individual is no less  important; just  as  in the case of a challenge to the  validity  of  a statute under Art. 19 the court has to consider whether  the restrictions  imposed by the statute are reasonable  and  in the  interests of the general public, so in dealing  with  a challenge  to  the validity of a statute passed  under  Art. 304(b) the court has to consider whether the restrictions (1)  [1963] 2 S.C.R.747p.761. 1000 imposed by it are reasonable and are required in the  public interest.    The   impact  of  the   restrictions   on   the individual’s right has to be judged in one case, whereas the impact of the restrictions on the freedom of trade has to be judged in the other; but basically, it is the invasion of  a guaranteed right whose validity is being examined in  either case;  and so, if the law can be retrospective in one  case, there  is  no reason why it cannot be retrospective  in  the other.   We  are,  therefore, satisfied  that  there  is  no substance  in the plea raised by Mr. Pathak that the Act  is invalid solely because it operates retrospectively. It   is  then  faintly  suggested  that  the   retrospective operation  of s. 3, in substance, changes the  character  of the  tax.   The  argument is that the  proviso  to  s.  3(2) enables  the producer to recover the tax from the  purchaser in  case the goods are sold to a purchaser before  they  are carried, whereas such a provision did not exist in the  past and  in that sense, the retrospective operation changes  the character  of  the tax.  We have already  noticed  that  the proviso  in question is not retrospective in operation,  and so,  this  argument  has to be tested by  reference  to  the remaining portion of s. 3(2).  Thus tested, it is  difficult to accept it as sound.  In this connection, we may refer  to the recent decision of this Court in Rai Ramkrishna v. State of  Bihar(1)  where a similar plea was rejected and  it  was pointed  out that this Court has consistently held that  the mere fact that a validating statute operates retrospectively does  not justify the contention that the character  of  the tax  sought to be recovered by such retrospective  operation is necessarily changed. The  next question to consider in dealing with the  validity

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 35  

of  the Act which has been passed under Art. 304(b)  is  the extent  of  the dispute that is justifiable  in  law.   Art. 304(b) provides that notwithstanding anything in Art. 301 or Art.  303 the Legislature of a State may by law impose  such reasonable restrictions on the freedom of trade, commerce or (1)  [1964] 1 S.C.R. 897. 1001 intercourse 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.  It would thus be clear that an  Act  passed under  Art.  304(b) can be held to be valid if it  is  shown that  the restrictions imposed by it are reasonable  and  in the   public   interest.    It   is   true   that     before Bill is introduced in that behalf, the previous sanction  of the President has been obtained; but that does not take away the jurisdiction of the Court to consider the question as to whether  the  Act passed with the previous sanction  of  the President satisfies the requirements of Art. 304(b).   Since Art.  304(b)  permits  restrictions to  be  imposed  on  the freedom  of trade, the Constitution has made it  clear  that the  said  restrictions can be sustained only  if  they  are reasonable  and are required in the public  interest.   This position  is not disputed by Mr. Setalvad before us.  It  is true  that  in  the  case of  Atiabari  Tea  Co.(1),  whilst contrasting  the provisions of Art. 302 with those  of  Art. 304(b)  the majority judgment has observed that prima  facie the requirement of public interest may be said to have  been satisfied  by the previous sanction of the President and  it is  only  the reasonableness of the restrictions  which  may fall  to  be  considered in proceedings  before  the  Court. However,, this point did not directly arise for the decision of the Court, and so, those observations should not be  read as definitely expressing the opinion that the requirement of public  interest does not become the subject-matter  of  ad- judication in proceedings before the Court when the validity of an Act passed under Art. 304(b) is questioned. That  takes  us to the question about the onus of  proof  in these  proceedings.   It  may be that  in  most  cases,  the question about the onus of proof would turn out to be merely of  academic.  importance, because when  one  considers  the reasonableness of a given (1)  [1961] 1 S.C.R. 809 1002 restriction,  one inevitably enquires also whether the  said restriction  is not unreasonable; but since the point  about the onus has been argued before us, it is necessary that  we should  deal with it. Mr.Setalvad contends that  in  dealing with  the  question  about  the  constitutionality  of   any statute,  we must draw an initial presumption in  favour  of the  constitutionality of the statute, and he suggests  that this  initial  presumption will cover even  the  requirement that  the restriction must be reasonable and in  the  public interest as required by Art. 304(b).  The same argument  has been urged by him in regard to the presumption in so far  as the  petitioners’ fundamental right under Art. 19 (1)(g)  is concerned.  He urges that in determining the content of  the individual’s fundamental right under Art. 19(1)(g), we  must take  into account Art. 19(1)(g) as well as the  limitations placed  on  it by clause (6) of Art.  19.   The  fundamental right to carry on the trade is not an absolute right; it can be   regulated   and  controlled  by   law   which   imposes restrictions   on   the  said  right,  provided   the   said restrictions  are  reasonable and in the  interests  of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 35  

general public, and so, the contention is that when we speak about the initial presumption of constitutionality, it means that  the court should assume that the restrictions  imposed by  the statute are reasonable and in the interests  of  the general public, unless the contrary is shown. On  the other hand, Mr. Pathak strenuously argues  that  the initial presumption would be rebutted as soon as it is shown that  the fundamental right under Art. 19(1)(g ) is  invaded by a statute, or the freedom of trade guaranteed by Art. 301 is assaulted by the impugned statute.  Once a citizen  shows that  the  impugned statute invades  either  his  individual fundamental  right,  or the right of freedom of  trade,  the presumption has worked itself out and the onus shifts to the State  to  show that the invasion amounts to  a  restriction which  is  reasonable,  or it is in  the  interests  of  the general public. It may be conceded that, prima facie, there is some force in the argument raised before us by Mr. 1003 Setalvad.   If  the  freedom  guaranteed  to  an  individual citizen  is not absolute and its content must be  determined by reading Art. 19(1)(g) and clause (6) of Art. 19 together, it  can perhaps be said that the initial presumption  cannot be  rebutted merely by showing that the freedom  under  Art. 19(1)(g)  has,  prima facie, been invaded.  But  we  do  not think  it  necessary  to pursue  this  matter  any  further, because  we  are satisfied that the question raised  by  Mr. Setalvad  is  concluded against him by a  decision  of  this Court. In Saghir Ahmad v. The State of U.P.(1) where this Court was dealing with the invasion of the citizens’ fundamental right under  Art.  19(1)(g), it has been observed  that  when  the enactment  on  the  face  of  it  is  found  to  violate   a fundamental right guaranteed under Art. 19(1)(g), it must be held to be invalid, unless those who support the legislation can  bring it within the purview of the exception laid  down in  clause (6) of Art. 19.  If the respondents do not  place any  materials  before  the  Court  to  establish  that  the legislation  comes within the permissible limits  of  clause (6), it is surely not for the appellants to prove negatively that  the  legislation  was  not  reasonable  and  was   not conducive to the welfare of the community.  It is true  that on several occasions, this Court has generally observed that a presumption of constitutionality arises where a statute is impeached as being unconstitutional, but as has been held in the  case  of Saghir Ahmad(1) in regard to  the  fundamental right  under  Art. 19(1)(g) as soon as the invasion  of  the right is proved, it is for the State to prove its case  that the impugned legislation falls within clause (6) of Art. 19. The position may be different when we are dealing with  Art. 14,  because under that Article the initial  presumption  of constitutionality may have a larger sway inasmuch as it  may place the burden on the petitioner to show that the impugned law  denied equality before the law, or equal protection  of the   laws.   We  may  in  this  connection  refer  to   the observations made by this Court in the case of Hamdard (1)  [1955] 1. S.C.R. 707, 726. 1004 Dawakhana  (Wakf)  Lal  Kuan, Delhi v.  Union  of  India(1). Another principle which has to be borne in mind in examining the constitutionality of a statute, it was observed, is that it  must  be assumed that the  legislature  understands  and appreciates  the needs of the people and the laws it  enacts are  directed  to  problems  which  are  made  manifest   by experience and that the elected representatives assembled in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 35  

a   legislature  enact  laws  which  they  consider  to   be reasonable  for  the  purpose for which  they  are  enacted. Presumption  is,  therefore,  in  favour  of  the  constitu- tionality  of an enactment.  It is significant that all  the decisions  to  which reference is made in  support  of  this statement  of  the law are decisions under Art.  14  of  the Constitution.  Mr. Setalvad has fairly conceded that in view of  the  decision  of  this Court  in  the  case  of  Saghir Ahmad(2),  it would not be open to him to contend that  even after the invasion of the fundamental right of a citizen  is proved under Art. 19(1)(g), the onus would not shift to  the State.   In  our  opinion,  the said  decision  is  a  clear authority for the proposition that once the invasion of  the fundamental right under Art. 19(1) is proved, the State must justify its case under cl. (6) which is in the nature of  an exception  to the main provisions contained in  Art.  19(1). The  position with regard to the onus would be the  same  in dealing with "lie law passed under Art. 304(b).  In fact, in the case of such a law, the position is somewhat stronger in favour  of the citizen, because the very fact that a law  is passed  under Art. 304(b) means clearly that it purports  to restrict the freedom of trade.  That being so, we think that as  soon  as it is shown that the Act invades the  right  of freedom  of  trade, it is necessary to enquire  whether  the State has proved that the restrictions imposed by it by  way of taxation are reasonable and in the public interest within the  meaning  of Art. 304(b).  This enquiry would  be  of  a similar character in regard to cl. (6) of Art. 19. That  naturally takes us to the question as to  whether  the respondent has shown that the restric- (1) [1960] 2 S.C.R. 671, 679. (2) [1955] 1 S.C.R. 707, 726. tions imposed by the Act by levying a tax on the movement of tea can be said to be reasonable and in the public interest. The  decision of this question will inevitably  involve  the balancing  of the importance of freedon of trade as  against the   requirements   of  public   interest.    Art.   304(b) necessarily   postulates  that  considerations   of   public interest   may  require  and  justify  the   imposition   of restrictions  on  the freedom of trade,  provided  they  are reasonable.   In  determining  the  reasonableness  of   the restrictions  we  will  have  to  bear  in  mind  again  the importance  of  freedom  of trade and  the  requirements  of public interest.  It is a question of weighing one  relevant consideration  against  another  and  harmonising  both  the competing  interests so as to serve the public  interest  in the end.  This process of assessment may not always be easy, but,  nevertheless, we must try to weigh the pros  and  cons urged  before us by both the parties and decide whether  the tax  levied by the Act satisfies the requirement  prescribed by  Art.  304(b).  In support of his case,  Mr.  Pathak  has emphasised  the fact that the producer has been made  liable for  goods even when they are sold before they are  carried. In  other words, the argument which he urged in  support  of his case that the Act was beyond the legislative  competence of the State Legislature, has been again pressed by him into service  in  support  of the plea that  the  restriction  is unreasonable.  We are not impressed by this plea. It  is then urged that the serious infirmity in the  Act  is that  it  levies a flat rate in respect  of  goods  carried. Normally,  the method which should have been adopted by  the Act  is  what  is sometimes  described  as  the  ton-mileage method,  i.e., levy the tax according to the weight  of  the goods carried and the distance over which they are  carried. Since the Act imposes a flat rate merely on the weight,  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 35  

burden, imposed by it is unreasonable. On the other hand, Mr. Setalvad strongly urges that the  tax constitutes a reasonable restriction in the public interest, because it purports to raise revenue 1006 for public purposes.  As we have already seen, tax laws have to  stand. the scrutiny of Art. 19.  That being so, as  soon as  the validity of a tax law is challenged under  Art.  19, the  State  would be entitled to rely on the fact  that  the revenue raised by the tax law serves public purpose and that is its basic justification for being treated as a reasonable restriction on the individual’s fundamental right under Art. 19(1)(g).    It   would,   therefore.   follow   that    the consideration   on   which  Mr.  Setalvad  relies   is   not irrelevant, though its significance and importance cannot be over-rated.  In this context, it may, however, be legitimate to bear in mind that the revenue is required by the State to raise money in order to carry on the function of  government and to sustain the manifold welfare activities undertaken by it.   Similarly,  the  fact that  the  President  has  given previous  sanction  to  the introduction  of  the  Bill  may conceivably  be relevant, because the Constitution seems  to contemplate  that  the  sanction  of  the  President   would indicate that the Central Government had applied its mind to the problem and had come to the conclusion that the proposed tax  is reasonable and in the public interest.  But we  must hasten  to  add that the significance of  his  consideration cannot also be exaggerated. Mr. Setalvad urges that evidence in the case shows that  the State  has  levied the tax on the goods carried  because  it wants  to utilise the income for the purpose of keeping  the roads  in  order and to meet the huge expenses  incurred  in maintaining  the waterways in the State.  In  the  affidavit filed  on behalf of the respondent, details have been  given about  the  expenditure incurred by the State on  roads  and waterways from year to year, and the revenue received by  it form the carriage tax during the same period.  The affidavit points  out that tea and the jute are the main  products  of the  State of Assam and in order to have a regular and  easy flow  of  trade, the State has to maintain the  roads.   The trade in these commodities through waterways is cheaper and, therefore,  the  State  has  also to  incur  large  sums  on maintaining the waterways The statement filed in 1007 the affidavit clearly shows that every year the  expenditure incurred  is very much more than the revenue  received  from carriage tax.  It may perhaps be that since the  ton-mileage method  has not been adopted in imposing the tax, the  State may  not  be able to claim that the tax is  compensatory  in character.   Usually, compensatory character may be  claimed for  a tax of this kind, provided the extent of the  service rendered by the State by raising the tax is shown and it  is also  proved that the recovery of the tax has some  relation to  the  rendering  of the said service.  That  is  why  Mr. Setalvad  has  not  argued  that  the  tax  in  question  is compensatory in character.  He, however, suggests that under Art.  304(b)  it  would  be  open  to  him  to  sustain  the restriction imposed by the tax on the ground that the tax is levied  not  merely to raise general revenue for  the  State which itself is a public purpose, but that the tax is raised and utilised for keeping the waterways and the roads in good condition   in  the  State.   In  our  opinion,   there   is considerable force in these contentions. Then we turn to the main point urged by Mr. Pathak that  the flat  rate introduces an element of unreasonableness in  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 35  

levy  of  the  tax.  It is necessary to bear  in  mind  that having  regard to the interests of the trade as a  whole,  a flat  rate  may in some cases be reasonable.   If  different rates are levied by reference to the distance over which the tea is carried before it reaches the Calcutta Port, it would obviously mean that some producers of tea would have to  pay more  taxes than others and that would introduce an  element of   unfair  competition  between  the  producers   of   tea considered  as a class.  We are referring to this aspect  of the matter to emphasis the fact that the legislature has  to consider  several  relevant factors before  deciding  how  a particular tax should be levied.  The law of taxation is  in the ultimate analysis the result of the balancing of several complex considerations, and so, it would be unreasonable  to insist upon the application of a general rule that if a  tax is   levied  at  a  flat  rate,  it  must  be   treated   as unreasonable. 1008 In the present case, the legislature may have considered the requirements of the trade carried on by the producers of tea and may have thought that a flat rate would be just and fair to  the  trade as a whole.  These are questions  which  must normally  be left to the legislature to decide.   Therefore, we  do  not  think  that  the  main  ground  on  which   the reasonableness  of the tax levied by s. 3 was  impeached  by Mr. Pathak, can be sustained. Mr.  Pathak  further  contended that s. 34  of  the  Act  is unconstitutional  inasmuch  as  it  is  discriminatory   and imposes   an  unreasonable  restriction  on  the   citizens’ fundamental  right  to trade under Art. 19(1)(g).   We  have already  cited  s. 34.  The argument  that  the  restriction imposed by s. 34 is unreasonable, proceeds on the assumption that  sub-section (2) prohibits a producer from  ventilating his grievance against irregular, excessive, or illegal  levy of  the tax before any forum, and such a prohibition, it  is urged, is patently unreasonable.  We are satisfied that  the assumption  on which the argument is founded  is  completely misplaced.   What s. 34(2)(a) prohibits is merely a suit  or the other proceeding in any court.  It does not prohibit the remedy  of  an appeal or revision specifically  provided  by sections 16 & 17 of the Act. Then   it  is  urged  that  s.  34(1)  makes  an   invidious distinction  between producers who had been ordered  to  pay the  tax  under  the earlier Act and who took  no  steps  to challenge the said levy either by an appeal or revision, and those  who had adopted the remedy of an appeal  or  revision under  the said Act.  In the case of the latter category  of producers  the appeals and revisions would be continued  and dealt  with as though the said proceedings had been  adopted under  the relevant provisions of the Act.  whereas  assess- ments which had been closed under the earlier Act cannot  be reopened  by the producers by filing an appeal  or  revision after  the  Act was passed.  We do not think  there  is  any substance   in  this  argument.   Persons  who   had   taken proceedings  by way of appeal or revision under the  earlier Act are, on this argu-  1009 ment, treated as of the same class as persons who had  taken no  such  proceedings,  and that, in  our  opinion,  is  not justified because the two categories are not same or similar in  character.  Besides, an argument of this kind is  purely hypothetical  and  not based on any material facts.   It  is very difficult to assume that producers who were taxed under the earlier Act paid the tax without preferring an appeal or revision though they had a grievance against the validity or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 35  

regularity  of the assessment order.  Therefore, we  do  not think  the  challenge  to  the validity  of  s.  34  can  be sustained. A similar challenge has been made against the validity of s. 24  which prescribes punishment for the three categories  of offences specified by it under clauses (1), (2) & (3).   The argument  is that since the earlier Act was struck  down  as unconstitutional,  if any producer had  knowingly  submitted false  returns or had knowingly produced incorrect  account, or  had  contravened the relevant provision of s.  8(1),  it could not be said that he was guilty of any offence, and so, he  could not have been prosecuted under  the  corresponding provision  of  the earlier Act which also was  s.  24,  that being  so,  s.  24, of the present  Act  which  purports  to operate retrospectively would be invalid.  There may be some force  in  this  contention;  but we  do  not  see  how  the petitioners can be permitted to challenge the validity of s. 24  when  it  is  not alleged by them  that  any  action  is proposed  to be taken against them under the  said  section. In  dealing with petitions under Art. 32, this  Court  would naturally  confine the petitioners to the provisions of  the impugned  Act by which their fundamental rights  are  either affected  or threatened.  That is why we are  not  satisfied that  it  is  necessary to decide  the  question  about  the validity of s. 24 in the present proceedings. That takes us to the question whether the tax levied by  the Act   can  be  said  to  be  discriminatory  and  as   such, unconstitutional  because it has selected only tea and  jute as objects of taxation.  The argument I/SCI/64-64 1010 appears  to be that the legislature should have taxed  other commodities  along with tea and jute and in so far  as  only tea and jute have been selected for the purpose of taxation, Art.  14  has been contravened.  This argument  is  entirely fallacious.   It is not disputed that tea and jute  are  the main products of the State of Assam and it is not surprising that  the  Assam Legislature, therefore, levied tax  on  the said  two  articles.   Besides,  the  legislature  which  is competent  to  levy  a tax must  inevitably  be  given  full freedom to determine which articles should be taxed, in what manner and at what rate, vide Raja Jagannath Baksh Singh  v. The  State  of U.P.(1). It would be idle to contend  that  a State must tax everything in order to tax something.  In tax matters, "the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if  it does so reasonably.  The Supreme Court of the United  States of America has been practical and has permitted a very  wide latitude in classification for taxation"(2).  This  approach has  been approved by this Court in the case of  East  India Tobacco Co. v. State of Andhra Pradesh .(3). It is, of course, true that the validity of tax laws can  be questioned  in the light of the provisions of Arts. 14,  19; and  Art.  301  if the said  tax  directly  and  immediately imposes a restriction on the freedom of trade; but the power conferred  on this Court to strike down a taxing statute  if it contravenes the provisions of Arts. 14, 19 or 301 has  to be  exercised with circumspection, bearing in mind that  the power of the State to levy taxes for the purpose of  govern- ance  and  for  carrying out its  welfare  activities  is  a necessary attribute of sovereignty and in that sense it is a power  of  paramount  character.  In  what  cases  a  taxing statute  can  be struck down as  being  unconstitutional  is illustrated  by  the decision of this Court in  K.T.  Moopil Nair  v. The State of Kerala (4).  In that case,  a  careful

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 35  

examination of the scheme of the relevant provisions of  the Travancore-Cochin (1)[1963] 1 S.C.R, 220. (2) Willis on Constitutional Law’p. 587. (3) [1963] 1 S.C.R. 404, 409. (4) [1961] 3 S.C.R. 77. 1011 Land Tax Act (No. 15 of 1955) satisfied this Court that  the said   Act   imposed  unreasonable   restrictions   on   the fundamental  rights  of the  citizens,  conferred  unbridled power    on   the   appropriate   authorities,    introduced unconstitutional discrimination and in consequence, amounted to  a  colourable exercise of legislative power.  It  is  in regard  to  such  a taxing statute  which  can  properly  be regarded as purely confiscatory that the power of the  Court can be legitimately invoked and exercised.  In our  opinion, it would be idle to suggest that a tax imposed by the Act in the present case should be struck down because it has  taxed only tea and jute. The next contention to which reference must be made is  that the  Act is a colourable exercise of legislative  power  and should also be regarded as confiscatory for the reason  that it  has  been  passed  substantially  for  the  purpose   of validating  the  recoveries made under the earlier  Act  and enforcing  the assessment orders passed under the  Act.   We have already seen that the Act is retrospective in character and  came into force from the date on which the earlier  Act was  applied.   We have also noticed  that  the  prospective operation  of the Act was limited to one year from the  date on  which it was published.  In fact, a subsequent  Act  had been  passed by the Assam Legislature (Act No. 16  of  1962) and this Act has adopted a somewhat different procedure  and prescribed a different machinery for the recovery of the tax imposed by it.  Section 3 of this Act makes the owner liable to pay the tax and s. 2(7) defines the owner as meaning  the owner of a taxable vehicle and includes in that category the four types of persons specified by clauses (a) to (d) of  s. 2(7).   The  argument,  therefore,  is  that  the  Act   was deliberately  passed  by  the  legislature  merely  for  the purpose of recovering dues to which it had originally made a claim  under the earlier Act which was unconstitutional  and that, it is suggested, makes the Act open to the charge that it  represents a colourable exercise of  legislative  power. We are satisfied that there is 1012 no substance in this argument.  It is not disputed that  the power  to make a law necessarily includes the power to  make the  provisions  of the law retrospective.  It is  also  not disputed  that it is within the competence of a  legislature to  pass  validating Acts, because the power  to  pass  such validating Acts is essentially subsidiary to the main  power of legislation on the topics included in the relevant  List. Therefore, if the legislature felt that the infirmity in the earlier  Act could be cured and it proceeded to comply  with the  requirements of Art. 304(b), it cannot be said  that  a law   passed  -under  Art.  304(b)  is  void,  because   the legislature  has  thereby attempted to recover  taxes  which could  not be recovered under the earlier Act owing  to  the constitutional  infirmity in the said Act.  The exercise  of legislative  power which has resulted in the passing of  the present Act cannot, in our opinion, be said to be colourable in any sense. Is  the Act extra-territorial in its application ?  That  is the  next question which calls for an answer, In support  of the  plea  of  extra-territoriality, it is  urged  that  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 25 of 35  

petitioners are all residents of Bengal, that they carry  on their  tea business in Calcutta, and it is only on the  very narrow  ground  that  in  its passage  from  tea  garden  to Calcutta  the tea in question has to cross a distance  of  a mile  and a half in Assam that the tax purports to make  the producers  from Bengal liable under s. 3(2).  This  argument also is entirely misconceived.  Entry 56 in List II empowers the  Assam  Legislature  to levy a  tax  on  goods  carried. Whether the goods are carried for a long distance or a short distance  cannot  effect  the question  of  the  legislative competence  of  the legislature.  It is the  carriage  goods through  Assam  that  is  the taxing  event  and  since  the physical  carriage of goods through a part of Assam  is  not denied,  it  is  difficult to see how  a  challenge  to  the validity  of  the  Act  on the  ground  that  it  is  extra- territorial  in character could be sustained.  The  doctrine of nexus has been applied in considering the validity of tax statutes  in this country in the Tata Iron & Steel Co.  Ltd. v.  The State of Biliar(1).  Das (1)  [1958] S.C.R. 1355. 1013 C.J.,  who spoke for the Court has examined the  genesis  of the doctrine of nexus, has considered the relevant  judicial decisions  bearing  on  the  point  and  has  expressed  the conclusion  of  the  Court that the  said  doctrine  can  be invoked to sustain the validity of tax statutes.  The  nexus in question must be rational, but it would be impossible  to accede to the argument that the sufficiency of nexus can  be a matter for adjudication before the Court.  In the  present case,  undoubtedly, tea has been carried over a part of  the inland  waterways  in Assam and that satisfies the  test  of nexus.    The   argument   of   extra-territoriality   must, therefore, fail. Mr. Mazumdar has urged before us three subsidiary points  in addition to the points argued by Mr. Pathak.      He contends that the tax levied by the Act is   invalid because a tax can be levied on goods carried    only  if  the   said goods  join  the mass of goods in the taxing State,  In  the present case the goods had not entered the mass of goods  in the  State of Assam at any stage; they just traveled  for  a very short distance on their way from the tea garden, to the Calcutta  Port and that cannot attract a tax under Entry  56 of  List 11.  In support of this argument, Mr. Mazumdar  has invited  our attention to the decision of this Court in  The Central  India  Spinning and Weaving and  Manufacturing  Co. Ltd., the Empress Mills, Nagpur v. The Municipal  Committee, Wardha(1).  In  that case, this Court  was  considering  the scope  and  effect  of s. 66(1)(c) of  the  C.P.  and  Berar Municipalities  Act, 1922, and the decision turned upon  the true interpretation of the’ words "imported into".  In  that connection,  the legislative history of the octroi duty  was examined and it was held that the concept of import requires that. the goods which are brought into must mix,-up with the mass of the property, in the local area where the goods  are alleged  to  have  been imported.. If  the  goods  are  just carried  and not mixed with the mass of the property in  the area through which they are carried, they cannot be said  to have been imported into that (1)  [1958] S.C.R. 1102. 1014 area.   We  do  not  see  how  this  decision  which  turned essentially  upon  the true significance of the  concept  of import  can have any relevance where the tax with  which  we are concerned is a tax on goods carried.  The word "carried" is of much wider denotation, and it would be unreasonable to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 26 of 35  

limit  its  scope by introducing  considerations  which  are relevant in dealing with the question of import.  Therefore, we do not  think that’ the attempt to change the validity of the Act on the ground that the carried goods which are taxed do  not  join the mass of goods in the State of  Assam,  can succeed. Mr. Mazumdar has also urged that so far as the  petitioners’ goods  are concerned, they are substantially carried by  the railway  and should, therefore, be field to be  outside  the purview  of s. 3 of the Act.  We have already seen that  the operation  of  the Act is confined to the goods  carried  by road  or  by  an  inland waterways  and  the  goods  carried entirely by the railway are outside its scope.  The question which  Mr.  Mazumdar  has raised before us  is  that  having regard  to  the  long distance which  the  tea  chests  have travelled between the tea gardens and the Calcutta Port,  it should  be  held that a short distance of 1-1/2 to  2  miles which they travelled by inland waterways does not alter  the character  of their journey; it is, on the whole, a  journey made  by  the railway, and so, the goods must be  deemed  to have been carried by railway throughout.  This argument also is  misconceived.  As we have just indicated, the length  of the  distance  over  which  the goods  are  carried  has  no relevance to the point.  It is the physical fact of carriage of  goods through a part of Assam that attracts the levy  of the tax imposed by s. 3. Besides, the definition of  railway to which Mr. Mazumdar invited our attention contained in  s. 3  of the Indian Railways Act (No. 9 of 1890)  itself  shows that  the  carriage of the goods over the  inland  waterways cannot  be  brought  within the  scope  of  the  definition. Section  3(4) defines the railway as meaning a  railway  for any   portion  of  a  railway,  for  the   public   carriage passengers, 1015 animals  or  goods, and includes, inter alia,  all  ferries, ships,  boats and rafts which are used on inland waters  for the  purposes of the traffic of a railway and belong  to  or are  hired  or  worked by the  authority  administering  the railway.  It is common ground that the ferries by which  tea chests  of  the  petitioners are  carried  over  the  inland waterways  in  Assam do not belong to the railway,  nor  are they  hired  or worked by the authority of  the  railway  to which  the goods were consigned for carriage.  In  fact,  s. 74E  of the Railway Act which, after amendment,  has  become s.76D  in  1961, clearly brings out the fact that  when  any goods are tendered to a railway administration for  carriage by  railway and have been booked through over a  railway  or any  other  transport system not belonging  to  the  railway administration,  the person who tenders the goods  shall  be deemed  to  have contracted with the railway  and  the  said other transport system separately.  Therefore, the  argument based on the fact that the goods have been entrusted to  the railway  for through carriage, and so, the carriage  of  the goods  should be held to be outside the purview of s.  3  of the Act, cannot be sustained. That leaves only one more point urged by Mr. Mazumdar to  be considered.   Mr. Mazumdar contends that the tax is  invalid for  the reason that tea which is one of the  objects  taxed has been covered by the Central Tea Act (Act No. 29 of 1953) and he argues that since the Central Act has been passed  by reference  to  the relevant Entry in List 1 in  the  Seventh Schedule, it is not open to the State Legislature to pass  a taxing  statute in respect of tea.  It is true that the  Tea Act  has  made several provisions in regard to tea  and  has constituted a Board to deal with the problems enumerated  in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 27 of 35  

the other provisions of the said Act; but one has merely  to glance  through  the relevant provisions of the Tea  Act  to realise  that  the  scope and purpose of  the  said  Act  is entirely different from the scope and purpose of the  taxing Act with which we are concerned.  The pith and substance  of the taxing statute is the levy of a tax 1016 on tea, which is carried in the State of Assam and the right to  levy such a tax cannot be said to have been  taken  away merely  by  the fact that a Tea Act had been passed  by  the Central Legislature which is referable to the relevant Entry in  List  1 of the 7th Schedule.  The power to  levy  a  tax which  has been conferred on the State Legislature by  Entry 56  cannot, therefore, be said to be controlled by  the  Tea Act in question.  ’It would be noticed that List I does  not contain any Entry by which the Central Legislature can  pass an  Act levying a tax on goods carried which can be said  to control  Entry 56 in List 11.  That being so, we, must  hold that  there is no substance in the argument that  the  State Legislature  has  no  power to levy a tax on  tea  which  is carried over- a part of the area of the State of Assam. A similar argument was urged by Mr. Mazumdar on the strength of  the provisions contained in the River Boards  Act,  1956 (No.   49  of  1956).   Mr.  Mazumdar  suggested  that   the Brahmaputra River over a part of whose stream the tea chests are  carried  is  governed by the provisions  of  the  River Boards Act and that imposes a ban on the power of the  Assam Legislature to pass an Act in respect of goods carried  over the  Brahmaputra  River.   What  we  have  said  about   the objection ’raised by Mr. Mazumdar on the strength of the Tea Act applies with equal force to the present argument. The  result  is, the petition fails and  is  dismissed  with costs. SARKAR J.-I agree that the petition fails but I wish to  say a few words of my own. The  petition challenges the validity of the Assam  Taxation (on  Goods  Carried by Road or on  Inland  Water-ways)  Act, 1961.  (Act  10 of 1961), passed by the Legislature  of  the State of Assam.  There are two petitioners, one of whom is a limited  company and cannot, therefore, admittedly  maintain the  petition which is under Art. 32.  It is  conceded  that the petition is maintainable by the other petitioner, an 1017 officer of the Company, as he is interested in the rights of the Company.  No question of the competency of the  petition was, therefore, raised on behalf of the respondents who  are the  State of Assam and two of its officers  concerned  with the collection of the tax under the Act. The  petitioner  Company  is the owner of a  tea  estate  in Jalpaiguri in the State of West Bengal.  One of the  grounds on  which the validity of the Act is challenged is that  the Act imposes an unreasonable restriction on the trade of  the Company.   The respondents contend that the Act is valid  in view  of the provisions of Art. 304(b) and also cl.  (6)  of Art. 19 of the Constitution.  They say that  the-restriction imposed  by  the  Act is reasonable.   Article  301  of  the Constitution  provides that subject to the other  provisions of Part XIII, trade, commerce and intercourse throughout the territory  of India shall be free, and the relevant part  of Art. 304 is in these terms:               "Notwithstanding    anything    in     article               301......... the Legislature of a State may by               law-               (a)..........................................               (b)   impose  such reasonable restrictions  on

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 28 of 35  

             the freedom of trade, commerce or  intercourse               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." It  is  not in dispute that the sanction  of  the  President contemplated in the proviso to Art. 304(b) had been obtained in connection with the impugned Act.  That Act had, however, a predecessor which bore the same title and was Assam Act 13 of  1954  but for which no sanction of the  President  under Art. 304(b) had been obtained.  In Atiabari Tea Co. Ltd.  v. The State of Assam(1), this-Court by a majority held that as Act 13 of 1954 imposed a tax on the carriage of (1)[1961]1 S.C.R. 809. 1018 goods  it  constituted  a direct  restriction  on  the  free movement  of trade and as no sanction of the  President  had been obtained in respect of it was void.  No question  arose there as to the reasonableness of the restriction imposed by the Act.  The other members of the Court who constituted the minority expressed dissenting opinions but no useful purpose will  be  served by referring to them.  As a result  of  the opinion of the majority Act 13 of 1954 became void. Article  301  and  the succeeding  articles  in  Part  XIII, including  Art. 304, were again considered by another and  a larger  bench  of  this Court in  The  Automobile  Transport (Rajasthan) Ltd. v. The State of Rajasthan.(1) Das J.,  with whose  judgment  Kapur  J.,  and  myself  were   associated, accepted  the interpretation of Art. 301 by the majority  in the  Atiabari Tea Co. case (2) as correct, but  stated  that regulatory measures such as rules laying down speed limit or lights  to  be carried by, vehicles and other rules  of  the road  as also measures imposing compensatory taxes such  as, taxes  collected for maintaining the roads or bridges,  were not  restrictions  within Art. 301 as such  measures  really facilitated   trade  rather  than  restrict  it.   It   was, therefore, said by Das J.,that such     measures  need   not comply  with the requirements of the proviso to Art.  304(b) of  the Constitution.  As I apprehend the judgment of  Subba Rao  J., in that case, he seems to have taken the same  view though  he  used  the description  ’regulatory  measure’  to include  measures laying down the rule of the road  as  also measures  intended  to  raise  funds  for  construction  and maintenance of roads.  This was the opinion of the  majority of  the Court in that case.  It is unnecessary to  refer  to the other opinion expressed in it. Neither of these cases, however, has any bearing on the case in hand for it is not contended by the respondents that  the impugned  Act was a compensatory measure.  It was of  course not a regulatory measure as laying down a rule of the  road. Indeed (1)[1963] 1 S.C.R. 491. (2) [1961] 1 S.C.R, 809.  1019 it  Was not contended that the impugned Act did  not  impose restrictions  on  the  movement of trade.  In  view  of  the sanction  of the President which had been ,obtained  in  the present  case,  the  only question  concerning  the  freedom guaranteed  by Art. 301 was whether the restriction  imposed by  the Act was reasonably required in the public  interest. It  was  said  that the impugned Act (Act  10  of  1961)  is practically in the same terms as the predecessor Act of 1954 but  that by itself would not bring the impugned Act  within

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 29 of 35  

the mischief of the decision in the Atiabari Tea Co.(1) case for  that  case  held the earlier Act invalid  only  on  the ground  that  the  sanction of the President  had  not  been obtained.   No  question  was  canvassed  there  as  to  the reasonableness  of any restriction imposed by the Act.   The sanction  of the President, as already stated, was  obtained for  the  impugned Act.  I should however  state  here  that apart  from  the  point  about  the  reasonableness  of  the restrictions  imposed on trade by the Act, there were  other attacks on it.  These will be mentioned later. The  impugned  Act came into force on April  15,  1961,  and imposed  a tax on manufactured tea and jute carried  by  any means  other  than railway and airways.  This case  is  not, however,  concerned with any carriage of jute.  The Act  was given  a retrospective operation as it was to be  deemed  to have effect from April 24, 1954, being the date on which the predecessor  Act,  (Act  13  of  1954),  came  into   force. Further, the Act was to remain in force till March 31, 1962, that  is, for about a year only; see s. 1(3).  It has  since been  replaced by another Act, namely, Act 16 of  1962.   It may be that as this last mentioned Act was in contemplation, the  impugned Act was given a short term of life.  This  Act further  stated that the tax collected under Act 13 of  1954 would   be   deemed  to  have  been  collected   under   the corresponding provisions contained in it. There  is  one other matter to which I would like  to  refer before I proceed to consider the points argued (1)  [1961] 1 S.C.R. 809. 1020 at  the bar.  I have said that the tea estate of  the  peti- tioner  Company  was in West Bengal and not in  Assam.   Its practice was to book its tea from a railway station in  West Bengal  for carriage to Calcutta for sale there.   Now  what the  railway  did  was to carry the tea to  another  of  its stations called Dhubri Ghat on the river Brahmputra  situate in Assam.  The railway had arranged for the transshipment of the  tea there from its wagons to) steamers belonging  to  a carrier  company at Dhubri Ghat and these  steamers  carried the  tea by inland waterways to Calcutta.  The  steamers  in the  course of their journey passed through one and  a  half mile  or  two miles of Assam waterways, about 572  miles  of Pakistan  waterways and 165 miles of West Bengal  waterways, before reaching Calcutta.  The tax was levied in respect  of the  carriage  of  the  tea for about  two  miles  on  Assam waterways. At  the hearing in this Court learned counsel  appearing  in support of the petition really attacked only two sections of the impugned Act, namely, ss. 3 and 34.  Section 3, which is the charging sections is in these terms:               S.    3. (1) Subject to the provisions of this               Act,  there  shall  be levied  a  tax  on  (a)               manufactured tea and (b) Jute in bales carried               by motor vehicle, cart, trolley, boat,  animal               and  human  agency or any other  means  except               railways  and airways in such manner a,-Id  in               respect  of  such period and at such  rate  as               specified in the Schedule.               (2)   Such  tax  levied  on  manufactured  tea               shall  be realised from the producer and  that               levied  on  jute shall be  realised  from  the               dealer: Provided that where tea is sold at the factory premises, the producer  shall  be liable for realisation of tax  from  the purchaser  with effect from such date as the Government,  by notification,  appoint,  for  the carriage of  such  tea  as

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 30 of 35  

provided  in this section and the producer shall  be  liable for the payment of such tax notwithstanding 1021 the fact that the tea is not carried by the producer: x          x            x            x             x The  first  contention was that the section was  beyond  the legislative competence of the State Legislature.  It is  not in  dispute  that the Act had been passed under  the  powers contained  in Item 56 of List II in the Seventh Schedule  to the  Constitution  which authorised a State  Legislature  to pass laws imposing "taxes on goods and passengers carried on roads or on inland waterways".  It was said that under  this entry  a tax could be levied only on the person who  carried the goods but the proviso to s. 3(2) showed that even  where a  producer was not himself carrying the tea, he was  liable for  the  tax  and, therefore, the Act levied  the  tax  not really  on  goods carried by road or waterways and  was  for that reason, ultra vires the State Legislature and void.  It may be that there is nothing in s. 3 imposing directly a tax on  the  purchaser  of the tea even when he  is  the  person carrying  it.  It seems to me however that under Item 56  of List II it was competent for the legislature to provide  for the  tax being realised from the producer in the way it  has been  done in the Act.  It is wellknown that the entries  in the  legislative  lists have to be read  with  all  possible width and amplitude.  An entry authorising the levy of a tax of  a particular kind would justify that levy in the  manner best suited for collecting it The purchasers of tea would be mostly parties in Calcutta.  The State of Assam may find  it difficult to realise the tax from them.  It may,  therefore, legitimately  provide that the tax may be realised from  the producer  even where he does notches the tea  for  otherwise the  tax  may  be  evaded. Then again, under  s.  3  tax  is leviable  only when tea has been carried by road  or  inland water-ways.  It is clear, however, that it was the action of the  producer, namely, the sale by him, which  alone  caused the  carriage of the tea; without the sale there would  have been no occasion for the purchaser to carry the tea.  If  he did not actually 1022 carry  the  tea  himself, he  certainly  brought  about  its carriage.   Therefore, he might under Item 56 of List 11  be made liable for the carriage of the tea just as much as  the person  actually  carrying it.  I am unable to see  why  the words of Item 56 of List 11 would not cover both. I do not think it necessary to decide the question raised at the bar whether the producer mentioned in sub-s. (2) of s. 3 refers  only  to  a producer who  himself  carries  the  tea produced  by him.  Even if the word ’producer’ in that  sub- section  includes one who does not himself carry the tea,  a tax  can  be  legitimately levied on him  when  the  tea  is carried  as a result of its sale by him and for facility  of collection of the tax. It was next said that the proviso in s. 3 may, if effect  is given  to  it from a past date, impose a tax on  a  producer which  he  could  not collect from the  purchaser.   It  was pointed  out that if he was made liable by the  notification mentioned  in  the  proviso in respect of  sales  which  had already taken place, he would have to pay the tax personally as  the sales having taken place, he could no  more  collect the  tax  from the purchaser.  It was  contended  that  this would  make the restriction put by the Act unreasonable  and also  make the provision incompetent as outside Item  56  of List 11 for the reasons earlier mentioned.  It was also said that  this would create a discrimination  between  producers

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 31 of 35  

hit by such retrospective notification and those whose sales came  after  the date when the notification  was  published. All these reasons, it was contended, would make the  proviso illegal and void.  I think the whole contention is imaginary and unfounded.  It is based on the notification being  given a retrospective effect but I am clear in my mind that  under the   proviso   a  notification  cannot   be   issued   with retrospective  effect.   Under the proviso the  producer  is made  liable for realisation of the tax from  the  purchaser from  a  date  appointed by  the  notification.   The  noti- fication, therefore, necessarily contemplates a situation  1023 in   which  the  producer  can  collect  the  tax   from   a purchaser.He  cannot  of  course do so in  respect  of  past sales.    Therefore, the notification if it appointed a past date would be incompetent. The next contention is that the Act must be held to be  void as   it  had  been  given  retrospective  operation.    This contention  was  founded  on the  argument  that  a  statute contemplated  by Art. 304(b) cannot be retrospective.  I  am unable to see why not.  Without more, when a legislature has the  power to pass a law it can pass a law having a  retros- pective  operation.   This, I do not  think,  was  disputed. What was said was that the terms of Art. 304 indicated  that it was not intended that a retrospective law would be passed under it.  It was argued that the law contemplated there was one  which  put restrictions on the freedom of the  flow  of trade and, therefore, if the trade had once ’flown’ it could not be restricted and so a retrospective effect could not be given  to  a law passed under the Article.  I am  unable  to appreciate  this argument.  If the flow of trade  in  future can  be restricted, then I do not see why a trade which  has flown in the past cannot be restricted retrospectively.   It is  not  disputed that a restriction which  can  be  imposed under  cl.  (6) of Art. 19 can be  imposed  retrospectively. There  is no reason why the same position should not  obtain in regard to the restrictions contemplated by Art. 304(b). It was then said that the effect of Art. 304 was to prohibit the  doing of a thing and a prohibition by its  very  nature could  only  be in respect of the future and,  therefore,  a retrospective  restriction  would be  outside  the  Article. This  argument  was sought to be supported by  reference  to Punjab  Province  v.  Daulat  Singh(1)  where  the  Judicial Committee said that where a legislature had power to make  a law prohibiting something, it would not in exercise of  that power prohibit that thing from a past date because the  word ’prohibit’  in  the  nature  of  it,  referred  only  to   a prospective prohibition.  But I do not (1)  L.R. 73 I.A. 59. 1024 find  any prohibition in Art. 304.  The effect of Arts.  301 and 304 is that the freedom of trade is not to be restricted by  law  passed  by  a State except  by  a  law  imposing  a reasonable  restriction on it in the interest of  the-public and  passed  with the sanction of the  President.   It  then comes  to this that the freedom can be restricted by  a  law which  has  to  satisfy the two  conditions.   Article  304, therefore, permits and does not prohibit.  There is no scope for applying   here the Punjab Province case(1). The  next  point  to  which I wish  to  refer  is  that  the restriction  imposed by the tax levied under the Act is  not reasonable.  A question was raised as to on whom the onus to prove  the reasonableness of the restriction lies.   It  was said that it has been held by this Court in Saghir Ahmad  v. The  State of U.P.(2) that the onus lies on the  State.   It

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 32 of 35  

must  be  conceded that it does seem to have  been  so  held there.   On the other hand, however, there is a  very  large number of cases where it is said that there is a presumption as   to  the  constitutionality  of  a  statute  and   that, therefore,  the onus of showing that it is  unconstitutional is  on  the party so alleging: see the  cases  collected  in Hamdard  Dawakhana (Wakf) Lal Kuan v. Union  of  India(’-’). No   doubt   these  cases  dealt  with   the   question   of constitutionality  arising  from  discrimination,  that  is, under  Art. 14 of the Constitution, but I am unable  to  see that  makes  a difference on the question  of  onus.   These cases  say that the presumption of constitutionality  arises because "it must be assumed that the legislature understands and  appreciates  the  need of the people and  the  laws  it enacts  are directed to problems which are made manifest  by experience and that the elected representatives assembled in a   legislature  enact  laws  which  they  consider  to   be reasonable  for  the  pupose for  which  they  are  enacted. Presumption    is,    therefore,   in    favour    of    the constitutionality of an enactment": Hamdard Dawakhana (Wakf)(3)          case at p. 679. (1) L.R. 73 I.A. 19         (2) [1955] 1 S.C.R. 707, 727. (3)[1960] 2 S.C.R. 671, 679.  1025 If  the  Legislature is to be presumed to know that  an  Act which  makes a distinction is justified because  the  people with whom it is concerned are distinguished from the  others by an intelligible differentia having a rational relation to the  objects  of  the Act, that being the  test  to  save  a statute from being held to be discriminatory, then I do  not see  why it cannot be presumed that knowing the  people  and their needs, the legislature has passed a law which  imposes reasonable  restrictions on their activities.  It  was  said that  the  restriction is permitted by cl. (6)  of  Art.  19 which contains an exception and that an exception has to  be proved by the party who wants to take advantage of it.  That does  not  seem  to  me to be a  proper  way  of  reading  a constitution and this rule of construction must, in my view, give  way to the rule of presumption  of  constitutionality. It may also legitimately be said that there is no exception; the  real  fundamental  right  is what  is  left  after  the restriction  has  been imposed and, therefore,  the  citizen alleging  violation of his fundamental right must also  show that  the restriction is unreasonable.  It is not  necessary to pursue the matter further- or to pronounce finally on  it now because for one thing, the observation in Saghir Ahmad’s (1) case is there’ and for another, nothing turns on onus in this  case.   I  have only mentioned it as it  is  a  matter which, to my mind, requires consideration when the  question properly arises. The  first ground on which it was said that the Act  imposed an unreasonable restriction was that the rates imposed by it were flat rates.  The rates were prescribed in the  Schedule mentioned  in  s.  3  and different  rates  were  fixed  for different  periods  of time but in respect  of  each  period there  was one rate, for example, between June 1, 1954,  and June  30, 1955, the rate was one pice per pound.  The  point made was that the tax being a tax on carriage it becomes  an unreasonable  restriction if the tax did not vary  with  the distance over which the thing was carried.  Put that way, it would really seem not a question of (1) [1955] 1 S.C.R              707, 727. 1 SCI/64--65 1026 reasonableness but a question of legislative competence.   I

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 33 of 35  

am  wholly  unable to see that Item 56 in List  11  requires that  the  tax  imposed must be measured  according  to  the distance  over which the goods are carried.  Tested  by  the scale  of reasonableness also, a flat rate does not seem  to me to be wanting in that quality.  One may well ask why is a flat rate not reasonable?  I find no answer.  Why is a  rate depending on the distance carried more reasonable?  Again  I find  no answer.  If the rate varied with distance, then  it is  conceivable that in many cases the burden would be  much heavier.   How  could that have been more  reasonable?   The only effect of a flat rate may be that people who carry  for a  short  distance pay as much as those who carry  a  longer distance.   I  do  not  see that  this  can  make  the  levy unreasonable. Now let me look at the question from another point of  view. To start with it would not be wrong to say that since a  tax is  collected  in public interest and for  public  good  the burden  imposed  by  it  on  trade  would  prima  facie   be reasonable  in the public interest.  There is no  reason  to think  that the burden imposed by this Act is onerous,  that it  is such as would crush the trade by putting a weight  on it  which  it  could not carry.   Furthermore  it  has  been established  on the affidavit that the Government spends  on roads  and  facilities on waterways much more than  what  is collected  in the shape of tax on the goods  carried.   That also  is  a  consideration  which  goes  to  establish   the reasonableness  of  the levy.  The petitioner has  not  been able  to  put  before us anything which  would  destroy  the effect  of  these  considerations.  The fact  that  the  Act imposes  the tax with retrospective effect cannot by  itself also  make  the restriction unreasonable.  For  the  reasons earlier mentioned, it may still be reasonable. I now proceed to consider the charge of discrimination.   It was said that the Act offended Art. 14 because it taxed only tea  and jute and no other article.  But I am unable to  see that. this is discrimination. 1027 The  Act applies to all who are concerned with the  carriage of tea and jute.  No doubt it does not apply to the carriage of  other  goods  but  as has been  said,  "it  is  for  the legislature  to  decide on what objects to levy":  see  Raja Jagannath Baksh Singh v. The State of Uttar Pradesh(1).  The legislature  must  pick  and choose  and  such  picking  and choosing   cannot  by  itself  amount   to   discrimination. Besides,  it  is  common  knowledge  that  tea  is  a   very prosperous  industry in Assam and is certainly more  fit  to bear  the,  burden of taxation than  most  other  industries there..  The  flat  rate  of tax  imposed  also  creates  no discrimination for it applies the same rate to all.  It  has not been shown that in fact a discrimination has arisen. Then  it  was  said  that s. 34 of the  Act  amounted  to  a violation of Art. 14.  That section is in these terms:-               S.34.  (1) Any rules made, any  liability  in-               curred,  any  tax  levied  or  realised,   any               returns furnished, any proceedings  commenced,               any notification published any action taken or               anything whatsoever done under the  provisions               of  the Act repealed, shall be deemed to  have               been   made,   incurred,   levied,   realised,               furnished, commenced, published, taken or done               under  the  corresponding provisions  of  this               Act.               (2)   Notwithstanding  anything  contained  in               any  judgment, decree or order of  any  court,               all taxes imposed or realised or purporting to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 34 of 35  

             have  been imposed or realised under  the  Act               repealed shall for all purposes, be deemed  to               be,  and  to  have been,  validly  imposed  or               realised and accordingly-               (a)   no  suit  or other proceeding  shall  be               maintained  or continued in any court  against               the  Government  or any  person  or  authority               whatsoever for the refund of my taxes so paid;               and               (1) [1963] 1 S.C. R. 220, 234               1028               (b)   no  court  shall enforce any  decree  or               order  directing  the refund of any  taxes  so               paid. It was first said that the sub-section prevented people from whom  tax  had  been collected under Act 13  of  1954,  from taking  proceedings in court, while those subjected  to  the tax only under the impugned Act were    not  so   prevented. If by ’Proceedings in court’  are meant proceedings  outside those  for  which the Acts provide,  then  such  proceedings cannot be taken by persons from whom tax is collected  under the present Act either: see s. 29.  Therefore the Act  makes no  discrimination  as alleged.  If proceedings  by  way  of appeal and otherwise for which provision is made in the Acts themselves  are  to  be considered, then also  there  is  no discrimination.  Under the earlier Act there were provisions for appeal etc. and if one had filed an appeal I under  that Act,  that appeal had to be deemed to have been filed  under the impugned Act.  Likewise, in respect of every other  kind of  proceeding contemplated in the earlier Act.  If one  has not  chosen  to take these proceedings under  that  Act,  he cannot complain.  That would not be a case of discrimination by  the Act but would be giving up by a party of his  rights under it.  Therefore the position of a tax payer is the same under both the Acts. We  were  also referred to s. 24 of the Act.   That  section provides  for ’prosecution for failure to do certain  things required  by the Act to be done.  It was contended  that  as the  section had been given retrospective operation, it  had the effect of making something which was not an offence when done,  an  offence  by  an ex post  facto  law:  It  is  not necessary  to  go  into  that  question  for  it  is  purely academic.  It has not been suggested that the petitioner has been affected by it. Another point argued was that the Act was only a  colourable exercise of legislative power under Item 56 of List 11.  The contention  was that the Act had nothing to do with  tax  on carriage  of goods but was really passed to retain what  had been collected 1029 under an Act which this Court had declared invalid.  That of course is not on the face of it wholly correct, for the  Act operated  prospectively  also.   But apart  from  that  this contention which was based on s. 34(1) of the Act is  wholly unacceptable  to  me.   Such  a  contention  would  make  it impossible to pass an Act validating a taxing statute.  Such Acts  have  very  often been passed.  A  validating  Act  is passed  under the legislative power under which the  invalid law  had  been purported to be passed and it had  been  held that  where legislative power exists, it could not  be  said that  the exercise of that power was  colourable:  Gajapatti Narayan  Deo  v.  State  of Orissa(1).   See  also  M.P.  V. Sundararamier & Co. v. The State of Andhra Pradesh.(2) The  last thing to which I wish to refer is  the  contention that  the Act was bad as it had extraterrestrial  operation.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 35 of 35  

It  was said that to the petitioner it applied only  because the tea was carried over inland waterways in Assam for about a  mile and a half only.  Apparently, the argument  is  that this  distance  is too trivial.  But it seems to  me  beyond question  that  if the goods were carried for  any  distance over  the  territory of Assam, however short  that  distance might be, the Assam Legislature would have full jurisdiction to impose a tax on such carriage.  This point is, therefore, also without any merit. Mr. Mazumdar raised certain other points and these have been dealt  with by my brother Gajendragadkar.  I do not wish  to add anything to what he has said concerning them. I would, therefore, dismiss the petition. Petition dismissed. (1) [1954] S.C.R. 1.     (2) [1958] S.C.R, 1422. 1030