# M. A. RAHMAN AND OTHERS v. THE STATE OF ANDHRA PRADESH

- **Citation:** [1962] 1 S.C.R. 694
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** P. B. Gajendragadkar, A. K. Sarkar, K. N. Wanchoo, K. c. DAS GUPTA, N. Rajagopala Ayyangar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-a-rahman-and-others-v-the-state-of-andhra-pradesh-2065
- **Pages:** 8

## Headnote

[1962]
Motor Spirit-Registration of dealers-If ultra vires the Constitution-Constitution of India, Art. r9(r)(g)-The Madras Sales of
Motor Spirit Taxation (Andhra Pradesh Extension and Amendment)
Act (Andhra Pradesh V of r958)-The Madras Sales of Motor
Spirit Taxation Act (VI of r939) ss. 3 and 4, sub-ss. (I) and (4).
The Madras Sales of Motor Spirit Taxation Act (Mad. VI of
1939) was made applicable to the State of Andhra Pradesh by
the Madras Sales of Motor Spirit Taxation (Andhra Pradesh
Extension and Amendment) Act (Andhra Pradesh V of 1958).
The purpose and object of the Act was to levy and collect tax
on retail sales of motor spirit and the liability for payment was
placed upon the person effecting the sale.
In order that the
State may know the persons from whom tax was due s. 4(1)
provided for registration of dealers and s. 4(6) provided for
the suspension of such registration in the event of some contraventions. All that any one who wanted to carry on business
had to do was to ask for registration which he would get under
the rules. The petitioners who were dealers in motor spirit in
Hyderabad filed writ petition challenging the provisions of the
said s. 4 of sub-ss. (1) and (6) on the ground that such registration and cancellation were not reasonable restrictions on the
fundamental rights of the petitioners to carry on business under
Art. lg(r)(g) of the Constitution particularly as the cancellation
of registration resulted in the total extinction of the business
and was an unreasonable restriction and prayed that sub-ss. (1)
and (4) of s. 4 of the Act and r. I4 framed under s. 26 of the Act
be declared ultra vires.
Held, that the provisions of s. 4(1) of the Act were constitutional. Registration of dealers under s. 4(1) was an eminently
reasonable provision in order to carry' out the object of the Act,
the purpose behind the registration being that those on whom
the liability to pay tax under s. 3 of the Act lay, were known to
the State, so that it could realise the tax from them.
The provision of s. 4(6) for cancellation of registration for
failure to pay the tax or for fraudulently evading the payment
of it was an additional coercive process which was expected to
be immediately effective and enabled the State to realise its
revenue. The fact that in some cases restriction might result
in the extinction of the business of a dealer would not by itself
t
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1 S.C.R. SUPREME COURT REPORTS
695
make the provision as to cancellation of. registration an unreasonable restriction on the fundamental right guaranteed by
Art. t9(1)(g) of the Constitution.
Narendra Kumar v. The Union of India, [1960] 2 S.C.R. 375,
referred to.
ORIGINAL JURISDICTION:
Petition Nos. 145 and 149
to 158 of 1959.
Writ Petition under Art. 32 of the Constitution of
India for enforcement of Fundamental Rights.
Sardar Bahad,ur, for the petitioners.
O. K. Daphtary, Solicitor-General of India, R. Ganapathy Iyer and T. M. Sen, for the respondents.
1961. March 30. The Judgment of the Court was
delivered by
:A1. A. Rahman
v.
The State of
Andhra Pradesh
WANCHOO, J.-These eleven petitions raise a comWanchoo J.
mon point and will be disposed of together. The brief
facts necessary for present purposes are these.
The
petitioners are dealers in motor spirit in Hyderabad.
In 1949 the Hyderabad Sales of Motor Spirit Taxation
Regulation, No. XXIV of 1358 J!'asli (hereinafter
called the Regulation) was passed and the petitioners
were registered as retail dealers of petroleum products
under the Regulation.
In 1957 the petitioners and
others filed writ petitions in the High Court of Andhra
Pradesh questioning the validity of the Regulation.
There was also a prayer for stay of the levy and
collection of the tax and the High Court ordered that
all further proceedings in the matter of levy, demand
and collection of tax including cancellation of registration certificate and threatened attachment of property
and the launching of criminal proceedings in pursuance of the Reg

## Text

March 30.
694
SUPREME COURT REPORTS
M. A. RAHMAN AND OTHERS
v.
THE STATE OF ANDHRA PRADESH
(P. B. GAJENDRAGADKAR, A. K. SARKAR,
K. N. WANCHOO, K. c. DAS GUPTA
and N. RAJAGOPALA AYYANGAR, JJ.)
[1962]
Motor Spirit-Registration of dealers-If ultra vires the Constitution-Constitution of India, Art. r9(r)(g)-The Madras Sales of
Motor Spirit Taxation (Andhra Pradesh Extension and Amendment)
Act (Andhra Pradesh V of r958)-The Madras Sales of Motor
Spirit Taxation Act (VI of r939) ss. 3 and 4, sub-ss. (I) and (4).
The Madras Sales of Motor Spirit Taxation Act (Mad. VI of
1939) was made applicable to the State of Andhra Pradesh by
the Madras Sales of Motor Spirit Taxation (Andhra Pradesh
Extension and Amendment) Act (Andhra Pradesh V of 1958).
The purpose and object of the Act was to levy and collect tax
on retail sales of motor spirit and the liability for payment was
placed upon the person effecting the sale.
In order that the
State may know the persons from whom tax was due s. 4(1)
provided for registration of dealers and s. 4(6) provided for
the suspension of such registration in the event of some contraventions. All that any one who wanted to carry on business
had to do was to ask for registration which he would get under
the rules. The petitioners who were dealers in motor spirit in
Hyderabad filed writ petition challenging the provisions of the
said s. 4 of sub-ss. (1) and (6) on the ground that such registration and cancellation were not reasonable restrictions on the
fundamental rights of the petitioners to carry on business under
Art. lg(r)(g) of the Constitution particularly as the cancellation
of registration resulted in the total extinction of the business
and was an unreasonable restriction and prayed that sub-ss. (1)
and (4) of s. 4 of the Act and r. I4 framed under s. 26 of the Act
be declared ultra vires.
Held, that the provisions of s. 4(1) of the Act were constitutional. Registration of dealers under s. 4(1) was an eminently
reasonable provision in order to carry' out the object of the Act,
the purpose behind the registration being that those on whom
the liability to pay tax under s. 3 of the Act lay, were known to
the State, so that it could realise the tax from them.
The provision of s. 4(6) for cancellation of registration for
failure to pay the tax or for fraudulently evading the payment
of it was an additional coercive process which was expected to
be immediately effective and enabled the State to realise its
revenue. The fact that in some cases restriction might result
in the extinction of the business of a dealer would not by itself
t
•
'
'
1 S.C.R. SUPREME COURT REPORTS
695
make the provision as to cancellation of. registration an unreasonable restriction on the fundamental right guaranteed by
Art. t9(1)(g) of the Constitution.
Narendra Kumar v. The Union of India, [1960] 2 S.C.R. 375,
referred to.
ORIGINAL JURISDICTION:
Petition Nos. 145 and 149
to 158 of 1959.
Writ Petition under Art. 32 of the Constitution of
India for enforcement of Fundamental Rights.
Sardar Bahad,ur, for the petitioners.
O. K. Daphtary, Solicitor-General of India, R. Ganapathy Iyer and T. M. Sen, for the respondents.
1961. March 30. The Judgment of the Court was
delivered by
:A1. A. Rahman
v.
The State of
Andhra Pradesh
WANCHOO, J.-These eleven petitions raise a comWanchoo J.
mon point and will be disposed of together. The brief
facts necessary for present purposes are these.
The
petitioners are dealers in motor spirit in Hyderabad.
In 1949 the Hyderabad Sales of Motor Spirit Taxation
Regulation, No. XXIV of 1358 J!'asli (hereinafter
called the Regulation) was passed and the petitioners
were registered as retail dealers of petroleum products
under the Regulation.
In 1957 the petitioners and
others filed writ petitions in the High Court of Andhra
Pradesh questioning the validity of the Regulation.
There was also a prayer for stay of the levy and
collection of the tax and the High Court ordered that
all further proceedings in the matter of levy, demand
and collection of tax including cancellation of registration certificate and threatened attachment of property
and the launching of criminal proceedings in pursuance of the Regulation be stayed.
The petitioners
allege that on this stay being granted by the High
Court, they thought that s. 3 of the Regulation was
suspended during the period of stay and therefore
they stopped collecting the tax from consumers.
While these petitions were pending in the High Court,
the Madras Sales of Motor Spirit Taxation (Andhra
Pradesh Extension and Amendment) Act, No. V of
1958 (hereinafter called the Act), was passed by which
696
SUPREME COURT REPORTS
[1962]
'96'
the Madras Sales of Motor Spirit Taxation Act, No. VI
M.A. Rahman of 1939 was applied to Andhra Pradesh with some
v.
modifications and the Regulation was repealed.
This
The State of Act, like the Regulation, had provisions for registraAndhra Pradesh tion of dealers and in consequence fresh registration
certificates were issued to the petitioners as well as to
Wanchoo J.
all other dealers in the State. In August 1958 the petitions challenging the validity of the Regulation were
dismissed. In September 1958 notices were issued to the
petitioners informing them that they had failed to submit returns showing sales of motor spirit from March
1957 to March 1958 and they were required to submit
returns within seven days, failing which best judgment
assessments would be made under the relevant provision of the Regulation. The petitioners maderepresentations against this order and their main case ·was
that they had not collected any tax from consumers
during this period and it would therefore be harsh to
demand tax from them in the circumstances. Thereupon it is said that best judgment assessments were
made against the petitioners and they were required to
pay the tax, though liberty to pay in instalments wa~
granted to them for this purpose. As however~ ~l;ie
petitioners failed to deposit the tax even in instalments, the. registration certificate of . one of the
petitioners was cancelled and other petitioners were
threatened with cancellation of .. their registration
certificates about October 1959: · Consequently, the
present petitions were filed soon after challenging the
provisions of the Act relating to cancellation .of regis:
tration certificates on the ground that such. canc~lla_
tion was not a reasonable restriction on the fundamental rights of the petitioners to carry . on business
under Art. 19 (1) (g) of the Constitution. The petitioners therefore pray for a declaratioif that sub-ss. (1)
and (6) of s. 4 of the Act aud, t. 14 purported to be
framed thereunder are ultra vires as being violative. of
Art. 19 (1) (g) of the Constitution and for consequen_tial orders against the respondents, namely, the Sta~!l
of Andhra Pradesh and its officers, from enforcing ~he
said provisions.
'
.
. .
·
The petitions have been opposed by the respondents
f
:r __ > 1 S.C.R. SUPREME COURT REPORTS
697
and their case is that the provisions in question are
1961
reasonable restrictions on the right guaranteed under M.A. Rahman
Art. 19 ( 1) (g) and are therefore perfectly valid and
v.
constitutional. The respondents also say that the
The State of
allegation of the petitioners that they did not collect A ndhra Pradesh
the tax during the period of the stay orders from
Wanchoo ].
consumers is false.
-
In order to decide the constitutionality of the provisions which have.been challenged it is necessary to look
into the purpose and object of the Act in which those
provisions appear. The Act was passed in order to
levy and collect tax on retail sales of motor spirit in
the interest of the general revenues of the State.
)
Section 2 of the Act is the definition section. Section 3
is the charging section and provides the rates at which
the tax is to be levied on all retail sales of motor spirit.
Section 4 (1) wpich is being challenged is in these
terms:-
"No person shall, after the commencement of this
Act, carry on business in motor spirit as an importer
or as a wholesale or retail dealer at any place in the
State unless he has been registered as such under
this Act."
Sub-sections (2) and (3) make certain ancillary provisions and sub.8. (4) is in these terms:-
"Registration may be made subject to such conditions, if any, as may be prescribed including in the
case of an applicant for registration as a retail
I
dealer, the making of such deposit or the furnishing
,
of such security as the registering authority may
consider necessary to ensure the due payment of the
tax which may from time to time be payable by
him."
·sub-section (5) is unnecessary for our purpose, and
sub-s. (6) is in these terms:-
"Any registration under sub-section (1) may be
suspended or cancelled by such authority, for such
reasons, and in such manner, as may be prescribed."
-,
It is hot necessary to refer to other sections which
>
make various provisions necessary for the enforcement
~
of the Act till we come to s. 26 which gives power to
88
M.A. Rahman
v.
The State of
Andhra Pradesh
Wanchoo ].
698
SUPREME COURT REPORTS
[1962]
the State Government to make rules to carry out the
purposes of the Act. Rule 14 which has been attacked
has been made under the power conferred under s. 26
and it is not being disputed that if the main provisions
contained in s. 4 are constitutional, the rule is within
the ambit of the Act and the rule making power of
the State Government.
It will be clear from this analysis of the impugned
provisions of the Act that the purpose and object of
the Act is to levy and collect tax for purposes of the
general revenues of the State and the liability for
payment is placed under s. 3 upon the person effecting
the sale. He is required by s. 5 of the Act to keep
books of account in the prescribed form and to submit
to the Commercial Officer and to such other officers as
may be prescribed, a return in such form, containing
such particulars and at such intervals, as may be
prescribed. Along with the return,' under s. 6 he is
required to pay the amount of tax due in respect of
the motor spirit sold by him in retail during the pre-
~
ceding month according to the return. In order therefore that the State may have a check on the person
from whom the tax is dues. 4(1) provides for registration of dealers who carry on the business in motor
spirit. Without such registration it would be impossible for the State to know the persons who are selling
motor spirit and from whom the tax is due. The provision therefore under s. 4(1) for registration of dealers
is an eminently reasonable provision in order to carry
out the object of the Act, namely, the levy and collection of this tax for purposes of the State. It is really ,,
no restriction on carrying on business in motor spirit;
any one who carries on such business is free to do so
and all that he has to do is to ask for registration,
which he will get subject to the provisions of sub-s. (4).
That sub-section has not been challenged in these
petitions and therefore we proceed on the assumption
that it is constitutional. It follows therefore that all
that anyone who wants to carry on business in motor
spirit has to do is to ask for registration which he will
get under the rules, and the purpose behind registra-
~
tion is that those on whom the liability to pay tax ,
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I S.C.R. SUPREME COURT REPORTS
699
under s. 3 of the Act lies, are known to the State so
1961
that it may realise the tax from them. The challenge M. A. Rahman
therefore to the constitutionality of s. 4(1) must fail.
v.
Then we turn to sub-s. (6), which provides that any
The State of
registration under sub-s. (1) may be suspended or can- Andhrn Pradesh
celled by such authority, for such reasons, and in such
--
manner, as may be prescribed. The main attack of
Wan,hoo J.
the petitioners is on this sub-section. They contend
that this sub-section authorises the State to cancel a
registration. The effect of such cancellation read with
sub-s. (1) is that a person whose registration is cancelled cannot carry on business in motor spirit as he was
doing before the cancellation. It is said that cancellation results in the total extinction of the business of
the person whose registration is cancelled and thus
the provision as to cancellation is an unreasonable
restriction on the fundamental right to carry on
business.
There is no doubt that if a registration is cancelled
under sub-s. (6) it will not be possible for the person
whose registration is so cancelled to carry on his business in motor spirit. Rule 14 provides conditions under
which the registration may be cancelled and we are in
the present case concerned with two of them, namely,
where the holder of a• registration certificate (a) fails
to pay the tax or any other amount payable under
the Act and (b) fraudulently evades the payment of
the tax.
The reasonableness of this provision as to cancellation of registration certificate has to be judged in the
backgrotmd of what we have already said about the
purpose of the levy and its liability on the seller. It
is true that there are other provisions in the law for
realisation of public dues from those who default in
making payments; but generally speaking cancellation
of registration in cases like these is one more method
of compelling payment of tax which is due to the
State. Collection of revenue is necessary in order that
the administration of the State may go on smoothly in
the interest of the general public. The State has
therefore armed itself with one more coercive method
in order to realise the tax in such cases. It is true
1y6r
700
SUPREME COURT REPORTS
[1962]
that cancellation of registration may result in a dealer
being unable to carry on the business, but the same
v.
result may even follow from the application of other
The state of coercive processes for realisation of dues from a trader,
M.A. Rahman
Andhra Pradesh for his assets may be sold off to pay the arrears of tax
and he may thereafter be not in a position to carry on
the business at all. Therefore the provision for cancellation of registration for failure to pay the tax or
Wanchoo ].
for fraudulently evading the payment of it is an additional coercive process which is expected to be immediately effective and enables the State to realise its
revenues which are necessary for carrying on the
administration in the interest of the general public.
The fact that in some cases restrictions may result in
the extinction of the business of a dealer would not
by itself make the provision as to cancellation of registration an unreasonable restriction on the fundamental right guaranteed by Art. 19(1)(g). We may in
this connection refer to NarendraKumar v. The Union
of India('), where it was held that:
"the word 'restriction' in Arts. 19(5) and 19(6) of
the Constitution includes cases of 'prohibition' also;
that where a restriction reaches the stage of total
restraint of rights special care has to be taken by
the Court to see that the test of reasonableness is
satisfied by considering the question in the background of the facts and circumstances under which
the order was made, taking into account the nature
of the evil that was sought to be remedied by such
law, the ratio of the harm caused to individual citizens by the proposed remedy, the beneficial effect
reasonably expected to result to the general public,
and whether the restraint caused by the law was
more than was necessary in the interests of the
general public."
Applying these tests we are of opinion that the cancellation of registration will be justified even though
it results in the extinction of business as such cancellation is in respect of a tax meant for the general
revenues of the State to carry on the administra.tion
in the interest of the gener~l public.
(•) [•96<>l • s.c.R. 375.
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I S.C.R. SUPREME COURT REPORTS
701
Besides, there is another consideration to which we
1961
may advert in the end, though even otherwise the M.A. Rahman
cancellation is justified. Though there is no provision
v.
in the Act or the Rules specifically authorising the
The state of
seller to pass on the tax to the consumer, what Andhra Pradesh
actually happens is that the seller includes the tax in
-
the price and thus passes it on to the consumer. Then
wanchoo f.
in his turn the seller pays the tax to the State. In
effect by thus passing on the tax to the consumer
through the price, the dealer has already collected the
tax. Therefore the compulsion of payment which
arises because of the provision for cancellation of registration is under the circumstances justified and there
is no reason why he should fail to pay it to the State
or evade payment thereof fraudulently. The fault for
failure to pay the tax or fraudulent evasion in payment thereof lies in the circumstances entirely on the
dealer and he cannot be heard to complain that cancellation of registration in such a case is a disproportionate restriction on the right to carry on business
which cannot be justified in the interests of the
general public.
Under the circumstances we are of opinion that the
ratio of Narendra Kumar's case(') applies fully to the
present case and the provision contained in sub-s. (6) of
s. 4 is a reasonable restriction within the meaning of
Art. 19(6) of the Constitution. The petitions therefore
fail and are hereby dismissed with costs; there will
be one set of hearing costs only.
Petitions dismissed.
(1) [1962] S.C.R. 375.