Bengal Immunity Co v State of Bihar
Bengal Immunity Co. Ltd. v. State of Bihar
Citation: AIR 1955 SC 661
Facts of the Case:
The Bengal Immunity Company was engaged in manufacturing vaccines.
The State of Bihar passed a law imposing sales tax on medicines and vaccines, including those produced by Bengal Immunity.
Bengal Immunity challenged the law on the grounds that it violated Article 286 of the Constitution of India, which restricts states from taxing goods in certain circumstances, especially those in inter-state trade.
Legal Questions:
Whether the Bihar sales tax law was ultra vires the Constitution.
Whether Article 286 prohibited the state from levying tax on goods meant for inter-state trade.
The distinction between goods in the course of import/export or inter-state movement and goods manufactured within the state.
Judgment:
The Supreme Court, in its judgment, held that:
State cannot tax goods in the course of inter-state trade:
Article 286(1) bars states from imposing tax on goods that are in the course of import into, or export out of, the state.
Goods manufactured for inter-state trade are protected:
If goods are clearly destined for inter-state commerce, they cannot be taxed by the state of origin.
Definition of “in the course of import/export”:
The Court examined whether goods temporarily passing through the state for manufacturing or distribution are protected.
It emphasized that states can only tax goods within their territorial jurisdiction not intended for inter-state movement.
Outcome:
The Bihar sales tax was found to be ultra vires to the extent it taxed vaccines meant for inter-state trade.
Key Principles Established:
Article 286 protects inter-state commerce:
States cannot impose taxes on goods moving in the course of inter-state trade or commerce.
Scope of state taxation:
States can only tax goods consumed within the state and not those destined for inter-state markets.
Judicial review of state legislation:
The case reinforced the Supreme Court’s power to strike down state laws violating constitutional provisions on trade and commerce.
Significance of the Case:
Landmark case on inter-state trade and taxation under the Indian Constitution.
Reinforced Article 286, ensuring free flow of goods between states without undue taxation.
Influenced later cases on state taxation powers vs. inter-state trade, including CIT v. Bharat Sanchar Nigam Ltd. and others.
Conclusion:
Bengal Immunity Co. v. State of Bihar (1955) is a landmark case establishing that states cannot levy taxes on goods in the course of inter-state trade, ensuring that Article 286 protects the freedom of commerce between states while maintaining the limits of state taxation powers.
RELATED Blog
0 comments