Atma Ram Budhia v. State of Bihar (1952)

This is the module's statement of the proposition that a court leans towards constitutionality. It is worth noticing at once that the judgment does not use the word presumption. It states the point as a settled rule of preference between rival constructions: "It is well settled that where two constructions are possible, then the one which leans towards the constitutionality of the legislation should be accepted in preference to the one which has the effect of destroying it."

That formulation is the whole value of the case for this unit. The rule bites only where the language genuinely admits of two constructions; it is a tie-breaker, not a licence to rewrite; and the Court here applied it to a confessedly badly drafted taxing Act, then went on to sustain the Act on each of the four constitutional challenges made to it.

Three suits, two instituted at Ranchi and one at Gaya, were transferred to the High Court because of the constitutional question they raised in common: whether Part III of the Bihar Finance Act 1950 was without jurisdiction. The plaintiffs were owners of motor vehicles, and in one suit a passenger who travelled by bus and taxi and consigned goods by public carriers. They sued for a declaration that the Act was ultra vires the Bihar Legislature and for an injunction restraining the State from realising tax, calling for returns, or requiring security or accounts.

The Act received the Governor's assent on 27 March 1950 and came into operation on 1 April 1950. Under Part III the State levied a tax on all passengers and goods carried by motor vehicles and public carriers at two annas in the rupee on all fares and freights payable to owners; rules were notified on 24 July 1950. Section 12 was admittedly the charging section. Sub-section (1) provided that "there shall be charged, levied and paid to the State Government, a tax on all passengers carried by motor cabs, stage carriages and contract carriages and on all goods transported by public carriers at the rate of two annas in the rupee on all fares and freights payable to owners". Sub-section (3) obliged owners to pay the realised tax into the treasury and furnish returns; s. 13 dealt with assessment, s. 14 with composition, s. 26 with rule-making.

Four issues were framed: legislative competence; contravention of Arts. 14, 19 and 23; conflict with Part XIII, particularly Art. 301 and the proviso to Art. 304; and unconstitutionality by reason of delegation of legislative function.

The plaintiffs' case was that the intention "was not really to levy tax on passengers and goods carried by road" but to tax fares and freights payable to owners, the language being "simply camouflaged to make a show of legislative competence". They pointed to the machinery: sub-ss. (2) and (3) of s. 12 speak of "the full amount of tax due from him", s. 13 of tax due from the owner, s. 14 of the tax assessable on him; nowhere does the Act authorise owners to recover the tax from passengers or consignors, though such provisions appear in the Cess Act, the Bihar Entertainment Tax Act, the Bihar Electricity Act and the Bengal Ferries Act. A tax on passengers, they said, would be a fixed sum, not a quantity varying with fares.

Sarjoo Prosad J began with the whole-statute approach: in finding out the purposes of a legislation "all the various provisions of the Act have to be examined as a compact whole and not merely a few sections thereof in their isolation". He conceded the gap frankly — "there is apparently a lacuna in the Act, in that there is no specific provision authorising the owners of motor vehicles to realise the tax from passengers and goods carried on those vehicles."

But "the key to the whole statute lies in Section 12 of the Act which is the main section, the others being in the nature of corollaries". Sub-section (1) provides that the tax shall be on all passengers and goods transported; the latter part "only indicates the measure of the tax"; and "There is nothing in law to prohibit the tax being a variable quantity." Such a construction "is in consonance with the purpose of the Act and any other construction for which the plaintiffs contend would defeat that purpose."

It is at that point, with two constructions genuinely open, that the rule is invoked: "It is well settled that where two constructions are possible, then the one which leans towards the constitutionality of the legislation should be accepted in preference to the one which has the effect of destroying it." Once adopted, the later provisions fell into place as machinery for realising the tax "through the instrumentality of the owners", so that tax due from owners or assessable on them "must in the context be understood to be tax which has been collected by these owners", the collection being on behalf of the State.

The measure is not the subject. Following Ralla Ram v. Province of East Punjab, the Court held that the subject-matter of a tax is identified in the charging section; the fares and freights "have been used merely as a standard for calculating the tax, and there is nothing irrational in doing so." Willoughby was cited for the proposition that "any reasonable standard of measurement may be selected, and that the intrinsic character of the tax is not determined by the mode of measurement thus selected."

Implied powers. Maxwell was relied on: "Where an Act confers a jurisdiction, it impliedly also grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution", and "A duty or right imposed or given to one may also cast by implication a corresponding burthen on another." The statute "must be construed to have implicitly granted the power and the right to the "owners" to collect the tax in order to make the statute effective." Modifying language to save purpose. Again from Maxwell, where the ordinary meaning "leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence."

The limit acknowledged. The Court accepted that "the principle of necessary intendment should not be ordinarily extended to taxing statutes", and that where the only question is whether a particular item of property has been taxed "the Act must expressly and unequivocally supply the answer" — distinguishing that situation from the present one, where the vires of the Act were in issue. Narayan J put the same limit in the classic form: "There is no room for any intendment; there is no equity about a tax; ............you read-nothing in; you imply nothing; but you look fairly at what is said and at what is said clearly and that is the tax."

Competence was upheld on entry 56 of List II, which authorises taxes on goods and passengers carried by road, so that in legislating "the State legislature was acting within the field of its legislative competence". Fundamental rights. Article 23(2) "clearly makes an exception in favour of the State and enables the State to impose compulsory service for public purposes provided such an imposition is not vitiated on grounds of discrimination", and no discrimination was suggested. The owners therefore could not complain of duties imposed in the public interest to secure collection. Part XIII. The argument under Art. 19(1)(g) and Art. 304 failed on the pith and substance of the Act: "the statute professes and in fact is an Act to tax 'goods and passengers' and does not profess to regulate 'trade or commerce'", the directness of the legislation being the test, as in State of Bombay v. F.N. Balsara. Delegation. The constitutional legality of the Act could not be decided on the assumption that the prescribed or appellate authority would be someone unfit or too lowly; abuse of a power "sometimes occurs; but the validity of the law cannot be contested because of such an apprehension". As to s. 26(g), no rule had been shown to be beyond the Act, and in any event the provision was "sever-able from the other provisions of the statute".

Part III of the Bihar Finance Act 1950 is valid. The tax is on passengers and goods, fares and freights being only the measure; the owners' power to collect is implicit; the Act is within entry 56 of List II and offends neither the fundamental rights chapter nor Part XIII, and is not bad for delegation. The suits were dismissed with costs. Das J agreed, differing only in thinking the words "within that State" in Art. 304(b) wide enough to include freedom of trade within the State, though the Act did not interfere with it. Narayan J agreed, observing that the Act "cannot be regarded as an ably drafted Act" and that the absence of a collection provision was "a serious lacuna", but that the charging section was plain, that it is a cardinal rule of construction to "intend the Legislature to have meant what they have actually expressed", and that sub-s. (1) "cannot be rendered a nullity on the ground that the Statute does not contain a distinct provision authorising the owner to collect the taxes."