State Of Kerala Vs. A.B. Abdul Khadir &amp; Ors
credit facilities and a most of other factors - natural and business - enter into the maintenance of trade relations and the free flow of trade cannot necessarily be deemed to have been obstructed merely because in a particular State the rate of tax on sales is higher than the rates prevailing in other State.8. On behalf of the appellant it was contended that the High Court was not right in holding that the ratio of Kalyani Stores case, (1966) 1 SCR 865 = (AIR 1966 SC 1686 ) applied to the present case and, that, Kerala Act 9 of 1964 as violative of Art. 301 of the Constitution. The view taken by the High Court was that in the absence of any production of tobacco inside Kerala State it was not competent for the Kerala Legislature to enact the impugned Act under Article 304 (a) of the Constitution. In support of this view the High Court relied upon the following passage from the judgment of this Court:"Exercise of the power under Article 304 (a) can only be effective if the tax or duty imposed on goods imported from other States and the tax or duty imposed on similar goods manufactured or produced in that State are such that there is no discrimination against imported goods. As no foreign liquor is produced or manufactured in the State of Orissa the power to legislate given by Art. 304 is not available and the restriction which is declared on the ground of trade, commerce or intercourse by Art. 301 of the Constitution remains unfettered."9. In our opinion the High Court has not correctly appreciated the import of the decision of this Court in the Kalyani Stores case, (1966) 1 SCR 865 = (AIR 1966 SC 1686). The appellant in that case challenged the imposition of a duty of excise on foreign liquor imported into the Orissa State which had been levied at Rs. 40 per L. P. Gallon until March 31, 1961 by virtue of a notification issued in 1937 under section 27 of the Bihar and Orissa Excise Act, 1915 and which had been enhanced with effect from April 1, 1961 by a fresh notification. It was contended on behalf of the appellant that since no foreign liquor was manufactured within the State and consequently no excise duty was being levied on any locally manufactured foreign liquor countervailing duty could not be charged on such liquor brought from outside the State and that the impost was in violation of Arts. 301, 303 and 304 of the Constitution. It was held by the majority of Judges that the notification dated March 31, 1961 enhancing the levy by Rs. 30/- per L. P. Gallon infringed the guarantee of freedom under Art. 301 and may be saved only if it falls within the exception contained in Art. 304. As no liquor was produced or manufactured within the State, the protection of Article 304 was not available. The decision was based on the assumption that the notification dated March 31, 1961 enhancing duty on Foreign liquor infringed the guarantee under Art. 301 and may be saved if it fell within the exceptions contained in Art. 304 of the Constitution.The Court did not intend to lay down the proposition that imposition of a duty or tax in every case would be tantamount per se to an infringement of Art. 301. As we have already pointed out it is well established by numerous authorities of this Court that only such restrictions or impediments which directly or immediately impede the free flow of trade, commerce and intercourse fall within the prohibition imposed by Art. 301. A tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and in its own setting of time and circumstance. In the present case the High Court has not gone into the question whether the provisions of Act 9 of 1964 and the notification dated January 25, 1951 issued under the Cochin Tobacco Act constitute such restrictions or impediments as directly and immediately hamper free flow of trade, commerce and intercourse and, therefore, fall within the prohibition imposed under Art. 301 of the Constitution. Unless the High Court first comes to the finding on the available material whether or not there is infringement of the guarantee under Art. 301 of the Constitution the further question as to whether the statute is saved under Art. 304 (b) does not arise and the principle laid down by this Court in Kalyani Stores case, (1966) 1 SCR 865 = (AIR 1966 SC 1686 ) cannot be invoked.10. It was also said on behalf of the respondents that the State Legislature had no power to levy and collect licence fee under the impugned Act as it was in substance a duty of excise falling under the Union List. The Contrary viewpoint was presented on behalf of the appellant and it was contended that the legislation falls under Entry 62 of List II and the State Legislature was competent to enact. It is open to the parties to argue this matter before the High Court at the time of re-hearing.11. For the reasons already expressed we hold that the appeal should be allowed and the judgment of the Kerala High Court dated October 3, 1966 in O. P. 934 of 1964 should be set aside and the case should go back for hearing in the light of the law laid down in this judgment.12. It is desirable that the High Court should give an opportunity to the parties to file further affidavits before taking up the case for re-hearing.13. On behalf of the appellants Mr. Chagla has given an undertaking that the provisions of the Act would not be enforced against the respondents for a month from this date. The respondents say that they will apply to the Keral High Court for stay in the
1[ds]The view taken by the High Court was that in the absence of any production of tobacco inside Kerala State it was not competent for the Kerala Legislature to enact the impugned Act under Article 304 (a) of the Constitution.In our opinion the High Court has not correctly appreciated the import of the decision of this Court in the Kalyani Stores case, (1966) 1 SCR 865   = (AIR 1966 SCthe present case the High Court has not gone into the question whether the provisions of Act 9 of 1964 and the notification dated January 25, 1951 issued under the Cochin Tobacco Act constitute such restrictions or impediments as directly and immediately hamper free flow of trade, commerce and intercourse and, therefore, fall within the prohibition imposed under Art. 301 of the Constitution. Unless the High Court first comes to the finding on the available material whether or not there is infringement of the guarantee under Art. 301 of the Constitution the further question as to whether the statute is saved under Art. 304 (b) does not arise and the principle laid down by this Court in Kalyani Stores case, (1966) 1 SCR 865   = (AIR 1966 SC 1686  ) cannot be invoked.n our opinion the High Court has not correctly appreciated the import of the decision of this Court in the Kalyani Stores case, (1966) 1 SCR 865   = (AIR 1966 SC1686). The appellant in that case challenged the imposition of a duty of excise on foreign liquor imported into the Orissa State which had been levied at Rs. 40 per L. P. Gallon until March 31, 1961 by virtue of a notification issued in 1937 under section 27 of the Bihar and Orissa Excise Act, 1915 and which had been enhanced with effect from April 1, 1961 by a fresh notification. It was contended on behalf of the appellant that since no foreign liquor was manufactured within the State and consequently no excise duty was being levied on any locally manufactured foreign liquor countervailing duty could not be charged on such liquor brought from outside the State and that the impost was in violation of Arts. 301, 303 and 304 of the Constitution. It was held by the majority of Judges that the notification dated March 31, 1961 enhancing the levy by Rs. 30/per L. P. Gallon infringed the guarantee of freedom under Art. 301 and may be saved only if it falls within the exception contained in Art. 304. As no liquor was produced or manufactured within the State, the protection of Article 304 was not available. The decision was based on the assumption that the notification dated March 31, 1961 enhancing duty on Foreign liquor infringed the guarantee under Art. 301 and may be saved if it fell within the exceptions contained in Art. 304 of the Constitution.The Court did not intend to lay down the proposition that imposition of a duty or tax in every case would be tantamount per se to an infringement of Art. 301. As we have already pointed out it is well established by numerous authorities of this Court that only such restrictions or impediments which directly or immediately impede the free flow of trade, commerce and intercourse fall within the prohibition imposed by Art. 301. A tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and in its own setting of time and circumstance. Inthe present case the High Court has not gone into the question whether the provisions of Act 9 of 1964 and the notification dated January 25, 1951 issued under the Cochin Tobacco Act constitute such restrictions or impediments as directly and immediately hamper free flow of trade, commerce and intercourse and, therefore, fall within the prohibition imposed under Art. 301 of the Constitution. Unless the High Court first comes to the finding on the available material whether or not there is infringement of the guarantee under Art. 301 of the Constitution the further question as to whether the statute is saved under Art. 304 (b) does not arise and the principle laid down by this Court in Kalyani Stores case, (1966) 1 SCR 865   = (AIR 1966 SC 1686  ) cannot beis open to the parties to argue this matter before the High Court at the time of
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credit facilities and a most of other factors - natural and business - enter into the maintenance of trade relations and the free flow of trade cannot necessarily be deemed to have been obstructed merely because in a particular State the rate of tax on sales is higher than the rates prevailing in other State.8. On behalf of the appellant it was contended that the High Court was not right in holding that the ratio of Kalyani Stores case, (1966) 1 SCR 865 = (AIR 1966 SC 1686 ) applied to the present case and, that, Kerala Act 9 of 1964 as violative of Art. 301 of the Constitution. The view taken by the High Court was that in the absence of any production of tobacco inside Kerala State it was not competent for the Kerala Legislature to enact the impugned Act under Article 304 (a) of the Constitution. In support of this view the High Court relied upon the following passage from the judgment of this Court:"Exercise of the power under Article 304 (a) can only be effective if the tax or duty imposed on goods imported from other States and the tax or duty imposed on similar goods manufactured or produced in that State are such that there is no discrimination against imported goods. As no foreign liquor is produced or manufactured in the State of Orissa the power to legislate given by Art. 304 is not available and the restriction which is declared on the ground of trade, commerce or intercourse by Art. 301 of the Constitution remains unfettered."9. In our opinion the High Court has not correctly appreciated the import of the decision of this Court in the Kalyani Stores case, (1966) 1 SCR 865 = (AIR 1966 SC 1686). The appellant in that case challenged the imposition of a duty of excise on foreign liquor imported into the Orissa State which had been levied at Rs. 40 per L. P. Gallon until March 31, 1961 by virtue of a notification issued in 1937 under section 27 of the Bihar and Orissa Excise Act, 1915 and which had been enhanced with effect from April 1, 1961 by a fresh notification. It was contended on behalf of the appellant that since no foreign liquor was manufactured within the State and consequently no excise duty was being levied on any locally manufactured foreign liquor countervailing duty could not be charged on such liquor brought from outside the State and that the impost was in violation of Arts. 301, 303 and 304 of the Constitution. It was held by the majority of Judges that the notification dated March 31, 1961 enhancing the levy by Rs. 30/- per L. P. Gallon infringed the guarantee of freedom under Art. 301 and may be saved only if it falls within the exception contained in Art. 304. As no liquor was produced or manufactured within the State, the protection of Article 304 was not available. The decision was based on the assumption that the notification dated March 31, 1961 enhancing duty on Foreign liquor infringed the guarantee under Art. 301 and may be saved if it fell within the exceptions contained in Art. 304 of the Constitution.The Court did not intend to lay down the proposition that imposition of a duty or tax in every case would be tantamount per se to an infringement of Art. 301. As we have already pointed out it is well established by numerous authorities of this Court that only such restrictions or impediments which directly or immediately impede the free flow of trade, commerce and intercourse fall within the prohibition imposed by Art. 301. A tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and in its own setting of time and circumstance. In the present case the High Court has not gone into the question whether the provisions of Act 9 of 1964 and the notification dated January 25, 1951 issued under the Cochin Tobacco Act constitute such restrictions or impediments as directly and immediately hamper free flow of trade, commerce and intercourse and, therefore, fall within the prohibition imposed under Art. 301 of the Constitution. Unless the High Court first comes to the finding on the available material whether or not there is infringement of the guarantee under Art. 301 of the Constitution the further question as to whether the statute is saved under Art. 304 (b) does not arise and the principle laid down by this Court in Kalyani Stores case, (1966) 1 SCR 865 = (AIR 1966 SC 1686 ) cannot be invoked.10. It was also said on behalf of the respondents that the State Legislature had no power to levy and collect licence fee under the impugned Act as it was in substance a duty of excise falling under the Union List. The Contrary viewpoint was presented on behalf of the appellant and it was contended that the legislation falls under Entry 62 of List II and the State Legislature was competent to enact. It is open to the parties to argue this matter before the High Court at the time of re-hearing.11. For the reasons already expressed we hold that the appeal should be allowed and the judgment of the Kerala High Court dated October 3, 1966 in O. P. 934 of 1964 should be set aside and the case should go back for hearing in the light of the law laid down in this judgment.12. It is desirable that the High Court should give an opportunity to the parties to file further affidavits before taking up the case for re-hearing.13. On behalf of the appellants Mr. Chagla has given an undertaking that the provisions of the Act would not be enforced against the respondents for a month from this date. The respondents say that they will apply to the Keral High Court for stay in the

### Response:
1

### Explanation:
The view taken by the High Court was that in the absence of any production of tobacco inside Kerala State it was not competent for the Kerala Legislature to enact the impugned Act under Article 304 (a) of the Constitution.In our opinion the High Court has not correctly appreciated the import of the decision of this Court in the Kalyani Stores case, (1966) 1 SCR 865   = (AIR 1966 SCthe present case the High Court has not gone into the question whether the provisions of Act 9 of 1964 and the notification dated January 25, 1951 issued under the Cochin Tobacco Act constitute such restrictions or impediments as directly and immediately hamper free flow of trade, commerce and intercourse and, therefore, fall within the prohibition imposed under Art. 301 of the Constitution. Unless the High Court first comes to the finding on the available material whether or not there is infringement of the guarantee under Art. 301 of the Constitution the further question as to whether the statute is saved under Art. 304 (b) does not arise and the principle laid down by this Court in Kalyani Stores case, (1966) 1 SCR 865   = (AIR 1966 SC 1686  ) cannot be invoked.n our opinion the High Court has not correctly appreciated the import of the decision of this Court in the Kalyani Stores case, (1966) 1 SCR 865   = (AIR 1966 SC1686). The appellant in that case challenged the imposition of a duty of excise on foreign liquor imported into the Orissa State which had been levied at Rs. 40 per L. P. Gallon until March 31, 1961 by virtue of a notification issued in 1937 under section 27 of the Bihar and Orissa Excise Act, 1915 and which had been enhanced with effect from April 1, 1961 by a fresh notification. It was contended on behalf of the appellant that since no foreign liquor was manufactured within the State and consequently no excise duty was being levied on any locally manufactured foreign liquor countervailing duty could not be charged on such liquor brought from outside the State and that the impost was in violation of Arts. 301, 303 and 304 of the Constitution. It was held by the majority of Judges that the notification dated March 31, 1961 enhancing the levy by Rs. 30/per L. P. Gallon infringed the guarantee of freedom under Art. 301 and may be saved only if it falls within the exception contained in Art. 304. As no liquor was produced or manufactured within the State, the protection of Article 304 was not available. The decision was based on the assumption that the notification dated March 31, 1961 enhancing duty on Foreign liquor infringed the guarantee under Art. 301 and may be saved if it fell within the exceptions contained in Art. 304 of the Constitution.The Court did not intend to lay down the proposition that imposition of a duty or tax in every case would be tantamount per se to an infringement of Art. 301. As we have already pointed out it is well established by numerous authorities of this Court that only such restrictions or impediments which directly or immediately impede the free flow of trade, commerce and intercourse fall within the prohibition imposed by Art. 301. A tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and in its own setting of time and circumstance. Inthe present case the High Court has not gone into the question whether the provisions of Act 9 of 1964 and the notification dated January 25, 1951 issued under the Cochin Tobacco Act constitute such restrictions or impediments as directly and immediately hamper free flow of trade, commerce and intercourse and, therefore, fall within the prohibition imposed under Art. 301 of the Constitution. Unless the High Court first comes to the finding on the available material whether or not there is infringement of the guarantee under Art. 301 of the Constitution the further question as to whether the statute is saved under Art. 304 (b) does not arise and the principle laid down by this Court in Kalyani Stores case, (1966) 1 SCR 865   = (AIR 1966 SC 1686  ) cannot beis open to the parties to argue this matter before the High Court at the time of
