Sarwar Ali, A.C.J:— These two writ applications have been heard one after the other and are being disposed of by a common judgment as the main points involved are basically the same.

2. In both these writ applications section 5 of the Bihar Sales-Tax Third Ordinance, 1980 (Ordinance 115 of 1980) and section 5 of the Bihar Finance Act, 1981 are under challenge. So also the notifications issued under the aforesaid Ordinance. The impugned provision levies a surcharge on sales or purchase tax payable by every dealer whose gross turnover during a year exceeds Rs. 5,000,00/. The surcharge is not to exceed 10 percentum of the total amount of tax payable by the dealer, as may be fixed by the State Government by a notification. Annexure-1 to C.W.J.C 1788/81 is the notification enforcing the impugned provisions of the Sales-tax Ordinance. Annexure-2 is the notification fixing the rate of surcharge at 10 per centum.

3. The Ordinance aforesaid was followed by successive Ordinances and now Bihar Finance Act, 1981 has been enacted. The provisions are, for the present purposes, the same. Reference need only be made to the provisions of the Ordinance. Whatever argument or decision is applicable to the Ordinance shall apply to the Bihar Finance Act, 1981 as well.

4. Under the Ordinance sales tax is leviable on inter-State sales. Section 3 is the charging section. This has to be read along with Section 6. But for the purpose of computing the gross turnover not only intra-state sales, but sales made outside the State and in the course of inter State trade or commerce or export are also taken into account. Section 5 of the Ordinance which levies the surcharge states in sub-clause (3) that the dealer, who is liable to pay surcharge, shall not be entitled to collect the amount of such surcharge. Thus the position is that a person whose gross turnover is Rs. 5,000,00/- or more is liable to pay surcharge only on inter-state sals made by him, but for the purpose of computing the gross turnover outside sales, interstate sales as also the sales in course of export and import have also to be taken into account The impugned provision of the Ordinance is said to be ultra vires on the ground of legislative incompetence, and infraction of Articles 14 and 19(1)(g) of the Constitution. It was also contended that the provision of the Section 5(3) of Finance Act and the corresponding provision of the Ordinance will have an effect against the dealers who sell drugs, prices of which are governed under Durg (Price Control) Order, 1979 (hereinafter referred to as the ‘Order’.

5. Before I deal with the contentions raised in these writ applications I would refer to the decision of the Supreme Court in S. Kodar v. State Of Kerala 1. In this case the validity of Tamil Nadu Additional Sales-tax Act, 1973 was under challenge. Two grounds were put forth on behalf of the appellant before the Supreme Court. They were:—

(a) The State legislature had no competence to enact the law.

(b) The provisions of the impugned Act were violative of the fundamental rights guaranteed under Articles 19(1)(f), 19(1)(g) and Article 14 of the Constitution.

6. Section 2(1) of the Act aforesaid provided that in case of a dealer whose total turnover for a year exceeds Rs. 10,000,00/- the tax payable would be increased by additional tax at the rate of 5 per cent of the tax payable by the dealer. Sub-section (2) stated that the dealer shall not be entitled to collect the additional tax payable under the sub-section. The argument was that the additional tax was a tax on income of the dealer and as such outside the scope of Entry 54 of List II of the 7th Schedule of the Constitution. It was held that in reality it was a tax on the aggregate sale effected by a dealer during the year. It was an enhancement in the rate of sales-tax when the turnover of a dealer, exceeded Rs. 10,000,00/- a year. It was thus a tax on sale or purchase of goods and was covered by Entry 54 aforesaid. The contention of the appellant that the additional sales-tax is not a tax on sales, but on income of the dealer, was found to be without substance. The contention that the provisions of the Act were violative of the fundamental rights of the appellant under Article 19(1)(f) and 19(1)(g) was also negatived. It was held that the fact that the dealers could not pass on the incidence of the tax on sale to the purchaser did not contravene the rights of the petitioners guaranteed under the aforesaid articles of the Constitution. The Supreme Court further held that the tax was not confiscatory in the nature. It was observed in this context that “as long as the tax retains its avowed character and does not confiscate property in the guise of a tax, its reasonableness is outside judicial ken”. Classification of dealers on the basis of their respective turn over for the purpose of graded imposition so long as it is based on differential criteria relevant to the legislative object to be achieved is not unconstitutional.” It was explained that “The basis is that just as any tax upon income or upon transfers at death, so also in impost upon business, the little men, by reason of inferior capacity to pay, should bear a lighter load of tax, relatively as well as absolutely, than is brone by a big one.” It was further observed that the capacity of a dealer in particular circumstances, to pay tax is not an irrelevant factor in fixing the rate of tax and one index of capacity is the quantum of turnover. The argument that while a dealer beyond certain limit is obliged to pay higher tax, when others bear a less tax, and it is consequently discriminatory, really misses the point, namely, that the former kind of dealers are in a position of economic superiority by reason of their volume of business and form a class by themselves. They cannot be treated as on par with comparatively small dealers. An attempt to proportion the payment to capacity to pay and has to bring about a real and factual equality cannot be ruled out as irrelevant in the levy of tax on the sale or purchase of goods. The object of a tax is not only to raise revenue but also to regulate the economic life of the society.”

7. This decision of the Supreme Court has not deterred the petitioners and others from challenging the imposition of surcharge under the impugned provisions. They say that the contentions that they are now raising have not been considered by the Supreme Court in S. Kodar's case. They are thus entitled to challenge the provisions aforesaid. I shall now deal with the contentions that have been raised on behalf of the two petitioners. Some of the contentions are common. Some, however, are claimed to be applicable to the individual cases.

8. It is contended that the State legislature has no power to make law by which sale or purchase in course of inter-state trade or commerce is included in the gross turnover on the basis on which the liability to pay surcharge is determined. The reason assigned is that inter state sales and export sales are sales on which the State Legislature has no power to legislate upon. By including the said sales in the gross turnover of a dealer for purpose of fixing his liability to pay surcharge amounts to legislating in the forbidden field. The levy of surcharge after taking into account the inter-state sales and export sales is thus beyond the legislative competence of the State Legislature. In my opinion the contention is devoid of substance. The impugned provisions do not attempt to levy any tax on inter-State sales or export sales. Such sales are taken into account only for the purpose of selecting the class of dealers who are to be taxed. But the sales which are actually taxed (by levy of surcharge) are only intra-state sales. Intra-state sales are within the taxing power of the State Legislature, irrespective of the volume of turnover. In my view, therefore, the mere fact that inter-State sales and export sates have been taken into consideration for the purpose of ascertaining the gross turnover does not amount to levy or imposition of tax on such sales. Learned counsel for the petitioners referred to the decision in A.V Farnandez v. State of Kerala 2 and relied on paragraph 41 of the judgment. The situation discussed therein is different from the situation in the present case. Paragraph 44 of the judgment makes it clear that for the purpose of registration of dealer and submission of returns of sales tax such sales can be taken into consideration. This is what was observed in the said case:

“This position is not at all affected by the provision with regard to registration and submissions of returns of the sales tax by the dealers under the Act. The Legislature, in spite of its disability in the matter of the imposition of sales tax by virtue of the provisions of Article 286 of the Constitution, may for the purposes of the returns of sales-tax include these transactions in the dealer's turnover.

Such inclusion, however, for the purposes aforesaid would not affect the non-liability of these transactions to levy or imposition of sales tax by virtue of the provisions of Article 286 of the Constitution and the corresponding provision enacted in the Act, as above”.

9. In my view therefore, the vires of the legislation cannot be successfully challenged on the ground urged during the course of argument.

10. It was contended that the effect of the law is that two dealers may have inter state sales of less than Rs. 5,000,00/- yet if one of them has even a small inter-state sales so that the total of the two sales exceed Rs. 5,000,00/- he shall be liable to surcharge. There is thus discrimination between two persons similarly situated having the same quantum of inter-state sales, there being no rational basis for the classification. In my view, this argument is unreasonable. The basis of classification is the gross turnover. One, who has higher gross turnover and one who has lower turnover belong to two different classes or category. The imposition of tax based on the gross turnover is in my view, a rational classification. The classification can rest on the volume of business, including non-liable sales. It is based on capacity to pay the tax increase. The matter has been so fully discussed in S. Kodar's case by the Supreme Court itself that any further discussion is not called for.

11. On behalf of the petitioners in C.W.J.C 2771 of 1981 it was contended that in some cases dealers are liable to sales-tax at the first stage of sale while in other cases it is at the last stage. Thus one class of manufacturer may have to bear the burden of the taxes while another class of manufacturer bears no such burden. But it has to be observed that the fixation of the point at which sales tax is leviable is based on numerous administrative considerations. It is not possible to levy the tax at the same stage for all goods The law permits the fixation of tax of various stages. If the fixation of tax at different stages is permissible and that has not been challenged, the mere fact that one class of manufacturer may have to bear greater burden does not make the legislation discriminatory that the learned counsel is attempting to do is to compare those who do not have the liability to pay sales tax with those who have such liability. Such comparison for the purpose of involving Article 14, in my view impermissible.

12. Learned counsel contested that the percentage of tax on various goods is different In some cases for instance, it is only 3 per cent and in some, as here, it is 13 per cent. Thus 10 per cent of 3 per cent would be only 0.3 per cent, whereas in the other case it would be 1.3 per cent. It was, therefore, contended that there is no rational basis for imposing a higher burden of surcharge on the petitioner. Here again what the learned counsel looses sight of is the fact that rate of sales-tax for all goods is not, and need not be the same. But the percentage of the surcharge is the same. If some goods are liable to lesser percentage of sales tax surcharge would necessarily be lower. There is nothing irrational or arbitrary in this. In relation to the percentage of surcharge all are treated alike and the same percentage (10% at present) has to be paid by all dealers who come within the provision of section 5 of the Ordinance. It is but natural that if the percentage of initial tax is lower, the net effect of the Imposition of surcharge will also be lower.

13. It was contended by Shri Shree Nath Singh learned counsel appearing for the petitioners in C.W.J.C 2771/81 that the impugned provision is confiscatory. Reference was made to several decisions of the Supreme Court. The general proposition is not in dispute. A taxing statute is not wholly inmuned from attack on the ground of violation of Article 4 or 19(1)(g) of the Constitution. If it is confiscatory in character and effect it cannot be sustained. Each cases with have therefore to depend on its own fact. Other cases can only be illustrative. The case of Kunnothal Thathumi Moopil Nair v. State of Kerala 3 provides an illustration of a case where the legislation was held to be confiscatory. This was patent on facts. As pointed out by the Supreme Court the liability to lax in respect of the forest lands in that case amounted to Rs. 54,000/- whereas the annual Income of the petitioner for the time being was only Rs. 3100/- without making any deductions for expense on management. Such being the effect of the legislation it was held to be confiscatory. The case of Raja Jagannath Baksh Singh v. State of U.P . A.I.R 1962 S.C 1563. is illustration of a case where the impugned provision was not held to be confiscatory. Therein the petitioner had a net income of over 65,000/- rupees. The tax levy was to the extent of Rs. 14,882/86. It was held that the tax could not by any stretch of imagination be deemed to be confiscatory.

14. Learned counsel for the petitioners referred Annexure-8 to show that the imposition of surcharge would result to the petitioner's having to carry on trade and business at a loss. This makes the impugned provision confiscatory. I would only take Item no. 1 from Annexure-8 to illustrate the fallacy. It is accepted that the margin allowed by the manufacturer is Rs. 3150/-. The surcharge it is asserted would be Rs. 2052/-. This leaves a margin of Rs. 1098/. It is stated in the chart that the expenses of sale per vehicle is Rs. 1200/-. But that cannot be the criterion for judging the confiscatory nature of the provision. It is clear that the margin of gross profit on the sale of each vehicle is still Rs. 1098/-. It is for the petitioner to so manage his affairs that the expenses are commensurate with the expected profit.

15. That apart, the basic question is different. The decision of the Supreme Court. In Anakapalls Co-operative Agricultural & Industrial Society Ltd. v. Union of India . 1973 3 SCC 435 clarifies this. That was a case where statutorily a certain quantum of profit was to be provided for the producer of sugar. The prices were to be fixed under the terms of the Essential Commodities Act after taking that into account. The Supreme Court held that the price fixation could not depend upon its impact on conditional purchasers. It was the Industry as such which will have to be taken into consideration for the purpose of the aforesaid fixation. Here also it is not that an individual has been managing his affairs which would affect the validity of the provision. If it could be shown that no one, in the category of business which the petitioner was carrying on could make any profit, the position might have been different. The petitioner has not been able to show that imposition is such that no one in the situation of the petitioner could carry on trade or business without making any profit. Lest I may be misunderstood I would like to clarify that. I am not suggesting that if the taxing provision is such as to make it impossible for a category of businessman to make a profit, the provision would be necessarily unconstitutional.

16. It has also to be borne in mind that private contracts between dealers, or dealers and manufacturers, cannot control the power of legislation, particularly, in regard to imposition of taxes. If it were so it would be always possible for persons in trade and business to so frame their contract as to make it impossible to impose taxes. The parties must adjust their dealings or contracts taking into account the provisions of law including taxing statutes. So far as the present case is concerned, the petitioner has not been able to show that the imposition of tax is such as to amount to confiscation or even serious detriment in carrying on the trade or business.

17. A contention was raised on behalf of the petitioners in CWJC 1788/81 that there is inconsistency between Drug (Price Control) Order made under the provisions of the Essential Commodities Act and the impugned provision. Section 5(3) of the Finance Act and the corresponding provision of the Ordinance can have no effect against the petitioner-dealer who sells drugs, price of which is governed by the Order. The Order aforesaid has been promulgated in exercise of the power under Section 3 of the Essential Commodities Act, The Government has been given the power under clause 3 of the said Order to fix the maximum price at which bulk drugs specified in the first and second schedule of the Order have to be sold, In fixing the price the Government takes into consideration the average cost of production of such bulk drugs manufactured by an efficient manufacturer and allows a reasonable return on the share capital of the company plus free reserve, if any. The Central Government also fixes the retail price of the formulations according to the cost as laid down under clause 10 of the said Order. Clause 21 permits the retailer to realise from the purchaser local tax which includes sales tax apart from the price. Similar power to charge the local tax in respect of the bulk drug is given under clause 3(3) of the said Control Order. Thus in case of drugs which the petitioner manufacture and sells the price is determined on the basis of cost and a fair return, Section 5(3) of the Ordinance imposes prohibition to collect the amount of surcharge. The petitioner cannot thus add to the cost of the price by including the surcharge. This has to be paid out of the fair return on the manufactured goods which is allowed by the Drug Controller under the Order. The argument of the learned counsel, therefore, is that in view of the conflict between the Drug Control Order and the section 5(3) of the Ordinance, the latter will have no effect. Moreover if effect is to be given it would amount to unreasonable restriction on the petitioner's right to carry on business as guaranteed under Article 19(1)(g).

18. So far as the first limb of argument is concerned it has to be appreciated that the impugned legislation falls entirely within the State list. It is wholly effective even though there may be some conflict or overlapping with the Central Law. It would be sufficient only to refer to the decision of the Privy Council in Profullo Kumar Mukharji v. Bank of Commerce Ltd., Kbulana 6. Therein there was direct conflict between the provisions under the Negotiable Instrument Act (relating to interest) on the one hand and the Bengal Money Lenders Act on the other. It was pointed out by the Privy Council “subjects must still overlap and when they do the question must be asked what in pith and substance is the effect of the enactment of which the complaint is made in what list is its true nature and character to be found.” It was pointed out that it was only where its provision advance so far into federal territory as to show that its true nature is not concerned with the provincial matter that the provision can be said to be transgressing constitutionally permissible limit, Here, in my view, the impugned provision is squarely within the law making power of the State Legislature in Entry 54 of List II of 7th Schedule of the Constitution. Any incidental encroachment has to be ignored. Full effect has to be given to the provision, being constitutionally valid, and all incidental encroachment and overlapping are of no consequence. See also A.S Krishna v. State of Madras 7. Moreover the provision relied upon by the learned counsel merely makes it permissible for the seller to pass on burden of local taxes. It does not compel him do so. There is thus no question of disobedience of a mandatory direction under the Central Act. It has also to be observed that clause 16 of the Order vests the relevant authority with the power to revise the price. The petitioner can approach the relevant authority for the same. But the mere fact that the profit is to some extent adversely affected by the impugned provision does not amount to imposition of unreasonable restriction on the right of the petitioner to carry on trade or business. Indeed the profit at any point of time is reduced with the imposition of higher or further tax. If the contention of the petitioner is accepted it would mean that the taxing power would have to be obliterated or mutilated to a great extent. Such is not the position under our Constitutional scheme. It has not been shown that the impact of the surcharge is such as to make it impossible for persons in drug business to carry on trade or business because of the impugned imposition. The argument of learned counsel cannot, therefore, be accepted.

19. In my view, therefore, the challenge to the impugned provision fails. These writ applications are accordingly dismissed but in the circumstances without costs.

U.C Sharma, J.:—I agree.