“A CRITICAL APPRAISAL OF BENGAL IMMUNITY COMPANY V.

STATE OF BIHAR”

FINAL DRAFT SUBMITTED IN THE PARTIAL FULFILMENT OF THE

COURSE TITLED – CONSTITUTIONAL LAW- II

SUBMITTED TO:
DR. ANIRUDH PRASAD
FACULTY OF CONSTITUTIONAL LAW-II

SUBMITTED BY:
NAME: MANDIRA PRIYA
COURSE: B.B.A., LL.B.(Hons.)
ROLL NO: 1832
SEMESTER – 6th

CHANAKYA NATIONAL LAW UNIVERSITY, NYAYA NAGAR,

MITHAPUR, PATNA – 800001

1
DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B.B.A., LL.B.(Hons.) Project Report entitled “A

critical appraisal of Bengal immunity co. V. State of Bihar” submitted at Chanakya National

Law University is an authentic record of my work carried out under the supervision of Dr.

Anirudh Prasad. I have not submitted this work elsewhere for any other degree or diploma. I

am fully responsible for the contents of my Project Report.

SIGNATURE OF CANDIDATE
NAME OF CANDIDATE: MANDIRA PRIYA
CHANAKYA NATIONAL LAW UNIVERSITY, PATNA.

2
 ACKNOWLEDGEMENT

I would like to thank my faculty Dr. Anirudh Prasad whose guidance helped me a lot with

structuring my project.

I owe the present accomplishment of my project to my friends, who helped me immensely with

materials throughout the project and without whom I couldn’t have completed it in the present

way.

I would also like to extend my gratitude to my parents and all those unseen hands that helped

me out at every stage of my project.

THANK YOU,
NAME: Mandira Priya
COURSE: B.B.A., LL.B. (Hons.)
ROLL NO: 1832
SEMESTER – 6th

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INDEX

INTRODUCTION …………………………………………………………………….…...pg5
• AIMS AND OBJECTIVES
• HYPOTHESIS
• RESEARCH METHODOLOGY
• SOURCES OF DATA

1. FACTS OF THE CASE………………………………………..……………...….pg7

2. RULE OF MISCHEIF…………………………………….…………………..…pg10
3. CONSTITUTIONAL PROVISIONS………………………..…………………..pg14
4.CONCLUSION…………………………………………………………………pg22

BIBLIOGRAPHY…………………………………………………………………………pg23

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INTRODUCTION

Within the context of law, the mischief rule is a rule of statutory interpretation that attempts to
determine the legislator's intention. Originating from a 16th century case in the United
Kingdom, its main aim is to determine the "mischief and defect" that the statute in question has
set out to remedy, and what ruling would effectively implement this remedy. When material
words are capable of bearing two or more constructions the most firmly established rule for
construction of such words "of all statutes in general" is the rule laid down in Heydons case
also known as mischief rule. This rule is also known as purposive construction. The rules lay
down that the court should adopt the construction which shall suppress the mischief and
advance the remedy. 4 In Indian context the rule was best explained in the case of Bengal
immunity co. v State of Bihar

Article 286. Restrictions as to imposition of tax on the sale or purchase of goods

(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase
of goods where such sale or purchase takes place
(a) outside the State; or
(b) in the course of the import of the goods into, or export of the goods out of, the territory of
India
(2) Parliament may by law formulate principles for determining when a sale or purchase of
goods takes place in any of the ways mentioned in clause ( 1 )
(3) Any law of a State shall, in so far as it imposes, or authorises the imposition of,
(a) a tax on the sale or purchase of goods declared by Parliament by law to be of special
importance in inter State trade or commerce; or
(b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub clause (b),
sub clause (c) or sub clause (d) of clause 29 A of Article 366, be subject to such restrictions
and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament
may by law specify

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 AIMS AND OBJECTIVES

The aim of the researcher is:

• To know about rule of mischief .

• To find out how taxes are imposed in case of inter-state trade.

HYPOTHESIS:

The Mischief rule is a rule that judges can apply in statutory interpretation in order to
discover parliament’s intention.

RESEARCH METHODOLOGY
Doctrinal method of research has been utilised to complete the project report.

SOURCES OF DATA:
The researcher has relied on both primary and secondary sources to complete the project.
1. Primary Sources: Acts.
2. Secondary Sources: Books, newspapers and websites

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FACTS OF THE CASE

The appellant company is an incorporated company carrying on the business of manufacturing

and selling various sera, vaccines, biological products and medicines. Its registered head office
is at Calcutta and its laboratory and factory are at Baranagar in the district of 24 Perganas in
West Bengal. It is registered as a dealer under the Bengal Finance (Sales Tax) Act and its
registered number is S.L. 683A. Its products have extensive sales throughout the Union of India
and abroad. The goods are dispatched from Calcutta by rail, steamer or air against orders
accepted by the appellant company in Calcutta. The appellant company has neither any agent
or manager in Bihar nor any office, godown or laboratory in that State. On the 24th October,
1951 the Assistant Superintendent of Commercial Taxes, Bihar wrote a letter to the appellant
company which concluded as follows :

"Necessary action may therefore be taken to get your firm registered under the Bihar Sales
Tax Act. Steps may kindly be taken to deposit Bihar Sales Tax dues in any Bihar Treasury at
an early date under intimation to this Department".

On the 18th December, 1951 a notice was issued by the Superintendent, Commercial Taxes,
Central Circle Bihar, Patna calling upon the appellant company1 (i) to apply for registration
and (ii) to submit returns showing its turnover for the period commencing from the 26th
January, 1950 and ending with the 30th September, 1951. This notice was issued under section
13(5) of the Bihar Sales Tax Act, 1947 (hereinafter called the Act) read with rule 28. It was
drawn up according to Form No. 8 prescribed by the rules and was headed "Notice of hearing
under section 13(5)'. The reason for issuing this notice, as recited therein, was that on
information which had come to his possession the Superintendent was satisfied that the
appellant company was liable to pay tax but had nevertheless willfully failed to apply for
registration under the Act. Suffice it to say that while the appellant company denied its liability
on the ground, inter alia, that it was not resident in Bihar, it carried on no business there, none
of its sales took place in Bihar and that it did not collect any sales tax from any person of that

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https://www.lawyerservices.in/The-Bengal-Immunity-Co-Ltd-Versus-State-of-Bihar-and-Others-1952-12-04

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State, the Bihar Sales Tax authorities maintained that under section 33,2 which was
substantially based on article 286 of the constitution and was inserted in the Act by the
President's Adaptation Order promulgated on the 4th April, 1951, all sales in West Bengal or
any other State under which the goods had been delivered in the State of Bihar as a direct result
of the sale for the purpose of consumption in that State were liable to Bihar Sales Tax.
Eventually on the 29th May, 1952 the Assistant Superintendent of Sales Tax, Bihar called upon
the appellant company to comply with the notice by the 14th June, 1952 and threatened that,
in default of compliance, he would proceed to take steps for assessment to the best of his
judgment. The appellant company by its letter dated the 7th June, 1952 characterized the notice
under section 13(5) as ultra vires and entirely illegal and called upon the Superintendent to
forthwith rescind and cancel the same. On the 10th June, 1952 the appellant company presented
before the High Court at Patna a petition under article 226 claiming the reliefs hereinbefore
mentioned. The respondents did not file any affidavit in opposition controverting any of the
allegations of facts made in the petition and it must, accordingly, be taken that those facts are
admitted as correct by the respondents. The High Court dismissed the petition on the 4th
December, 1952 but on the next day issued a certificate, under article 132(1) of the
Constitution, that the case involved a substantial question of law as to the interpretation of the
constitution. Hence the present appeal.

The principal question is whether the tax threatened to be levied on the sales made by the
appellant company and implemented by delivery in the circumstances and manner mentioned
in its petition is leviable by the State of Bihar. This was done by construing article 286 whose
interpretation came into question and the meaning granted to it in the case of The State of
Bombay v. The United Motors (India) Ltd was overruled. It raises a question of construction
of article 286 of the Constitution.

It is a sound rule of construction of a statute firmly established in England as far back as 1584
when Heydon's case 7 was decided that

"......... for the sure and true interpretation of all Statutes in general (be they penal or beneficial,
restrictive or enlarging of the common law) four things are to be discerned and considered :

1. What was the common law before the making of the Act.,

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2. What was the mischief and defect for which the common law did not provide.,

3. What remedy the Parliament hath resolved and appointed to cure the disease of the Common
wealth., and

4. The true reason of the remedy; and then the office of all the judges is always to make such
construction as shall suppress the mischief, and advance the remedy, and to suppress subtle
inventions and evasions for continuance of the mischief, and pro privato commodo, and to add
force and life to the cure and remedy, according to the true intent of the makers of the Act, pro
bono publico". This rule is equally applicable to the construction of article 286 of our
Constitution. In order to properly interpret the provisions of that article it is, therefore,
necessary to consider how the matter stood immediately before the Constitution came into
force, what the mischief was for which the old law did not provide and the remedy which has
been provided by the Constitution to cure that mischief.

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RULE OF MISCHIEF

This is a very important rule as far as the Interpretation of Statute is concerned. It is often
referred to as the “rule in Heydon’s Case“3. This very important case reported by Lord Coke
and decided by the Barons of the Exchequer in the 16th century laid down the following rules:

That for the sure and true interpretation of all statutes in general, be they penal or beneficial,
restrictive or enlarging of the common law; four things are to be considered –

1) What was the common law before the passing of the Act?

2) What was the mischief and defect for which the common law did not provide?

3) What remedy the Parliament hath resolved and appointed to cure the “disease of the
Commonwealth”.

4) The true reasons for the remedy.

And then the office of all the Judges is always to make such construction as shall suppress the
mischief and advance the remedy. Before proceeding any further, a word of warning is
appropriate. Uses the exact words – “disease of the Commonwealth” – used byLord Coke in
his report and it is important to bear in mind that words had different meanings. It is necessary
to discover their meaning at the time of writing. From the 14th century to the end of the 17th,
the meaning of disease was lack of ease, disquiet or distress and Commonwealth, of course,
meant the Country.

According to an early case, The Longford(1889) 14 P.D. 34 an Act must be construed as if one
were interpreting it on the day it was passed. Thus, we ask ourselves what the word meant on
the day it was uttered if by analogy we argue that the same can be said of a judgment. The
importance of the mischief rule in criminal law can best be shown by considering examples.
An Act of Parliament will state the purpose for which it was enacted. If we take the case of
4
Parkin v. Norman[1982] All E.R. 583, (reserved judgment), it can be seen that the court

3
https://www.scribd.com/document/300264135/Bengal-immunity-case-mischief-rule
4
[1960] 1 WLR 830

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decided that the Public Order Act 1936 was never designed to deal with homosexual behavior
in public toilets. The long title to the Act reads:

“An Act to prohibit the wearing of uniforms in connexion with political objects and the
maintenance by private persons of associations of military or similar characters; and to make
further provision for the preservation of public order on the occasion of public processions and
meetings and in public places.”

The purposes of the Act and the mischief rule are, therefore, closely connected, and it is very
genuine to look at the long title. Another example of the application of the mischief rule is
found in Ohison v. Hylton[1975] All E.R. 490. The facts, briefly, were a carpenter was on his
way home from work. He boarded a train which was crowded. Another passenger objected and
subsequently both finished up on the platform. The defendant, the carpenter, took one of his
tools of his trade, a hammer, from his briefcase and struck the other man with it. He was
charged under the Prevention of Crime Act 1953. Lord Widgery, CJ, said, inter alia:

“This is a case in which the mischief at which the statute is aimed appears to me to be very
clear. Immediately prior to the passing of the 1953 Act the criminal law was adequate to deal
with the actual use of weapons in the course of a criminal assault. Where it was lacking,
however, was that the mere carrying of offensive weapons was not an offence. The long title
of the Act reads as follows5:

‘An Act to prohibit the carrying of offensive weapons in public places without lawful authority
or reasonable excuse’. Parliament is there recognizing the need for preventive justice where,
by preventing the carriage of offensive weapons in a public place, it reduced the opportunity
for the use of such weapons. If, however, the prosecutor is right, the scope goes far beyond the
mischief aimed at, and in every case where an assault is committed with a weapon and in a
public place an offence under the 1953 Act can be charged in addition to the charge of assault.
Whilst on the subject of offensive weapons, mention must be made of the Divisional Court’s
decision in Gibson v. Wales(1983) 147 J. P. 143, which decided that a “flick knife” is an
offensive weapon per se.’”

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Within the context of law, the mischief rule is a rule of statutory interpretation that attempts to
determine the legislator’s intention. Originating from a 16th century case in the United
Kingdom, its main aim is to determine the “mischief and defect” that the statute in question
has set out to remedy, and what ruling would effectively implement this remedy. When material
words are capable of bearing two or more constructions the most firmly established rule for
construction of such words “of all statutes in general” is the rule laid down in Heydons case
also known as mischief rule. This rule is also known as purposive construction. The rules lay
down that the court should adopt the construction which shall suppress the mischief and
advance the remedy6.

In the Indian context, the rule was best explained in the case of Bengal immunity co. v State of
Bihar. The appellant company is an incorporated company carrying on the business of
manufacturing and selling various sera, vaccines, biological products and medicines. Its
registered head office is at Calcutta and its laboratory and factory are at Baranagar in the district
of 24 – Perganas in West Bengal.7 It is registered as a dealer under the Bengal Finance (Sales
Tax) Act and its registered number is S.L. 683A. Its products have extensive sales throughout
the Union of India and abroad. The goods are dispatched from Calcutta by rail, steamer or air
against orders accepted by the appellant company in Calcutta. The appellant company has
neither any agent or manager in Bihar nor any office, godown or laboratory in that State. On
the 24th October, 1951 the Assistant Superintendent of Commercial Taxes, Bihar wrote a letter
to the appellant company which concluded as follows :-

“Necessary action may therefore be taken to get your firm registered under the Bihar Sales Tax
Act. Steps may kindly be taken to deposit Bihar Sales Tax dues in any Bihar Treasury at an
early date under intimation to this Department”.

The principal question is whether the tax threatened to be levied on the sales made by the
appellant company and implemented by delivery in the circumstances and manner mentioned
in its petition is leviable by the State of Bihar. This was done by construing article 286 whose
interpretation came into question and the meaning granted to it in the case of The State of
Bombay v. The United Motors (India) Ltd6 was overruled. It raises a question of construction

6
https://www.lawyerservices.in/The-Bengal-Immunity-Co-Ltd-Versus-State-of-Bihar-and-Others-1952-12-04
7
https://www.lawctopus.com/academike/mischief-rule-statutory-interpretation/

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of article 286 of the Constitution. It was decided that Bihar Sales Tax Act, 1947 in so far as it
purports to tax sales or purchases that take place in the course of inter-State trade or commerce,
is unconstitutional, illegal and void8.

The Act imposes tax on subjects divisible in their nature but does not exclude in express terms
subjects exempted by the Constitution. In such a situation the Act need not be declared wholly
ultra vires and void. Until Parliament by law provides otherwise, the State of Bihar do forbear
and abstain from imposing sales tax on out-of-state dealers in respect of sales or purchases that
have taken place in the course of inter-State trade or commerce even though the goods have
been delivered as a direct result of such sales or purchases for consumption in Bihar. The State
must pay the costs of the appellant in this Court and in the court below. Bhagwati, J. had agreed
to the above interpretation9.

8
https://www.casemine.com/judgement/in/560989dbe4b0149711381c6c
9
https://www.lawctopus.com/academike/mischief-rule-statutory-interpretation/
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CONSTITUTIONAL PROVISIONS

Article 286 in The Constitution Of India 1949

286. Restrictions as to imposition of tax on the sale or purchase of goods

(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase
of goods where such sale or purchase takes place
(a) outside the State; or
(b) in the course of the import of the goods into, or export of the goods out of, the territory of
India
(2) Parliament may by law formulate principles for determining when a sale or purchase of
goods takes place in any of the ways mentioned in clause ( 1 )
(3) Any law of a State shall, in so far as it imposes, or authorises the imposition of,
(a) a tax on the sale or purchase of goods declared by Parliament by law to be of special
importance in inter State trade or commerce; or
(b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub clause (b),
sub clause (c) or sub clause (d) of clause 29 A of Article 366, be subject to such restrictions
and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament
may by law specify
The contention of Dr. Sen Gupta is that Section 2(c) 10and the new explanation added to
section 2(g) of the Act are void and inoperative since they violate Article 286(2) of the
Constitution. The objection of the learned counsel is that the impugned sections authorise
imposition of tax of the sale or purchase of goods in the course of inter-State trade or
commerce and was therefore void and illegal to that extent. The argument is based upon
Article 286(2) of the Constitution which states : "Except in so far as Parliament may by law
otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the
sale or purchase of any goods where such sale or purchase takes place in the course of inter-
State trade or commerce". It was pointed out by the learned counsel that the petitioner was a
manufacturer of vaccine and biological products with its head-office located at Calcutta, that
the petitioner sold goods to various persons of Bihar, that the goods were despatched from

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Calcutta and after crossing the inter-State border the goods were delivered to various persons
in Bihar. It was argued that the petitioner was engaged in inter-State trade or commerce and
the State of Bihar had no authority to impose tax on the goods of the petitioner.

In my opinion the argument is attractive but wholly unsound. Section 33(2) of the newly
amended Act only reproduces the explanation which is set out in Article 286(1) of the
Constitution. It is necessary in this context to set out the provisions of Article 286 in full11 :-

"(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or
purchase of goods where such sale or purchase takes place -

(a) outside the State; or

(b) in the course of the import of the goods into, or export of the goods out of, the territory of
India.

Explanation. - For the purposes of sub-clause (a), a sale or purchase shall be deemed to have
taken place in the State in which the goods have actually been delivered as a direct result of
such sale or purchase for the purpose of consumption in that State, notwithstanding the fact
that under the general law relating to sale of goods the property in the goods has by reason of
such sale or purchase in another State.12

(2) Except in so far as Parliament may by law otherwise provide, no law of a State shall
impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such
sale or purchase takes place in the course of inter-State trade or commerce..........".

The problem in this case is what is the right construction to be placed on the general language
of clause (2) of this Article. Let us take a concrete example. A trader sends goods from State
A to State B for the purpose of consumption in State B. The contract of sale is effected in
State A and title passes in State A but goods are actually delivered in State B for consumption
in that State. There is movement of goods across the inter-State border, and if the sale takes

11
https://www.casemine.com/judgement/in/560989dbe4b0149711381c6c
12
https://www.lawctopus.com/academike/mischief-rule-statutory-interpretation/

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place at any stage of this movement, Article 286(2) of the Constitution would prohibit State B
or State A from imposing a tax on the sale. Since the sale has taken place outside the State
border the case would also fall under Article 286(1)(a) which prohibits State B from taxing
such a sale. But the Explanation states that notwithstanding the fact that title has passed and
sale has taken place in State A, the sale or purchase should be deemed to have been effected
in State B in which the goods have been actually delivered for the purpose of consumption. It
follows that State B would have jurisdiction to impose a tax on such sale. It is therefore
manifest that if Article 286(2) is construed in a full and unqualified sense the explanation to
Article 286(1) would become nugatory and of no effect. This would be contrary to all canon
of sound construction. In order to obviate such result it is necessary that the two parts of the
Article must be read together and the language of the one must be interpreted and where
necessary be modified by the other. The principle is stated by the Judicial Committee in
Citizens Insurance Co. of Canada v. Parsons and Queen Insurance Co. v. Parsons ((1881) 7
App. Cas. 95 at p. 109) 13: "With regard to certain classes of subjects, therefore, generally
described in Section 91, legislative power may reside as to some matters falling within the
general description of these subjects in the legislatures of the provinces. In these cases it is
the duty of the Courts, however difficult it may be, to ascertain in what degree, and to what
extent, authority to deal with matters falling within these classes of subjects exists in each
legislature, and to define in the particular case before them the limits of their respective
powers. It could not have been the intention that a conflict should exist; and, in order to
prevent such a result, the two sections must be read together, and the language of the one
interpreted, and, where necessary, modified, by that of the other. In this way it may, in most
cases be found possible to arrive at a reasonable and practical construction of the language of
the sections, so as to reconcile the respective powers they contain, and give effect to all of
them". The principle of construction is that from a large general class must be excepted a
particular class which forms a branch or sub-division of the larger class. If no such exception
is made the danger would be that the more general class will absorb or override the particular
class. In the present case Article 286(2) refers to inter-State trade or commerce which is a
conception of general scope. In Welton v. Missouri (91 U.S. 275), Field, J., said : "Commerce
is a term of the largest import. It comprehends intercourse for the purposes of trade in any
and all its forms, including the transportation, purchase, sale and exchange of commodities
between the citizens of our country and the citizens or subjects of other countries and

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between the citizens of different States". On the contrary, the explanation to Article 286(1)
relates to a small category of sale of goods in which the property passes in State A and the
goods are actually delivered as a direct result of the sale and for the purpose of consumption
in State B. The transactions within the scope of the explanation are manifestly of a particular
or a smaller class. Applying the principle of construction already formulated it is mainfest
that the phrase "sale or purchase in the course of inter-State trade or commerce" in Article
286(2) must be construed so as to exclude the particular class to sales or purchases described
in the explanation to Article 286(1). If this conclusion is right it follows that the newly
amended Section 2(c) and 2(g) and the newly substituted Section 33 of the Bihar Sales Tax
Act are not in conflict with Article 286(2) of the Constitution.

The language of the explanation to Article 286(1) is significant. It applies only when the
goods are actually delivered for the purpose of consumption in the State. It corresponds to
what is called in American Legislation a "use tax". As regards the legislative authority of the
State to impose such a tax, the constitutional position in America is different and the
American decisions are not of much assistance. For the commerce clause has been utilised as
an instrument for assertion of national power as opposed to local State interest in the
American constitutional scheme. The power of the State to tax is also subject to due process
clause of the fourteenth Amendment. Even so the Supreme Court has sustained State
legislation taxing "use" of property which has just been moved in inter-State commerce or
imposing property tax on goods at the conclusion of the inter-State journey. In McGoldrick v.
Berwind-White Coal Mining Co. (309 U.S. 33), it was held by the Supreme Court that the
New York City tax laid upon the Pennsylvania Corporation as regards sale of coal for
consumption in New York City did not infringe the commerce clause of the Federal
Constitution. In the course of his opinion Mr. Justice Stone said : "But it was not the purpose
of the commerce clause to relieve those engaged in inter-State commerce of their just share of
state tax burdens, merely because an incidental or consequential effect of the tax is an
increase in the cost of doing the business. Not all State taxation is to be condemned because,
in some manner, it has an effect upon commerce between the States and there are many forms
of tax whose burdens, when distributed through the play of economic forces, affect inter-
State commerce, which nevertheless falls short of the regulation of the commerce which the
Constitution leaves to Congress14."

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Article 254 in The Constitution Of India 1949

254. Inconsistency between laws made by Parliament and laws made by the Legislatures of
States

(1) If any provision of a law made by the Legislature of a State is repugnant to any provision
of a law made by Parliament which Parliament is competent to enact, or to any provision of an
existing law with respect to one of the matters enumerated in the Concurrent List, then, subject
to the provisions of clause ( 2 ), the law made by Parliament, whether passed before or after
the law made by the Legislature of such State, or, as the case may be, the existing law, shall
prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy,
be void

(2) Where a law made by the Legislature of a State with respect to one of the matters
enumerated in the concurrent List contains any provision repugnant to the provisions of an
earlier law made by Parliament or an existing law with respect to that matter, then, the law so
made by the Legislature of such State shall, if it has been reserved for the consideration of the
President and has received his assent, prevail in that State: Provided that nothing in this clause
shall prevent Parliament from enacting at any time any law with respect to the same matter
including a law adding to, amending, varying or repealing the law so made by the Legislature
of the State.

It was next objected that the impugned sections of the Sales Tax Act were invalid since they
are repugnant to the Indian Sale of Goods Act and the assent of the President has not been taken
under Article 254 of the Constitution. The argument is founded on Article 254(1) of the
Constitution which states,15 "If any provision of a law made by the Legislature of a State is
repugnant to any provision of a law made by Parliament which Parliament is competent to
enact, or to any provision of an existing law with respect to one of the matters enumerated in
the Concurrent List, then, subject to the provisions of clause (2), the law made by Parliament,
whether passed before or after the law made by Legislature of such State, or, as the case may
be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the
extent of the repugnancy, be void". In my opinion the argument proceeds upon misconception.
The Bihar Sales Tax Act is in pith and substance not a law with respect to sale of goods but is

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a law imposing tax on sale of goods. The Act is entitled as an Act to provide for the levy of a
tax on the sale of goods in Bihar. The preamble recites that it is necessary to make an addition
to the revenues of Bihar and for that purpose to impose a tax on sale of goods in Bihar. The
main provisions of the Act are designed to carry out the purpose stated in the preamble. It is
manifest that the legislation falls entirely within Item 54 of the State List, viz., taxes on the sale
or purchase of goods other than newspapers. It follows that Article 254 has no application to
the present case though the Act may incidentally trench to a certain extent upon Items 7 and 8
in the Concurrent List. The case falls within the ration of Megh Raj v. Allah Rakhia ([1947] 74
I.A. 12) in which the Judicial Committee held that Section 107 of the Government of India Act,
1935, had no application in a case where the province could show, as it did in that case, that it
was acting wholly within its powers under the Provincial List and was not relying on any power
conferred on it by List III of the Concurrent List. In that case it was argued that the Punjab
Restitution of Mortgaged Lands Act, 1938, was invalid in that a number of its provisions were
in fact legislation on matters falling within List III, namely, Items 7, 8 and 10 of that List. It
was held by the Judicial Committee that the impugned Act which dealt with mortgages on
agricultural lands was legislation falling entirely within Item 21 of the Provincial Legislative
List, that is, land or any interest in land and, therefore, no question or repugnancy could arise
by reason of the fact that the Act might encroach to a certain extent upon the items in the
Concurrent Legislative List, viz., Items 7, 8 and 10. The argument of Dr. Sen Gupta on this
part of the case must therefore fail.

. It was contended by Dr. Sen Gupta that the impugned provisions of the Bihar Sales Tax Act
impose restrictions on the freedom of trade or commerce within the meaning of Article 304(b),
that the Act was not valid since previous sanction of the President had not been obtained to the
introduction of the Bill in the State Legislature. In my opinion the argument of the learned
counsel is not correct. Article 304 occurs in Part XIII of the Constitution which is entitled
"Trade, Commerce and Intercourse within the Territory of India". Article 301 states that
"subject to the other provisions of this Part, trade, commerce and intercourse throughout the
territory of India shall be free". Article 304(b) empowers the legislature of a State to enact
legislation imposing reasonable restrictions on the freedom of trade, commerce or intercourse
with or within that State as may be required in the public interest. The proviso stipulates that
no bill or amendment for the purposes of clause (b) shall be introduced or moved in the
Legislature of a State without the previous sanction of the President. But neither Article 301
nor Article 304 has any relevance in the context of the present case. The Bihar Sales Tax Act

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makes no discrimination between the goods imported and the goods produced or manufactured
in the State. The Act is in its true nature and character - in its "pith and substance" - not
legislation with respect to freedom of trade or commerce but it is legislation enacted by the
State Legislature by virtue of the power conferred by Item 52 of the State List. How can it be
then said that the legislation falls within the ambit of Part XIII of the Constitution ? The Act
professes to be an Act imposing tax on the sale of goods in Bihar. It does not profess to directly
tax articles in inter-State trade or commerce. The acts and the transactions on which it directly
operates are not inter-State commercial dealings or inter-State transportation. The operation of
the Act in no way depends on the inter-State or intra-State nature of the sale transaction. The
Act does not differentiate between inter-State sales and intra-State sales. The statute has
manifestly been enacted for the purpose of imposing tax on the sale of goods and not for
regulating inter-State or intra-State trade or commerce. It is difficult therefore to accept the
argument that the Act contravenes in any way Article 304 of the Constitution. This opinion is
supported by the ration of the Australian case, O. Gilpin Ltd. v. Commissioner for Road
Transport and Tramways (52 C.L.R. 189) in which it was held that the provisions of the State
Transport Act, 1931, and the charge imposed under Section 37 did not contravene Section 92
of the Constitution as interfering with the freedom of trade, commerce and intercourse among
the States.16

Article 141 in The Constitution Of India 1949

141. Law declared by Supreme Court to be binding on all courts The law declared by the
Supreme Court shall be binding on all courts within the territory of India
Ratio decidendi of a judgement is not to be discovered from a stray word or phrase read in
isolation. It has to be found out only by reading the entire judgement. A stray sentence in a
judgement without a focused argument cannot be considered as the ratio of the judgement.

The question was considered in detail by the supreme court in this case. The court held that
there is nothing in the Indian constitution which prevents the supreme court departing from
from its own previous decision if convinced of its error and its beneficial effect on the general
interest of the public. The supreme court should not lightly dissent from its previous decisions.
Its power of review must be exercised with due care and caution and only advancing the public
well being in the light of surrounding circumstances of each case brought to its notice but it is
not right to confine its power within rigidly fixed limits. If on a re-examination it comes to the

16
https://www.lawyerservices.in/The-Bengal-Immunity-Co-Ltd-Versus-State-of-Bihar-and-Others-1952-12-04

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conclusion that the previous majority decision was plainly erroneous then it will be its duty to
say so and not to perpetuate its mistake. The doctrine of stare decisis, the court said is not an
inflexible rule of law and cannot be permitted to perpetuate errors of the supreme court to the
detriment of the general welfare of the public. More so, the doctrine has hardly any application
to an isolated and stray decision of the court very recently made and not followed by series of
decisions based theron.

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CONCLUSION

The view as propounded by them besides preventing multiple taxation goes to the length of
prohibiting any imposition of sales tax by any State. Such was not the intention of the
Constitution. Whereas the imposition of multiple sales tax on transactions of sale or purchase
may be an obstacle to the free flow of inland trade and commerce, the imposition of sales tax
by a single State in which the sale is deemed to have taken place by virtue of the Explanation
cannot be predicated as having such an effect. Clause (2) of article 286 of the Constitution is
subject to article 286(1)(a) read with the Explanation. Finally, the former view was adopted
and it was declared that until Parliament by law provides otherwise, the State of Bihar do for
bear and abstain from imposing Sales Tax on outofState dealers in respect of sales or purchases
that have taken place in the course of interState trade or commerce even though the goods have
been delivered as a direct result of such sales or purchases for consumption in Bihar.

As it can be seen from the case, mischief rule can be applied differently by different judges. It
is mainly about the discretion and understanding of the person applying it. Though, it as a far
more satisfactory way of interpreting acts as opposed to the Golden or Literal rules. It usually
avoids unjust or absurd results in sentencing but it also seen to be out of date as it has been in
use since the 16th century, when common law was the primary source of law and parliamentary
supremacy was not established. It gives too much power to the unelected judiciary which is
argued to be undemocratic. In the 16th century, the judiciary would often draft acts on behalf
of the king and were therefore well qualified in what mischief the act was meant to remedy.
This is not often the case in modern legal systems. The rule can make the law uncertain,
susceptible to the slippery slop.

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BIBLIOGRAPHY

BOOKS:
1. Singh, Mahendra P. , Constitution of India., Eastern Book Company Lucknow, 2008
2. Pandey, J.N., The Constitution of India, Central Law Agency, Allahabad, 2010

WEBSITES:
• https://www.casemine.com/judgement/in/560989dbe4b0149711381c6c
• https://www.lawyerservices.in/The-Bengal-Immunity-Co-Ltd-Versus-State-of-Bihar-and-
Others-1952-12-04
• https://en.wikipedia.org/wiki/Mischief_rule
• https://www.scribd.com/document/300264135/Bengal-immunity-case-mischief-rule
• https://www.advocatekhoj.com/library/judgments/index.php?go=1962/november/30.php

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