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The principal contention advanced by the appellants in these appeals is that the field of price fixation of essential commodities in general, and drugs and formulations in particular, is an occupied field by virtue of various control orders issued by the Central Government from time to time under sub-s. (I) of s. 3 of the Essential Commodities Act, 1955 which allows the manufacturer of producer of goods to pass on the tax liability to the consumer and therefore the State Legislature of Bihar had no legislative competence to enact sub-s. (3) of s. S of the Act which interdicts that no dealer liable to pay a surcharge, in addition to the tax payable by him, shall be entitled to collect the amount of surcharge, and thereby trenches upon a field occupied by a law made by Parliament. Alternatively, the submission is that if sub-s (3) of s. 5 of the Act were to cover all sales including sales of essential commodities whose prices are fixed by the Central Government by various control orders issued under the Essential commodities Act, then there will be repugnancy between the State law and the various control orders which according to s. 6 of the Essential Commodities Act must prevail. There is also a subsidiary contention put forward on behalf of the appellants that sub-s. (I) of s. S of the Act is ultra vires the State Legislature in as much as the liability to pay surcharge is on a dealer whose gross turnover during a year exceeds Rs. 5 lakhes or more i.e. inclusive of transactions relating to Sale or purchase of goods which have taken place in the course of inter-state trade or commerce or outside the State or in the course of import into, or export of goods outside the territory of India. The submission is that such transactions are covered by Art. 286 of the Constitution and A therefore are outside the purview of the Act and thus they cannot be taken into consideration for computation of the gross turnover as defined in s. 2 (j) of the Act for the purpose of bearing the incidence of surcharge under sub-s. (1) of s. 5 of the Act.

These appeals were argued with much learning and resource particularly with respect to federal supremacy and conflict of powers between the Union and State Legislatures and as to how if there is such conflict, their respective powers can be fairly reconciled. In support of these appeals, learned counsel for the appellants have advanced the following contentions viz: (1) The opening words of Art. 246 (3) of the Constitution "Subject to clauses (1) and (2)"

make the power of the Legislature of any State to make laws for such State or any part thereof with respect to any of the matters enumerated in List II of the Seventh Schedule subject to the Union power to legislate with respect to any of the matters enumerated in List I or List III. That is to say, sub-s. (3) of s. 5 of the Act which provides that no dealer shall be entitled to collect the surcharge levied on him must therefore yield to s. 6 of the Essential Commodities Act which provides that any order made under s. 3 of the Act shall have effect notwithstanding anything inconsistent therewith contained in any enactment other then the Act or any instrument having effect by virtue of any enactment other than the Act. The entire submission proceeds on the doctrine of occupied field and the concept of federal supremacy. In short, the contention is that the Union power shall prevail in a case of conflict between List II and List III. (2) sub-s. (3) of s. 5 of the Act which provides that no dealer shall be entitled to collect the amount of surcharge levied on him, clearly falls within Entry 54 of List II of the Seventh Schedule and it collides with, and or is inconsistent with, or repugnant to, the scheme of Drugs (Price Control) order? 1979 generally so far as price fixation of drugs is concerned and particularly with paragraph 21 which enables the manufacturer or producer of drugs to pass on the liability to pay sales tax to the consumer. If that be so, then there will be repugnancy between the State law and the Control order which according to s. 6 of the Essential Commodities Act, must prevail. It is the duty of the Court to adopt the rule of harmonious construction to prevent a conflict between both the laws and care should be taken to see that both can operate in different fields without encroachment. It is therefore submitted that there is no question of repugnancy and it can be avoided by the principle of reconciliation. That is only possible by giving full effect to the non obstante clause in s. 6 of the Essential Commodities Act. (3) The provisions contained in sub-s. (3) of s. 5 of the Act is ex facie and patently discriminatory. The Essential Commodities Act treats certain controlled commodities and their sellers in a special manner by fixing controlled prices. The sellers so treated by this Central law are so circumstanced that they cannot be equated with other sellers not effected by any control orders. The class of dealers who can raise their sale prices and absorb the surcharge levied under sub-s. (1) of s. 5 and a class of dealers like the manufacturers andproducers of medicines and drugs who cannot raise their sale prices beyond the controlled price are treated similarly. Once the fact of different classes being separate is taken, than a State law which treats both classes equally and visits them with different burdens, would be violative of Art. 14. The State cannot by treating unequals as equals impose different burden on different classes. (4) The restriction imposed by sub-s. (3) of s. 5 of the Act which prevents the manufacturers of producers of medicines and drugs from passing on the liability to pay surcharge is confiscatory and casts a disproportionate burden on such manufacturers and producers and constitutes an unreasonable restriction on the freedom to carry on their business guaranteed under Art. 19 (1) (g). (5) Sub-s (1) s. 5 of the Act is ultra vires the State Legislature of Bihar insofar as for the purpose of the levy of surcharge on a certain class of dealers, it takes into account his gross turnover as defined in s. 2 (j) of the Act. It is urged that the State Legislature was not competent under Entry 54 of List II of the Seventh Schedule to enact a provision like sub-s. (1) of s. S of the Act which makes the grass turnover of a dealer as defined in s. 2 (j) to be the basis for the levy of a surcharge i. e. inclusive of transactions relating to sale or purchase of goods which have taken place in the course of inter-state trade or commerce or outside the territory of India. Such transactions are outside the purview of the Act and therefore they cannot be taken into consideration for computation of the gross turnover as defined in s. 2 (j) of the Act for the purpose of bearing the incidence of surcharge.
Provided that the aggregate of the tax and surcharge payable under this Part shall not exceed, in respect of goods declared to be of special importance in inter-State trade or commerce by section 14 of the central Sales Tax Act, 1256 (Act 74 of 1956), the rate fixed by section 15 of the said Act:
The expression "gross turnover" as defined in s. 2(j) Of the Act insofar as material reads: -
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"2(j) "gross turnover" means-
(i) for the purposes of levy of sales tax, aggregate of sale prices received and receivable by a dealer, during any given period, in respect of sale of goods (including the sale of goods made outside the State or in the course of inter-State trade or commerce or export) but does not include sale prices of goods or class or classes or description of goods which have borne the incidence of purchase tax under section 4."

There still remains the contention that for the purpose of levying surcharge it is impermissible to take into account the method of computation of gross turnover, the turnover representing sales in the course of inter-State trade and outside the State and sales in the course of export out of India. It is urged that the non-obstante clause in s. 7 of the Act has the effect of taking these transactions out of the purview of the Act with the result that a dealer is not required nor is he entitled to include them in the calculations of his turnover liable to tax thereunder. The submission is that sub-s. (1) of s. 5 of the Act is ultra vires the State Legislature in so far as for purposes of levying the charge, the incidence of liability of a dealer to pay such surcharge depends on his gross turnover as defined in s. 2 (j) of the Act. In support of the contention, reliance was placed on the following passage in the judgment of this Court in A. V. Fernandez v. State of Kerala(1):