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19. For complete and effective adjudication of the controversy raised by the learned counsel for the parties mentioned hereinabove, after referring to the features of Act No. 13 of 1999, we consider it appropriate to discuss the proposition of law propounded by honourable Supreme Court, on the subject.

20. The aforesaid question argued before us, came up for consideration before a constitutional Bench of Supreme Court, in the year 1961, in the case of Atiabari Tea Co. Ltd. AIR 1961 SC 232, wherein, it is ruled that although, power of levying tax is essential for the very existence of the Government, its exercise must inevitably be controlled by the constitutional provisions made in that behalf. It cannot be said that the power of taxation per se is outside the purview of any constitutional limitations, envisaged in Part XIII to the Constitution. It is held in the case of Atiabari Tea Co. Ltd. AIR 1961 SC 232, that power of Parliament and Legislature of States, to make laws including laws imposing taxes, is subject to the provisions of the Constitution and that must bring in the application of the provisions of Part XIII. In case of Atiabari Tea Co. Ltd. AIR 1961 SC 232, it was ruled by majority view that Article 401, read with its proper context and subject to the limitations prescribed by the other relevant articles in Part XIII, must be regarded as imposing a constitutional limitation on the legislative power of Parliament and the Legislature of the States. Wherever it is held that Article 401 applies the legislative competence of the Legislature in question will have to be judged in the light of the relevant articles of Part XIII. In determining the limits of the width and amplitude of the freedom guaranteed by Article 401, a rational and workable test to apply would be : Does the impugned restriction operate directly or immediately on trade or its movement ? It is held in the case of Atiabari Tea Co. Ltd. AIR 1961 SC 232, that when it is said that the freedom of the movement of trade cannot be subject to any restrictions in the form of taxes imposed on the carriage of goods or their movement, all that is meant is that the said restrictions can be imposed by the State Legislatures only after satisfying the requirements of Article 404(b).

21. The intricate constitutional question canvassed at the Bar in the present case, before us, was raised before the Supreme Court, in the case of Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406, wherein, the majority view of 4 to 3, after taking into account ratio of majority view rendered by the then honourable five Judges of Supreme Court in Constitutional Bench case of Atiabari Tea Co. Ltd. AIR 1961 SC 232, substantially agreed with the proposition of law propounded in the case of Atiabari Tea Co. Ltd. AIR 1961 SC 232, with the following clarification in paragraph 17 of the majority view judgment, which reads thus :

22. The aforesaid decisions rendered by apex Court, in the cases of Atiabari Tea Co. Ltd. AIR 1961 SC 232 and Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406, came up for consideration before a Constitutional Bench of honourable five Judges of the Supreme Court, in the case of Khyerbari Tea Co. Ltd. v. State of Assam reported in AIR 1964 SC 925, wherein, the majority view ruled in paragraph 14, which reads thus :

"It would immediately be noticed that though the majority view in the Automobile Transport (Rajasthan) Ltd. case [1963] 1 SCR 491 ; AIR 1962 SC 1406, substantially agreed with the majority decision in the case of Atiabari Tea Co. [1961] 1 SCR 809 ; AIR 1961 SC 232, there would be a clear difference between the said two views in relation to the scope and effect of the provisions of Article 404(b). According to the majority view in the case of Atiabari Tea Co. Ltd. [1961] 1 SCR 809 ; AIR 1961 SC 232 if an Act is passed under Article 404(b) and its validity is impeached, then, the State may seek to justify the Act on the ground that the restrictions imposed by it are reasonable and in the public interest, and in doing so, it may for instance, rely on the fact that the taxes levied by the impugned Act are compensatory in character. On the other hand, according to the majority decision in the Automobile Transport (Rajasthan) Ltd. case [1963] 1 SCR 491 ; AIR 1962 SC 1406, compensatory taxation would be outside Article 401 and cannot, therefore, fall under Article 404(b)..........."

"In view of the grave impact of this judgment, when appeals from Rajasthan High Court came up for consideration in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan [1963] 1 SCR 491 ; AIR 1962 SC 1406 (hereinafter referred to as the "Automobile case"), a larger Bench was constituted and that Bench considered the question once again. The appellants in that case impugned the Rajasthan Motor Vehicles Taxation Act, 1951, inter alia, as violating Article 401. The High Court dismissed the petitions and this Court, by a majority of 4 to 3 held that the Act was valid and dismissed the appeals. The case practically overruled the decision in Atiabari case [1961] 1 SCR 809 ; AIR 1961 SC 232, insofar as it held that if a State Legislature wanted to impose tax to raise moneys necessary in order to maintain roads, that could only be done after obtaining the sanction of the President as provided in Article 404(b). In Khyerbari Tea Co. Ltd. v. State of Assam [1964] 5 SCR 975 ; AIR 1964 SC 925 it was said that the decision in Atiabari case [1961] 1 SCR 809 ; AIR 1961 SC 232 was affirmed in Automobile case [1963] 1 SCR 491 ; AIR 1962 SC 1406, with a clarification that regulatory measures or measures imposing compensatory tax do not come within the purview of restrictions contemplated in Article 401 and that such measures need not comply with the requirement of the provisions of Article 404(b). In whatever way one may choose to put it, the effect of the majority decision in the Automobile case [1963] 1 SCR 491 ; AIR 1962 SC 1406 is that a compensatory tax is not a restriction upon the movement part of trade and commerce."