.JINDAL STA!NLESS TTD. & ANR. v. STATE OF HARYANA & ORS.

159. Dr. Ambedkar also referred to the Constitution of USA and highlighted the difference between Indian Federation and American Federation. While speaking on the difference of Indian Federation to that of American Federation Dr. Ambedkar stated:

"But there are some other special features of the proposed Indian Federation which mark it off not only from the American Federation but from all other Federations. Allfederal systems including the American are placed in a tight mould of federalism. No matter what the circumstances, it cannot change its form and shape. It can never be unitary. On the other hand the Draft Constitution can be both unitary as well as federal according to the requirements of time and circumstances. In normal times. it is framed to work as a federal system. But in times of was it is so designed as to make it work as though it was a unitary system. "

160. Dr. Ambedkar further stated that a Federal Constitution cannot but be a written Constitution. The following was stated: "A Federal Constitution cannot but he a written Constitution and a written Constitution must necessarily H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 737

[ASHOK BHUSHAN, J.]

he a rigul Constitution. A Federal Constitution means division of Sovereignty by no less a sanction than that of the law of the Constitution between the Federal Government and the States, with two necessary consequences (J)that any invasion by the Federal Government in the field assigned to the States and vice versa is a breach of the Constitution (2)such breach is a justiciable mater to he determined hy the Judiciary only. ··

161. A.V. Dicey in his celebrated work "The Law of the Constitution" while dealing with the aim of Federation stated the c following:

"A federal state is a political contrivance intended to reconcile national unity and power with the maintenance of 'state rights'. The end aimed at fixes the essential character of.federalism. For the method hy which federalism attempts to reconcile the apparently inconsistent claims of national sovereignty and of state sovereigntv consists of the formation of a constitution under which the ordinary powers of sovereignty are elaborately divided between the common or national government and the separate States. The details of this division vary under every different federal constitution.hut the general principle on which it should rest is obvious. Whatever concerns the nation is a whole should be placed under the control of the national government. All matters which are not primariZv of common interest should remain in the hands of the several States."

162. A. V. Dicey further stated about three leading characteristics of federalism; "the supremacy of the constitution- /he distribution among bodies with limited and H

738 SUPREME COURT REPORTS [2016] 10 S.C.R.

A co-ordinate authority of the different powers of government- the authority of the Courts to act as interpreters of the constitution. "

163. Shri Alladi Krislmaswami Ayyar while referring to Part XA B i.e. trade, c01mnerce and intercourse (within the territory oflndia) referring to factors offederation in the context of trade, commerce and intercourse stated as follows:

c "Therefore, in a federation what you have to do is, first, you will have to take into account the larger interests of India and permit freedom of trade and intercourse as far as possible. Secondly, you cannot ignore altogether regional interests. Thirdly, there must be the power intervention of the Centre in any case of crisis D to deal with peculiar problems that might arise in any part of India. All these three factors are taken into account in the scheme that has been placed· before you.

164. The nature offederalism as contained in the Constitution of India came for consideration before this Court in large number of cases. Several larger Benches of this Court dealt with the issue and had deliberated and explained the principles offederalism as incorporated in the Constitution. A Seven Judge Bench in the Special Reference No.I F of 1964: In the matter of: Under Article 143 of the Constitution of India, (1965) I SCR 413 referring to fundamental feature of a Federal Constitution laid down that supremacy of the Constitution is fundamental to the existence of the Federal Constitution, following was stated:

G "fn_ dealing with this question, it is necessary to bear in mind one fundamental feature of a federal constitution. Jn England, Parliament is sovereign; and in the words of Dicey, the three distinguishing features of the H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 739

[ASHOK BHUSHAN, J.]

principle of Parliamentary Sovereignty are that A Parliament has the right to make or unmake any law whatever: that 110 person or hody is recognised by the law of England is hf!ving a right to override or set aside the legislation of Parliament; and that the right or power of Parliament extends to every part of the Queen:~ B dominions (Dicey, The Law of the Constitution I 0th ed. pp. xxxiv, xxxv). On the other hand, the essential characteristic offederalism is "the distrihution o.f limited executive, legislative and judicial authority among hodies which are co-ordinate with an independent of each others. " The supremacy of the constitution is c fundamental to the existence o.f a federal State in order to prevent either the legislature of the federal unit or those o.f the member States from destroying or impairing that delicate balance of power which satisfies the particular requirements of States which are desirous of D union, but not prepared to merge their individuality in a unity. This supremacy of the constitution is protected by the authority of an independent judicial body to act as the interpreter of a scheme of distribution o.fpowers. "

165. In the landmark judgment of this Court in His Holiness E Kesavanand Bharati Sripadagalvaru vs. State of Kera/a and another,(1973) 4 sec 225 a new dimension was given to the Constitutional principles. This Court by majority judgment declared that the basic feature of the Constitution could not be amended by a constitutional amendment. Chief Justice, Sikri while delivering the majority F judgment had held that federal character of the Constitution is one of the basic structures of the Constitution.

166. Shelat and Grover, JJ. while delivering concurring opinion had also stated that our Constitution has all essential elements of federal structure. In paragraph 486 following was stated: G

"The Constitution has all the essential elements of a federal structure as was the case in the Government of India Act, 1935, the essence o.ffederalism being the H

740 SUPREME COURT REPORTS [2016] 10 S.C.R.

A distribution of powers between the federation or the Union and the States or. the provinces. All the legislatures have plenary powers but these are controlled by the basic concepts of the Constitution itself and they function within the limits laid down in it Per B Gajendragadkar C.J. in Special Reference No. I of 1964, [1965] I S. C.R. 413. All the functionaries, be they legislators, members of the executive or the judiciary take oath of allegiance to the Constitution and derive their authority and jurisdiction from its provisions. The Constitution has entrusted to the c judicature in this country the task of construing the provisions of the Constitution and of safeguarding the fundamental rights Ibid p. 446. It is a written and controlled Constitution. "

167. Again a Seven Judge Bench in State ofRajastha11 and others vs. Union of India and others, (1977) 3 SCC 592 had an occasion to consider the nature ofindian Constitution.. M.H. Beg, CJ, while delivering majority decision in paragraph 57 following was stated:

E "57. The two conditions Dicey postulated for the existence offederalism were: .firstly, "a body of countries such as the Cantons of Switzerland, the Colonies of America, or the Provinces of Canada, so .closely connerted by locality, hy history, hy race, or the like. as he capable of bearing, in the eyes of their inhabitants an impress of common nationality"; and, secondly, absolute~y essential to the founding of a federal system is the "existence of a very peculiar state of sentiment among the inhabitants of the countries". He pointed out that, without the desire to unite there could be no basis for federalism. But, if the desire to unite goes to the extent of forming an integrated whole in all substantial matters of Government, it produces a unitary rather than a federal constitution. Hence, he said, a H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 741

[ASHOK BHUSHAN, J.]

federal State "Is a political contrivance intended to A reconcile national unity with the maintenance of State rights. ·· The degree to which the State rights are separateZv preserved and safeguarded gives the extent to which expression is given to one of the two contradictory urges so that there is a union without a B unity in matters of government. In a sense, therefore, the Indian union is federal. But, the extent offederalism in it is largezy watered down hy the needs of progress and development of a country which has to he nationally integrated, politicalZv and economically coordinated, and socialZv. intellectualZv and spiritually up-lifted. In c such a system. the States cannot stand in the way of legitimate and comprehensively planned development of the country in the manner directed by the Central Government ...... " D

168. Further in paragraph 60 referring to Dr. Ambedkar following was stated:

"60. Although Dr. Amhedkar thought that our E Constitution is federal "inasmuch as it establishes what may be called a Dual Polity, " he also said, in the Constituent Assemhly, that our Constitution makers had avoided the 'tight mould of federalism' in which the American Constitution was forged. Dr. Ambedkar, one F of the principal architects of our Constitution, considered our Constitution to he both unitary as well as federal according to the requirements of time and circumstances '. "

169. A Nine Judge Bench had occasion to elaborately consider the nature of Constitution oflndia in S.R. Bommai and others vs. Union of India and others, (1994) 3 SCC l, Ahmadi, J. referring to federal character of the Constitution in paragraph 14 following was stated: H

742 SUPREME C'GCRT REPORTS [2016] 10 S.C.R.

A "I 4.111 order to understand whether our Constitution is truly federal, it is essential to know the true concept offedcralism. Dicey calls it a political contrivance for a hody of States which desire Union hut not unity. Federalism is, therefore, a concept which unites B separate States into a Union without sacrificing their own .fimdamental political integrity. Separate States, therefore, desire to unite so that all the member-States may share in formulation of the basic policies applicable to all and participate in the execution of decisions made in pursuance of such basic policies. c Thus the essence of a federation is the existence of the Union and the States and the distribution of powers between them. Federalism, therefore, essentianv implies demarcation of powers in a federal compact. "

170. Ahmadi, J. further stated that the Constitution of India is differently described, more appropriately as 'quasi-federal' because it is a mixture of the federal and unitary elements, leaning more towards the latter.

E 171. B.P. Jeevan Reddy, J., held that the founding fathers wished to establish a strong a Center. In the light of the past history of this sub- continent, this was probably a natural and necessary decision. In paragraphs 275 and 276 following was stated:

F "275. A review of the provisions of the Constitution shows unmistakably that while creating a federation, the Founding Fathers wished to establish a strong Centre. In the light of the past history of this sub- continent. this was probab~y a natural and necessary G decision. In a land as varied as India is, a strong Centre is perhaps a necessity. This bias towards Centre is reflected in the distribution of legislative head1· between the Centre and States. All the more important head5 of legislation are placed in List I. Even among the legislative heads mentioned in List II, several of them, H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 743

[ASHOK BHUSHAN, J.]

e.g., Entries 2, 13, 17, 23, 24, 26, 27, 32, 33, 50, 57 A and 63 are either limited by or made subject to certain entries in List I to some or the other extent. Even in the Concurrent List (List III), the parliamentary enactment is given the primacy, irrespective of the fact whether such enactment is earlier or later in point of time to a B State enactment on the same subject-matter. Residuary powers are with the Centre. By the 42nd Amendment, quite a few of the entries in List II were omitted and/or tran.~ferred to other lists. Above all, Article 3 empowers Parliament to form new States out of existing States either hy merger or division as also to increase, diminish or c alter the boundaries of the States .....

276. The fact that under the scheme of our Constitution, greater power is conferred upon the Centre vis-a-vis the States does not mean that States are mere appendages of the Centre. Within the sphere allotted to them, States D are supreme. The Centre cannot tamper with their powers. More particularly, the courts should not adopt an approach, an interpretation, which has the effect of or tends to have the effect of whittling down the powers reserved to the States. It is a matter of common knowledge that over the last several decades, the trend the world over is towards strengthening of Central Governments he it the result of advances in technological/scientific fi.eldv or otherwise, and that even in USA the Centre has become far more powerful notwithstanding the ohvious bias in that Constitution in favour of the States. All this must put the court on guard against any conscious whittling down of the powers of the States. Let it be said that the federalism in the Indian Constitution is not a matter of administrative convenience, but one of principle the outcome of our own historical process and a recognition of the ground realities.· This aspect has been dealt with elaborately by Shri M. C. Setalvad in his Tagore Law Lectures "Union and State relations under the Indian Constitution" (Eastern Law House, Calcutta, 1974). The H

744 SUPREME C,JURT REPORTS [2016] 10 S.C.R.

A nature of the Indian federation with reference to its historical background, the distribution of legislative powers, .financial and administrative relations, powers of taxation, provisions relating to trade, commerce and industJ:v. have all been dealt with anaZvtically. It is not B possible nor is it necessary for the present purposes to refer to them. It is enough to note that our Constitution has certainly a bias toward~ Centre vis-a-vis the States Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, (1963) 1 SCR 491, 540: AIR 1962 SC 1406. It is equal~v necessary to emphasise that courts should c he careful not to upset the delicately-crafted constitutional scheme by a process of interpretation. "

172. A Constitution Bench in Ku/dip Nayar vs. Union ofIndia, D (2006) 7 SCC 1, held that India is not a federal State in the traditional sense of the tenn and it is not a true federation fom1ed by agreement between various States and it has been described as quasi-federation and similar other concepts. Dr. Justice Durga Das Basu in his Treatise "Comparative E Federalism" by tracing the history of framing of our Constitution stated following in Chapter IV "Indian Federation in particular"-

"The strong centralising tendency of the Indian federation which has attracted the notice of.foreign observers, can be properly appreciated on~v if its genesis is understood. Federation, under our Constitution, is the resultant of conflicting forces. The political tradition of the country was unitary, but it was not possible to adopt a unitary Constitution, since it was necessmy to fit in the Indian States (about 600 in number) which had practica!Zv become independent since the lapse of paramountcy, as a result of the Indian Independence Act, 1947. On the other hand, it was not possible to make the Union the 'exceptional· government as in the United States, because all the units of the federation H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 745

[ASHOK BHUSHAN, J.]

were not equally developed.and central control was A necessa1y to secure uniform development of the country as well as of the backivard classes of the population. Above all, a strong Central Government had been necessitated by the situation created by the partition of the country. It may be recalled that the Objectives B Resolution adopted by the Constituent Assembly at the outset envisaged that the units of the Union of India should be 'autonomous 'and vested with residuary power. But the fi"amers of the Draft Constitution had to depart fi'om the federal concept emhodied in the Objectives Resolution owing to a change in the political situation c which had taken place i11 the meantime. The object of the framers of our Constitution.thus, was to build a strong central authori~v which might resist external aggression and also to check internal disruptive forces that might tend to undermine the nascent State. D This object has been sought to be attained.not only by endowing larger enumerated powers upon the Union than elsewhere and by giving it the residue [Art.248] (as in Canada), but also by enabling the Centre itself to assume control of the units whenever there is any E threat of disruption either from outside or from within. "

173. The law declared by this Court as noted above clearly indicate that the Indian Constitution is basically federal in fonn and is marked traditional characteristics ofa federal system, namely, supremacy of the F Constitution, division of power between the Union and States and existence of an independent judiciary. Federalism is one of the basic features of Indian Constitution. However, the history of Constitution including the Debates in the Constituent Assembly indicate that the distribution of powers was given shape with creating a strong Centre G with the object of unity and integrity of India. The States are sovereign in the allotted fields. The Indian Constitution cannot be put in traditional mould of federalism. The traditional concept of federalism has been adopted with necessary modification in the framework of the Constitution to suit the country's necessity and requirement. The sum total of above H

746 SUPREME COURT REPORTS [2016] 10 S.C.R.

A discussion is that federalism in the Constitution is limited and controlled by the Constitution and the exercise of powers of both the States and the Centre arc controlled by express provisions of the Constitution.

174. The submission that while interpreting Part Xlll of the Constitution federal nature of the Constitution has not to be tinkered B with shall be adverted hereinafter while dealing with interpretation of different A1ticles of Part Xlll of the Constitution specially Article 304.

C. LIMITATION ON THE LEGISLATIVE POWER OF THE STATE UNDER THE CONSTITUTION c

175. Thomas M. Cooley in ''A Treatise on the Constitutional Limitations'' defines a Constitution in the following words:

"A co11stitution is sometimes defi11ed as the fundamental law of a state, co11tai11ing the principles upon which the government is founded, regulating the division of the sovereign powers. and directing to what persons each of these powers is to be confided. and the manner in which it is to be exercised. Perhaps an equallv complete defi11itio11 would be,that bodv of rules and maxims in accordance with which the powers of sovereign(v are habitually exercised. "

176. The Indian Constitution has adopted federal structure as noted above. Three characteristics of federal system are : ( l) supremacy of the Constitution; (2) division of powers between the Union and State Governments: and (3) existence of an independent judiciary. The Constitution operates as a fundamental law. Organs of the States, i.e., executive Legislature and judiciary derive their authority and discharge their responsibilities within the framework of the Constitution. Neither the Union Parliament nor State Legislature are sovereign. The legislative power given to Parliament and State Legislature is provided for and dealt in the Constitution. The State is sovereign to legislate on any subject in conformity with the Constitutional limitations. What are the limitations envisaged by the Constitution in exercise of the legislative pow,er of the H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 747

[ASHOK BHUSHAN, J.]

State, is one of the issues for consideration before us. Learned counsel appearing for the States contend that the power to legislate as on the subjects as enumerated in List II is a sovereign power which also includes power of State to impose taxes in which no limitation can be read from Part XIII of the Constitution. It is contended that it is only by a specific prohibition or limitation in the Constitution which has to be read as limiting the sovereign power of the State. On the other side, the petitioners contend that State Legislature while exercising its power of taxation exercise the same legislative power as it does while enacting any other law which it is competent to enact and there is no qualitative distinction between the exercise of legislative power enacting a law levying tax or enacting a non-fiscal law. In making of any law, all limitations envisaged by the c Constitution shall apply. Learned counsel appearing for the States have submitted that limitations on taxing power of the State Legislature are all contained only in Part XII of the Constitution and no other limitation in exercise of State legislative power can be read.

177. Article 13 sub-clause (2) in Part lll of the Constitution D provides express prohibition in making of law by the State. Article 13 sub-clause (2) is as follows:

"13(2). The State shall not make any law which takes away or abridges the rights conferred hy this Part and any law made in contravention of this clause shall, to the extent of the contravention, he void. "

178. Part XI of the Constitution deals with "Relations between the Union and the States". Chapter I of which contains heading "Legislative Relations". Chapter I contains Article 245 to Article 255. Article 245 begins with the words : subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any or any part of the State. Article 246 deals with the subject- matter of the laws made by Parliament .and by the Legislatures of States. Articles 245 and 246 are as follows:

748 SUPREME COURT REPORTS [2016] 10 S.C.R.

A "245. Extent of laws made by Parliament and by the Legislatures of States.-(1) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or B any part of the State.

(2) No law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation."

246. Subject-matter of laws made by Parliament anti c by the Legislatures of States.-(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the "Union List''). D (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the E "Concurrent List'').

(3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the F matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the "State List'').

(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is G a matter enumerated in the State List. "

179. During submissions before us, one of the issues raised is as to whether Article 245 is source oflegislative power or it is Article 246. Some of the counsel appearing on behalf of the States contend that the H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 749

[ASHOK BHUSHAN, J.]

word "subject to the provisions ofthis Constitution" is there only in Article A 245 which does not govern, Article 246 under which Legislature of any State has exclusive power to make law. Articles 245 and 246 both cover the same subject i.e. law making by the Parliament and the Legislature. Article 245 deals with the extent of laws whereas Article 246 deals with the subject-matter of laws. Both the Aiiicles together define and B demarcate the legislative powers to be exercised by the Parliament and the States. The issue is no longer res integra. The Constitution Bench of this Court in Maharaj Umeg Singh and others vs. The State of Bombay and otlters,(1955) 2 SCR 164, had occasion to consider the extent and limitations on the legislative powers as provided under A11icles 245 and 246. Following was laid by this Cotui in the above case: c

"The fetter or limitation upon the legislative power of the Stale Legislature which had plenary powers of legislation within the amhit of the legislatire heads spec(fied in the Lists II & III of the Seventh Schedule to the Constitution could only be imposed hy the Constitution itself and not by any obligation which had been undertaken by either the Dominion Government or the l'rovi11ce of Bombay or even the State of Bombay. Under Article 246 the State Legislature was invested with the power to legislate 011 the topics enumerated in Lists Ii & III of the Seventh Schedule to the Co11stil11tion and this power was by virtue of article 2../5(/ )subject to the provisions ()f the Constitutio11. The Constitution itself laid down the fetters or limitations 011 this powe¹: F e.g., in article 303 or article 286(2) .. ,

It is relevant to note that Constitution Bench has noticed Article 303 as one of the A1iicles by which limitations were put on the legislative powers of the State. G

180. The above view has been reiterated in a large number of judgments of this Cou1i. It will be sufficient to refer only one more Constitution Bench judgment of this Court in Stllte o/Keralt11111d other.~ vs. Mllr Appraem Kuri Compllny Limited llfl(f llnother, (2012) 7 H

750 SUPREME COURT REPORTS [2016] 10 S.C.R.

A SCC 106. This Court again had occasion to consider A1ticles 245 and

246. The Constitution Bench held in the said case that while the legislative power is derived from Article 245, entries in the Seventh Schedule of the Constitution only demarcate the legislative fields of the respective legislatures and do not confer legislative power as such. Following B observations were made in paragraph 35:

"35 ..... While the legislative power is derived.from Article 245,the entries in the Seventh Schedule of the Constitution onlv demarcate the legislative fields of the c respective legislatures and do not confer legislative power as such. While Parliament has power to make laws for the whole or any part of the territory of India, the legislature of a State can make laws only for the State or part thereof Thus Article 245 inter alia indicates D the extent of laws made by Parliament and by the State Legislatures. "

181. In paragraph 37 it was laid down that the expression "subject to other provisions of the Constitution" has also to be read in Article 246, E following was laid down in paragraph 37:

"Article 246, thus, provides for distribution, as between Union and the States, of the legislative powers which F are conferred hy Article 245. Article 245 begins with the expression "subject to the provisions of this Constitution". There.fore, Article 246 must he read as "subject to other provisions of the Constitution".

G 182. Thus, it is well settled that legislative power of the State is subject to the provisions of the Constitution. The words 'subject to the provisions of this Constitution' had to give its full meaning and content. Thus, limitation of the legislative powers wherever found in the Constitution has to be given effect to. There can be no doubt that Part XU of the Constitution deals with "Finance, Property, Contracts and H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 751

[ASHOK BHUSHAN, J.]

Suits" and there are various express limitations provided in Part XII, A namely, Articles 276, 286 and certain other Articles but can Part XII be treated as the only limitations on the legislative powers of the States, the answer has to be in negative. We have already extracted Article 13 sub-clause (2) and there are more than one Constitution Bench judgments which held that taxing legislation has also to confonn Article 13 sub- B clause(2). In Kunnatltat Thathunni Moopil Nair vs. The State of Kerala and another, (1961) 3 SCR 77, Constitutional validity of Travancore-Cochin Land Tax Act, 1955 was challenged. Following contention was raised by the petitioners:

c "On the legal aspect of the controversy raised on behalf of the petitioners, it was argued that the Act has its justification in Art.265 of the Constitution, which was not subject to the provisions of Part III of the Constitution and that, therefore, Arts. 14, 19, 31 could not he pressed in aid of the petitioners. It was also contended that even if the Act is, in effect, confiscatory, it cannot be questioned, being a taxing statute.'·'

183. Repelling the contention the Constitution Bench held that tax legislation is also subject to Article 13. Following was held:

"It has to be done by authority of law, which must mean valid law. In order that the law may he valid, the tax proposed to be levied must he within the legislative competence of the Legislature imposing a tax and authorizing the collection thereof and, secondly, the tax must he subject to the conditions laid down in Art.13 of the Constitution. One of such conditions envisaged hy Art.13 (2) is that the Legislature shall not make any law which takes away or abridges the equality clause in Art.14 which enjoins the State not to deny to any person equality before the law or the equal protection of the laws of the countly. " H

752 SUPREME COURT REPORTS [2016] 10 S.C.R.

A 184. Another Constitution Bench judgment in Hari Krishna Bhargav vs. Union of India and another, 1966 AIR SC 619, held that exercise of taxing power is also to be tested in the light of the fundamental freedoms guaranteed under Chapter Ill of the Constitution. Following was observed in paragraph 7: B "7 .... Exercise of the taxing power to the State has undouhtedly to be tested in the light of the fundamental freedoms guaranteed hy Ch.III of the Constitution. It is not a power which transcend~ the .fimdamental rights, c as was assumed in certain earlier decisions. Ramjilal v. Income-tax Officer Mohinder Garh, 1951 SCR 127: (AIR 1951 SC 97): Laxmanappa Hanumantappa v. Union of lndia,1955-1 SCR 769: (AIR 1955 SC 3): and the view expressed by VenkatarammaAyyar, J., inAnantha D Krishnan v. State of Madras, JLR (1952) Mad 933: (AIR 1952 Mad 395). But it is now settled by decisions of the Court (e.g.), Kunnathat Thathunni Moopil Nair v.State of Kera/a, 1961-3 SCR 77: (AIR 1961 SC 552), that a taxing statute is subject to the "conditions laid down in Art.13 of the Constitution". A taxing statute may E accordingly he open to challenge on the ground that it is expropriatary, or that the statute prescribes no . procedure or machinery for assessing tax. hut it is not open to challenge merely on the ground that the tax is harsh or excessive. " F

185. All legislative power5 is su~ject to limitations in the Constitution, be it fiscal statutes or non-fiscal statutes.

186. Now, we come to the question as to whether Part Xlll also G contains limitations on the legislative power of the State. Part Xlll of the Constitution has been included in the Constitution after great deliberation and debates in the Constituent Assembly as noted above. Part XIII contains one of the most important right and principle on which country was to march to attain economic freedom. Justice Gajendragadkar, J. has beautifully explained the nature and contents of right guaranteed H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 753

[ASHOK BHUSHAN, J.]

under Part XIII in following words: - A

"The provision contained in Article 301 guaranteeing the freedom of trade, commerce and intercourse is not a declaration of a mere platitude, or the expression of B a pious hope of a declaratory character; it is not also a mere statement of a directive principle of State policy; it embodies and enshrines a principle of paramount important that the economic unity of the country will provide the main sustaining force for the stability and progress of the political and cultural unity of the c country. "

187. Justice Gajendragadkar speaking for majority in the above case has also held that Article 301 is a Constitutional limitation on the legislative power of the Parliament and the States in following words:-

"That is why it seems to us that Article 301, read in its proper context and subject to the limitations prescribed by the other relevant Articles in Part Xlll, must by regarded as imposing a constitutional limitation on the legislative power of Parliament and the Legislatures of the States. "

188. While discussing the "limitation on the legislative power of the State under the Constitution" we have already concluded thatArticle 245 which is a source of all legislative power puts a general limitation on all legislative power which has been expressly made 'subject to the provisions of this Constitution'. When all legislative powers are subject to the provision of Constitution, Part Xlll being also a part of the G Constitution, all legislative power has also to be subject to Part XIII.

189. A textual interpretation of Part XIll also lead to the same conclusion. Article 303 is an express provision which provides for 'restriction on the legislative power of the Union and the States with H

754 SUPREME COURT REPORTS [2016] 10 S.C.R.

A regard to trade and commerce'. Article 304 is another provision which although empowers the legislature of the State to put restriction on trade, commerce and intercourse among the States by law, but law to be made by the State is hedged by various restrictions as contained in Article 304(a) and 304(b). Thus Article 304 is also a limitation on legislative power of the State. B

190. This Court in State of Karnataka mu/ Another Vs. Han.m Corporation, (1980) 4 SCC 697, has held in Para 30:

"Article 304(a) imposes a restriction on the power of c the legislature of a State to levy tax ....... ".

191. Article 30 l contains a general limitation on all legislative power. A Constitutional Bench of this Court in State of Tamil Nad11 D and Others Vi·. Sitolaxmi Mills and Others (1974) 4 SCC 408 111 para 7 as Stated:

" .... In other words Article 301 imposes a general limitation on all legislative power in order to secure that E trade. commerce and intercourse in the territory of India shall be free". ·

192. Justice K. Mathew in G K. Krishnan and Other.1 Vi'. State F of Tamil Nadu anti Other.1 (1975) I SCC 375 had again reiterated that Article 304 imposes a general limitation on all legislative power, he states that 'Article 301 imposes a general limitation on all legislative power in order to secure that trade, commerce and intercourse throughout the territory oflndia shall be free'. In view of the aforesaid discussion, we conclude that Part XIII of the Constitution contains limitation on the G legislative power of the State and all legislative power of the State whether fiscal or non-fiscal has to conform Part XII of the Constitution. D. Whether Part XIII of the Constitution l'OVers "tax legislation" and word "restriction" used therein includes tax legislation. H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 755

[ASHOK BHUSHAN . .J.]

193. The above subject is being considered in two parts. Firstly, A whether Part XIII of the Constitution covers tax legislation and secondly. whether word restriction used in Pati XIII includes tax legislation. Whether Part XIII covers tax legislation

194. Learned counsel for both the parties have to make different B submissions on the above subject. Learned counsel for the petitioners on the one hand contends that all tax legislation which restrict freedom of trade, commerce and intercourse are covered by Pati XIII whereas learned counsel appearing for the States contend that Part XIII only covers non-discriminatory taxes as referred to under Article 304(a) and no other tax legislation is covered under Paii Xlll. c J 95. Gajendragadkar J.. speaking for majority in Atiabari Tea Co. Ltd. has rejected the argument that tax laws are outside Paii XIII. Even Sinha C.J., having expressed the following opinion at Page 828:

D " ... Therefore. when Part XIII of the Constitution speaks of imposition of reasonable restrictions in public interest, it could not have intended to include taxation within the generic term 'reasonable restrictions'.... " In the same Paragraph further observed: E "... if a law is passed by the Legislature imposing a tax which in its true nature and effect is meant to impose an impediment to the .fi'ee .flow of trade, commerce and intercourse, for example, by imposing a high tariff wall. or by preventing imports into or exports out of a State, r such a law is outside the sig11(ficance of taxation. as such. but assumes the character of a trade barrier which it was the intention of the Constitution makers to abolish by Part XIIJ... " G

196. Shah J .• inAtiahari Tea Company has held that all taxations which imposed restriction are hit by Article 30 l. The Automobile Tramport (supra) where correctness of Atiahari Tea Co. was questioned reiterated that taxation is included in Part XIII. Following H

756 SUPREME COURT REPORTS [2016] 10 S.C.R.

A was observed by Das J.

" ... in view of the provisions of Article 245, we find it difficult to accept the argument that the restrictions in Part XIII of the Constitution do not apply to taxation B laws ... "

197. Both K. SubbaRao, J. and M. Hidayatullah, J. in their separate opinions have held that restriction by law of taxation is also hit by Article c 301.

198. Learned Counsel for the States in support of their submission further contends that both the words i.e. 'tax' and 'restriction' have been used in Article 304(a) and Article 304(b) separately. Both the words are not interchangeable nor the scheme of Article 304 indicates that the word 'restriction' includes taxation. Learned counsel further submits that reading taxation into word 'restriction' as used in Part XIII is accepting an interpretation which fetters the plenary powers oflegislation granted to the States under the Constitution.

199. All subsequent judgments of this Court have also proceeded on the premise that a tax legislation which impedes the freedom of trade, commerce and intercourse and is not saved by Article 302 to 304 is invalid. Apart from the reason which found favour in Atiabari Tea Company and Automobile Transport the following reasons reinforce~ our view that Part Xlll covers all tax legislations which impede the freedom of trade, commerce and intercourse: (a) The express use of word tax in Article 304(a) and 306 (as it existed before its repeal by Constitution's 7th Amendment Act, 1956) indicates that taxes were expressly included in Part XIII. Had the taxes, apart from as mentioned in 304(a) were not to be covered under Part G XIII, Article 306 ought not to have been engrafted which permitted continuance of tax or duty on the import and export of the goods, in Part B States for a period not exceeding ten years from the commencement of the constitution. The framers of the Constitution were conscious that unless an overriding effect is given to taxes which are continuing in the State the same shall fall foul to Article 301. H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 757

[ASHOK BHUSHAN, J.]

(b) Article 302 uses the phrase, "Parliament may by law''. Whereas A Article 303 uses the phrase "neither Parliament nor the legislature of the State shall have power to make any law....." Article 304 uses the phrase the legislature of a State "may by law". All laws framed by Parliament or State in exercise of legislative entries under VI1 1h Schedule are law. Article 302 - 304 contain exception according to which, freedom of 8 trade, commerce and intercourse as guaranteed under Article 30 l can be overridden. The word law is wide enough to include both fiscal and non-fiscal legislations. (c) Article 303 imposes restriction on the legislative power of the Union as well as of the State with regard to trade and commerce. Article c 303(1) provides that a State shall have no powers to make any law giving or authorising the giving oJ~ any preference to one State over another, or making or authorising the making of, any discrimination between one State or another, by virtue of any entry relating to trade and commerce in any Lists of the Vll'h Schedule. The legislative power of the State, which is restricted under 303( I) cannot be held to be confined only to law as referred to in 304(a) rather it can extend to a legislation by virtue of any entry relating to the trade and commerce in List II. From this. it is clear that tax legislation which are covered under Part XIII are not confined to only Article 304(a). · ( d) In the event, the submission is accepted that all taxes are outside Part Xlll except non-discriminatory taxes as permitted under Article 304(a), the same will lead to giving right to the Parliament and State Legislature to pass facially non-discriminatory laws but creating restrictions on trade and commerce by other means by providing arbitrary procedure and various other kind of restraints. The taxation which can impede the trade, commerce and intercourse thus cannot be confined only to non-discriminatory taxation. Even, non-discriminatory taxes which create restraint on trade have to be held to fall foul to Article 301. In the event of accepting the above submission, the restraint in trade by other means of taxation shall be out of reach of Part XIII, which is never the intention of the framers of the Constitution. (e) A11icle 304(a) covers imposition of taxes ori goods imported from other States. Article 304(a) does not apply to imposition of taxes on intra-State trade. Can it be presumed that intra-State taxation, if it contains restraint on trade between one local area to another local area 1-1

758 SUPREME C:JURT REPORTS [2016] l 0 S.C.R.

A or is discriminatory. the same is outside the reach of Article 30 l? The answer is obviously no. Trade and commerce throughout the territory of India is to be free. Thus reach of Article 301 is not confined to taxation as contemplated by 304(a) rather Part XIII embraces in itself all kind of tax legislation, which contains restraint on trade. commerce and B intercourse. (f) Atiicle 304(a) only covers taxes on goods imported from other State and Union Territories. List II of Vll'h Schedule contains various other entries which empower the State to levy taxes. Entry 49 to Entry 62 enumerate various fields of taxing legislation. In the event, the c submission is accepted that it is only taxes referred to under Article 304(a), are covered by Part Xlll, all taxing legislations as enumerated in List II shall go out of reach of Part XIII. Whether Constitlltion framers contemplated that restriction in freedom of trade, commerce and intercourse can be imposed by the State by taxing legislation other than those referred to in 304(a), answer has to be negative. Other taxing legislation apart from those, mentioned in Atiicle 304(a) are not immuned from restriction contained in Part XIII. For example, Entry 49 provides 'taxes on lands and buildings'. A State Legislation is passed imposing taxes on buildings where trade and commerce is carried, the effect of which is to impede the trade and commerce, can it be said that such tax legislation cannot be questioned as violating Article 30 I. The answer is that such legislation has also to comply with Article 30 I. Thus. Article 304(a) is not the only taxation which is covered by Pati XII!. But it is only species of taxation which has been expressly indicated for carving out gateway for the State Legislature to impose tax which may not impede Article 30 I. F (g) Lastly, there are no provision in Part Xlll which negate the applicability of Part XIII on taxes which operates as restriction to trade, commerce and intercourse. Something which is not expressly excluded in Pati XIII cannot be excluded by way of interpretation. G Whether restriction used under Part XIII includes tax legislation

200. While discussing the subject' Legislative History and Debates in Constituent Assembly' on freedom of trade, commerce and intercourse. we have already found that taxes were treated as restrictions on freedom H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 759

[ASHOK BHUSHAN, J.]

of trade and commerce and it was further comprehended that restrictions on freedom of trade and commerce can be put by taxation also. Apart from above, there are following reasons which support our conclusion that word 'restriction' used in Part Xlll includes tax legislation: (i) The textual interpretation of Part Xlll itself indicates that taxes were contemplated to be included in word 'restriction'. The heading of Article 304 reads 'restrictions on trade, commerce and intercourse among States'. Although the heading refers to 'restrictions' but Article 304(a) uses the word 'any tax'. (ii) The same conclusion is drawn from the Article 306 as it was enacted. Article 306 also contained a heading 'power of certain States C in Part B of the l" Schedule to impose restriction on 'trade and commerce'.' Article 306 contained a non ohstante clause empowering Part B, States to continue to levy and collect such tax, subject to an agreement with the Government of India which was being levied at the time of D commencement of the Constitution. The heading only referred to restrictions on trade and commerce whereas section referred to imposition of taxes. Thus textual interpretation of Article 304 and 306 clearly -indicates that word 'restriction' was used as inclusive of taxes. E (iii) The word 'restriction' has been used in Part III, in Article 19(2) to Article 19(6). The word 'restriction' has also been used in Part XIII. The word 'restriction' appearing in Part III and Part XIII have the same meaning and should be construed as such. It is well known principle of statutory interpretation of Constitution that when the same words or F phrases are used in different parts of the Constitution, the same meaning should be ascribed to such word unless the context demands otherwise. It is sufficient to refer to judgment of this Court in Kesavananda Bharati Versus State of Kera/a, (1973) 4 SCC 225. Justice "Hegde and Mukherjea" in Para 640 had reiterated the above principle as: G

"... it is one of the accepted rules of construction that the courts should presume that ordinarily the Legislature uses the same words in a statute to convey the same H

760 SUPREME CSURT REPORTS [2016] 10 S.C.R.

A meaning. {f d(fferent words are used in the same statute, it is reasonable to assume that, unless the context othen1Jise indicates. the Legislature intended to convey different meanings of those words. This rule of interpretation is applicable in construing a Constitution B as well... " (iv) This Cou1i had occasion to consider the word 'restriction' as used in Part Ill in context of taxing legislation, namely. Travancore- Cochin Land Tax Act, 1955 in KT. Moopil Ntiir Versus State ofKera/a and Anr., 1961 (3) SCR 77. When word 'restriction' as used in Part c III has been held to include restriction by tax legislation also, we see no reasons for not reading tax legislation in word 'restriction• in Part XIIL also. The word restriction has to be given same meaning as contained in Part Xlll. (v) Article 302 contains a heading 'power of Parliament to impose D restrictions on trade, commerce and intercourse'. Article further provides that the Parliament by laws impose such restrictions on the freedom of trade, commerce and intercourse. Under Article 302 tax laws enacted by the Parliament. namely, Central Sales Tax Act 1956 has been saved by this Court in State of E Madras Vs. N. K. Nataraja Mudaliar 1968 (3) SCR 829. Bachawat, J., agreeing with the majority opinion stated as following:

"I may add that even assuming that the Central Sales Tax Act. 1956 is within the mischief (~f Art. 301, it is F certainly a law made by Parliament in the public interest and is saved by Art. 302. find nothing in the Act which offends Art. 303(1)."

G (vi) The word 'restriction' used in A1iicle 304(b) has also to be interpreted in the same manner. As noted above, Article 304(a) covers limited field to taxes on goods imported from other States. Article 304(a) does not cover intra-State taxation. An Intra-State Tax Legislation. impeding the freedom of trade, commerce and intercourse between one local area to another local area, has also to fall foul to Article 301. There H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 761

[ASHOK BHUSHAN, J.]

may be val id reasons for State legislature to impose restriction with regard to intra-State taxation and there may be reasons for fixing different rate of taxes with regard to different local areas, which may be a restriction on the trade, commerce and intercourse. A1iicle 304(b) is a window by which a State can impose reasonable restriction in public interest. In the event, it is held that Article 304(b) does not cover taxes, the State will have no mechanism to impose restriction on intra-State trade and with regard to imposition of taxes other than goods impmted from other States, which can not be the intention of framers of the Constitution. From the foregoing discussion, we arrive at following conclusions: c i. Part XIII of the Constitution covers tax legislation which restrict freedom of trade, commerce and intercourse. ii.The word 'restriction' used in Part XIII includes tax legislations also. D

E. LEGISLATIVE HISTORY AND CONSTITUENT ASSEMBLY DEBATES RELATING TO ARTICLE 304(a)AND 304(b)

20 I. By Section 297 of Government oflndiaAct, 1935, the certain E restrictions on the Provincial Legislature and the Government were imposed to ensure freedom of trade, as has already been noted above. When the Constituent Assembly proceeded to finalise the provisions of the Constitution on freedom of trade and commerce, the Legislative Scheme as such under Section 297 was already enforced. By Section F 297(l)(a) the State Legislature and Government were prohibited from restricting the entry into. or export from, the Province of goods of any class or description; and further by Section 297( 1)( b) imposition of any tax, cess, toll, or due which was discriminatory in nature was prohibited. As noted above the Sub-Committee on the fundamental rights in its report G dated 3"1 April, 194 7 has proposed the following clause with regard to trade, commerce and intercourse: "13.Subject to regulation by the/aw of the Union, trade,commerce, and intercourse among the units, H

762 SUPREME COURT REPORTS [2016] 10 S.C.R.

A whether hy means of internal carriage or hy ocean navigation, shall he free: Provided that any unit may by law impose reasonable restrictions thereon in the interest of puhlic order, morality or health. " B

202. Shri Alladi Krishnaswami Ayyar put a note on the above Clause 13 which was to the following effect:

c "Clause 13. Though I have heen in some measure responsible for the inclusion of this clause I feel it must he made clear that :(1) goods from other parts of India than in the units concerned coming into the units cannot escape duties and taxes to which the goods produced in the units themselves are subject. "

203. While submitting the report of the Sub-Committee dated 16'11 April, 1947, Chainnan ofFundamental Rights Sub-Cmmnittee stated that although every citizen is entitled to free trade, commerce and intercourse within the territories of the Union unburdened by any internal duties or taxes of customs but many Indian States depend upon such duties and taxes for a considerable part of their revenue and cannot do without it all at once. It was stated that some agreement had to be made with those States in the light of their existing rights with a view to their ultimate elimination within a period to be prescribed by the Constitution.

204. Thus, with regard to the taxes.the above view was reiterated by Shri Vallabhbhai Patel in the report ofAdvisory Committee submitted on 23 1d April, 1947. Shri C. Rajagopalachari in Advisory Committee proceeding had stated : "I think we should add to 14( 1) that this shall not be a bar to the imposition of taxes for genuine purposes of revenue." Before the Constituent Assembly the Advisory Committee had recommended Clause 10 regarding trade, commerce and intercourse to the following effect: "JO. Suhject to regulation by the law of the Union H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 763

[ASHOK BHUSHAN, J.]

trade, commerce, and intercourse among the Units by A and between the citizens shall he free: Provided that any Unit may by law impose reasonable restrictions in the interest of public order, morality or health in or in an emergency: B Provided that nothing in this section shall prevent any Unit from imposing on good~ imported from other Units the same duties and taxes to which the good~ produced in the Unit are subject: Provided further that no preference shall be given by any regulation of commerce revenue by a Unit to one Unit over c another."

205. The above Clause 10 came for discussion before the Constitution Assembly on 1st May, 194 7. Shri K.M. Munshi before the D Constituent Assembly placed amendment for adding the words 'and under regulations and conditions which are non-discriminatory'. The Constituent Assembly approved Clause IO by accepting amendment proposed by Shri K.M. Munshi. Third proviso thus was approved as follows: E "Provided that nothing in this section shall prevent any Unit from imposing on good~ imported from either Units the same duties and taxes to which the goods produced in the Unit are subject and under regulations and conditions which are non-discriminatory. " F

206. The above proviso was included in the Draft Constitution published in October, 194 7 and thereafter draft as finalised by Drafting Committee provided for restriction on trade, commerce and intercourse by Article 244 which was of the following effect: G

"244. Notwithstanding anything contained in Article 16 or in the last preceding Article of this Constitution, it shall be lawful for any State- H

764 SUPREME COURT REPORTS [2016] 10 S.C.R.

A ., (a) to impose on goods imported from other States any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and B (b) to impose by law such reasonable restrictions on the freedom of trade, commerce or intercourse with that State as may be required in the public interests: Provided that during a period of five years from the commencement of this Constitution the provisions of clause c (b) of this article shall not apply to trade or commerce in any of the commodities mentioned in clause (a) of Article 306 of this Constitution."

207. Article 244 which was subsequently approved as Article 274D D in Part XA and was adopted as Article 304 of the Constitution. The above indicates that initially the provisions empowered the State "to impose on goods imported from other States any tax to which similar goods manufactured or produced in that State are subject", and by an amendment another resttiction i.e. "so, however, as not to discriminate between goods so imported and goods so manufactured or produced" was added. Article 304(a) contains both the above restrictions on the legislative power of the State. The proceedings of the Constituent Assembly, thus, clearly indicate that both the above conditions have been added in the provision as separate conditions and the second condition was added by way of amendment in addition to the first condition which already existed. Now coming to Article 304(b) which was similar to draft Article 244(b ), Constituent Assembly debated the above Article threadbare.

208. Dr: Ambedkar had moved motion for inclusion of a separate G Part XA wherein Article 244 was deleted and substituted by a draft Article 274D which was to the similar effect. In the Constituent Assembly Debates dated 3rd December, 1948 the draft Article 16 which was included in the fundamental rights came for consideration. In the context of the above discussion objections were raised to Article 244 by Shri C. Subramanian. Shri C. Subramanian raised objection that a State H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 765

[ASHOK BHUSHAN, J.]

Legislature has been given power to impose certain taxes and impose A certain restrictions which clearly means that no fundamental right is reserved for free trade and commerce. The objection of Shri C. Subramanian was taken in the following words:

B "You will find, Sir, that in article 244, even though it might he inter-state trade and commerce, the State Legislature is given certain powers to impose certain taxes and impose certain restrictions. Having this in mind, if we come to Article 16, we.find the words "subject to the provisions of article 244 of this Constitution'', c that is, even in respect of inter-state trade and coinmerce, the State Legislature has heen given certain powers and that is not touched hy this article. Therefore leaving that, the article would read "subject to the provisions of any law made by Parliament, trade and commerce D and intercourse through the territory of India shall be free". 1 really fail to understand how this can be a fundamental right and whether there is any right at all reserved. The very conception of a fundamental right is that there is a certain right taken out of the province of the legislature either of the Union or of the State. " E

209. Dr. Ambedkar replying to the above objection with regard to Article 244 stated as follows: F "With regard to the other argument, that since trade and commerce have been made subject to article 244, we have practically destroyed the fundamental right, I think 1 may fair~y say that my friend Mr: Subramaniam has either not read article 244, or has misread .that G article. Article 244 has a very limited scope. All that it does is to give powers to the provincial legislatures in dealing with inter-state commerce and trade, to impose certain restrictions on the entry of good~ manufactured H

766 SUPREME COURT REPORTS [2016] 10 S.C.R.

A or transported from another State, provided the legislation is such that it does not impose any disparity, discrimination between the good~ manufactured within the State and the goody imported/ram outside the State. Now, I am sure he will agree that that is a very limited B law. It certainly does not take away the right of trade and commerce and intercourse throughout India which is required to he free. "

210. As stated above Article 244 was akin to Article 274D which c was sought to be added in new Chapter and came for discussion on 81h September, 1949 before the Constituent Assembly. Dr. B.R. Ambedkar by moving a motion in support of Chapter XA giving a complete picture of the A1iicles now put at one place stated as follows:

D "I should also like, to say that according to the provisions contained in this part it is not the intention to make trade and commerce absolutely free, that is to say, deprive both Parliament as well as the States of any power to depart from the fundamental provision that trade and commerce shall he free throughout India. The freedom of trade and commerce has been made subject to certain limitations which may be imposed by Parliament or which may be imposed by the Legislatures of various States, subject to the fact that the limitation contained in the power of Parliament to invade the freedom of trade and commerce is confined to cases arising from scarcity ofgoody in any part of the territory of India and in the case of the States it must he justified on the ground ofpublic interest. The action of the States in invading the freedom of trade and commerce in the public interest is also made subject to a condition that any Bill affecting the freedom of trade and commerce shall have the previous sanction of the President; otherwise, the State would not be in a position to undertake such legislation. " H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 767

[ASHOK BHUSHAN, J.]

211. Pandit Thakur Das Bhargava raised various amendments. A Pandit Bhargava moving his amendments stated:

"Now, in regard to these amendments my submission is that the way in which I look at the subject is different B from the way in which D1: Amhedkar look at it. According to me, these rights of trade and commerce and intercourse should he absolute and only circumscribed hy provisions relating to emergencies while in his view, the power of the Central Government as well as of the provincial Governments should he c there, and these rights should be qualified We have already passed article 16 which runs thus: "Subject to the provisions of article 244 of this Constitution and of any law made by Parliament, trade, commerce and intercourse throughout the territory of D India shall he free. " This article yet stands as it is. There has so far been no amendment that it stands abrogated. The existence of this article in the Chapter on Guaranteed Rights assures us that this is a fundamental right. The nature E of this .fundamental right has been, I know, curtailed to a great extent by the use of the words "and of any law made by Parliament". Subject to this, this fundamental right has been guaranteed to the citizens of India by the Constitution we have already passed. F

212. With regard to Article 274D, Pandit Thakur Das Bhargava raised serious objections to sub-cluase (b ), following was stated by Pandit Bhargava" G

"Similarly Si1; in regard to article 274D, I have no objection to clause (a): hut so far as (h) is concerned, this is the clause to which I object most seriously. I think this is unnecessary because when the powers are given H

768 SUPREME COURT REPORTS [2016] 10 S.C.R.

A to the Parliament as originally they were given to the Parliament, I have no objection. The Parliament shall have to consider it from the general standpoint, from the standpoint of the whole of India, whereas a State is bound to consider it from a parochial point of view, B from the point of view of the State and there.fore, this mutual jealousy is bound to arise if we allow these powers to the State. There.fore, the policy of the Government should be that so far as the State is concerned, they should not be allowed to exercise that power unless it be through Parliament. ff a State is c empowered to use its powers under clause (a) I have no quarrel as it will he a salutary power; hut if you allow clause (b) to remain as it is, I do not understand what it may lead to."

213. Prof.Shibban Lal Saksena also supported the amendments moved by Pandit Bhargava.

214. Shri T.T. Krishnamachari replying the objections of Pandit Bhargava stated following with regard to Article 274D: E

"So far as 274D is concerned, my honourable Friend Pandit Thakur Das Bhargava will either wholly amend it in such a way as to completely change its shape or completely eliminate it. I feel that it arises-I have no douht--from a particular bitter experience of his in which a Provincial Government has not executed its duty towards its people in the proper way. But hard cases do not always mean bad law. There is not reason for us to completely shut out discretion or the States in so far as the Central Government will have enough power not mere~v to have a uniform fiscal policy but also as far as possihle to have a uniform economic policy. And that is provided by the fact that the President'.~ previous sanction is necessary in regard to any legislation undertaking by the State under clause (b) of 274D. H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 769

[ASHOK BHUSHAN, J.]

Pandit Thakur Das Bhargava: Is it not exactly the reason why the Provinces and the State Legislatures should not he given the power? Shri T. T. Krislmamachari: That is exactly the reason why they should he given the power. The State should he given a certain amount of right in this matter and the onzv reason why the Centre should interfere is to see that the economic and .fiscal policy of the Centre is not unduzv interfered with, and to the extent that it cannot he inte1:fered with the State must he given a reasonable amount of power to order its own affairs. " C

215. Shri Alladi Krishnaswami Ayyar replying the objections of Pandit Bhargava with regard to Article 274D stated as follows:

D "Then I am surprised at exception being taken to the terms of article 274D. It does not give any unfettered power to the States. The proviso clearly lays down- "No Bill or amendment for the purposes of clause (b) of this article shall be introduced or moved in the legislature of the State nor shall any Ordinance he promulgated.for the purpose by the Governor or Ruler of the State without the previous sanction of the President". Therefore, if on account of parochial patriotism or separatism, without consulting the larger interests of India as a whole !f any Bill or amendment is introduced, it will be open to the President, namezv, the Cabinet of India to withhold sanction. This is therefore a very restricted power that is COl?ferred on the legislature of G a State. After all what is the nature of the power given ? The power is confined to imposing such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest therefore the President who has to H

770 SUPREME COURT REPORTS [2016] I0 S.C.R.

A grant sanction will have the opportunity lo see !hat the legislation is in !he public interes/ and that the restriction imposed is reasonable. It is not possih/e to devise a water-tight formula for the purpose of' defining these restrictions. " B

216. Replying the Debate, Dr. B.R. Ambedkar stated that he cannot usefully add anything to what Shri T.T. Krishnamachari and Shri Alladi KrishnaswamiAyyar had said. Article 274D was added to the Constitution by negating the amendments. From the above, it is clear that objections with regard to Article 2740 sub-clause (b) which is now Article 304( b) were raised before the Constituent Assembly but the objections were overruled by retaining Article 274D sub-clause (b) which is now Article 304(b), thus, inclusion ofArticle 304(b) in the Constitution was consequent to well deliberated Constitutional Scheme and was accepted as restriction on the power of State to have uniform fiscal policy and uniform an economic policy.

F. INTERPRETATION, SCOPE AND AMBIT OF ARTICLE 304(a) AND ARTICLE 304(b) E

217. Article 304 of the Constitution reads as follows:

"304. Restrictions on trade, commerce and intercourse F among States.-Notwithstanding anything in article 301 or article 303, the Legislature of a Stale may by law-·- (a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are sulJject, so. G however, as not to discriminate between goods so imported and goods so 111anuj(1c/ured or produced: and (b) impose such reasonable restrictions 011 the ji-eedom of trade, commerce or intercourse with or within that State as may be required in the public interest: H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 771

[ASHOK BHUSHAN, J.]

Provided that no Bill or amendment for the purposes of A clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President. "

218. 'Article begins with a non ohstante clause i.e. 'notwithstanding anything in Aiticle 301 or 303'. Article 301 declare:; that trade, commerce and intercourse throughout the territory of India shall be free. Article 304 has overriding effect over Article 301, Article 304 provides for 'restrictions on trade, commerce and intercourse' amongst States, as is clear by its heading, which otherwise would not c have been permissible under 301. Article 304 also overrides restrictions on the legislative power of the State as provided for in Article 303.

219. Article 304 empowers legislature of a State by law to impose on goods imported from other States or Union Territories any tax. A plain reading of Article 304(a) indicates that it contains certain conditions for imposition of taxes on goods imported from other States. Article 304(a) can be divided in following parts:- i . Impose on goods imported from other States or Union Territories; ii.Any tax to which similar goods manufactured or produced in that State are subject; iii. So, however, as not to discriminate between goods so imported and so manufactured or produced;

220. We have already noted, while noticing the proceeding before the Constituent Assembly that in the initial draft corresponding to 304(a) F the condition iii, i.e., "as not to discriminate between goods so imported and goods so manufactured or produced" was not there which was added by an amendment brought by Shri K. M. Munshi. Thus (ii) and (iii) Part of Article 304, as noted above contains two sepan1te and independent conditions for invoking 304(a). Learned counsel for the States G have submitted that the main content of Article 304(a) is imposition of non-discriminatory taxes. It is contended that in event, there are no similar goods manufactured or produced in the State to the goods which are / imported there is no question of discrimination and State is· free to tax imported goods, which are not produced or manufactured in the State. H

772 SUPREME COURT REPORTS [2016] 10 S.C.R.

A On first blush, the submission appears to be attractive but on a deeper scrutiny it merits rejection. Article 304 is, in nature of enabling provisions to the State, to impose taxes on goods imported from other States. Framers of the Constitution had stated that the goods coming from other parts of the India in the units concerned cannot escape duties and taxes B to which the goods produced in the units are subject. There is specific purpose and object in enabling the State to impose tax on goods imported from other States only when similar goods manufactured or produced in that State are subject. The object is that trade and commerce throughout the territory of India has to be free, as required by Article 301 and limited power to State was given to tax the outside goods when local goods are c subject to taxes. In event, locally manufactured or produced goods are not subject to any tax, State has no jurisdiction to impose tax on similar goods coming from other States. Tax on the locally manufactured or produced goods is condition precedent for imposing tax on similar goods coming from other States. Idea is that when State does not tax its locally D manufactured or produced goods, similar goods coming from out of the State be pennitted a free flow which is a part of freedom guaranteed under Article 301.

221. The last condition that 'so, however, as not to discriminate between goods so imported and goods so manufactured or produced ... " E is another limb of restriction which prohibits the State from discriminating in imposing taxes on imp01ted goods as compared to goods manufactured or produced locally. The question of discrimination shall arise only when first condition that is locally manufactured or produced goods are taxed by a State. In event, a patticular good is not produced or manufactured in a State, State cannot be allowed to impose tax on goods coming from F othe;· States. First condition that is, taxing of the local goods being not fulfilled, the question of discrimination, does not arise. We are thus of the considered opinion that power under Article 304(a) for imposing taxes on the impotted goods can be exercised by a State only when similar goods manufactured or produced locally are subject to tax. When G the similar goods are not subject to tax or similar goods are not available in the State, the State is obliged to pennit free flow of goods from other States which is cardinal principle enshrined in Article 301 and the relaxation to the States has been given only on a condition that State imposes taxes both on local goods and outside goods. Article 304(a) came for consideration before this Court in several cases including the H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 773

[ASHOK BHUSHAN, J.]

Constitution Bench of this Court in State of Madhya Pradesh Vs. A Bhailal Bhai and Others 1964 6 SCR 261, in the above case the State has filed an appeal against judgment of the High Court ofM.P. by which judgment High Court had allowed the writ petition filed by the assessee permitting the refund of the tax assessed and collected from them hclding assessment and collection as violative of Article 301 and B not being saved by 304(a). The writ petitioners were carrying business of sale of tobacco in accordance with the notifications issued by the State Government, in the notification in question the tax was imposed only on imported tobacco and not on home grown tobacco which was noticed by the High Court in the judgment in following words: c "The High Court was of opinion on a consideration of the notification under which the tax was assessed that it imposed a tax only on imported tobacco and not on home grown tobacco and so it did not come within the D special provisions of Art. 304(a) of the Constitution and consequently the infringement of Art. 301 of the· Constitution which resultedFom the imposition of a tax on import of goods made the provisions void in law. The prayer for refund was allowed in the applications out of which C.A. Nos. 362-377, C.A. Nos. 861-867 of E 1962 and C.A. No. 25 of 1963 have arisen. The prayer was rejected in the remaining applications. In the present appeals the State of Madhya Pradesh challenges the correctness of the High Court :s decision that the taxing provision was unconstitutional and void and also the orders for refund made in some of the petitions mentioned above. ··

222. This Court came to conclusion that similar goods manufactured or produced in the State of the Madhya Bharat have not been subject to the tax which tobacco imported from other States have to pay hence tax was not saved under 304(a), affirming the judgment of the High Court this Court held as follows:

774 SUPREME r ;)URT REPORTS [2016] 10 S.C.R.

A "There can, therefore, be 110 escape from the conclusion that similar good5 mant!factured or produced in the Sate of Madhya Bharat have not heen subjected to the tax which tobacco leaves, mam!factured tobacco and tobacco used for Bi di manufacturing, imported from B other States have to pay on sale hy the importer. This tax is, therefore, not within the saving provisions of Art. 304(a). As already pointed out it contravenes the provisions of Art. 301 of the Constitution. The tax has therefore been rightly held by the High Court to he invalid. It is clear that the assessment of tax under these c notifications was thus invalid in law. "

224. The petitioners were asked to pay duty at the rate of Rs. 30, in respect of stocks of liquor found in the shop after April l, 1961. The E petitioners challenged the legality of the levy by filing a w1it petition, the following contention was raised before this Court:

"The appellants contended, inter alia that the State could levy under s.2 7 of the Bihar and Orissa Act duty on excisable articles produced or manufactured in the State and a countervailing duty on excisable articles imported into the State, imposed with a view to equalize the burden on the imported articles with the burden on manufactured articles in the State, hut no countervailing duty on liquor imported could he levied if there was in the year of licence no liquor, similar to the imported liquor, manufactured within the State, and as there was no distillery in the State manufacturing 'foreign liquor" the levy of countervailing duty was without authority of law." H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 775

[ASHOK BHUSHAN, J.]

225. The writ petition was dismissed by the High Court justifying A the levy of duties of excise as countervailing duties under Entry 51 List II in VII 1h Schedule. The judgment came to be challenged before this Court. This Court negativated the view of the High Court, justifying the levy as countervailing duty in following words: B "The fact that countervailing duties may he imposed at the same or lower rates suggests that they are meant to counterhalance the duties of excise imposed on good5 manufactured in the State. They may be imposed at the same rate as excise duties or at a lower rate, preswnahly c to equalise the hurden after taking into account the cost of transport from the place of manufacture to the taxing State. It seems, therefore, that countervailing duties are meant to equalise the burden on alcoholic liquors imported from outside the State and the burden placed by excise duties on alcoholic liquors manufactured or produced in the State. If no alcoholic liquors similar to those imported into the State are produced or manufactured, the right to impose counterbalancing duties of excise levied on the goods manufactured in the State will not arise. It may, therefore, be accepted that countervailing duties can only be levied if similar goods are actually produced or mam1factured in the State on which excise duties are being levied. "

226. This Court held that exercise of power under Article 304(a) can only be effective if the tax duty is imposed on goods imported from other States and the tax or duty imposed on similar goods manufactured or produced in that State are such. This Court held as no foreign liquor is manufactured or, produced in the State of Orissa, power to legislate given under Article 304(a) is not valid and following was laid down: G

"Exercise of the power under Art. 304(a) can on~v he effective if the tax or duty is imposed on goods imported H

776 SUPREME C:.JURT REPORTS [2016] 10 S.C.R.

A from other Sates and the tax or duty imposed on similar goods mam!factured or produced in that State are such that there is no discrimination against imported good~. As no foreign liquor is produced or manufactured in the State of Orissa the power to legislate given by 'Art. B 304 is not available and the restriction which is declared on the freedom of trade, commerce or intercourse by Art. 301 of the Constitution remains unfet.tered."

227. ln the above two Constitution Bench judgments, this Court C have clearly struck down levy of taxes on import of goods, when there was no taxes levied by State on the goods locally manufactured or produced or those goods were not locally available.

228. The question of discrimination between tax imposed on the imported goods and that of locally manufactured or produced goods is another factor, on which the levy can fall foul. In Firm A. T.B. Mehtabmajid and Company Vs. State of Madras and Anothers 1963 SCR Supl.(2) 435 a question of discriminatory levy under Article 304(a) was considered.

229. In a writ petition under Article 32 of the Constitution filed in this Court, rule 16 of Madras General Sales Tax (Turnover and Assessment Rules, 1939) was under challenge. Petitioner was a dealer in hides and skins who used to sell the hides and skins taken from outside the State of Madras as well as those taken from inside the State. Case of the petitioner was to the following effect: F "ft is contended.for the petitioner that the effect of this rule is that tanned hides or skins imported.from outside the State and sold within the State are subject to a higher rate of tax than the tax imposed on hides or skins tanned G and sold within the State, in as much as sales tax on the imported hides or skins tanned outside the State is on their sale price while the tax on hides or skins tanned within the State, though ostensibly on their sale price, is, in view of the proviso to cl. (ii) of sub-r. (2) of r. 16. H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 777

[ASHOK BHUSHAN, J.]

really on the sale price of these hides or skins when they are purchased in the raw condition and which is suhstantial~v less than the sale price of tanned hides or skins. Furthe1; for similar reasons. hides or skins importedfrom outside the State after purchase in their raw condition and then tanned inside the State are also subject to higher taxation than hides or skins purchased in the raw condition in the State and tanned within the State, as the tax on the former is on the sale price of the tanned hides or skins and on the latter is on the sale price of the raw hides or skins. Such a discriminatory taxation is said to offend the provisions of the Art. 304(a) c of the Constitution. Similar are the contentions for the intervenes in the case. "

230. This Court held that taxing laws can be restrictions on the D trade, commerce and intercourse and the tax which is affecting and discriminating goods of one State and goods of another may affect the free flow of trade and offend Article 301 and will be followed only if it comes within the tenn of Article 304(a). This Court held as follows:

E "ft is therefore now well settled that taxing laws can he restrictions on trade, commerce, and intercourse, if they hamper the flow of trade and if they are not what can be termed to he compensatory taxes or regulatory measures. Sales tax, of the kind under consideration here. cannot he said to he a measure regulating any trade or a compensatory tax levied/or the use of trading facilities. Sales tax, which has the effect of discriminating between goods of one State and goods of another, may affect the free .flow of trade and it will then offend against Art. 301 and will be valid only if it comes within the terms of Art. 304(a). Article 304(a) enables the Legislature of a State to make laws affecting trade, commerce and intercourse. It enables the imposition of taxes on good~ from other H

778 SUPREME COURT REPORTS [2016] 10 S.C.R.

A States ifsimilar good~ in the State are subjected to similar taxes, so as not to discriminate between the goods manufactured or produced in that State and the goods which are imported.from other States. This means that if the effect of the sales-tax on tanned hides or skins B imported.from outside is that the latter becomes subject to a higher tax by the application of the proviso to suh- rule of r. 16 of the Rules, then the tax is discriminatory and unconstitutional and must be struck down. "

c 231. This Couii allowed the petition by recording the following conclusion:

"We are therefore of opinion that the provisions of 1: 16(2) discriminate against the imported hides or skins D which had been purchased or tanned outside the State and that therefore they contravene the provisions of Art. 304(a) of the Constitution.

E 232. The law laid down by the above Constitution Bench judgment of this Court reaffim1s our view that for enabling a State to make a law under Article 304(a), following two preconditions, which are independent of each other have to be satisfied:

F a. Imposes on goods imported from other States or the Union Territories any tax to which similar goods manufactured or produced in that State are subject. b. So, however, as not to discriminate between goods so imported and goods so manufactured and produced; G

233. During the course of his submission Shri Salve has referred to enactments of State of Tamil Nadu, States of Kerala, State of Assam and State of Andhra Pradesh. Referring to Tamil Nadu Entry Tax on H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 779

[ASHOK BHUSHAN, J.]

Entry of Goods into Local Areas Tax Act, 2001, Shri Salve has contended that under Section 3 sub-section 2, tax is payable by an importer. Entry of goods into local area was defined as entry of scheduled goods into a local area from any place outside the State for consumption, use or sale. therein. His contention was that enactment clearly imposes Entry Tax only on goods imported and there was no Entry Tax on the local goods which clearly violates Article 304(a) of the Constitution oflndia.

234. We find force in the submission of Shri Salve, which is supported by the Constitution Bench judgments in State ofMadras Vs. Bhailal Balli and Kalyani Stores Vs. State of Orissa and Others. Imposition of tax only on imported goods when no such tax is levied on local goods violates Article 304(a). The Division Bench of the Madras High court in ITC Ltd. Vs. State of Tamil Nadu and Others /2007/ 7 VST 367 Madras has struck down the enactment. To the same effect, submissions have been made by Shri Salve with regard to Entry Tax enactments of State of Kerala, State of Andhra Pradesh and State of Assam. D

235. Articles 304(a) and 304(b) are joined with conjunction 'and'. Learned counsel for the petitioners who have challenged the various enactments of various States contend that clauses (a) and (b) of Article 304 have to be read conjunctively as they are not mutually exclusive. It is contended that tax Legislation by State has to comply both clauses (a) E and (b) whereas learned counsel for the States contends that word 'and' has to be read disjunctively. Legislation which is in accordance with Article 304(a) need not be in compliance of A1ticle 304(b). Learned counsel for the States has further contended that in fact Article 304(b) does not include tax legislation, hence, it is another reason to contend that tax legislation complying A1ticle 304(a) need not to comply Article 304(b).

236. We need to first advert to true meaning and purpose of word 'and' which joins both clauses (a) and (b) of Article 304. According to the principles of statutory interpretation the word 'and' is normally used conjunctively and word 'or' is nonnally used disjunctively but at times they are used as vice versa to give effect to the manifest intention of the Legislation as disclosed in the context of the Legislation. This Court in large number of cases have read word 'and' as 'or'. In 1969(1) SCR 219, this Court had occasion to consider the word 'and' as used in Section H

780 SUPREME COURT REPORTS [2016] I 0 S.C.R.

A 3(b) of the Drugs Act, 1940. Section 3(b)(I) which defines the Drug provided as:

"The definition of "drug" contained in S.3(b) is i11 the following terms :- B (ij all medicines for internal or exlernal use of human beings or animals and all substances intended to be used for or (in !he diagnosis, treatment), mitigation or prevention of disease in human beings or animals other than medicines and .substances exclusively used or c prepared for use in accordance with Ayurvedic or Unani systems of medicine ............... "

237. The issue before this Court as to whether word 'and' used in the Section 3(b )(I) between words "medicines and substances'' be read as 'or', this Court laid down the following:

"Now if the, expression "subs lances" is to be taken to mean something other than "medicine" as has been held in our previous decision it becomes difficult to understand how the word "and" as used in the definition of drug in Ll_(b) (i) between "medicines., and "substances" could have been intended to hal'e been used conjunctively. It would be much more appropriate in the context to read it disjunctively. In Stroud :5 Judicial Dictionmy, 3rd Ed. ii is stated at page 135 that "and" has Generally a cumulative, sense, requiring. the fulfillment <~(all the conditions that it joins toget!Je1: and herein it is the antithesis of "or". Sometimes. however; even in such a connection, it is, by force of a G contents, read as "or". Similarly in Maxwell on interpretation of Statutes, 11th Ed. it has been accepted that "to can:y out the intention of the legislature it is occasionally found necessary to read the conjunclions 'or ' and ·and' one for the other". H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 781

[ASHOK BHUSHAN, J.]

238. We may revert to the Constitutional Scheme to find out the A true purpose and object of the provision. Article 304 is an exemption granted to the State when State can impose taxes and impose restrictions on the freedom of trade and commerce which freedom is guaranteed under Atticle 301 of the Constitution of India. Article 304 begins with the words "Notwithstanding anything in Article 301 or Article 303, the B Legislature ofa State may by law-". Two sub-clauses (a) and (b) are enabling powers given to the State by which taxes can be imposed on imported goods and restrictions can be imposed on the freedom of trade, commerce or intercourse. In the event, we tend to read conjunction 'and' as 'or' it may mean that the State may exercise only one of the enabling powers as given in the clauses (a) and (b). It is not the intention c of Article 304 to empower the State to only exercise either of the powers, the clear intendment of the State is that the State may by law impose on goods imported from other States any tax- clause (a);and impose reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State - clause (b). The use of word 'may' in the beginning of Article 304 indicates that the power is enabling and States are entitled to exercise either or both the powers as may be required in the facts of the case.

239. Further, there is no compulsion on the State to exercise powers given in clauses (a) and (b) both. The State may choose to exercise only power given in clause (a) or power given in clause (b ). We, thus, are not persuaded to accept the contention that whenever State makes a law under clause (a) it has necessarily to comply clause (b) also. ShriArvind P. Datar, learned senior couusel, has submitted that use of word 'and' between clauses (a) and (b) of Article 304 is joint and several and has to be read as and/or. In support of his submission he has placed reliance on the ~tatutory Interpretation, Second Edition by RUTH SULLIVAN. Learned Author has expressed following views on 'And' or 'Or':

"2) "And" and "Or" G a) Joint or Joint and Several "and" Both "and" and "or" are inherentzv amhiguous. "And" is always conjunctive in the sense that it always signals the cumulation of the possihilities listed hefore and qfier H

782 SUPREME COURT REPORTS [2016) 10 S.C.R.

A the "and". However, "and" is ambiguous in that it may be joint or joint and several. Jn the case of a joint "and'', every listed possibility must be included: both (a) and (b); all of (a), (b), and (c). Jn the case of a joint and several "'and", all the possibilities may be, but need B not be, included: (a) or (b) or both; (a) or (b) or (c), or any of two. or all three. Jn other word~, the joint and several ··and" is equivalent to "and/or". Which meaning is appropriate depends· on the context. When "and" is used before the final item in a list of c powers, for example, it is joint and several: To carry out the purposes of this Act, the Governor in Council may make regulations respecting (a) the conditions on which licences may be issued; (b) the information and fees that firearm vendors may be required to fimiish; and (c) the annual fees that firearm owners may be charged. , In this provision the Governor in Council is empowered to make regulations on any one or more of the listed subjects. However, notice what happens if "may" is replaced by "shall". If the Governor in Council is obliged to make regulations respecting (a) conditions (b) information and (c) fees, the joint and several "and" F becomes joint. "

240. We find force in the submission and we are of the view that word 'and' between clauses (a) and (b) has to be read as joint and several, both meaning can be assigned as per requirement of a State G Legislature. One of the submissions raised by the learned counsel of the petitioners as noted above is that whenever State Legislature imposes a tax by law under clause (a), it has necessarily to go through the procedure provided under clause 304(b), since both the clauses are conjunctive and require compliance. We are not inclined to accept the extreme submission that in each and every case whenever law is framed under H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 783

[ASHOK BHUSHAN, J.]

clause (a) procedure under clause (b) has to be complied with. The A proviso to clause (b) 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, is confined to clause (b) which indicates that Constitutional Scheme does not provide that it is necessary to comply for framing law under clause (a) the requirement B of clause (b) also. We, however, hasten tn add that there may be cases where a law which may confonn the requirement under sub-clause (a) but still contains restrictions on the freedom of trade, commerce and intercourse, in that event, compliance of clause (b) may also be necessary, but a law framed in accordance with clause (a) imposing a tax which does not contain any restriction on the freedom of trade, c commerce and intercourse as envisaged in clause (b) need not go through the procedure as contemplated by clause (b ). We thus come to the· conclusion that with regard to law made by State Legislature exercising the power under clause (a) of Article 304 which does not impose any restriction on the freedom of trade, commerce and intercourse need not comply with Article 304(b). However, a law even though may comply with Article 304(a) but contains restrictions on the freedom of trade, commerce and intercourse has to obtain sanction of the President as contemplated by proviso to clause (b ). The requirement of obtaining previous sanction of the President has to be decided in accordance with the nature and content of the State Legislation.

241. One of the submissions which has been emphatically pressed by Shri P.P. Rao and Shri Rakesh Dwivedi, learned senior counsel appearing for the States is that requirement of obtaining previous sanction of the President by the State Legislature erodes the sovereignty of the F State Legislature of making law in the field allocated to them included in the VU'h Schedule read with Article 246. It is contended that a State's taxing power is a sovereign power granted to the State and insisting for previous sanction of the President for framing a taxing legislation by the State erodes their sovereignty and is also against the federal structure of the Constitution. We in the foregoing paragraphs have elaborately G considered the nature of federal structure of the Constitution of India, which is not a federal Constitution, as it is traditionally understood. This Court tenned the Constitution oflndia as quasi-federal, mixture offederal ·ai:id unitary elements, leaning more towards the latter, as noted above. The division of powers between Union and the Stat~ Legislatures is H

784 SUPREME COURT REPORTS [2016] 10 S.C.R.

A clearly defined and demarcated in the Constitutional Scheme. The Constitutional Scheme delineates the scheme of check and balances between the Union and States. Apatt from Article 304(b) following are the ether Constitutional provisions where Presidential sanction has been contemplated: B (1) 31-A. Saving of laws providing for acquisition of estates, etc.- (1) Notwithstanding anything contained in Article 13, no law providing for- c xxxxxxxxxxxxxxxxxx.xx Provided that where such law is a law made hy the Legislature of a State, the provisions of this article shall not apply thereto unless such law, having been D rese1Ted for the consideration of the President, has received his assent. (2) 31-C. Saving of laws giving effect to certain directive principles.- xxxxxxxxxxxxxxxxxxx E Provided that where such law is made by the Legislature of a State, the provisions of this Article shall not apply thereto unless such law, having been reserved for the consideration of the President, has received his assent. F (3) 213. Power of Governor to promulgate Ordinances during recess of Legislature.- xxxxxxxxxxxxxxxxxxx Provided that the Governor shall not, without G instructions from the President, promulgate any such Ordinance if - (a) a Bill containing the same provisions would under this Constitution have required the previous sanction of the President for the introduction thereof H

JINDAL STAINLESS LTD. v. STATE OF HARYANA 785

[ASHOK BHUSHAN, J.]

inio the Legislature; or A (b) he would have deemed it necessary to reserve a Bill containing the same provisions for the consideration of the President; or (c) an Act qf the Legislature of the State containing B the same provisions would under this Constitution have been invalid unless, having been reserved for the consideration of the President, it had received the assent of the Presidellf; or xxxxxxxxxxxxxxxxxx c (4) 254. Inconsistency between laws made by Parliament and laws made by tlte Legislature of States.- xxxxxxxxxxxxxxxxxxx (2) Where a law made by the Legislature of a State with respect to one of the matters enumerated in the D 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, !fit has been reserved for the consideration of the President and has received his assent, prevail in that State: xxxxxxxxxxxxxxxxxxx (5) 274. Prior recommendation of President required to Bills affecting taxation ill wlticlt States are interested.- (1) No Bill or amendment which imposes or varies u11y tax or duty in which States are interested, or which varies the meaning of the expression G "agricultural income" as defined for the purposes of the enactments relating to Indian income-tax, or which affects the principles on which under any qf the foregoing provisions qf this Chapter moneys are or may distributable to States, or which imposes any H

786 SUPREME COURT REPORTS [2016] 10 S.C.R.

A such surcharge for the purposes of the Union as is mentioned in the foregoing provisions of this Chapter, shall be introduced or moved in either House of Parliament except on the recommendation of the President. B (6)288. Exemption from taxation by States in respect of water or electricity in certain cases.- xxxxxxxxxxxxxxxxxxx ., (3) The Legislature of a State may by law impose, or authorize the imposition of. any such tax as is c mentioned in clause (J), but no such law shall have any effect unless it has, cifier having been reserved for the consideration of the President, received his assent; and if any such law provides for the fixation of the rates and other incidents of law by any D authority, the law shall provide for the previous consent of the President being obtained to the making of any such rule or order.