Article 254 of the Constitution makes provision, first what would happen in case of conflict between a Central and State law with regard to the subjects enumerated in the Concurrent List and secondly for resolving such conflict. Article 254 (1) enunciates the normal rule that in the event of conflict between a Union and State law in the Concurrent list the former prevails over the latter. Clause (1) lays down that if a State law relating to a Concurrent subject is repugnant to a Union law relating to that subject, then, whether the Union law is prior or later in time, the Union law will prevail and the State law shall to the extent of such repugnancy, be void.
To the general rule laid down in clause (1), clause (2) engrafts an exception, viz, that if the President assents to a State law which has been reserved for his consideration, it will prevail notwithstanding its repugnancy to an earlier law of the Union, both laws dealing with a Concurrent subject. In such a case the Central law will give way to the State law only to the extent of inconsistency between the two and no more.
The predominance of the State law may however be taken away if Parliament legislates under the proviso to clause (2). The proviso to clause (2) empowers the Parliament to repeal or amend a repugnant State law either directly or by itself enacting a law repugnant to State law with respect to the ‘same matter’. Even though the subsequent law made by Parliament does not expressly repeal a State law, even then the State law will become void as soon as the subsequent law of Parliament creating repugnancy is made.
A state law will be repugnant to the Union law when there is a direct conflict between the two laws. Such repugnancy may also arise when both laws operate in the same field and the two cannot possibly stand together.
HOECHST PHARMACEUTICALS V STATE OF BIHAR AIR 1983 SC 1019
List II Entry 54 —Taxes on sale and purchase of goods
List III Entry 33 –Trade and Commerce and the production supply and distribution of the products of any industry where the control of such industry is declared by Parliament by law to be expedients in public interest.
Law passed by Parliament under entry 33 List III
Essential Commodities Act 1955 has been passed by Parliament under entry 33 List III providing for regulation production supply and distribution of essential commodities
Under this law the Central government passed an order by under section 3 of the Act which stated that manufacturers or producers of goods could pass on the tax liability (sales tax and excise duty) to the consumers. In other words the sales tax could be recovered from purchasers of goods and products by the manufacturers and producers.
The Central law was on the subject of Price Fixation of essential commodities under entry 33 List III
Law passed by Bihar Legislature under Entry 54 List II
Section 5 of Bihar Finance Act 1981 prohibited the dealers to recover surcharge ( sales tax) from the purchasers .This law interdicted that no dealer liable to pay a surcharge in addition to tax payable by him shall be entitled to collect the amount of surcharge from the purchaser.
Section 5 provided for the imposition of a surcharge at 10 percent of the amount of tax payable by a dealer whose gross turnover during a year exceeded rupees 5 lakhs, in addition to tax payable by him’
Messrs Hoechst Pharmaceuticals and Glaxo Laboratories challenged the Bihar Act on the ground that under the Central law they were allowed to pass on the tax liability to consumers but the Bihar Act denied them
Argument of Petitioners
Price fixation is an occupied field by Central law and State law is repugnant to Central Law and hence void under Article 254(1).
Argument of Bihar State
Central law and State law operated in different and distinct fields. Under entry 54 List II
Under Entry 54 the State while levying a tax on sale or purchase of goods is competent to prohibit the dealers liable to pay a surcharge from recovering the same from the purchaser.
There was an apparent conflict between Central law which allowed manufacturers or producers of drugs to pass on the liability to pay sales tax to the purchaser and the State law which prohibits such manufacturers or producers to recover surcharge (sales tax) from purchasers
Argument of Petitioners
Since Parliament has chosen to occupy the field of price fixation under entry 33 List III the State legislature is not competent to pass a law under entry 54 List II prohibiting the passing of liability of tax to the purchasers, Hence the State law was repugnant to Central law and void under 254 (1)
The Supreme Court held
“The true principle in judging the constitutional validity of section 5 of the Act is to determine whether in pith and substance it is a law relatable to Entry 54 of List II and not whether there is repugnancy between section 5 of the Act and Price Control order made by the Central government under Essential Commodities Act under entry 33 of List III.”
“The question of repugnancy under Article 254 (1) between a law made by Parliament and a law made by the State legislature can arise only in case both the legislations occupy the same field with respect to one of the matters enumerated in the Concurrent List, and there is a direct conflict between the two laws. It is when both these requirements are fulfilled that the State law will to the extent of repugnancy, become void.”
“Article 254(1) has no application cases of repugnancy due to overlapping found between List II on the one hand and Lists I and III on the other. If such overlapping exists in any particular case the State law will be ultra vires because of the non-obstante clause in Article 246(1) read with the opening words “subject to” in Article 246(3). In such a case the State law will fail not because of repugnance to the Union law but due to want of legislative competence”
“The underlying principle is that the question of repugnancy arises only when both the legislatures are competent to legislate in the same field that is with respect to one of the matters enumerated in the Concurrent List. Article 254(1) cannot apply unless both the Union and State Law relate to a subject specified in the Concurrent List and they occupy the same field”
There cannot be any intrusion by a law made by Parliament under entry 33 List III into a forbidden field viz the State’s exclusive power to make a law with respect to levy and imposition of a tax on sale or purchase of goods relatable to Entry 54 List II. It follows that the two laws viz the price control order passed by the Central government under Essential Commodities Act passed under entry 33 List III and Section 5 of the Bihar Finance Act operate on two separate and distinct fields and both are capable of being obeyed. There is no question of any clash between the two laws and the question of repugnancy does not come into play
THE APPLICATION OF PROVISO TO ARTICLE 254(2)
Zaverbhai v State of Bombay (1954)
The Central Legislature passed Essential Supplies (Temporary Powers) Act in 1946. Section 7 of the Central Act provided for penalties for contravention of orders made under Section 3 of the Act. The punishment provided under Section 7 was imprisonment up to three years or with fine or both.
In 1947 the Bombay Legislature passed a law enhancing the imprisonment which may extend up to seven years and not less than six months plus fine.
Both the Central and State laws were on a matter enumerated in List III.
Since the State law was repugnant to Central law on the same matter the assent of Centre was obtained and under Article 254(2) the State law became operative in the State of Bombay despite being repugnant to Central Law
In 1950 Central Legislature enacted a new Section 7 and divided the offences in three categories in the Essential Supplies (Temporary Powers Act).
Section 7 of the Central Act also specified punishments separately for the three categories of offences. The Central law provided for imprisonment for three years or fine or both
Since the State Law had provided for imprisonment for 7 years and not less than six months plus fine there was an apparent repugnancy between the State law and Central law.
The Supreme Court held that the Bombay Act of 1947 was impliedly repealed by Section 7 which had amended the Central Act in 1950 and Section 2 of the Bombay Act cannot prevail as against Section 7 of the Essential Supplies (Temporary Powers) Act 1946 as amended in 1950.
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