Civil Appeal No 3045 of 1980 etc
From the Judgment and order dated 361980 of the Kerala High Court in CRP No 2711 of 19178 section Padmanabhan and N Sudhakaran for the Appellant
Abdul Khader and KMK Nair for the Respondents
The Judgment of the Court was delivered by 665 NATARAJAN J
The appeals by special leave and the special leave petitions raise a common question of law regarding the scope and effect of Explanation II A to Clause 25 of Section 2 of the Kerala Land Reforms Act
1964 for short the Act hereafter as amended by Act
17 of 1972
It is however necessary to mention two matters even at the outset of the judgment
Had the judgments in the two appeals been pronounced after the decision in Velayudhan vs Aishabi AIR 1981 Kerala 185 by a Full Bench of the Kerala High Court the results would have been different and there would have been no necessity for these appeals being filed
Secondly the decision in Velayudhan vs Aishabi has become final since no appeal has been preferred to this Court against the judgment therein
What falls for consideration in all these cases is whether by reason of Explanation IIA to Section 225 of the Act a person in occupation of a homestead or a hut belonging to another during the period stipulated in the Explanation would become a Kudikidappuka ran and be entitled to Kudikidappu rights under the Act
For a proper understanding of the issue
we may make a brief reference to the history of the Legislation and to some of the earlier decision of the High Court
Originally
the occupants of dwelling houses or huts on homestead land belonging to others were only given a right to remove the materials of the super structure put up by them or alternately to seek monetary compensation thereof
The restricted conferment of rights exposed the occupants of huts belonging to others to indiscriminate eviction
To afford protection to them the erstwhile Cochin State and the Travancore State passed suitable enactments to safeguard their possession
Eventually when the Travancore Cochin State came to be formed an Act known as the Travancore Cochin Prevention of Eviction of Kudikidappukars Act 1950 was passed
Even under that Act protection was given only to those persons who had put up the super structures themselves and not to persons who were occupying huts put up by the land owners
Protection was extended to that class of persons also under the Kerala Stay of Eviction Proceedings Act
The said Act was amended by the Kerala Stay of Eviction Proceedings Act 1958
This was followed by the Kerala Land Reforms Act 1964 the Act
Clause 25 of Section 2 of the Act defined a Kudikidappukaran and Kudikidappu as under 25 Kudikidappukaran means a person who has neither a homestead nor any land exceeding in extent three cents in any city or major municipality or five cents in any other 666 municipality or ten cents in any panchayat area or town ship in possession either as owner or as tenant on which he could erect a homestead and a who has been permitted with or without an obligation to pay rent by a person in lawful possession of any land to have the use and occupation of a portion of such land for the purpose of erecting a homestead or b who has been permitted by a person in lawful possession of any land to occupy with or without an obligation to pay rent a hut belonging to such person and situate in the said land and Kudikidappu  means the land and the homestead or the hut so permitted to be erected or occupied together with the easement attached thereto
 There were two Explanation to Section 225
For our purpose it is enough if we set out Explanation II alone
It read as under Explanation II
Any person who was in occupation of a Kudikidappu on the 11th day of April 1957 and who continued to be in such occupation at the commencement of this Act shall be deemed to be in occupation of such Kudikidappu with permission as required under the clause
Emphasis supplied
In Gopalan vs Chellamma Madhavan Nair J of the Kerala High Court held without noticing a contrary view taken in an earlier case in Second Appeal No 558 of 1961 that to be a Kudikidappukaran the occupancy must have commenced with the permission of the owner of the land that the permission given should not have been withdrawn or terminated subsequently but must have continued to be effective till the relevant time that Explanation II would only have the effect of extending the permission initially granted to the date of the commencement of the Act and that a trespasser forcibly entering upon the land will not be entitled to claim rights as a Kudikidappukaran
Subsequent to this decision the Act underwent several amendments under the Kerala Land Reforms Amendment Act 1969
One of the changes effected was the substitution of Explanation II 667 extracted above by a proviso which read as under A Provided that a person who on the 16th August 1968 was in occupation of any land and the homestead thereon or in occupation of a hut belonging to any other person and who continued to be in such occupation at the commencement of the Kerala Land Reforms Amendment Act 1969 shall be deemed to be in occupation of such land and homestead or hut as the case may be with permission as required under this clause Emphasis supplied
The proviso came to be construed by Krishna Iyer J as he then was in Mariam and others vs Ouseph Xavier 19711 KLT 709 and the learned Judge differed only partly from the view taken in Gopalan vs Chellamma supra and held that the initial leave to occupy is obligatory to make the dweller a Kudikidappukaran and that the proviso operates only at the next stage and hence such protection was afforded only to persons who had initially obtained permission to occupy the homestead or hut and continued to be in occupation till the commencement of the Act but without reference to any further question as to whether the permission initially granted continued to subsist or had been subsequently revoked
After this decision was rendered the Legislature once again brought about certain amendments to the Act by means of the Kerala Land Reforms Amendment Act 1972
The Legislature omitted the proviso to Section 225 extracted above and introduced Explanation II A with retrospective effect
Explanation II A is to the following effect Explanation Il A Notwithstanding any judgment decree or order of any court a person who on the 16th day of August 1968 was in occupation of any land and the dwelling house thereon whether constructed by him or by any of his predecessors in interest or belonging to any other person and continued to be in such occupation till the 1st day of January 1970 shall be deemed to be a Kudikidappukaran emphasis supplied
Provided that no such person shall be deemed to be a Kudikidappukaran a in cases where the dwelling house had not been 668 constructed by such person or by any or his predecessors in interest if i such dwelling house was constructed at a cost at the time of construction exceeding seven hundred and fifty rupees or ii such dwelling house could have at the time of construction yielded a monthly rent exceeding five rupees or b if he has a building or is in possession of any land exceeding in extent three cents in any city or major municipality or five cents in any other municipality or ten cents in any panchayat area or township either as owner or as ten ant on which he could erect a building
The scope and effect of Explanation II A introduced by the Amending Act of 1972 came to be construed by a Division Bench of the Kerala High Court in Achuthan vs Narayani Amma 1980 KLT 160 AIR 1980 NOC 90
The Bench held that the effect of Explanation II A is to dispense with proof of permissive occupation either in sup port or rebuttal thereof and that even in the absence of such proof and without any enquiry as regards the original occupation a person who satisfies the conditions mentioned therein and does not fall within the ambit of the proviso thereto has to be deemed a Kudikidappukaran
However in Moideenkuktty vs Gopalan another Division Bench took a contrary view and held that the legal fiction which had all along existed right from 1955 under Section 42 of the Travancore Cochin Act 1955 Explanation II to Section 220 of the Agrarian Relations Act 1961 Explanation II To Section 225 of the Kerala Land Reforms Act 1964 and the proviso thereto as inserted by the Amending Act 1969 was only intended to protect a Kudikidappukaran who began his occupation of a Kudikidappu with permission by providing for the statutory continuance of the permission initially given till the commencement of each of the above mentioned Statutes and the Explanation II A introduced by Act 17 of 1972 had not altered or widened the legal fiction so as to cover a case of initial permission also
The Bench therefore held that unless initial permission for occupation of a homestead or hut is established Explanation II A will not be attracted
It was on account of the conflicting views taken by the two Division Benches in Achuthan s case supra and Moideenkukutty s case supra a reference was made to a Full Bench for decision 669 of the case in Velayudhan  Ors
vs Aishabi  Ors
supra The Full Bench after elaborately tracing the history of the Legislation and considering the changes brought about periodically by the Legislature to confer Kudikidappu rights on occupants of homesteads and huts and reviewing the earlier decisions came to the conclusion that Explanation II A could be treated as an addendum to Section 225 in order to widen the definition or alternately Section 225 can be treated as the main provision and Explanation II A as an exception thereto
In that view of the matter the Full Bench held that the decision in Achuthan s case supra laid down the correct law and the view taken in Moideenkukutty s case was not sustainable
It is in the conspectus of the several amendments made by the Legislature to Section 225 of the Act and the decisions rendered by the Kerala High Court we have to examine the contentions of the counsel for the appellants and the respondents in the respective appeals
The Full Bench of the Kerala High Court has analysed the position and summed up its view in the following manner regarding the purpose underlying the changes brought about in the Act and the new dimension that has now been given by Explanation II A to Section 225
The relevant passage in Velayudkan s case supra occurs in para 24 at page 192 of the report AIR 1981 Kerala 192 and is as follows When the words in occupation of a Kudikidappu  in Explanation II to Sec 225 in the KLR Act as originally enacted was held by this Court to be suggestive of the need for the person claiming Kudikidappu right thereunder to prove permissive occupation as on the relevant date 1141957 thereunder the legislature omitted the word Kudikidappu and resorted to the terminology of in occupation of any land and the homestead thereon or in occupation of a hut    in the proviso to Section 225 as amended by the Amending Act 1969
When this Court pointed out that still the emphasis of the fiction is on the permissive aspect of occupation and not on the status of the person as Kudikidappukaran and that the words homestead  and hut  are indicative of the requirement that permissive occupation as on the relevant date 1681968 has to be established the legislature reacted by omitting the words homestead  and hut  from the fiction and laying stress on the status as Kudikidappukaran by enacting Explanation II A to Section 225 of the KLR Act as per the
KLR Amending Act 1972
 670 At the outset it has to be pointed out that Explanation II A has been made a non obstante provision in order to give over riding effect to the Explanation over any judgment decree or order of any Court passed against a person who was on 1681968 in occupation of a homestead or hut thereon and who continued to be in such occupation till the 1st day of January 1970
Now if we look at Explanation II to Section 225 as it originally stood and the proviso which replaced it under the 1969 Amendment Act and Explanation II A which was introduced by the amending Act 1972 we may notice the significant changes made by the Legislature and the underlying reasons therefor
In Explanation II it was laid down that any person in occupation of a Kudikidappu during the prescribed period viz 1141957 to the date of commencement of the Act shall be deemed to be in occupation of such Kudikidappu with permission as required under this clause
Since it was held in Gopalan s case supra that the use of the words in occupation of a Kudikidappu with permission obligated an occupant of a Kudikidappu to prove initial permission to enter a homestead or occupy a hut on the land of another and further prove continuance of such permission till the relevant date the Legislature omitted the word kudikidappu in the proviso that was substituted for Explanation II under the 1969 Amendment Act
Even then it was held in Mariam s case supra that initial leave to occupy was obligatory to make an occupant a Kudikidappukaran because of the use of the words with permission as required under the clause in the proviso
Therefore what the Legislature has done while introducing Explanation by the 1972 Amendment Act is to do away with any reference to occupation being referable to any permission granted by the owner of the land or the hut as the case may be
Not only has the Legislature eschewed any reference to permissive occupation but has also given a mandate that everyone in actual occupation of any land and the dwelling house thereon between the dates 1681968 to 111970 irrespective of who built the dwelling place shall be granted recognition as a Kudikidappukaran
The words used are the person  in occupation  shall be deemed to be a Kudikidappukaran
 By reason of this explicit provision there is no scope whatever for restricting the class of persons entitled to the benefit of Explanation II A to only those who are able to prove obtainment of initial permission to occupy a homestead or a hut thereon
Explanation II A equates an occupant of a homestead or a hut thereon during the relevant period with a Kudikidappukaran as defined under the main clause
Such being the case anyone satisfying the requirements of Explanation II A would automatically be entitled to have the status of a Kudikidappukaran and to all the benefits flowing therefrom
In other 671 words a person falling under Explanation II A has to be statutorily deemed as one permitted to occupy a homestead or the hut thereon as envisaged in Sub Clauses a and b of Clause25 to Section 2
The only limitation placed by Explanation II A is that a person falling within the terms of the definition should satisfy the conditions laid down by the proviso to the Explanation viz that if he or his predecessor had not constructed the dwelling house the house should not costwise exceed Rs750 or rentwise exceed a monthly rent of Rs5 and the occupant should not be in possession of land exceeding three cents in extent in any city or major municipality or five cents in any other municipality or ten cents in any panchayat area or township either as owner or as a tenant on which he could erect a building
viewed in the proper perspective Explanation II A constitutes a second limb of Clause 25 of Section 2 devised by the Legislature to give full effect to its intendment viz entitling a person to claim Kudikidappu rights under Section 225 if he proves initial permission to occupy the land and the dwelling house without the need of proving continuous possession during a prescribed period of time or in the alternative to claim Kudikidappu rights under Explanation II A by proving continuous occupation during the period of time prescribed by the Explanation without the necessity of proving obtainment of initial permission to occupy the land and the dwelling house thereon
Explanation II A has got operative force of its own and this may be seen from the fact that Clause 25 of Section 2 as well as Sub Clause b of the proviso to Explanation II A lay down identical conditions which are to be satisfied by an applicant under the main clause or the Explanation for claiming rights as a Kudikidappukaran
Both the provisions lay down that any claimant for Kudikidappu rights should not have a homestead or any land exceeding in extent three cents in any city or major municipality or five cents in any other municipality or ten cents in any panchayat area or township in his possession either as owner or tenant on which he could erect a homestead
If the Explanation is subservient to Section 225 there was no need for the Legislature to have provided Sub Clause b to the proviso to Explanation II A
There is no repugnancy between the two provisions because Section 225 pertains to occupants of homestead of one category while Explanation II A pertains to homestead occupants of a different category
By introducing Explanation II A the Legislature has created a statutory fiction
As to how statutory fictions are to be interpreted is by now well settled
The approach formulated by Lord Asquith in East End Dwelling Co Ltd vs Finsbary Borough Council has been approved by this Court in a number of cases
The line of 672 approach set out by Lord Asquith is as under If you are bidden to treat an imaginary state of affairs as real you must surely unless prohibited from doing so also imagine as real the consequences and incidents which if the putative state of affairs had in fact existed must inevitably have flowed from or accompanies it
The statute says that you must imagine a certain state of affairs it does not say that having done so you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs
 This line of approach has been adopted by this Court in a number of cases and we may refer only to some of them
See MK Venkatachalam v Bombay Dyeing and manufacturing Co Ltd   Commissioner of Income Tax Delhi vs Teja Singh AIR 1959 SC 355 In Commissioner of Income Tax Delhi vs Teja Singh supra this Court pointed out that it is a rule of interpretation well settled that in construying the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate In Industrial supplies Pvt Ltd vs Union of India 1980 IV SCC 341 this Court observed as follows It is now axiomatic that when a legal fiction is incorporated in a statute the court has to ascertain for what purpose the fiction is created
After ascertaining the purpose full effect must be given to the statutory fiction and it should be carried to its logical conclusion
The court has to assume all the facts and consequences which are incidental or inevitable corollaries to giving effect to the fiction
The legal effect of the words as if he were  in the definition of owner in Section 3n of the Nationalisation Act read with Section 21 of the Mines Act is that although the petitioners were not the owners they being the contractors for the working of the mine in question were to be treated as such though in fact they were not so
 It has also to be borne in mind that the Kerala Land Reforms Act is a beneficial enactment intended to secure occupancy rights to farmers and agricultural labourers who do not have homestead lands and dwelling places of their own for their occupation
Incidentally we may mention that Act 17 of 72 has been subsequently included in the 9th Schedule to the Constitution and this would reflect in fuller mea 673 sure the anxiety of the Legislature to protect the rights of occupants of homestead and huts thereon
In the case of beneficial enactments the courts should follow a policy of benevolent and liberal construction
In Jeewanlal  Ors
vs Appellate Authority  it was observed as follows In construing a social welfare legislation the court should adopt a beneficent rule of construction and if a section is capable of two constructions that construction should be preferred which fulfils the policy of the Act and is more beneficial to the persons in whose interest the Act has been passed
When however the language is plain and unambiguous the Court must give effect to it whatever may be the consequence for in that case the words of the statute speak the intention of the Legislature
When the language is explicit its consequences are for the Legislature and not for the courts to consider
The argument of inconvenience and hardship is a dangerous one and is only admissible in construction where the meaning of the status is obscure and there are two methods of construction
In their anxiety to advance beneficent purpose of legislation the courts must not yield to the temptation of seeking ambiguity when there is none
In Bharat Singh vs Management of New Delhi Tuberculosis Centre New Delhi  Ors   the abovesaid policy was reiterated in the following words Now it is trite to say that acts aimed at social amelioration giving benefits for the have nots should receive liberal construction
It is always the duty of the court to give such a construction to a statute as would promote the purpose or object of the Act
A construction that promotes the purpose of the legislation should be preferred to a literal construction
A construction which would defeat the rights of the have not and the underdog and which would lead to injustice should always be avoided
 Therefore even if there is any little room for doubt whether Explanation II A can go to the extent of conferring Kudikidappu rights on persons who are not able to prove their lawful entry upon the land on the occupation of the dwelling house it has to be held that the Explanation has been specifically provided for giving greater thrust to 674 the intendment of the legislature and therefore the Explanation warrants a liberal and purposive interpretation so as to fulfil the object of the legislation and comply with the legislative intent
Mr Abdul Khader learned counsel for the respondent however sought to contend that whichever way Explanation II A is construed ie whether as a legal fiction or as a re enacted provision of substantive law the Explanation would still be trammelled by the basic prescription contained in the main clause regarding permissive occupation
The counsel argued that so long as clause 25 of Section 2 continued to define a Kudikidappukaran as a person who has been permitted  by a person in lawful possession  to have the use and occupation of a portion of the land for the purposes of erecting a homesteadhut belonging to him in the said land the Explanation would necessarily be governed and controlled by the words in Clause 25 of Section 2 and as such even if a person was in occupation of a homestead or hut between the period 1681968 to 111970 he will not be entitled to claim rights as a Kudikidappukaran unless he is able to prove grant of initial permission by the owner of the land or the hut as the case may be
It was argued that it was not the intention of the legislature to confer Kudikidappukaran rights on trespassers and unauthorised occupants
Our attention was drawn to the decisions in Sonawati  Ors
vs Shri Ram  Anr 1968 1 SCR 617 and Azad Singh  Others vs Barkat Ullah Khan  others  In these decisions the words Cultivatory possession occurring in the UP Zamindari abolition  Land Reforms Act and the UP Land Reforms Supplementary Act have been held to refer to lawful possession and as such they would not cover the case of a trespasser upon the land
These decisions can be of no avail in this case because Explanation II A has avoided any reference to permissive occupation and has straight away equated an occupant of a homestead during the prescribed period with a Kudikidappukaran as defined in the main clause
The Explanation has to be interpreted in the light of the words used by the legislature and having in mind the object sought to be achieved and the evil sought to be remedied by the Act Mr Abdul Khader alteratively contended that Explanation II A should be construed as a validating provision introduced by the legislature to overcome the limitations noticed by the Courts in the corresponding provisions in the previous enactments and as such the validation exercise cannot be given acceptance unless the validating law satisfied the tests prescribed therefor
The learned counsel referred to certain decisions in this behalf
viz Shri Prithvi Cotton Mills 675 Ltd  Anr
vs Broach Borough Municipality  Ors  Hari Singh  Ors
vs The Military Estate officer and Anr  and D Cawassi  Co Mysore vs The State of Mysore  Anr  AIR 1984 SC 1980 and argued that a validating law can be upheld only if the legislature has competence to legislate over the subject matter and secondly only if the legislature has removed the defects noticed by the Courts in the previous law
This argument fails to take note of the significant change the legislature has made in the wording of Explanation II A
It is therefore futile to contend that Explanation II A suffers from the same limitations the earlier provisions were thought to suffer from
After the arguments were concluded learned counsel for the respondents have circulated a copy of the judgment of this Court in CA No 165 of 1974 etc
Palayi Kizhakkekara Mathaiy s son KM Mathew  Anr
v Pothiyill Mommutty s son Hamsa Haji  Ors
 JT delivered on 2941987 wherein Section 7D of the Kerala Land Reforms Act 1963 as amended by the Kerala Land Reforms Amendment Act 1969 has been interpreted as conferring benefit thereunder only on persons whose occupation of the private forests or unsurveyed lands had a lawful origin and not on persons in unlawful occupation based on trespass or forcible and unlawful entry
We have carefully considered the judgment and find that the pronouncement therein does not in any way lend support to the contentions of the respondents herein
The scheme of Sections 7A 7B 7C 7D 8  9 of the Kerala Land Reforms Act 1963 is entirely different and this position is succinctly brought out by the following passage in the decision referred to above
The Court had summed up the scheme of the Act in the following words On a careful scrutiny of the aforesaid provisions it becomes abundantly clear that the intention of the legislature was to grant protection only to persons whose possession had a lawful origin in the sense that they had either bona fide believed the lands to be Government s land of which they could later seek assignment or had taken the lands on lease from person whom they bona fide believed to be competent to grant such leases or had come into possession with the intention of attorning to the lawful owners or on the basis of arrangements like varam etc
which were only in the nature of licences and fell short of a leasehold right
It was not within the contemplation of the legislature to confer the benefit of protection on persons 676 who had wilfully trespassed upon lands belonging to others and whose occupation was unlawful in its origin
The expression in occupation occurring in Section 7D must be construed as meaning in lawful occupation
 The clear finding in that case was that the appellant had claimed title on the basis of adverse possession and his own plea was that he had come into possession of the lands by trespass
He was therefore far removed from the class of persons whom the Legislature wanted to provide for viz persons who had entered upon land under a bona fide mistaken belief that the land belongs to Government and is capable of assignment or that the land belongs to the person who had granted them lease etc
The entry was therefore linked with a bona fide belief though mistaken about the character of the land and hence a trespasser is not entitled to claim any benefit
But in so far as Section 225 and Explanation II A of the Act are concerned the occupant of the homestead or hut is not enjoined to prove that he occupied the homestead or hut under a bona fide mistaken belief and that he was not a trespasser
He need only prove under the main clause that he had been permitted to occupy the homestead or hut and under Explanation II A that he had been in continuous occupation from 1681968 to 111970
Presumably the Legislature has thought that an occupant of a homestead or a hut would not have been allowed to remain in occupation for so long if he was a trespasser
There is therefore no conflict between the view taken by us in these appeals and the view taken by this Court in CA No 16574 etc
supra Having settled the question of law we will now deal with the appeals and the Special Leave Petitions on their merits
In CA No 3045 of 1980 it was found that the appellant was in possession of a hut from 1962 onwards
Nevertheless his claim for Kudikidappu rights under Explanation II A was rejected as he was not able to prove grant of permission to him by the respondent for occupying the hut
Since we have held that a claimant for Kudikidappu rights under Explanation II A who does not suffer any disqualification under the proviso need only prove the factum of possession between the prescribed dates for being placed on par with a Kudikidappukaran as defined in Section 225 of the Act the appeal has to succeed and will accordingly stand allowed
Consequently the order of the Land Tribunal Telicherry in OA No 22 of 1973 will stand restored but having regard to the lapse of time the appellant is directed to pay the entire amount towards the value of the hut and the land as fixed by the Land Tribunal within three months from today
677 As regards CA No 2505 of 1977 the appellant claimed Kudikidappu rights in respect of two sheds set out in plaint A  schedules
In so far as A schedule property is concerned the appellant is not entitled to any relief because it has been concurrently found by all the Courts that he had taken the shed on lease in the year 1954 under a rent chit for running a tea shop and that the shed continued to be in existence and it had not been rebuilt by the appellant
However in so far as the shed comprised in schedule is concerned the appellant has been denied relief solely on the ground that he had failed to prove grant of permission by the respondent and his predecessors in title to occupy the homestead and put up the shed
Having regard to the factum of occupation of the schedule property during the period envisaged by Explanation II A it follows that the appellant is entitled to a decree in respect of the schedule property
The appeal is therefore partly allowed in so far as the schedule property is concerned
The matter will stand remitted to the Land Tribunal Telicherry for determining the price of the schedule property for the directions regarding the manner in which the purchase price should be paid by the appellant Special Leave Petitions 204  205 have to fail because it has been concurrently found that the sheds occupied by the respondent in each case were included in the property leased to the petitioner though possession was allowed to be retained by the respondents and as such the respondents are entitled to claim Kudikidappu rights under Explanation II A of Section 225 of the Act As the respondents had been inducted into possession of the huts by the owner of the land and as the lease granted to the petitioner comprised the sheds occupied by the respondents also the petitioner cannot contend that the respondents are not entitled to seek the sale of ten cents of land adjoining each hut under Section 80B of the Act
Hence the Special Leave Petitions are dismissed
There will be no order as to costs in the appeals as well as the special leave petitions


Summary:
 The State of Andhra Pradesh in exercise of powers conferred under sub section 1 of section 9 of the Andhra Pradesh General Sales Tax Act 1957 made an order on January 27 1987 reducing the rate of tax on sale of Cement made to the manufacturing units of Cement products in the State
On the same date the State of Andhra pradesh made another order in exercise of the powers conferred by sub section 5 of section 8 of the  reducing the tax leviable under the said Act in respect of sales of Cement in the course of the inter State trade or commerce
The State of Karnataka in exercise of the powers conferred by sub section 5 of section 8 of the  issued a notification on 28101987 reducing the rate of tax payable under the said Act on the sale of Cement in the course of the inter State trade or commerce
The petitioners cement manufacturing concerns their shareholders and their authorised stockists filed this writ petition challenging the vires of section 85 of the Central Act 74 of 1956 and the notifications referred to above as ultra vires the provisions contained in Part XIII of the Constitution providing that trade commerce and inter course throughout the territory of India shall be free
According to the petitioners the three orders referred to above created trade barriers and directly impinged upon the freedom of trade commerce and inter course provided for in Article 301 of the constitution
Since the vires of section 85 of the Central Act 74 of 1956 had been assailed notice had been issued to the Union of India Attorney General and all the States but at the hearing of the writ petition the 575 petitioners gave up the challenge against section 85 of the Central Act
In view of that the writ petition was confined to the challenge against the two notification of the State of Andhra Pradesh and the lone notification of the State of Karnataka
The return to the rule nisi was made on behalf of the State of Andhra Pradesh
The State of Karnataka chose not to make any return to the rule nisi but its counsel joined at the hearing and contended that the order made by the Karnataka State did not affect the provisions in Part XllI of the Constitution
The Attorney General confined his submission to the scope of Part III of the Constitution and the effect of the notifications on the scheme contained in that part
Allowing the writ petition the Court  HELD The title for Part XIII
which contains the relevant Articles 30 l 302 303 and 304 is Trade Commerce and inter course within the Territory of India
 The true purpose of the provisions contained in Part Xlll of the Constitution as elucidated in the different decisions of the Constitution Benches of this Court is that the restriction provided for in Article 301 can within the ambit be limited by law made by the Parliament and the State legislature
No power is vested in the executive authority to act in any manner affecting or hindering the very essence and thesis contained in the scheme of Part XIII of the Constitution
lt is equally clear that the declaration contained in Part XIIl of the Constitution is against the creation of economic barriers and or pockets which stand against the free now of trade commerce and inter course
580F 587H 588A B Taxation is a deterrent against free flow
As a result of favourable or unfavourable treatment by way of taxation the course of flow of trade gets regulated either adversely or favourably
If the scheme which Part XIII guarantees has to be preserved in national interest it is necessary that the provisions in the Article must be strictly complied with
One has to recall the far sighted observations of Gajendragadkar
J in Atiabari Tea Co Ltd vs The State of Assam  Ors 1961 1SCR 609 and the observations then made obviously apply to cases of the type now before the Court588C D Under the first notification made under section 91 of the Andhra Pradesh General Sales Tax Act the rate of tax was reduced to 4 percent in respect of the sales made by the indigenous cement manufacturers to manufacturers of Cement products
The Tamil Nadu producers had sales officers in Andhra Pradesh and in regard to their sale to such manufacturers of cement products the benefit of the reduced rate of 576 taxation was not applicable
Two reasons were advanced by way of justification
One was that it was beneficial to the State revenue and secondly that it protected the local manufacturers too
It could not be demonstrated to the Court how the reduction in the rate of sales tax was beneificial to the State revenue
The other justification was what the provisions of Part XIII of the Constitution did not permit
The reasonable restriction contemplated in Part XIII have to be backed by law and not by executive action provided the same are within the limitations prescribed under the Scheme of Part XIII588D H The second notification related to the inter State transactions
Variation of the rate of inter State sales tax does affect free trade and commerce and creates a local preference which is contrary to the scheme of Part XIII of the Constitution
The notification extended the benefit even to the unregistered dealers
Both the notifications of the Andhra Pradesh Government were bad and hit by the provisions of Part Xlll of the Constitution
They could not be sustained in law592D In the case of the notification of the Karnataka State as already said no return had been made and no attempt had been made to place the facts and circumstances to justify the action
The notification suffered from the same vice as the second notification of the State of Andhra Pradesh suffered and no distinction could be drawn
The notification of the Karnataka Government was also bad in law
597E F The writ petition succeeded and the two impugned notifications of the Andhra Pradesh Government and the impugned notification of the Karnataka Government were quashed
592G Atiabari Tea Co Ltd vs The State of Assam  Ors  The Automobile Transport Rajasthan Limited vs The State of Rajasthan  Ors 1963 SCR 491 State of Madras vs NK Nataraja Mudaliar 1968 3 SCR 829 Gwalior Rayon Silk Mfg
Wvg Co Ltd vs The Assistant Commissioner of Sales Tax  Ors 1974 2 SCR 879 and State of Tamil Nadu etc
vs Sitalakshmi Mills etc   referred to