BUXA DOOARS TEA COMPANY LTD. ETC. versus STATE OF WEST BENGAL AND OTHERS

Citation: [1989] 3 S.C.R. 293 · Decided: 12-05-1989 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Case Allowed

Cited by 2 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

BUXA DOOARS TEA COMPANY LTD. ETC. 
v. 
STATE OF WEST BENGAL AND OTHERS 
MAY 12, 1989 
[R.S. PATHAK, CJ AND M.H. KANIA, J.) 
West Bengal Rural Employment and Production Act, 1976: 
ss. 4(2)(aa) & 4(4)-Rural employment cess-Levy of in respect of tea 
estates on despatches of tea grown 1herein-Constitutional validity of-
Whether beyond legislative competence. 
Constitution of India: Articles 301, 304(b) & Seventh Schedule 
List II Entry 49-West Bengal Rural Employment and Production Act, 
1976-Whether constitutionally valid. 
Statutory Interpretation: True nature of legislation imposing 
levy-Determination of. 
A 
B 
c 
D 
Section 4(1) of the West Bengal Rural Employment-and Produc-
tion Act, 1976 provided for levy of rural employment_ cess on immov-
able properties. Clause (aa) of s. 4(2) as amended bys. 7(b) of the West 
Bengal Taxation Laws (Amendment) Act, 1981 provided for l•vy of 
rural employment cess in respect of tea estates on the despatches of tea 
grown therein. The first proviso thereto provided for exclusion of 
despatches of tea for sale made at recognised c-entres . .The second pro-
viso thereto empowered the State Government to fix different rates of 
cess on despatches of different classes of tea. Sub-section ( 4) of the 
amended s. 4 provided for exemption of certain categories of despatches 
from the liability to pay the-whole or part of the cess or to reduce the 
rate of the cess payable thereon. The first proviso to s. 4(2)(aa) was, 
however, omitted by the West Bengal Taxation Laws (Amendment) 
Act, 1982. Article 304(b) of the Constitution permits the legislature of a 
State to impose reasonable restrictions on the freedom of trade, com-
merce or intercourse with or within that State provided the Bill or G 
amendment for that purpose is introduced with the. previous sanction of 
E 
F 
the President. 
It was contended for the petitioners that the levy of the cess under 
s. 4(1) read with s. 4(2)(aa) of the Act, as amended in 1981 and 1982, 
was violative of the freedom guaranteed by Article 301 of the Constitu-
293 
H 
294 
SUPREME COURT REPORTS 
[1989] 3 S.C.R. 
A 
lion and also lay outside the legislative competence of the State 
Government. 
B 
c 
Allowing the writ petitions, 
HELD: l. l If the levy of a tax on goods has direct and 
immediate effect of impeding the movement of goods throughout the 
territory of India, there is a violation of Article 301 of the Constitution. 
If, however, the impact of the levy is indirect or remote, no valid 
complaint can be made in relation to Article 301. There is also no 
violation of Article 30 I if the case falls under Article 304(b) and its 
proviso. [299F, 300D-E] 
l.2 Therefore, if the legislature of a State enacts a law which 
imposes such reasonable restrictions on the freedom of trade, com-
merce or intercourse with or within that State as may be required in the 
public interest and further that the Bill or amendment for the pur·poses 
0 
of clause (b) has been introduced or moved in the Legislature of a State 
with the previous sanction of the President, such enactment will not 
offend Article 30 I. The rural employment cess in the instant case was a 
tax. [300F, 299F] 
Atiabari Tea Co., Ltd. v. The State of Assam & Ors., [1961] I 
E 
S.C.R. 809; The Automobile Transport (Rajasthan) Ltd. v. The State of 
Rajasthan & Ors., [1963] I S.C.R. 491; Firm A. T.B. Mehtab Majid and 
Company v. State of Madras & Anr., [1963] Suppl. 2 S.C.R. 435; 
Kalyani Stores v. The State of Orissa & Ors., [1966] I S.C.R. 865; State 
of Mysore v. H. Sanjeeviah, [1967] 2 S.C.R. 361 and Andhra Sugars 
Ltd. & Anr. etc. v. State of Andhra Pradesh & Ors., [1968] I S.C.R. 
F 
G 
705, referred to. 
2.1 To determine whether the levy was in respect of tea estates, 
and, therefore, ofland thus making an indirect impact or was a levy on 
despatches of tea thereby directly impeding movement of goods, the 
substance of the legislation must be ascertained from the relevant provi-
sions of the statute. [301B] 
2.2 The subject of the levy, the nature of which defines the 
quality of the levy, however, must not be confused with the measure of 
liability, that is to say, the quantum of the tax. Furthermore, the 
standards laid down for measuring the liability under the levy must 
H bear a relationship to the nature of levy. [301B-C, 302D-E] 
y 
y 
.. 
BUXA TEA CO. v. STATE OF WEST BENGAL 
295 
Union of India & Ors. v. Bombay Tyre International Ltd. & 
A 
Ors., [1984] 1S.C.R.347, referred to. 

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