Atiabari Tea Co., Ltd. Vs. The State of Assam & Ors and Connected Petition A [1960] INSC 123 (16 August 1960)
16/08/1960 SINHA, BHUVNESHWAR P.(CJ) SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR, P.B.
WANCHOO, K.N.
GUPTA, K.C. DAS SHAH, J.C.
CITATION: 1961 AIR 232 1961 SCR (1) 809
CITATOR INFO :
R 1962 SC 562 (7) E 1962 SC1406 (1,3,6,7,8,9,13,17,53,124,128) R 1963 SC 928 (8,9) R 1963 SC1667 (1,2,69,12,13,14,31,56,57,58) R 1964 SC1006 (8) RF 1967 SC 1 (42) RF 1967 SC1643 (274) RF 1968 SC 599 (14) RF 1968 SC1277 (4) F 1969 SC 147 (8,9,26,33) E 1970 SC1864 (5) APL 1970 SC1912 (7) RF 1972 SC1061 (51) RF 1972 SC1804 (11) RF 1974 SC1505 (6) RF 1975 SC 17 (15) E 1975 SC 583 (11,13) D 1975 SC1443 (18,21) MV 1975 SC2065 (33) RF 1977 SC1825 (10) E&R 1978 SC 68 (252,253,254) RF 1981 SC 463 (24,26) RF 1981 SC 711 (11) RF 1981 SC 774 (9) R 1983 SC 634 (11,12) F 1983 SC1283 (5) R 1986 SC 63 (36) RF 1988 SC 567 (11,12) RF 1988 SC2038 (4) RF 1989 SC1119 (12,14) RF 1989 SC1949 (12) R 1989 SC2015 (8) RF 1990 SC 313 (24) C 1990 SC 772 (1,3) RF 1990 SC 781 (74) E&D 1990 SC 820 (10,17,20) RF 1990 SC2072 (48)
ACT:
Freedom of Trade--If includes freedom from taxation--State Law imposing tax on goods carried by road or inland waterways--Constitutionally of--Constitution of India, Arts.
301 and 304--Assam Taxation (on goods carried by Roads and Inland Waterways) Act, 1954 (Ass. XIII of 1954).
HEADNOTE:
The Assam Taxation (on goods carried by Roads and Inland Waterways) Act, 1954, was passed under Entry 56 of List II of Seventh Schedule to the Constitution. The appellants contended that the Act violated the freedom of trade guaranteed by Art. 301 Of the Constitution and as it was not passed after obtaining the previous sanction of the President as required by Art. 304(b) it was ultra vires.
The respondent urged that taxing laws were not governed by Part XIII (which contained Arts. 301 and 304) but only by Part XII and in the alternative that the provisions of Part XIII applied only to such legislative entries in the Seventh Schedule as dealt specifically with trade, commerce and intercourse.
Held, (per Gajendragadkar, Wanchoo and Das Gupta, JJ.) that the Act violated Art. 30i and since it did not comply with the provisions of Art. 304(b) it was ultra vires and void.
The freedom of trade, commerce and intercourse guaranteed by Art. 301 was wider than that contained in S. 297 Of the Government of India Act, 1935, and it included freedom from tax laws also. Article 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 it attracts the provisions of Art. 301, and its validity can be sustained only if it satisfied the requirements of Art. 302 or Art.
304. The operation of Art. 301 cannot be restricted to legislation under the Entries dealing with trade and commerce. The Assam Act directly affected the freedom contemplated by Art. 301.
Ramjilal v. Income-tax Officer, Mohindargarh, [1951] S.C.R.
127, M. P. V. Sundararamier & Co. v. The State of Andhra Pradesh, [1058] S.C.R. 1422, James v. Commonwealth of Australia, (1936) A.C. 578, The State of Bombay v. The United Motors (India) Ltd., [1953] S C.R. 1069, Saghir Ahmed v. The State of U.P.
810 [1955] 1 S.C.R. 707, James v. State of South Australia, (1927) 40 C.L.R. 1 and James v. Cowan, (1932) A.C. 542, referred to.
Per Sinha, C. J.-The Assam Act did not contravene Art. 301 and was not ultra vires. Neither the one extreme position that Art. 301 included freedom from all taxation nor the other that taxation was wholly outside the purview of Art.
301 was correct. 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. The Assam Act was a taxing statute simpliciter and did not suffer from any of the vices against which Part XIII of the Constitution was intended.
Ramjilal v. Income-tax Officer, Mohindargarh, [1951] S.C.R.
127, referred to.
Further, the impugned Act was within the competence of the State Legislature and fell directly within Entry 56 of List 11 ; it was not in conflict with the Tea Act Of 1953 enacted by Parliament; it did not contravene Art. 14 and it was not extra-territorial in operation.
The Tata Iron & Steel Co. Ltd. v. The State of Bihar, [1958] S.C.R. 1355, followed.
Per Shah, J.-The Assam Act infringed the guarantee of freedom of trade and commerce under Art. 301 and as the Bill was not moved with the previous sanction of the President as required by Art. 304(b) nor was it validated by the assent of the President under Art. 255(c), it was ultra vires and void. Article 301 guarantees freedom in its widest amplitude, freedom from prohibition, control, burden or impediment in commercial intercourse. The freedom includes not only freedom from discriminative tariffs and trade barriers but also from all taxation on commercial intercourse. Part XIII of the Constitution places restrictions upon the legislative power granted by Arts.
245, 246 and 248 and the Lists and these restrictions include burdens in the nature of taxation.
James v. Commonwealth of Australia, L.R. (1936) A.C. 578, referred to.
ORIGINAL JURISDICTION: Petitions Nos. 246 of 1956 and 2 of 1959 (Under Article 32 of the Constitution of India for enforcement of Fundamental Rights) with C. As. Nos. 126 to 128 of 1958.
1960. August 16, 17. N. C. Chatterjee, with N. C. Chakravarti, Dipti Bose and S. C. Mazumdar for the petitioners in Petition No. 246 of 1956 and with P. Chaudhuri, D. N. Mukherji and B. N. Ghose, for the appellants in C. As. Nos. 126-128 of 1958. The Assam 811 Taxation (on goods carried by road and inland waterways) Act, contravenes Art. 301 of the Constitution. Article 301 means freedom from all restrictions including tax laws.
Articles 245 and 246 are subject to Art. 301. It is wrong to say that taxation is outside the scope of Art. 301.
Article 304(a) itself contemplates'the imposition of tax.
Article 304(b) may also refer to tax in certain circumstances, in cases other than those covered by Art.
304(a). In enacting Art. 301 the Constituent Assembly rejected s. 297 of the Government of India Act, 1935, and deliberately adopted the Australian s. 92. Movement is an essential ingredient of trade and commerce and there must be no fetter on it; any taxation would be a fetter. Taxation is not outside the ambit of Art. 301 ; I.L.R. 1955 Bom. 680, 683. What is commerce is brought out in the following decisions : 6 L. Ed. 1, 68; [1952] S.C.R. 572, 578 ; 93 C.L.R. 127 ; 1936 A.C. 573, 627 A.I.R. 1954 Raj. 217.
B. Sen and S. N. Mukherjee, for the petitioners in Petn.No. 2/59. Article 301 sets out the general freedom and Art.
302 the restrictions that can be placed on this freedom.
Non-discrimination is one of the aspects of the freedom in Art. 301. Article 306 as it stood before its deletion, spoke of taxation or duty on import or export of goods between States. It postulated 'taxes' in Art. 301 ; but for the non-obstante clause it would have been affected by Art.
301. The Supreme Court has discussed the scope of Art. 301 in [1953] S.C.R. 1069, 1079, 1081, 1088. The decision Of Chagla, C. J., in I.L.R. 1955 Bom. 680 regarding scope of Art. 301 was not reversed by the Supreme Court.
B. K. P. Sinha and A. G. Ratnaparkhi.-With regard to the scope of Art. 301 reference is invited to the decision in A.I.R. 1954 Hyd. 207, A.I.R. 1958 M.P. 33, A.I.R. 1956 M.B. 214, I.L.R. 1952 Mad. 933, 55 C.L.R. 1, 56 and regarding the meaning of export to the decision in I.L.R. 1955 Tr. Co.
M. C. Setalvad, Attorney-General of India, with S. M. Lahiri, Advocate-General of Assam and Naunit 812 Lal, for the respondents in Petition No. 246 of 1956 and Civil Appeals Nos. 126-128 of 1958 and Petition No. 2 of 1959, and with T. M. Sen, for the Intervener, AttorneyGeneral of India. Power to tax is an incident of sovereignty. The Power is divided between the Union and the States. Part XII of the Constitution deals with taxationseveral aspects of it. All restrictions on the powers to tax are contained in Part XII which is self contained. Part XII1 deals with something else. Art. 301 deals with freedom of inter-State as well as intra-state trade and is different from s. 92 of the Australian Constitution. In Article 301 freedom of trade only means freedom from trade barriers-it does not mean freedom from taxation. Taxation simpliciter was not within the terms of Art. 301. Taxation is not a restriction within the meaning of Part XIII.
Article 302 uses the words " in the public interest ". If the restrictions contemplated therein included tax, then every tax will have to be justified to be in the public interest. Restrictions do not include taxing measures, otherwise there will be a power of judicial review in respect of all such taxing measures. Cooley's Constitutional Limitations, 8th Edition, Vol. II, p. 986-988.
Taxation is a peculiarly legislative activity. It is likely that if the Constitution makers wanted to put a bar on the taxation power, it would have been placed 'in Part XII and not left to be inferred from Art. 301 ; [1951] S.C.R. 127, 136-137: [1955] 1 S.C.R. 765. The word “restriction " is very inapt to describe taxation. Apart from Part III all restrictions must be found in Part XIII so far as taxation is concerned. Article 301 does not start with the words “notwithstanding anything in this Constitution " because it is concerned only with a small sphere of freedom of trade and commerce and not with taxation. Restriction in these Articles means restriction on movement. The result of holding otherwise would be that even for intrastate taxes the States will have to go to the President and the legislation will be subject to judicial review. If Part III as well as Art. 301 apply to taxing measures, the question will arise which test would 813 the Court apply-" reasonable in the interest of the general public†as envisaged by Part III or " in the interest of the public " envisaged by Art. 302. This indicates that neither Part III nor Art. 301 apply to taxing measures.
Article 303 deals with preference and discrimination between one State and another. It is restricted to legislation with respect to the entries regarding trade and commerce within the State, like entry 26, list II and the entries 33 and 42 of list 111. Nothing in Art. 303 indicates that the freedom there includes freedom from taxation. Article 304(a) deals with discrimination and not with taxation simpliciter. It lays no restriction on the State taxing goods in its own territory: [1958] S.C.R. 1472. Article 304(a) cannot be interpreted as throwing any light on the scope of Art. 301.
Section 297 of the Government of India Act, 1935, was the predecessor of Art. 304. Article 304(a) assumes that there is an existing tax on goods which is not levied under 304(a).
There is an intermediate position also. Article 301 should be restricted to legislation which is directly with respect to trade and commerce and not to legislation, which is in pith and substance not with respect to trade but only incidentally or indirectly affects trade and commerce. The Assam Act passed under entry 56 is not a legislation with respect to trade and commerce.
Mahabir Prasad, Advocate-General for the State of Bihar, B. K. Saran and K. L. Mehta for the Intervener, State of Bihar.-Article 301 merely concerns itself with the restrictions on the free flow of trade and commerce. It deals with policy of protection. Article 302 also contemplates movement and passage of goods. Restriction does not as a rule imply taxation. If taxation is imposed with a view to restrict goods passing from one State to another, it will become a restriction under Art. 301.
Article 304(a) permits tax on entry of goods equal to the tax on such goods which are in the State. Octroi may be hit by Art. 301 if it is not saved by other provisions. It 104 814 is a restriction within Art. 301 when it obstructs the movement of trade.
S. M. Sikri, Advocate General for the State of Punjab, N. S. Bindra and T. M. Sen for the Intervener, the State of Punjab. It is impossible to determine whether a particular tax places reasonable restrictions and whether it is in the public interest. Article 301 is concerned with the right of passage generally with respect to trade and commerce and Art. 19(1)(g) with the right of an individual: 1955 P.L.R.
304; I.L.R. 7 Raj. 794; A.I.R. 1960 Andhra 234. Article 302 assumes legislation of Parliament under the entries relating to trade and commerce.
R. Ganapathi Iyer and T. M. Sen, for Intervener No. 3, the State of Madras adopted the submissions made by the Attorney-General.
G. C. Kasliwal, Advocate-General for the State of Rajasthan and T. M. Sen for the Intervener, the State of Rajasthan adopted the submissions made by the Attorney-General.
G. C. Mathur and C. P. Lal, for the Intervener No. 6, the State of Uttar Pradesh, adopted the submissions made by the Attorney-General.
N. C. Chatterjee in reply. Article 301 is an over. riding provision over all other provisions. It is much wider than s. 297 of the Government of India Act. It applies to all pecuniary burdens and commands that trade shall be free from all pecuniary burdens: 22 C.L.R. 566; 1936 A.C. 573, 629630.
1960. September 26. The Judgment of Sinha, C. J., was delivered by Sinha, C. J. The judgment of Gajendragadkar, Wanchoo and Das Gupta, JJ., was delivered by Gajendragadkar, J. and Shah, J., delivered his own judgment.
SINHA C. J.-These appeals on certificates granted under Art.
132 of the Constitution by the High Court of Judicature in Assam and Writ Petitions under Art. 32 of the Constitution impugn the constitutionality of the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, (Assam Act XIII 815 of 1954), which hereinafter will be referred to as the Act.
The appellants moved the High Court under Art. 226 of the Constitution challenging the validity of the Act. The High Court by its judgment and order dated June 6, 1955, dismissed the writ petitions. Thereupon, the appellants obtained the certificates that the cases involved substantial questions of law as to the interpretation of the Constitution. The petitions under Art. 32 of the Constitution were moved in this Court for the same purpose of challenging the vires of the Act. The appellants and the petitioners will-, in the course of this judgment, be referred to, for the sake of convenience, as the appellants.
The State of Assam, the Commissioner of Taxes, appointed under s. 6 of the Act, and the Superintendent of Taxes are the respondents to the appeals and the writ petitions.
It appears that the appellants are growers of tea in West Bengal or in Assam and carry their tea to the market in Calcutta from where the tea is sold for consumption in the country or is exported for sale out of the country. The sale of tea inside Assam bears a very small proportion to the tea produced and manufactured by the appellants. Thus the bulk of tea produced and manufactured is carried out of Assam, either for internal consumption in India or for export abroad. Besides the tea carried by rail, a large quantity of tea is carried by road or by inland waterways from Assam to Bengal and in some of these cases, from one part of West Bengal to another part of the same State through inland waterways, only a few miles of which pass through the territory of the State of Assam. The Assam Legislature passed the Act which received the assent of the Governor of Assam on April 9, 1954, and came into force on and from June 1, 1954. The purpose of the Act is to levy taxes on certain goods carried by road or inland waterways in the State of Assam. On June 30, 1954, the second respondent, the Commissioner of Taxes, Assam, in exercise of the powers conferred upon him by subs. (3) of s. 7 of the Act,, published a notification in the Assam Government Gazette bearing date June 21, 816 1954, by which he notified for general information that the return under the aforesaid Act and the rules made there under for the period commencing June 1, 1954 to September 30, 1954, should be furnished by October 30, 1954. The said notification also demanded the furnishing of quarterly returns before January 30, 1955 and April 36, 1955, for the quarters ending December 31, 1954 and March 31, 1955, respectively. The appellants in some of the cases, in pursuance of demand notices, submitted returns to the third respondent, the Superintendent of Taxes, in the prescribed form in respect of tea dispatched and carried up to September 30, 1954, under protest. They also paid the tax demanded under protest. The appellants moved the High Court of Judicature in Assam under Art. 226 of the Constitution challenging the validity of the said Act and praying for the issue of a writ of mandamus directing the respondents to forbear from giving effect to the provisions of the Act and the notification issued under the Act and/or a writ of prohibition or any other appropriate writ restraining them from taking steps under the provisions of the Act. The appellants challenged the validity of the Act mainly on the grounds that (1) the Act, rules and the notifications under the Act were ultra vires the Constitution, because the Act was repugnant to the provisions of Art. 301 of the Constitution as the tax on carriage of tea through the State of Assam had the effect of interfering with the freedom of trade, commerce and intercourse; (2) that tea being a controlled industry under the provisions of the Tea Act XXIX of 1953, the Union Government alone had the power to regulate the manufacture, production, distribution or transport of tea and the jurisdiction of the Assam Legislature was thus completely ousted; (3) that the tax under the Act was nothing but a duty of excise, in substance, though not in form, and was thus an encroachment on the Central legislative field within the meaning of entry 84 of the Union List. The impugned Act was also challenged on the ground that it was discriminatory and thus void under Art. 14 of 817 the Constitution. The competence of the Assam Legislature to legislate on the subject was also questioned.
The respondents opposed those petitions under Art. 226 of the Constitution in the High Court. It was denied by the State that the Act or the rules made there under or the notifications issued thereunder were ultra vires the Constitution or that the Act contravened the provisions of Art. 301 of the Constitution or that it was an encroachment on the sphere of the Union Legislature or was in any way in conflict with the provisions of the Tea Act XXIX of 1953.
The case of the respondents was that the Act was in pith and substance, a legislation to levy tax on certain classes and types of goods carried by road or inland waterways, strictly within entry no. 56 of the State List. It was also asserted that the Act was within the legislative competence of the Assam Legislature and was not within the terms of the prohibition contained in Art. 301 of the Constitution.
These petitions were heard by a Special Bench of the Assam High Court, which, by its judgment and order dated June 6, 1955, dismissed them holding that the Act was not unconstitutional. Two separate, but concurring judgments, were delivered by Sarjoo Prasad, C. J. and Ram Labbaya, J.
The learned Chief Justice, in the course of his judgment, held that the Act contemplated imposition of a tax on transport or carriage of goods within the Meaning of entry 56 of List II and did not amount to interference with the freedom of trade and commerce within the meaning of Art. 301 of the Constitution ; that the pith and substance of the impugned Act was that it was a taxing legislation which was not directly concerned with trade and commerce, though it might indirectly entrench on the field of trade and commerce and that Art. 301 was not directly concerned with taxing laws. He also held that the impost levied by the Act was not in the nature of an excise duty and that there was no substance in the contention that it encroached upon entry 84 of the Union List 1. It was also held that the impugned Act did not, in any way, come in conflict with the control of the tea industry 818 introduced by the Central Legislation, namely, the Tea Act XXIX of 1953.
Ram Labhaya, J., examined the provisions of the impugned Act in great detail and came to the conclusion that the element of carriage was expressly made a condition of liability to tax under the impugned Act and it was, therefore, distinguishable from a duty of excise and came directly under entry 56 of List 11. On the crucial question arising in this case, his conclusion was that taxation per se has not the effect of abridging or curtailing the freedom contemplated by Art. 301 ; that Arts. 302 and 304 restrict the powers of Parliament and the State Legislatures in the matter of legislation under entries 42 of List 1, 26 of List 11 and 33 of List III and that restrictions properly so called on the movement of goods and traffic must find their justification from the provisions of Part XIII of the Constitution ; that the impugned Act made provision for taxation which did not directly impinge upon the freedom of trade, commerce and intercourse within the meaning of Art.
301. His view also was that in some cases taxation may have the effect of placing restrictions on movement of goods and traffic, and if it has that effect, it comes within the mischief of Art. 301. In the result, his conclusion was that the impugned Act in its pith and substance fell within the ambit of entry 56 of List 11. He also examined the terms of the Union legislation, Tea Act No. XXIX of 1953, and came to the conclusion that the impugned Act did not trespass upon the field of the controlled industry of tea.
His conclusion with reference to the argument of discrimination based on Art. 14 was that there was no proof forthcoming of any real discrimination between persons and things. With these conclusions Deka, J., the third Judge, entirely agreed. From the judgment of the High Court the appellants have come up in appeal on certificates granted by the High Court. The two petitions under Art. 32 of the Constitution were filed on behalf of two other producers of tea. They raise the same questions as arise for determination in the three appeals from the decision of the Assam High Court. They have all been 819 heard together And will be dealt with by a common judgment.
Mr. Chatterjee, on behalf of the appellants, contended that the impugned Act imposed fetters on the free flow of trade and commerce in respect of tea and jute, the two commodities dealt with by the Act and, A therefore,, contravened the provisions of Art. 301 of the Constitution; that the legislation was beyond the legislative competence of the Assam Legislature and was not authorised by entry 56 in List II ; that the tea industry was a controlled industry as declared by Parliament and directly came under entry 52 of List 1 ; that it was a colourable piece of legislation which, in its true effect, was a levy of a duty of excise which could only be done by the Union Legislature, and finally, that it contravened Art. 14 of the Constitution.
The learned Attorney General on behalf of the State of Assam as also of the Union contended, on the other hand, that taxation simpliciter was not within the terms of Art. 301.
Taxation as such is not a restriction within the meaning of Part XIII. It is an attribute of sovereignty, which is not justiciable. The power to tax is a peculiar legislative function with which the courts are not directly concerned and that, therefore, the freedom contemplated by Art. 301 does not mean freedom from taxation and that taxation is not included within the connotation of the term. " Restriction " in the context of Part XIII meant legislation which had the effect of impeding the free flow of goods and traffic by erection of tariff walls, for example, a tariff wall, if erected by a Legislature, may be justiciable, but not legislation simply imposing a tax for purposes of revenue.
He further contended that Part XII of the Constitution is a self-contained part dealing with finance etc., even as Part XIII is a self-contained part dealing with trade, commerce and intercourse within the territory of India. He emphasised that the American and Australian decisions are no guide to the decision of the points in controversy in the present case, as the framework of their respective constitutions was entirely different from the Indian 820 Constitution. Particularly, the Australian Constitution did not contain anything corresponding to Parts III and XII of our Constitution. According to his contention " freedom " in Part XIII meant freedom from discriminatory taxation and freedom from trade barriers. The Advocate-General of the several States who appeared in this case supported the viewpoint stressed by the learned Attorney General.
The most important question that falls to be determined in this batch of cases is whether the impugned Act infringes the provisions of Part XIII of the Constitution, with particular reference ‘to Art. 301. Part XIII is headed "Trade Commerce and Intercourse within the Territory of India". Article 301, which is the opening Article in this Part is in very general terms, which are as under:" Subject to the other provisions of this part, trade, commerce and intercourse throughout the territory of India shall be free ".
It is clear that this Part is not subject to the other provisions of the Constitution and the generality of the words used in Art. 301 is cut down only by the provisions of the other Articles of this Part ending with Art. 307. It has not been and it could not be contended that the generality of the expressions used in Art. 301 admit of any Exceptions or explanations not occurring in this Part itself, nor has it been contended that trade, commerce and intercourse are subject to any other fetters. All parties are agreed that trade, commerce and intercourse throughout the territory of India have been emphatically declared by the Constitution to be free, but there is a wide divergence of views on the answer to the question " free from what ?" It has been contended on behalf of the appellants that the answer to this question must be that trade, commerce and intercourse throughout India, shall be free from everything including taxation. On the other hand, the contention on behalf of the Union Government and the State Government is that the freedom envisaged by Art. 301 does not include immunity from taxation and that freedom means that there shall be no trade barriers or tariff 821 walls shutting out commodities, traffic and intercourse between individuals, and no shutting in.
In order fully to appreciate the implications of the provisions of Part XIII of the Constitution, it is necessary to bear in mind the history and background of those provisions. The Constitution Act of 1935 (Government of India Act, 26 ('Teo. 5, Ch. 2) which envisaged a federal constitution for the whole of India, including what was then Indian India in contradistinction to British India, which could not be fully implemented and which also introduced full provincial autonomy enacted s. 297 prohibiting certain restrictions on internal trade in these terms:" 297.-(1) No Provincial Legislature or Government shall(a) by virtue of the entry in the Provincial Legislative List relating to trade and commerce within the Province, or the entry in that list relating to the production, supply, and distribution of commodities, have power to pass any law or take any executive action prohibiting or restricting the entry into, or export from the Province of goods of any class or description ; or (b) by virtue of anything in this Act have power to impose any tax, cess, toll or due which, as between goods manufactured or produced in the Province and similar goods not so 'manufactured or produced, discriminates in favour of the former, or which, in the case of goods manufactured or produced outside the Province, discriminates between goods manufactured or produced in one locality and similar goods manufactured or produced in another locality.
(2) Any law passed in contravention of this section shall, to the extent of the contravention, be invalid." It will be noticed that the prohibition contained in the section quoted above applied only to Provincial Governments and Provincial Legislatures with reference to entries in the Provincial Legislative List relating to trade and commerce within the Province and to production, supply and distribution of commodities. That section dealt with prohibitions or 105 822 restrictions in respect of import into or export from a Province, of goods generally. It also dealt with the power to impose taxes etc. and prohibited discrimination against goods manufactured or produced outside a Province or goods produced in different localities. Part XIII of the Constitution has introduced all those prohibitions, not only in respect of State Legislatures, but of Parliament also.
In other words, Part XIII enlarges the scope of the inhibitions and lays down the limits within which the Union Parliament or a State Legislature may legislate with reference to trade, commerce and intercourse inter-State, intrastate and throughout the territory of India.
In this connection it has got to be remembered that before the commencement of the Constitution about two-thirds of India was directly under British rule and was called ' British India' and the remaining about one-third was being directly ruled by the Princes and was known as Native States. There were a large number of them with varying degrees of sovereignty vested in them. Those rulers had, broadly speaking, the trappings of a Sovereign State with power to impose taxes and to regulate the flow of trade, commerce and intercourse. It is a notorious fact that many of them had erected trade barriers seriously impeding the free flow of trade, commerce and intercourse, not only shutting out but also shutting in commodities meant for mass consumption. Between the years 1947 and 1950 almost all the Indian States entered into engagements with the Government of India and ultimately merged their individualities into India as one political unit, with the result that what was called British India, broadly speaking, became, under the Constitution, Part A States, and subject to certain exceptions not relevant to our purpose, the Native States became Part B States. We also know that before the Constitution introduced the categories of Part A States, Part B States and Part C States (excluding Part D relating to other territories), Part B States themselves, before their being constituted into so many units, contained many small States, which formed themselves into 823 Unions of a number of States, and had such trade barriers and custom posts, even inter se. But even after the merger, the Constitution had to take notice of the existence of trade barriers and therefore had to make transitional provisions with the ultimate objective of abolishing them all. Most of those Native States, big or small, had their own taxes, cesses, tolls and other imposts and duties meant not only for raising revenue, but also as trade barriers and tariff walls. It was in the background of these facts and circumstances that the Constitution by Art. 301 provided for the abolition of all those trade barriers and tariff walls.
When for the first time in the history of India the entire territory within the geographical boundaries of India, minus what became Pakistan, was knit into one political unit, it was necessary to abolish all those trade barriers and custom posts in the interest of national solidarity, economic and cultural unity as also of freedom of trade, commerce and intercourse.
It is in the background of these facts and circumstances that we have to determine the ambit of the freedom contemplated by Art. 301. That Article envisages freedom of trade and commerce with reference to different parts of India as also freedom of movement of individuals in relation to their trade and other activities. Hence, Art. 301 has reference not only to trade and commerce, as ordinarily understood in common parlance, but also in relation to individuals who have to move with their goods and commodities throughout the length and breadth of the country. Movement of traffic in goods and commodities as also of persons can be by railway or airways, by road or by inland waterways etc., etc. Carriage of goods and passengers by railway, by sea or by air or by national waterways is covered by entry 30 of List 1 and taxes on railway fares and freights and terminal taxes on goods or passengers carried by railway, sea or air come under the purview of entry 89 in the same List. On the other hand, taxes on goods and passengers carried by road or inland waterways come under entry 56 of List II (State List). It will thus be seen that the Constitution makers contemplated taxes 824 on goods and passengers to be imposed by the Parliament on journeys covered by railway or by sea or by air; and by State Legislatures on journeys by road or inland waterways.
The power to tax is inherent in sovereignty. The sovereign State, in some cases the Union, in other cases the State, has the inherent power to impose taxes in order to raise revenue for purposes of State. Such a sovereign power ordinarily is not justiciable, simply because the State in its legislative department has to determine the policy and incidence of taxation. It is the St-ate which determines, through the Legislature, what taxes to impose, on whom and to what extent. The judicial department of the State is not expected to deal with such matters, because it is not for the courts to determine the policy and incidence of taxation. This power of the State to raise finances for Government purposes has been dealt with by Part XII of the Constitution, which contains the total prohibition of levy or collection of tax, except by authority of law (Art. 265).
This Part also deals with the distribution of revenue between the Union and the States. It does not clearly demarcate the taxing authority as between the Union and the States and therefore had to indicate in great detail what taxes shall be levied for the benefit of the Union or for the benefit of the States and what taxes may be levied and collected by the Union for the benefit of the States and the principle according to which those revenues have to be distributed amongst the constituent States of the Union. In short, Part XII is a self-contained series of provisions relating to the finances of the Union and of the States and their interrelation and adjustments (ignoring the provisions in Chapter 2 of that Part relating to borrowing and Chapter 3 relating to property contracts etc.). Like Part XIII, Part XII also is not expressed to be subject to the other provisions of the Constitution. Hence, both Parts XII and XIII are meant to be self-contained in their respective fields. It cannot, therefore, be said that the one is subject. to the other. But it has been argued on behalf of the appellants that the pro. visions of Art. 304 indicate that taxation is within 825 the purview of the overriding provisions, as they have been characterised, of Art. 301. But a close examination of the provisions of Art. 304 would show that it is divided into two parts, viz., (1) dealing with imposition of discriminatory taxes by a State Legislature; and (2) relating to imposition of reasonable restrictions, thus showing that imposition of taxes, discriminatory or otherwise, is a class apart from imposition of reasonable restrictions on freedom of trade, commerce and intercourse.
The second part of Art. 304 dealing with imposition of reasonable restrictions on freedom of trade, commerce and intercourse by a State Legislature is on a line with the imposition by Parliament of such restrictions between one State and another or within any part of the territory of India in public interest, contained in Art. 302. The provisions of Art. 303 further make it clear that the giving Of preference to one State over another or discrimination between one State and another are clearly within the purview of Part XIII, that is to say, they are calculated to impede the freedom of trade, commerce and intercourse. There is a prohibition against Parliament as also against the Legislature of a State making any law giving preference to one State over another or making or authorising the making of any discrimination between one State and another. But the most significant words in connection with giving preference or making discrimination as envisaged in Art. 303 are with reference to " any entry relating to trade and commerce in any of the Lists in the Seventh Schedule", that is to say, entry 42 in List 1, entry 26 in List II and entry 33 in List III of the Seventh Schedule. Hence, any legislation under those entries which has the effect of directly interfering with trade, commerce and intercourse being free throughout the territory of India has to be struck down as infringing the provisions of Art. 301. But in this matter also the Constitution makers had before them situations of emergency, say for example, created by drought or over flooding resulting in scarcity of commodities like foodgrains etc. In such a situation, Parliament has been armed with the power to grant preference to one State over 826 another or to make a discrimination as between two and more States if the Law dealing with such a situation declares that it is necessary to do so in order to deal with an emergency like the one referred to above. In this connection it may not be emphasised that Art. 303 has not been very accurately worded inasmuch as the non obstante clause, with which the Article opens, has reference only to Art. 302, which empowers Parliament to impose by law restrictions on the freedom of trade, commerce or intercourse, inter-State or intraState, in public interest.
But the non obstante clause is immediately followed by reference not only to Parliament but also to the Legislature of a State which are armed with the power of giving preference or making discrimination as aforesaid in respect of the entries relating to trade and commerce in any of the lists in the Seventh Schedule. Here, no reference is made to intercourse. But as the present controversy is not concerned with the freedom of intercourse, as distinguished from the freedom of trade and commerce, no more need be said about that omission.
Learned counsel for the appellants vehemently argued that the freedom contemplated by Art. 301 Must be construed in its most comprehensive sense of freedom from all kinds of impediments, restraints and trade barriers, including freedom from all taxation. In my opinion, there is no warrant for such an extreme position. It has to be remembered that trade, commerce and intercourse include individual freedom of movement of every citizen of India from State to State, which is also guaranteed by Art.
19(1)(d) of the Constitution. The three terms used in Art.
301 include not only free buying and selling, but also the freedom of bargain and contract and transmission of information relating to such bargains and contracts as also transport of goods and commodities for the purposes of production, distribution and consumption in all their aspects, that is to say, transportation by land, air or water. They must also include commerce not only in goods and commodities, but also transportation of men and animals by all means of transportation. Commerce would thus include dealings over the telegraph, 827 telephone or wireless and every kind of contract relating to sale, purchase, exchange etc. of goods and commodities.
Viewed in this all comprehensive sense taxation on trade, commerce and intercourse would have many ramifications and would cover almost the entire field of public taxation, both in the Union and in the State Lists. It is almost impossible to think that the makers of the Constitution intended to make trade, commerce and intercourse free from taxation in that comprehensive sense. If that were so, all laws of taxation relating to sale and purchase of goods on carriage of goods and commodities, men and animals, from one place to another, both inter-State and intrastate, would come within the purview of Art. 301 and the proviso to Art. 304 (b) would make it necessary that all Bills or Amendments of preexisting laws shall have to go through the gamut prescribed by that proviso. That will be putting too great an impediment to the power of taxation vested in the States and reduce the States' limited sovereignty under the Constitution to a mere fiction. That extreme position has, therefore, to be rejected as unsound.
In this connection, it is also pertinent to bear in mind that all taxation is not necessarily an impediment or a restraint in the matter of trade, commerce and intercourse.
Instead of being such impediments or restraints, they may, on the other hand, provide the wherewithal; to improve different kinds of means of transport, for example, in cane growing areas, unless there are good roads, facility for transport of sugarcane from sugarcane fields to sugar mills may be wholly lacking or insufficient. In order to make new roads as also to improve old ones, cess on the grower of cane or others interested in the transport of this commodity has to be imposed, and has been known in some parts of India to have been imposed at a certain rate per maund or ton of sugarcane transported to sugar factories. Such an imposition is a tax on transport of sugarcane from one place to another, either intrastate or inter-State. It is the tax thus realised that makes it feasible for opening new means of 828 communication or for improving old ones. It cannot, therefore, be said that taxation in every case must mean an impediment or restraint against free flow of trade and commerce. Similarly, for the facility of passengers and goods by motor transport or by railway, a surcharge on usual fares or freights is levied, or may be levied in future.
But for such a surcharge, improvement in the means of communication may not be available at all. Hence, in my opinion, it is not correct to characterise a tax on movement of goods or passengers as necessarily connoting an impediment, or a restraint, in the matter of trade and commerce. That is another good reason in support of the conclusion that taxation is not ordinarily included within the terms of Art. 301 of the Constitution.
In my opinion, another very cogent reason for holding that taxation simpliciter is not within the terms of Art. 301 of the Constitution is that the very connotation of taxation is the power of the State to raise money for public purposes by compelling the payment by persons, both natural and juristic, of monies earned or possessed by them, by virtue of the facilities and protection afforded by the State.
Stich burdens or imposts, either direct or indirect, are in the ultimate analysis meant as a contribution by the citizens or persons residing in the State or dealing with the citizens of the State, for the support of the Government, with particular reference to their respective abilities to make such contributions. Thus public purpose is implicit in every taxation, as such. There. fore, when Part XIII of the Constitution speaks of imposition of reasonable restrictions in public interest, it could not have intended to include taxation within the generic term " reasonable restrictions ". This Court has laid it down in the case of Ramjilal v. Income Tax Officer, Mohindargarh (1) that imposition and collection of taxes by authority of law envisaged by Art. 265 is outside the scope of the expression " deprivation of property " in Art. 31(1) of the Constitution. Reasonable restrictions as used in Part III or Part XIII of the Constitution would in most cases be less (1) [1951] S.C.R. 127,136.
829 than total deprivation of property rights. Hence, Part XII dealing with finance etc. as already indicated, has been treated as a Part dealing with the sovereign power of the State to impose taxes, which must always mean imposing burdens on citizens and others, in public interest. If a law is passed by, the Legislature imposing a tax which in its true nature and effect is meant to impose an impediment to the free flow of trade, commerce and intercourse, for example, by imposing a high tariff wall, or by preventing imports into or exports out of a State, such a law is outside the significance of taxation, as such, but assumes the character of a trade barrier which it was the intention of the Constitution makers to abolish by Part XIII. The objections against the contention that taxation was included within the prohibition contained in Part XIII may thus be summarised: (1) Taxation, as such, always implies that it is in public interest. Hence, it would be outside particular restrictions, which may be characterised by the courts as reasonable and in public interest. (2) The power is vested in a sovereign State to carry on Government. Our Constitution has laid the foundations of a welfare State, which means very much expanding the scope of the activities of Government and administration, thus making it necessary for the State to impose taxes on a much larger scale and in much wider fields. The legislative entries in the three Lists referred to above empowering the Union Government and the State Governments to impose certain taxations with reference to movement of goods and passengers would be rendered ineffective, if not otiose, if it were held that taxation simpliciter is within the terms of Art. 301. (3) If the argument on behalf of the appellants were accepted, many taxes, for example, sales tax by the Union and by the States, would have to go through the gamut prescribed in Arts. 303 and 304, thus very much detracting from the limited sovereignty of the States, as envisaged by the Constitution. (4) Laws relating to taxation, which is essentially a legislative function of the State, will become justiciable and every 106 830 time a taxation law is challenged as unconstitutional, the State will have to satisfy the courts a course which will seriously affect the division of powers on which modern constitutions, including ours, are based. (5) Taxation on movement of goods and passengers is not necessarily an impediment.
That conclusion leads to a discussion of the other extreme position that taxation is wholly out of the purview of Art.
301. That extreme position is equally untenable in view of the fact that Art. 304 contains, and Art. 306, before it was repealed in 1956, contained, reference to taxation for certain purposes mentioned in those Articles. But Art. 306, which now stands repealed, contained references to tax or duty on the import of goods into one State from another or on the exports of goods from one State to another. Such imposts were really in the nature of impediments to the free flow of goods and commodities on account of customs barriers, which it was the intention of Art. 301 to abolish.
Similarly, Art. 304 while recognising the power of a State Legislature to tax goods imported inter-State, insists that a similar tax is imposed on goods manufactured or produced within the State. The Article thus brings out the clear distinction between taxation as such for the purpose of revenue and taxation for purposes of making discrimination or giving preference, both of which are treated by the Constitution as impediments to free trade and commerce. In other words, so long as the impost was not in the nature of an impediment to the free flow of goods and commodities between one State and another, including in this expression Union territories also, its legality was not subject to an attack based on the provisions of Part XIII. But that does not mean that State Legislatures derive their power of taxation by virtue of what is contained in Art. 304.
Article 304 only left intact such power of taxation, but contained the inhibition that such taxes shall not be permitted to have the effect of impeding the free flow of goods and commodities.
Article 301, with which Part XIII commences, contains the crucial words " shall be free " and provides 831 the key to the solution of the problems posed by the whole Part. The freedom declared by this Article is not an absolute freedom from all legislation. As already indicated, the several entries in the three Lists would suggest that both Parliament and State Legislatures have been given the power to legislate in respect of trade, commerce and intercourse, but it is equally clear that legislation should not have the effect of putting impediments in the way of free flow of trade and commerce.
In my opinion, it is equally clear that the freedom envisaged by the Article is not an absolute freedom from the incidence of taxation in respect of trade, commerce and intercourse, as shown by entries 89 and 92 A in List 1, entries 52, 54 and 56 to 60 in List II and entry 35 in List 111. All these entries in terms speak of taxation in relation to different aspects of trade, commerce and intercourse. The Union and State Legislature, therefore, have the power to legislate by way of taxation in respect of trade, commerce and intercourse, so as not to erect trade barriers, tariff walls or imposts, which have a deleterious effect on the free flow of trade, commerce and intercourse.
That freedom has further been circumscribed by the power vested in Parliament or in the Legislature of a State to impose restrictions in the public interest. Parliament has further been authorised to legislate in the way of giving preference or making discrimination in certain strictly limited circumstances indicated in el. (2) of Art. 303.
Thus, on a fair construction of the provisions of Part XIII, the following propositions emerge: (1) trade, commerce, and intercourse throughout the territory of India are not absolutely free, but are subject to certain powers of legislation by Parliament or the Legislature of a State; (2) the freedom declared by Art. 301 does not mean freedom from taxation simpliciter, but does mean freedom from taxation which has the effect of directly impeding the free flow of trade, commerce and intercourse; (3) the freedom envisaged in Art. 301 is subject to non-discriminatory restrictions imposed by Parliament in public interest (Art. 302); (4) even discriminatory or preferential legisla832 tion may be made by Parliament for the purpose of dealing with an emergency like a scarcity of goods in any part of India (Art. 303(2)); (5) reasonable restrictions may be imposed by the Legislature of a State in the public interest (Art. 304(b)); (6) non-discriminatory taxes may be imposed by the Legislature of a State on goods imported from another State or other States, if similar taxes are imposed on goods produced or manufactured in that State (Art. 304(a)); and lastly (7) restrictions imposed by existing laws have been continued, except in so far as the President may by order otherwise direct (Art. 305).
After having discussed the arguments for and against the proposition that Art. 301 includes within its large sweep taxation simpliciter, I now proceed to discuss the terms of the impugned Act in order to find out whether in the light of the discussion above, any of its provisions are liable to be struck down as unconstitutional, because they infringe Art. 301, as contended on behalf of the appellants. The Act, as the preamble shows, is intended to " impose a tax on certain goods carried by road or inland waterways Dealer " has been defined in s. 2(4) as under: "Dealer' means a person who owns jute in bales before it is carried by motor vehicle, cart, trolley, boat, animal and human agency or any other means except railways or airways and includes his agent." Producer has been defined by cl.'(12) of s. 2 as follows:" 'Producer' means a producer of tea and includes the person in charge of the garden where tea is produced ".
Section 3, which is the charging section, provides that manufactured tea in chests carried by motor vehicle, etc., except railways and airways, shall be liable to a tax at a certain rate per pound of such tea and that this tax shall be realised from the producer. It also provides that jute carried in bales by motor vehicle, etc., except railways and airways, shall be liable to a tax at a certain rate per maund on such jute, which shall be realised from the dealer.
It is not necessary 833 to set out the rate of taxes aforesaid, because 'no argument was advanced to the effect that they were oppressive or excessive. The tax on manufactured tea in chests is to be paid by the producer, which term includes the person in charge of the garden where tea is produced. This provision has occasioned the argument that it is an excise duty in the garb of a tax and will be dealt with later in the course of this judgment. The tax on jute carried in bales is made realisable from the dealer which means a person who owns the jute in bales. Section 6 lays down the taxing authorities.
Section 7 requires every producer and dealer to furnish returns of such tea or such jute as have been made liable to tax under s. 3, as aforesaid. Section 8 makes provision for licensing of balers, which means persons who own or possess a pressing machine for the compression of jute into bales.
Section 9 lays down the procedure of assessment and s. 10 the procedure for cancellation of assessment in certain circumstances. Section 11 lays down the procedure for assessment in such cases as have escaped assessment or there has been an evasion of the tax. It is not necessary to refer to the other provisions of the Act, because they are not relevant to the arguments advanced at the Bar. It will be seen from the bare summary of the relevant provisions of the statute that it is a taxing statute simpliciter without the least suggestion even of any attempt at discrimination against dealers and producers outside the State of Assam or of preference in favour of those inside the State. On the face of it, therefore, the Act does not suffer from any of the vices against which Part XIII of the Constitution was intended. It has not been suggested that the Act imposes a heavy burden on the dealer or the producer as the case may be. On the terms of the Statute, it cannot be said that it is intended to put obstacles or impediments in the way of free flow of traffic in respect of jute and tea. On the face of it, it would not be in the interest of the State of Assam to put any such impediments, because Assam is a large producer of those commodities and the market for those commodities is mainly in Calcutta.
834 In those I circumstances, it is difficult, if not impossible, to come to the conclusion that the Act comes within the purview of Art. 301 of the Constitution. If that is so, no further consideration arising out of the other provisions of Part XIII of the Constitution calls for any decision.
Having thus disposed of the main ground of attack against the constitutionality of the Act based on Art. 301 of the Constitution, it is necessary to advert to the other contentions raised on behalf of the appellants. It has been contended that the Act is beyond the legislative competence of the Assam Legislature. We have, therefore, to address ourselves to the question whether or not it is covered by any of the entries in List 11 of the Seventh Schedule.
Entry 56, in its very terms, " Taxes on goods and passengers carried by rail or in inland waterways ", completely covers the impugned Act. There is no occasion in this case to take recourse to the doctrine of pith and substance, inasmuch as the Act is a simple piece of taxing statute meant to tax transport of goods, in this case jute and tea, by road or on inland waterways. In my opinion, it is a very simple case of taxation completely covered by entry 56, but the argument against the competence of the Assam Legislature has been sought to be supported by the subsidiary contention that though in form it is a tax on the transport of goods within the terms of entry 56, in substance it is an imposition of excise duty within the meaning of entry 84 in List 1 of the Seventh Schedule, but, in my opinion, there is no substance in this contention for the simple reason that so long as jute or tea is not sought to be transported from one place to another, within the State or outside the State, no tax is sought to be levied by the Act. It is only when those goods are put on a motor truck or a boat or a steamer or other modes of transport contemplated by the Act, that the occasion for the payment of tax arises. A similar argument was advanced in the case of The Tata Iron & Steel Co. Ltd. v. The State of Bihar (2), and Das, C. J., delivering the majority judgment of the Court, disposed of the argument that the tax in that case was not (2) [1958] S.C.R. 1355.
835 on sale of goods, but was, in substance, a duty of excise, in these terms:
" This argument, however, overlooks the fact that under el. (ii) the producer or manufacturer became liable to pay the tax not because he produced or manufactured the goods, but because he sold the goods. In other words the tax was laid on the producer or manufacturer only qua seller and not qua manufacturer or producer as pointed out in Boddu Paidanna's case (1942) F.C.R. 290. In the words of their Lordships of the Judicial Committee in Governor General v. Province of Madras, 72 I.A. 91 at p. 103, ' a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods not on sales or the proceeds of sale of goods'.
If the goods produced or manufactured in Bihar were destroyed by fire before sale the manufacturer or producer would not have been liable to pay any tax under s. 4(1) read with s. 2(g), second proviso. As Gwyer, C. J., said in Boddu Paidanna's case, supra, at p. 102, the manufacturer or producer would be liable, if at all, to a sales-tax because he sells and not because he manufactures or produces; and he would be free from liability if he chose to give away everything which came from his factory'." (See p. 1369 of the Report). The observations quoted above completely cover the present controversy. The Legislature has chosen the dealer or the producer as the convenient agency for collection of the tax imposed by s. 3, but the occasion for the imposition of the tax is not the production or the dealing, but the transport of those goods. It must, therefore, be held that the Act does what it sets out to do, namely to impose a tax on goods carried by road or on inland waterways.
Another line of argument directed to the same end, namely, of attacking the competence of the Assam Legislature was that it impinged on the provisions of the Tea Act, XXIX of 1953. It was argued that the tea industry was a controlled one within the competence the Union Legislature. The Tea Act declared that it was expedient in the public interest that the 836 Union should take the tea industry under its control. With a view to controlling the industry in public interest the Act established the Tea Board (s. 4) whose function it was, inter alia, to regulate the production and extent of cultivation of tea, of improving the quality of tea, of promoting co-operative effort among growers and manufacturers of tea, etc., etc. (s. 10). With the objectives aforesaid, Chapter III lays down provisions for the control over the extension of tea cultivation and Chapter IV deals with provisions for control over the export of tea and tea seed. Chapter V lays down provisions for the imposition of duty of customs on export of tea outside India and the proceeds of the cess thus levied have to be credited to the Consolidated Fund of India. Out of that Fund, called the Tea Fund, the expenses of the establishment created by the Tea Act have to be met. The rest of the provisions of the Act are meant to implement the main provisions of the Act. There-are no provisions of the Tea Act which can be said to come into conflict with the provisions of the impugned Act. In our opinion, therefore, this ground of attack also fails.
A third line of argument against the constitutionality of the Act was that it is extra-territorial in its operation in so far as it purports to tax producers and dealers who may not be residents of the State of Assam. This argument has been advanced in the interest of the appellants and petitioners from West Bengal, who have to carry their goods by road or on waterways passing through the territory of Assam, from one part of West Bengal to another. So far as this group of cases is concerned, the main grievance of the appellants is that no doubt their goods have to pass through a portion of the territory of Assam, but the goods have been produced, packed and transported as merchandise from one part of West Bengal to another part of the same State. It is not denied that there is some real and substantial nexus to support the taxing statute, but it is contended that relatively to the whole journey to be covered by the merchandise, the portion of the territory of Assam covered in 837 that journey is very small. But in judging the validity of a legislation with reference to the contention based on extra-territoriality it is not relevant to consider the question of the proportion between the extent of territorial nexus to the whole length of the journey. If goods belonging to or carried by the appellants traverse any of the territory of Assam the taxation cannot be successfully assailed on this ground, once it is held that it was within the legislative competence of the Legislature imposing the tax in question. See in this connection the observations of this Court in The Tata Iron and Steel Co. Ltd. v. The State of Bihar (1) at pp. 1369 to 1371, where Das, C. J., speaking for the majority of the Court, has examined the theory of nexus with reference to a large body of case-law bearing on the question. I respectfully adopt that line of reasoning and hold that the Act does not suffer from the vice of extra-territoriality. It is true that the incidence of the taxation may fall upon persons not ordinarily residing in the State of Assam or upon goods not produced in Assam, but, in this connection, it is enough to point out that what has been said above in respect of the tax being in the nature of a duty of excise applies which equal force to this part of the argument also. The tax is leviable from such goods as traverse in their journey any part of the territory of Assam, not because the owners or the producers are residents of Assam, but because the wat
