Bengal Immunity Co. Ltd. v. State of Bihar
Supreme Court of India · 6 September 1955 · 7 judges
Until Parliament provides otherwise, no State may tax sales in the course of inter-State trade under Article 286(2), even if goods are delivered for consumption in that State; the Court departed from its United Motors decision.
Facts
The appellant company, with its registered office in Calcutta and factory in West Bengal, made sera, vaccines and medicines and sold them throughout India, despatching goods from Calcutta against orders accepted there. It had no office, agent or godown in Bihar. In 1951 the Bihar sales tax authorities issued a notice under section 13(5) of the Bihar Sales Tax Act, 1947, requiring it to register and file returns for January 1950 to September 1951, on the basis that sales delivered in Bihar for consumption there were taxable. The company petitioned the Patna High Court under Article 226. The High Court dismissed the petition as not maintainable, as no assessment had been made and the Act provided appeals. The company appealed on a certificate under Article 132(1).
Questions before the Court
- Whether a writ petition under Article 226 was maintainable against a notice under a taxing Act alleged to be ultra vires, before any assessment and despite remedies under the Act.
- Whether the Supreme Court may depart from its own previous decision, and whether the majority decision in State of Bombay v. United Motors (India) Ltd. should be reconsidered.
- Whether, under Article 286, a State may tax sales or purchases in the course of inter-State trade where the goods are delivered in that State for consumption there.
What the Court held
- The petition was maintainable. A notice under an Act alleged to be void imposes immediate hardship and need not be ignored at the party's peril, and remedies under an Act that is itself ultra vires are not adequate.
- Nothing in the Constitution prevents the Supreme Court from departing from its previous decision if convinced of its error and its baneful effect on the general public. Article 141 refers to courts other than the Supreme Court. The power must be exercised with care and caution.
- The parts of Article 286 deal with different topics. The Explanation to clause (1)(a) only fixes a fictional situs; it does not convert an inter-State sale into an intra-State one, and the situs of a sale is irrelevant to its inter-State character.
- Until Parliament by law under clause (2) provides otherwise, no State can tax sales or purchases taking place in the course of inter-State trade or commerce. The United Motors majority decision, so far as it held otherwise, was not well founded.
- The Bihar Sales Tax Act was void only so far as it taxed inter-State sales, being severable. Bihar was directed to forbear from taxing out-of-State dealers on such sales.
Why it matters
The judgment holds that the Supreme Court is not bound by its own earlier decisions, reading Article 141 as binding only other courts, and sets out circumstances in which the Court will reconsider a recent precedent, particularly on a constitutional question that cannot easily be corrected by amendment. On Article 286 it holds that the ban on taxing inter-State sales in clause (2) operates independently of the Explanation to clause (1)(a), departing from the majority view in United Motors.
In the Court's words
Copied from the official judgment; each passage links to its page.
“There is nothing in our Constitution which prevents us from departing from a previous decision if we are convinced of its error and its baneful effect on the general interests of the public. Article 141 which lays down that the law declared by this Court shall be binding on all Courts within the territory of India quite obviously refers to Courts other than this Court.”
“In any case, the doctrine of stare decisis is not an inflexible rule of law and cannot be permitted to perpetuate our errors to the detriment to the general welfare of the public or a considerable section thereof”
“For all the foregoing reasons we are definitely of opinion that, until Parliament by law made in exercise of the powers vested in it by clause (2) provides otherwise, no State can impose or authorise the imposition of any tax on sales or purchases of goods when such sales or purchases take place in the course of inter-State trade or commerce”
“The truth is that what is an interState sale or purchase continues to be so irrespective of the State where the sale is to be located either under the general law when it is finally determined what the general law is,or by the fiction created, by the Explanation. The situs of a sale or purchase is wholly irrelevant as regards its inter-State character.”
Provisions interpreted
- Article 286(1)(a) with Explanation, and Article 286(2), Constitution (as it stood in 1955)
- Article 141, Constitution
- Article 226, Constitution
- Sections 4, 13(5) and 33, Bihar Sales Tax Act, 1947
Related judgments
- Followed in Union of India v. Raghubir Singh (1989)
Case and bench
- Parties
- The Bengal Immunity Company Limited v. The State of Bihar
- Case
- Civil Appeal No. 159 of 1953
- Decided
- 6 September 1955
- Bench
- S.R. Das (Acting CJ), Vivian Bose, N.H. Bhagwati, B. Jagannadhadas, Jafer Imam, T.L. Venkatarama Ayyar, B.P. Sinha
- Opinions
- Majority 4:3. Judgment of S.R. Das, Acting C.J., Bose and Jafer Imam, JJ. delivered by S.R. Das, Acting C.J.; Bhagwati, J. agreed in a separate judgment. Jagannadhadas, Venkatarama Ayyar and B.P. Sinha, JJ. dissented in separate judgments and would have dismissed the appeal.
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