Case Note & Summary
The case concerned a challenge to the retrospective operation of the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961. On March 30, 1950, the Bihar Legislature passed the Bihar Finance Act, 1950, which levied a tax on passengers and goods carried by public service motor vehicles in Bihar. The appellants challenged the validity of Part III of the 1950 Act by instituting a suit in the Court of the First Subordinate Judge at Gaya on May 5, 1951, seeking a declaration that the provisions were unconstitutional and an injunction restraining the State from levying and realising the tax. A similar representative suit was filed by passengers and owners of goods. Both suits were transferred to the Patna High Court, which dismissed them on May 8, 1952, holding that the 1950 Act did not contravene Article 301 of the Constitution. The appellants then appealed to the Supreme Court. While the appeal was pending, this Court decided Atiabari Tea Co. Ltd. v. State of Assam, which held that a similar tax was unconstitutional. Following that decision, the respondent conceded that the appeal was covered, and on December 12, 1960, the Supreme Court allowed the appeal and granted the declaration and injunction. To overcome the effect of that judgment, the Governor of Bihar issued Bihar Ordinance No. 11 of 1961 on August 1, 1961, which validated the provisions of the 1950 Act that had been struck down and brought them into force retrospectively from April 1, 1950. The provisions of the Ordinance were subsequently incorporated into the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961. The appellants, along with eighteen other petitioners, filed writ petitions in the Patna High Court under Articles 226 and 227 of the Constitution challenging the validity of the entire 1961 Act. The High Court dismissed the petitions and held that the Act was valid both prospectively and retrospectively. The appellants then came to the Supreme Court by special leave, confining their challenge to the retrospective operation of the Act. They conceded that the Act was valid in its prospective operation and that Section 23(a), which validated acts done under the 1950 Act, was valid. Their specific contentions were that Section 23(b), insofar as it referred to proceedings commenced under the 1950 Act but not completed before the 1961 Act came into force, was invalid; and that the retrospective operation prescribed by Section 1(3) and part of Section 23(b) so completely altered the character of the tax proposed to be retrospectively recovered that it introduced a serious infirmity in the legislative competence of the Bihar Legislature itself, and that the retrospective operation was so unreasonable that it could not be saved under Article 304(b) or Article 19(5) and (6) of the Constitution. The Supreme Court rejected both contentions. On legislative competence, the Court held that the Bihar Legislature had power to levy a tax on passengers and goods under Entry 56 of List II of the Seventh Schedule. If in its essential features a taxing statute is within the competence of the Legislature by reference to the relevant entry, its character is not changed merely by its retrospective operation. The legislative power includes the subsidiary or auxiliary power to validate law which is found to be invalid. On the reasonableness of restrictions, the Court held that the length of time covered by retrospective operation cannot by itself be treated as decisive. The power of taxing people and their property is an essential attribute of Government, and the Government can legitimately exercise that power to the extent it thinks expedient. The Court referred to several precedents, including Atiabari Tea Co. Ltd. v. State of Assam, The Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, and others. In conclusion, the Court held that the restrictions imposed by the retrospective operation on the appellants' fundamental rights under Article 19(1)(f) and (g) were reasonable within the meaning of Articles 19(5), 19(6) and 304(b). The challenge to the validity of the retrospective operation was rejected, and the appeals were dismissed.
Headnote
A) Taxation - Legislative Competence - Retrospective Taxation - Constitution of India, Seventh Schedule List II Entry 56; Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961, Sections 1(3), 23(b) - The Bihar Legislature had legislative competence to levy tax on passengers and goods carried by public service motor vehicles; the retrospective operation of the Act did not alter the essential character of the tax or take it outside legislative competence. The court held that if in its essential features a taxing statute is within the competence of the Legislature by reference to the relevant entry in the List, its character is not necessarily changed merely by its retrospective operation. Held that the challenge to legislative competence fails. B) Constitutional Law - Fundamental Rights - Reasonableness of Restrictions - Constitution of India, Articles 19(1)(f), 19(1)(g), 19(5), 19(6), 304(b) - The retrospective operation of the Act imposed restrictions on the appellants' rights to hold property and carry on business; the court held these restrictions were reasonable. The length of time covered by the retrospective operation cannot by itself be treated as a decisive test. The State has plenary power to tax and to validate invalid laws retrospectively. Held that the restrictions are reasonable and saved by Articles 19(5), 19(6) and 304(b). C) Constitutional Law - Validation of Laws - Legislative Power - Constitution of India; Bihar Finance Act, 1950 and Bihar Taxation on Passengers and Goods Act, 1961 - The legislature can validate a law that has been struck down by courts by passing a validating act with retrospective effect. The legislative power includes the subsidiary or auxiliary power to validate law which is found to be invalid. Held that the Bihar Legislature could validate the 1950 tax levy by the 1961 Act.
Issue of Consideration
Whether the retrospective operation of the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961 was beyond the legislative competence of the Bihar Legislature; and whether such retrospective operation imposed unreasonable restrictions on fundamental rights under Article 19(1)(f) and 19(1)(g) of the Constitution, and was not saved by Articles 19(5), 19(6) and 304(b).
Final Decision
The Supreme Court held that the retrospective operation of the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961 was valid and within the legislative competence of the Bihar Legislature. The restrictions imposed on the fundamental rights of the appellants under Article 19(1)(f) and (g) by the retrospective operation were reasonable within the meaning of Articles 19(5) and (6) and Article 304(b). The challenge to the validity of the retrospective operation was rejected, and the appeals were dismissed.
Law Points
- Taxing statute within legislative competence does not lose competence due to retrospective operation
- legislature can make laws prospectively and retrospectively
- legislative power includes auxiliary power to validate invalid laws
- power to tax is essential attribute of government
- quantum and conditions of tax are within legislative competence
- restriction on fundamental rights under Article 19(1)(f) and (g) must be reasonable
- length of retrospective operation is not decisive test
- validation of invalid law through retrospective legislation permissible
