STATE OF BIHAR versus BIHAR CHAMBER OF COMMERCE

Citation: [1996] 2 S.C.R. 184 · Decided: 06-02-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed

Cited by 2 judgment(s) · cites 7 · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
STATE OF BIHAR 
v. 
BIHAR CHAMBER OF COMMERCE 
FEBRUARY 6, 1996 
[B.P. JEEVAN REDDY AND SUHAS C. SEN, JJ.] 
Bihar (Tax on Ent1y of Goods into Local Areas for Consumption, Use 
or sale 171erein) Act, 1993: 
C 
Entire State divided into local areas-Several trading facilities 
provided-Existence of some connection between the tax and trading 
facilities-Held: Tax coinpensat01y in nature and not violative of Article 301 
of the Constitution of India. 
Tax was in public interest and imposed reasonable restnctwn on 
D freedom of trade, commerce or intercourse-Hence saved by Article 304(b) 
read with A1ticle 255 of the Constitution of India. 
Section 3(1) proviso 6-Ent1y TQX---'-Different rates--For different com-
modities and different areas-Subject to ceiling of 5 percent-Conditions and 
restrictions-As imposed by State-Power conferred on State Govemment to 
E specify-Held : not unguided and hence not violative of Anicle u· of the 
Constitution. 
F 
Constitution of India, 1950: A1ticles 245, 246, 249 to 253 and Schedule 
VII List II Entry 52. 
Legislative competence-Tax under State Act Covered by Entry 52 List 
II Seventh Schedule-Not in the nature of sales t~Additional duties of i 
e.xcise-Under Central Act-Proceeds-State agreeing to take a share ' 
of-Held: No ground to urge State Legislature lacked legislative competence. 
G 
Article 301-Nature of t~Regulatory or compensatory-Entry of 
goods-/..,evy of tax on-State divided into local areas-Existence of some 
connection between tax and trading facilities-Held : tax compensatory in 
nature. 
Altic/es 19, 304(b) and 25~Trade, commerce and intercourse-
H Tax-Imposing restrictions on-Proviso to Article 304(b }-Condition 
184 
STATE v. BIHAR CHAMBER OF COMMERCE 
185 
under-Bill-President's previous sanction-No recital to that effect in A 
...,;> 
Act-Could be established aliunde-Even in absence of recital-Tax imposed 
for implementing welfare schemes-Indicated tax was in public inter-
est-Restriction-Rasonableness of-Equally relevant under Article 304(b ). 
Additional Duties of Excise (Goods of Special Imp01tance) Act, 1957: B 
,..___ 
Provision-Falls under Entry 84 of List I-Dealt with scheduled commodities 
only-Act neither made under Article 252 nor relatable to A1ticles 249 to 
253-Constitution of India, Schedule VII List I Entry 84 and Articles 245, 
246 and 249 to 253. 
The Bihar (Tax on Entry of Goods into Local Areas for Consump- c 
tion. Use or sale Therein) Act, 1993 which provided for levy of tax on entry 
of scheduled goods into Local area for consumption, use or sale therein at 
a rate not exceeding 5%. The respondents filed writ petition in the High 
Court questioning the constitutional validity of the Act. The High Court 
allowed the petition and struck down the Act. Aggrieved by the High D 
Court's judgment the appellant preferred the present appeal. 
On behalf of the appellants it was contended that the impugned tax 
was both compensatory and regulatory; that the money raised under the 
Act would be spent for the benefit of the local areas of the State; that the 
E 
challenge to the Act could not succeed because it had obtained the assent 
of the President under Article 304(b) read with Article 255 of the Constitu-
tion; that the impugned levy constituted a reasonable restriction imposed 
in public interest under Article 301 of the Constitution; and that where a 
ceiling was prescribed and the executive was empowered to prescribe the 
rate of tax subject to the said ceiling the confernment of power could not F 
--
be characterised as unguided, particularly where the power was conferred 
upon the Government. 
On behalf of the respondent it was contended that the State was 
sharing the revenue under the Additional Duties of Excise (Goods of G 
Special Importance) Act, 1957 and, therein, the State could not levy any 
entry tax under the impugned Act; and that the impugned Act did not 
---
indicate in any manner that the revenues raised thereunder would be 
passed on to the local authorities and the tax imposed could not be treated 
as a tax contemplated by Entry 52 List II of the Seventh Schedule to the 
Constitution. 
H 
186 
SUPREME COURT REPORTS 
A 
Allowing the appeal, this Court 
[1996] 2 S.C.R. . 
I 
I 
HELD : 1. The impugned tax is not a regulatory measure but a taxing 
enactment and the tax was levied upon the entry of goods into a local area, 
i.e., upon the movement of goods; where the local areas contemplated by 
the Bihar (Tax on entry of Good

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