Report No. 49

19. Atiabari case.- The following discussion in the Atiabari case1 is pertinent:-

'Having thus disposed of the main ground of attack against the constitutionality of the Act based on Article 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 II of the Seventh Schedule. Entry 56, in its very terms, "Taxes on goods and passengers carried by rail or on 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 I 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 Tata Iron and Steel and Co. Ltd. v. State of Bihar, (1958) SCR 1355: AIR 1958 SC 452 and Das, C.J., delivering the majority judgment of the Court, disposed of the argument that the tax in that case was not on sale of goods, but was, in substance, a duty of excise, in these terms:

This argument, however, overlooks the fact that under clause (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 Province of Madras v. Boddu Paidanna and Sons, AIR 1942 FC 33: 1942 FCR 90. In the words of their Lordships of the Judicial Committee in Governor-General v. Province of Madras, AIR 1945 PC 98 (101), 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 section 4(1) read with section 2(g), second proviso. As Gwyer, C.J., said in Boddu Paidanna's case, 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."

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 section 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.'

1. Atiabari Tea Co. v. State of Assam, AIR 1961 SC 232 (243), para. 20.