# RAI RAMKRISHNA & OTHERS v. THE STATE OF BIHAR - **Citation:** [1964] 1 S.C.R. 897 - **Court:** Supreme Court of India - **Decided:** 1964 - **Bench:** P. B. Gajendragadkar, K. N. Wanohoo, M. Hidayatullah, K. C. Das Gupta, J. C. Shah - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/rai-ramkrishna-others-v-the-state-of-bihar-2821 - **Pages:** 24 ## Headnote Tazing Statide-Tax on passengers and goods-Retros· pective operation-Validity-Restrictions, if unreasonableFundamental rights, if infringed-State's power of taxationGonstitution of India, Arts. 19(1)(/) and (g), (6), (6), 304(b), Seventh Schedule, hist II, Entry 66-liihar Finance Act, ltl60 ( Bihar 17 of 1960)-Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961, (Bihar 17 of 1961) ss. 1 (3), 23(b) • On March 30, 1950, the Bihar Legislature pa Motor Vehicles) Act, 1961·. As a result of the retrospective operation of the Act of 1961, its material provisions were deemed to have come into force from April I, 1950, the date on which the Act of 1950 came into forrc. · The appellants challenged the validity of the Act of 1961 but their writ petitions were dismissed by the High Court which held that the Act in its entirety was valid. The appell· ants came to this Court by, special leave. The appellant• conceded in this Court that the Act of 1961 in its prospective operation was perfectly valid and s. 23 (a) which validated the acts done under the Act of 1950 was valid. Wh~t was contended by the appellants was that the provisions of s. 23(b) in so far as they referred to proceedings commenced under the Act of 1950 but not completed before the Act of 1961 came into force were invalid. It was also contended that the retrospective operation prescribed by s. l (3) and a part of '· 23(b) so completely altered the character of the tax pro, osed to be retrospectively recovered that it introduced a serious infirrnity in the legislative competence of the Bihar Legislature itself and the retrospective operation .was so unreasonable that it could not be saved either under Art. 304(b) or Art. 19(5) and (6) of the Constitution of India. Held, that if In irs essential features a taxing statute Is within the competence of the Legislature which passed i•. by reference to the relevant entry in the List, its character Is not necessarily changed merely by its retrospective operation so as to make the said retrospective operation outside the legislative . compet.11ce of the said legislature. The challenge to the validity of the retrospective operation of the Act on the ground that the provision was beyond the legislative competence of the Bihar ~islature, must ~rejected. . Htld, als> that the restriction imposed on the fundamental dghts of the appellants under Art. 19(l)(f) and (g) by the retrospective operatioll' of the Act was reasonable within the meaning of Aris. 19(5) and (6) and A··t. 304(b). The test of the length of time cavered by the retrospective operation cannot by itself be treated as a decisive test. Where the legislature can make a valirl law, it can provide not only for tho prospective operation of the materhl provisions of the said law, but it ran also provid' fo1 1 he retros· pertive operation of the said provision•. The legislative power includes the subsidiary or the auxiliary power to validate I~w which is found to be invalid. If a Jaw passed by the legislature / • • • I S.C.R. SUPREME COURT REPORTS 809 i1 strurk down by the Courts, it is competent to the approprl· ate legislature to pa ## Text _Characters 0–39,596 of 49,581. This is a partial read: ask again with offset=39596 for what follows._ • • ' 1 S.C.R. SUPREME COURT REPORTS 897 there is nothing to show that any damage had been caused to the Inamdars of the village as a result of the di version of the water caused by the military authorities. Therefore, we are satisfied that the appellant cannot now make an alternative case on the ground of his rights as a riparian owner. -- The result is, the appeal fails and is dismissed with costs, two sets; one hearing fee .. Appe~l aismi.,sed. RAI RAMKRISHNA & OTHERS v. THE STATE OF BIHAR (P. B. GAJENDRAGADKAR, K. N. WANOHOO, M. HIDAYATULLAH, K. C. DAS GUPTA and J. C. SHAH, JJ.) Tazing Statide-Tax on passengers and goods-Retros· pective operation-Validity-Restrictions, if unreasonableFundamental rights, if infringed-State's power of taxationGonstitution of India, Arts. 19(1)(/) and (g), (6), (6), 304(b), Seventh Schedule, hist II, Entry 66-liihar Finance Act, ltl60 ( Bihar 17 of 1960)-Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961, (Bihar 17 of 1961) ss. 1 (3), 23(b) • On March 30, 1950, the Bihar Legislature pa Motor Vehicles) Act, 1961·. As a result of the retrospective operation of the Act of 1961, its material provisions were deemed to have come into force from April I, 1950, the date on which the Act of 1950 came into forrc. · The appellants challenged the validity of the Act of 1961 but their writ petitions were dismissed by the High Court which held that the Act in its entirety was valid. The appell· ants came to this Court by, special leave. The appellant• conceded in this Court that the Act of 1961 in its prospective operation was perfectly valid and s. 23 (a) which validated the acts done under the Act of 1950 was valid. Wh~t was contended by the appellants was that the provisions of s. 23(b) in so far as they referred to proceedings commenced under the Act of 1950 but not completed before the Act of 1961 came into force were invalid. It was also contended that the retrospective operation prescribed by s. l (3) and a part of '· 23(b) so completely altered the character of the tax pro, osed to be retrospectively recovered that it introduced a serious infirrnity in the legislative competence of the Bihar Legislature itself and the retrospective operation .was so unreasonable that it could not be saved either under Art. 304(b) or Art. 19(5) and (6) of the Constitution of India. Held, that if In irs essential features a taxing statute Is within the competence of the Legislature which passed i•. by reference to the relevant entry in the List, its character Is not necessarily changed merely by its retrospective operation so as to make the said retrospective operation outside the legislative . compet.11ce of the said legislature. The challenge to the validity of the retrospective operation of the Act on the ground that the provision was beyond the legislative competence of the Bihar ~islature, must ~rejected. . Htld, als> that the restriction imposed on the fundamental dghts of the appellants under Art. 19(l)(f) and (g) by the retrospective operatioll' of the Act was reasonable within the meaning of Aris. 19(5) and (6) and A··t. 304(b). The test of the length of time cavered by the retrospective operation cannot by itself be treated as a decisive test. Where the legislature can make a valirl law, it can provide not only for tho prospective operation of the materhl provisions of the said law, but it ran also provid' fo1 1 he retros· pertive operation of the said provision•. The legislative power includes the subsidiary or the auxiliary power to validate I~w which is found to be invalid. If a Jaw passed by the legislature / • • • I S.C.R. SUPREME COURT REPORTS 809 i1 strurk down by the Courts, it is competent to the approprl· ate legislature to pass a validating law so as to make the provi· sions of the earlier law efi'ective from the date when it was passed. The power of taxing people and their property Is an essential attribute of Government and the Government can legitimately exercise the said power by reference to the objects to which it is applirable to the utmost extent to which Government thinks it expedient to do so. The objects to be taxed so long as they happen to be within the legislative competence of the legislature, can be taxed by the legislature according to the exigencie; of its needs, because there can be no doubt that the State is entitled to rai;e revenue by taxatbn. The quantum of tax levied by the taxing statute, the conditions subject to whicli it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the legislature. · Atiabari Tea Oo. Ltd. v. Stale of Assam, [1961] l S.C.R. 809, The Automobile Transport (Rajasthan) Ltd. v. State of Rajaslhan, [1963] 1 S.C.R. 491, Unitrtl Provinces v. Mst. Atiqa Begum [1940] F.C.R. llO, Stale of West Bengal v. Subodh Gopal Brne, [1954] S.C.R. 587, The Express Newspapers (P) Lf,d. v. Union of India, [1959] S.C.R. 12, Kunnathet Thalhunni Moopil Nair v. Stale of Kerala, (1961] 3 S.C.R. 7 I, Raja Jagannalh Bak8h Singh v. State of Uttar Pradeah, [1963] I S.C.R. 220, Tata Iron &: Steel Oo. Ltd. v, The State of Bihar, [1958] S.C.R. 1355, M.P.V. Sundararamfer & Oo. v. The Stale of Andhra Pradesh, [1958] S.C.R. 1422, M/s.J. K. Jute Milla Oo. Ltd. v. Stale of Uttar Pradesh, [1962] 2 S.C.R. •I, and M/s. OhhotabhalJethabhai Patel&: Oo. v. Union of India, [1962] Supp. 2 S.C.R. 1, referred to. CIVIL APPELLATEjURISDIOTION: Civil Appeals Nos. 16 and 17of1962. Appeals by special leave from the judgment and order dated September 5, 1962, of the Patna N.igh Court in Mlisc. Judi. Cases Nos. 916 and 918 of 1961. . M. O. Betalt!ad, B. K. P. Sinha, A. N. Sinka, and B. P. Jka for the appellants. A. V. Viswanatka SaBtri, D. P. Singh, Anil Kumar Gupta, M. K. Ramamurtki, R. K. Garg and S. 0. Agarwala, for the respondent. - --· Jral Ram.trisW ... TM Sla11 o/ IJU.a JHJ &i Rmnhlilrna •• Tb 11414 of BiMr Gqjmdr,g•dk0<, J, 900 SUPREME COURT REPORTS [1964] VOL. 1963. February 11. The Judgment of the Court was delivered by GAJENDRAGAllKAR, .J .-The short question which these two appeals raise for our decision is in regard to the validity of the retrospective operation of the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961 (No. 17 of 1961) (hereinafter called 'The Act'). It is true that the two writ petitions Nos. 916/1961 and 918/1961 filed by the apFellants Rai Ramkrishna & Ors. and M/s. Road Transport Co., Dhanbad & Ors. respectively in the High Court at Patna along with 18 others under Articles 226 and 227 of the Constitution had challenged the validity of the whole of the Act. The High Co1irt has held that the Act is valid both in its prospective as well as its retrospective operation. In their appeals brought to this Court by special leave against the said judgment, the appellants do not challenge the conclusion of the High Court that the Act is valid in so far as its prospective operation is concerned; they have confined their appeals to its retrospective operation. Eighteen other petitioners who had joined the appellants in the High Court have accepted the decision of the High Court and have not come to this Court in appeal. Before dealing with the points raised by the appellants, it is necessary to set out briefly the background of the present dispute : On March, 30, • 1950, the Bihar L~gislature passed the Bihar Finance Act, 1!):30 (Bihar Act L of 1950); this Act levied a tax on passengers and goods carried by public service motor vehicles in Bihar. Nearly a year after this Act came into force, the appellants challenged its validity by instituting a suit No. 60/1951 in the Court of the First Subordinate .Judge at Gay a on May 6, 1951. In this suit, the appellants prayed that the provisions of Part III of the said Act were • l s.c.R. SUPREME COURT REPORTS 901 unconstitutional and asked for an injunction restraining the respondent, the State of Bihar, from levying and realising the said tax. It appears that a similar suit was instituted (No. 57/1951) on behalf of the passengers and owners of goods for obtaining similar reliefs against the bus operators. This latter suit was filed by the passengers and owners of goods in a representative capacity under O. 1 r. 8. Both these suits were transferred to the Patna High Court for disposal. A special Bench of the High Court which heard the said two suits dismissed them on May 8, 1952. The High Court found that the said Act of 1950 did not contravene Art. 301 of the Constitution and so, its validity was beyond challenge. The appellants then preferred an appeal to this Court No. 53/ 1952. Pending the said appeal in this Court, a similar question had been decided by this Court in the case of Atiabari Tea Company Ltd. v. The Stat.e of Assam (1). In consequence, when the appellants' appeal came for disposal before this Court, it was conceded by the respondent that the said appeal was covered by the decision of this Court in the case of Atiabari Tea Co. Ltd., and that in accordance with the said decision, the appeal had to be allowed. That is why the' appeal was allowed and the appellants were granted the declaration and injunction claimed by them in their suit. This judgment was pronounced on Dec.ember 12, 1960 . The respondent then issued an Ordinance (Bihar Ordinance No. II of 1961) on August 1, 1961. By this Ordinance, the material provisions of the earlier Act of 1950 which had been struck down by this Court were validated and brought into force retrospectively from the date when the earlier Act had purported to come into force. Subsequently, the provi~ions of the said Ordinance were incorporated in the Act which was duly passed by the Bihar Legislature and received the assent of (I) [1961] I S.Q.R. 809. 1963 Roi Romkrishn" •• 1 he StaJt •f Bi/iar Gajend,agadkar, J, 196J Rai R-.lrishM •• n. StaU ef Bilwr Gaj,,.,,.,edUT, J. 002 SUPREME COURT RE'.PoR.ts [1964] Vat. the President on September 23, 1961. As a result of the retrospective operation of this Act, its material provisions are deemed to have come into force on April 1, 1950, that is to say, the date' on which the earlier Act of 1950 had come into force. That, in brief, is the background of the present legislation. The appellants and the other petitioners who had joined by filing several petitions in the Patna High Court had challenged the validity of the Act on several grounds. The High Court has rcjccttd all these grounds and has taken the vi cw that the Act in its entirety is valid. The High Court has · found that the provisions of the Act no doubt take it within the purview of Part XIII of the Constitution; but it h'as held that the Act has been passed with the preyious sanction of the President and the restri; ctions imposed by it arc otherwise reasonable, and so, it is saved under Art. 304. (b) of the Constitution. The plea made by the respondent that the taxing provisions of the Act were compensatory in character and were, therefore, valid, was rejected by the High Court. The High Court held that the principle that a taxing statute which levies a compensatory or regulatory tax is not invalid which has been laid down by the majority decision of this Court in the case of The Automdlile Transport (Rajasthan) Lt,d. v. The State af Rajasthan ('), was not applicable to the provisions of the Act. The argument that the Act was invalid because it required the appellants to act as the Agents of the respondent for collecting the tax from the passcngen and from the owners of the goods without payment of any temuneration, was .rejected by the High Court. It was also urged that the Act contraveneg the provisions of Art. 199 (4) or the Constitution, but the High Court was not . impressed with this aigument; and the plea that the matters in dispute between the appellants and the ~dent arc really concluded by res judicOta, (I) (1963) I 8.0.R, 491. J. t s.c.ll. SUPRtME COlJR t. REPOR ts 903 appeared to the High Court without any substance. Tliat is how the writ petitions filed by the appellants failed, and so, they have come to this Court confining their challenge only to the validity of the reatros· pective operation of the Act. At this stage, it is necessary to refer to the material provisions of the earlier Acts. and examine the scheme of the Act impugned. The Finance ~ct of 1950 was an amending Act; it was. passed because it was thought expedient by the Bihar Legislature to amend the earlier Bihar Sales Tax Act, 1947, and the Bihar Agricultural Income-Tax Act, 1948. Section 12 of the said Act levied a tax on passengers. and goods carried or transported by public service vehicles and public carriers. Section 12 (1) pres· cribed the rate of the said taxation @ As.-/2/-in a rupee on all fares and freights payable to owriers of such motor cabs, · stage carriages,' contract carriages or public carriers, as carried the goods and passenger$ in question. Sub-section (2) dealt with the cases where any fare or freight was charged in a lump sum either for carrying goods or by way of contribution for a season ticket, or otherwise; and sub-section (3) provided that every owner of the public vehicle 11hall pay into the Government Treasury, the full amount of the tax due from him under sub-section (I) or sub-section (2) in such a manner and at such intervals as may be prescribed and shall furnish such returns by such dates and to 1uch authority as may be prescribed. In 1954, an amending Act was pa!Sed (Bihar Act 11 of 1954), and section 14 of this amending Act added an explanation to section 12 of the Act of 1950. By this explanation, every passenger carried by the public vehicle and every person whOle goods were transported by a public carrier was made liable to pay to the owner of the said carrier 1he amount of tax payable under sub·aectjODl,(l) .aad (2) J!J6J R41 Bo...mm.. v. · 'Tll4 S1o1 .. / Bilto r ~-..... 1. /~3 Roi Rami.rUhtt4 v. TA. Stah of B•h"' GajmtlragadJ;ar, J. 904 SUPREME COURT REPORTS (1964] VOL. of section 12, and every owner of the vehicle or carrier was at1thorised to recover such tax from such passenger or prrson. In ocher words, whereas before the passing of the amending Act, the owners of public vehicles may have been entitled to raise their fares or freight charges in ord<"r to enable them to pay the tax levied under s. 12 of the Act of 1950, after the amending Act was passed, they became entitled to recover the specific amounts from passengers and owners of goods by way of tax pay· able by them under the said section. After the Act as thus amended was struck down by this Court on December, 12, 1960 an Ordinance was passed and its provisions were included in the impugned Act which ultimately became the law in Bihar on September 25, 1961. The Act consists of 26 sections. Section 1 (3) expressly provides that the Act shall be deemed to have come into force on the first day of April, 1950. Section 2 defines, inter alia, goods, owners, passenger and public service motor vehicle. Section 3 is the charging section. Section 3 ( 1) provides that on and from the date on which this Act is deemed to have come into force under sub-section (3) of section l, there shall be levied and paid to the State Government a tax on all passenger.> and goods carried by a public service motor vehicle. Then the subsection prescribe~ the rate at which the said tax has to be paid. There is a proviso to this sub-section which it is unnecessary to set out. Sub-section (2) lays down that every owner shall, in the manner prescribed in section 9, pay to the State Government the amount of tax due under this section, and subsection (3) adds that every pllSSenger carried by a public service motor vehicle and every person whose goods are carried by such vehicle shall be liable to pay to the owner the amount of tax payable under this section and every owner shall recover such tax from such passenger or person, as the case may be. There are three more sub-sections to this section which need • • ' • i $.C.R. SUPREME COURT REPORTS 9o~ not detain us. It would be noticed that the effect l!Jf3 of s. 3 is that the passengers and the owners of goods Rai RamkriJ/ina are made liable to pay the tax to the owner of the v. Th< Stale of Biha r public service motor vehicle and the latter is made liable to pay the tax to the State Government, and Gaj1ndragaliluu, 1. both these provisions act retrospectively by virtue of s. 1 (3). In other words, the tax is levied on passengers and goods carried by the public vehicles, and the machinery devised is that the tax would be recovered from the owners of such vehicles. Section 4 requires the owners of public service inotor vehicles to register their vehicle~. Under s. 5, security has to be furnished by such owners; and returns have to be submitted under s. 6. Section 7 deals with the procedure for the assessment of tax. Section 8 provides for the payment of fixed amount in lieu of tax, and under s. 9 provision is made for the payment and recoyery 'of tax. Section 10 deals with the special mode of recovery. Section 11 deals with cases of transfer of public service motor vehicle and, makes both the transferor and the transferee liable for the tax as prescribed by it. Refund is dealt with by s. 12 ; and appeal, revision and review are provided by ss. 13, 14 and 15 respectively. Under s. 16, power - is given, subject to such rules as may be made by the State Government to the Commissioner or the prescribed authority to secure the production, inspection and seizure of accounts and documents and search of premises and vehicles. Section 17 makes the Commissioner and the prescribed authority public servants ; and section 18 deals with offences and penalties. Section 19 deals with compounding of offences. Section 20 prescribes the usual bar to certain proceedings, and section 21 refers to the limitation of certain suits and prosecutions. Section 22 confers power on the State Government to make rules. Section 23 is important. In effect, it provides that the acts done under Bihar Act 17 of 1950 shall be deemed to have been done under this Act. 006 SuPREME COURt REP61lts [1964] vot. INS It reads thus :- Cl t4 I , J. "Notwithstanding any judgment, decree or order of any Court, tribunal or authority- ( a) any amount paid, collected or recovered or purported to have been paid, collected or recovered as tax or penalty under the provisions of Part III of the Bihar Finance Act, 1950 (Bihar Act XVII of 1950), as amended from time to time (hereinafter referred to as the "said Act") or the rules made thereunder during the period beginning with the first day of April, 1950 and ending on the thirty-first day of July, 1961, shall be deemed to have been validly levied, paid, collected, or recovered under the provisions of this Act ; and (b) any proceeding commenced or purported to have been commenced for the assessment, collection or recovery of any amount as tax or penalty under the provisions of the said Act or the rules made thereunder during the period specified in clause (a) shall be deemed to have been commenced and conducted in accordance with the provisions of this Act, and, if not already completed, shall be continued and completed in accordance with the provisions of this Act." There is a proviso to thi~ section which is not relevant for our purpose. Sections 24 and 25 deal with repeals and savings; and section 26 provides that if any difficulty arises in giving effect to the provisions of the Act, the State Government may pas~ an order in that behalf, subject to the limitations prescribed by the said section. That, broadly stated, is the scheme of the Act. .. ' ' • ' 1 1 s.c.R.. SUPREME COUKT REPORTS 001 In order to appreciate the merits of the contentions raised by Mr. Setalvad on behalf of the appellants, it is necessary to specify clearly the limited character of the controversy between the parties in appeal. The appellants concede that the Act in its prospective operation is perfectly valid. ·They also concede that s.23(a) which validates the acts don~ under the earlier Act of 1950 is valid. It would be noticed that apart from the general retrospective operation of the Act for which a provision has been made by s.l (3 ), s. 23 itself makes a clear retrospective validating provision and it is not disputed that the acts validated by s.23(a) have been properly validated. With regard to the validating provision contained . in s. 23 (b}, it has been ur~ed that the said provision in so far as it refers to proceedings commenced under the earlier Act but not completed before the impugned Act came into force, is invalid. The rest of the provisions of s. 23 (b) are also not challenged. In other words, it is not disputed that in it~ pro~pective operation, the Act has been validly passed by the Bihar Legislature exercising its legislative power under Entry 56 in List II of the Seventh Schedule of the Constitution. The argument, however, is that its retro~pective operation prescribed bys. I (3) and by a part of s. 23 (b) so completely alters foe character of the tax proposed to be retrospectively recovered that it introduces a serious infirmity in the legislative competence of the Bihar Legislature itself. Alternatively, it is argued that the .said retrospective operation is so unreasonable that it cannot be saved either under Art. 304 (b} or / Art. 19 (5) and (6). It is these two narrow points which call for our decision in the present appeals. In dealing with this controversy, it is necessary to bear in mind some points OD which there ls 00 dispute. The· entries in the Seventh Schedule con• £erring le~lative power on the legislatures in question· must receive the widest denotation. This position ii &i /l.ailrrilr... •• Tk• S14u ef Bilwr - GqjtNJr.,odi•, J. ,.,, 11.i R-4ril,,,,. Y. ,.,~·~•/ Bilw GtiJ-11.,..., /. ... 008 SUPRt~ COURT REPORTS [1964] VOL. not disputed. Entry 56 of the Second List refers to taxes on goods and passengern carried by road or on inland waterways. It is clear that the State Legislatures are authorised to levy taxes on goods and passengers by this entry. It is not on all goods and passengers that taxes can be imposed under this entry; 1 t is on goods and passengers carried by road or on inland waterways that taxes can be imposed. The expression "carried by road or on inland waterways" is an adjectival clause qualifying goods and passengers, that is to say, it is goods and passengers of the said description that have to be taxed under this entry. Nevertheless, it is obvious that the goods as such cannpt pay taxes, and so taxes levied on goods have to be recovered from some persons, and these persons must have an intimate or direct connection or nexus with the goods before they can be called upon to pay the taxes in respect of the carried goods. Similarly, passengers who are carried are taxed under the entry. But, usually, it would be inexpedient, if not impossible, to recover the tax directly from the passengers and so, it would be expedient and convenient to provide for the recovery of the said tax from tbe owners of the vehicles themselves. That is why it is not disputed by Mr. Setalvad that in enacting a law under entry 56 in respect of taxes imposed on passengers carried by road or on inland waterways, it would be perfectly competent to the legislature to devise a machinery for the recovery of the said tax by requiring the bus operators or bus owners to pay the said tax. 1 • • The other point on which there is no dispute before us is that the legislative power conferred on the appropriate legislatures to enact laws in respect of topics covered by the several entries in the three Lists can be exercised both prospectively and retrospectively. Where the legislature can make a valid law, it may provide not only for the prospective .. operation of the material provlBions of the said law, 4 • 1 S.C.R. SUPREME COURT REPORTS 909 but it can-also provide for the retrospective opera· tion of the said provisions. Similarly, there IS no doubt that the legislative power in question includes the subsidiary or the auxiliary power to validate laws which have been found to be invalid. If a law passed by a legislature is struck down by the Courts as being invalid for one infirmity or another, if would be competent to the appropriate legislature to cure the said infirmity and pass a validating law so as to make the provisions of the said earlier law effective from the .date when it was passed. This position is treated as firmly established since the decision of the Federal Court in the case of The · United Provinces v. Mst. At.~qa Begum (1). It is also trne that though the Legislature can pass a law and make its provisions retrospective, it would be relevant to consider the effect of the said retrospective operation of the law both in respect of the legislative competence of the legislature and the re~sonableness of the restrictions imposed by it. In other words, it may be open to a party affected by the provisions of the Act to contend that the retrospective operation :>f the Act so completely alters the character of the tax imposed by it as to take it outside the limits of the entry which gives the legislature competence to enact the law; or, it may be open to it to contend in the alternative that the restrictions imposed by the Act are so unrea~onable that they should be struck down on the ground that they contravene his fundamental rights guaranteed under Art. 19 (1) (f) & (g). This position cannot be, and has not been, disputed by Mr. Sastri who appears for the respondi:nt, vide The State of West Be;l{Jal v. SUbodh Gopal Bose ('), and Express Newspaper• (Private) Ltd. v. The Union of India ('). In view of the recent decisions of this Court Mr. Sastri also concedes that taxing statutes are not beyond the pale of the constitutional limitations (1) [1940) F.O.R. 110. (2) [1954] s.o.R. 587, 626. (SJ[[19.!+) S.O.R. 12, 139; - ll4J a.Mrilholl •• T1" St.11 qf Bi/w Gqj~,J. hi -'•lrilhl Y, nit s""' fl a11tat Gojtlldratilbr. J. ' 910 SUPREME COURT REPORTS [1964] VOL. prcacribed by Articles 19 and 14, and he abo concedes that the test of reasouableness prescribed by Art. 304(b) is justiciable. It is, of course, true that the pawer of taxing the people and their property it an essential attribute of the Government and Government may legitimately exercise the said pawer by reference to the objects to which it is applicable to the utmost extent to which Government thinks it expedient to do so. The objects to be taxed so long as they happen to be .within the legislative competence of the legislature can be taxed by the legislature according to the exigencies of its needs, because there can be no doubt that the State is entitled to raise revenue by taxation. The quantum of taic levied bv the taicing statute, the conditions subject to which it is levied, the manner in which it is sou~ht to be recovered, are· all matters within the competence of ihe legisl~ tu re, and in dealing with the contention raised by a citizen that the taicing statute contravenes Art. 19, courts would naturally be circumspect and cautious. Where for instance, it appears that the taxing statute is plainly discrimina· tory, or provides no procedural machinery for assessment and levy of the tax, or that it is confiscatory, Courts would be justified in striking down the impugned statute as unconstitutiona\. In such cases, the character of the material provisions of the impugned statute is such that the Court would feel justified in taking t\le view that, in substance, the taxing statute is a cloak adopted by the legislature for achieving its confiscatory purposes. This is illustrated by the decision of this Court in the case of Kunnathet Tlu~thunni 1'tfoopil Nair v. Stale of Kerala (1). where a taicing statute was struck down because it suffered fmm several fatal infirmities. On the other hand, we may rder to the case of Raja .lagannath Baksh Singh v. State of Uttar Pmde.~h ('), whc:re a challenge to the taxing statute on the ground that its provisions were unreasonable was rejected and it was obseNed that unless .the infirmities in the (t) (19611 S S.C.R. 77. t2) (l96S) l 8.C.R. :UO. f • • • • • 1 S.C.R. SUPREME COURT REPORTS 911 impugned statute were of such a serious nature as to justify its description as a colourable exercise of legislative power; the Court would uphold a taxing statute. It is in the light of these principles of law which are not in dispute between the parties before us that we must proceed to examine the arguments urged by Mr. Setalvad il1 challenging the validity of the retrospective operation of the Act. Mr. Seta! vad contends that one has merely to read the provisions of s. 3(3) to realise that the character of the tax has been completely altered by its retrospective operation. It would be recalled that s. 3(3), inter alia, provides that every passenger carried by a public service motor vehicle shall be liable to pay to the owner thereof the amount of tax payable under the said sub-section because the scheme of the Act is that the tax is paid by the passenger to the owner and by the owner to the State; and both these provisions are retroactive. However, in respect of passengers carried by the owner between 1.4.1950 and the date of the Act, how can the owner recover the tax he is now bound to pay to the State, asks Mr. Setalvad ? Prima f acie, the argument appears to be attractive, but a closer examination would show that the difficulty which the owner may experience in recovering the tax from the passengers will not necessarily alter the chara.:ter of the tax. If the scheme of s. 3 for the levy and recovery of the tax is valid under entry li6 of List II so far as future recoveries are concerned, it is not easy to see how it can be said that the character of the tax is radically changed in the present circumstances, because it would be very difficult, if not impossible, for the owner to recover the tax from the passengers whom he has carried in the past. The tax recovered retrospectively like the one which will be recovered prospectively still continues to be a tax on passengers and it adopts the same machinery for the recovery of the tax both as to the lie hi ...Wis.\iu •• Till St.u ef Bilw>r Gaj-xad/rftr, /. ,.., . . ' 1 kh' .. 11ta6t•.JMU. Gflt t,/. Ill! SUPllME COURT REPORTS (1964] VOL. past as well as to the future. In thi,, connection, we ought to bear in mind that the incidence of the tax should not be confused with the machinery adopted by the statute to recover the said tax. Besides, as we will point out later, it is only during a comparatively short period that the owners' difficulties assume a significant form. Stated generally, it may not be unreasonable to assume that from the time when the Act of 1950 was brought into force it was known to all the owners that the legislature had imposed .a tax in respect of passengers and goods carried by them and since then, and particularly after the amendment of 195i, they may have raised their fares and freights to absorb their liability to pay the tax to the State. But apart from that, it seems to us that the nature of the ·tax in the present case is the same both in regard to prospective and retros· pective operations, and so, it is difficult to entertain the argument that the tax has ceased to be a tax on passengers and is, therefore, outside Entry 56. The argument that the retrospective operation of the Act is beyond the legislative competence of the Bihar Legislature must, therefore, be rejected. In this coooection, we cannot ignore the fact that prior to the passing of the impugned Act there was in operation a similar statute since April I, 1950 which was struck down as unconstitutional on the ground of want of a~ent of the President. This aspect of the matter, no doubt, will have to be further examined in the context of the appellants' case that the retrospective operation of the Act intrvduces a restriction which is unreasonable both under, Art. 19 (1) (f) & (g) and Art. 304 (b); but it has no validity in challenging the legislative competence of the Bihar Legislature in that behalf. We may, in this connection, incidentally refer to some decisions of this Court where a similar argument was urged in regard to the retrospective aperation of some Acts. It appears that in th0$C • • • • • 1 S.C.R. SUPREME COURT REPORTS 913 cases, the argument proceeded on a distinction between direct and indirect taxes. It is well·known that John Stuart Mill made a pointed di,tinction between -direct and indirect taxation and this distinction was reflected in s. 92 (II) of the British North America Act which gave to the Legislatures of the Provinces exclusive power to make laws in relation to direct taxation within the Province. No such distinction can be made in regard to the legislative power conferred on the appropriate legislatures by the respective entries in the Seventh Schedule of our Constitution, and so, it is unnecessary for us to consider any argument based on the said distinction in the present case. However, this argumeut was urged before this Court in challenging the validity of some Acts by reference to-their retrospective operation. In the Tata Iron ,[;Steel Co. Ltd. v. The State of Bihnr, (1), where this Court was called upon to examine the validity of the Bihar Sales Tax Act, 1947 as amended by the Amendment Act of 19J8, one of the points urged before this Court was that whereas sales-tax is an indirect tax on the consumer inasmuch as the idea in imposing the said tax on the seller is that he should pass it on to his purchaser and collect it from , him, the retrospective operation of the Act made the imposition of the said tax a direct tax on the seller and so, it was invalid. This argument was rejected. A similar objection against the retrospective operation of the Madras General Sales Tax Act, 193[) as adapted to Andhra by the Sales Tax Laws Validation Act, 1956 was rejected in the case M. P. V. Sundararam£er & Co. v. The St.ate of Andhra Pmdesh ('). In M/s. J. K. Jute Mills Co. Ltd. v. Stc~te of Uttar Pradesh ('),the argument that the character of the sales· tax as enacted by the U. P. Sales Tax Act, 1948, was radically altered in its retrospective operation, was likewise rejected. The same argument (I) [1958) S,C.R, 1355, 1377. (2) [1958] S.C.R. 1422. (3) (19621 2 s.c.R. 1. •• The ·'tat1 a/ !Jihar G1j1nira1cilar, I. /ffS RfiR.Mrir.Au v. ; J., S:.Je of Bo ha• G•jmira1otlJ.a1, J. 914 SUPREME COURT REPORTS[I964] VOL. in respect of an excise tax raised before this Court in the case of 11!/s. Chholablwi Jethabhai Patel"' Co. v. Union of India('), was for similar reasons rejected. The position, therefore, appears to be well settled that if in its essential features a taxing statute is within the legislative competence of the lrgislature which passed it by reference to the relevant entry in the List, its character is not '.Jecessarily changed merely by its retrospective operation so as to make the said retrospcrdve operation outside the legislative competence of the said legislature, and so, we must hold that th~ challenge to the validity of the retrospective operation of the Act on the ground that the provision in that behalf is beyond the legislative competence of the Bihar Legislature, must be rejected. That takes us to the question as to whether the restriction imposed on the appellants' right under Art. HJ (I) (f) and (g) by the retrospective operation of the Act is reasonable so as to attract the provisions of Art. 19 (5) and (6). The same question arises in regard to the test of reasonableness prescribed by Art. 304 (b). .Mr. Setalvad contends that since it is not disputed that the retrospective opera!ion of a taxing statute is a relevant fact tu consider in determining its reasonableness, it may not be unfair to suggest that if the retrospective operation covers a long period like ten years, it should be held to impose a restriction which is unrea•onable and as such, 'llust be struck down as being unconstitutional. In support of this plea, Mr. Setalvad has referred us to the observations (') made by Sutherland. "Tax statutes", says Sutherland, "may be retrospective if the legislature clearly so intends. If the retrospective feature of a law is arbitrary and burdensome, the statute will not be sustained. The reasonableness of each retroactive tax statute will depend on the circumstances of each case. A statute retroactively (I) (1962] Supp. 2 S.C.R. I. (2) Sutherland on Statutes and Statutory Con1tnctlon, 190 JW, yPI. 2 Panf'aplj 1211 pp. 1'1·1". • • i I r .. 1 S.C.R. SUPREME COURT REPORTS 915 imposing a tax on income earned between the adoption of an amendment making income taxt;S legal and the passage of the income-tax act is not unreasonable. Likewise, an income-tax not retroactive beyond the year of its passage, is clearly valid. ·The lor,igest period'bf r.e.troactivity yet sustained has been three years. In general, income taxes arc valid although retroactive,. if they affect prior bu~ recent transaction." Basing himself on these obServations, Mr. Setalvad contends that since the period covered by the retroactive operation of. the -Act-isbetween April. I, 1950 and September 25, 1961, it should be held that the restrictions impo,scd by such retroactive operation are unreasonable, ·and so, the Act should be struck cfown.in regard to its retrospccti ve operation. We do not think that such a mechanical test. can be applied in determining the validity of the retrospective operation of the Act. I l is conceivable that cases may arise in which the rrtrospective operation of a taxing or other statute may introdu<'e such an ekment of unreasonableness that the restrictions imposed by it may b~ open to serious cha llengc as unconstitutional; but the test of the len!(th nf time-covered by the retrospective operntio11 cannor, by itself, necessarily be a decisiv1: tr:st. \\'e may have a statute whose retrospective.operation rovers a comparatively short period and yet it is possible that the nature of the restrictio11 imposed by it may lw o_f such a c}Jaracter as to .intro