Constitutional Boundaries on India's Taxing Power: How Articles 14, 246, and 265 Shape Tax Legitimacy

Introduction: When Sovereign Authority Meets Constitutional Discipline

A fundamental tension lies at the heart of every constitutional democracy's fiscal architecture — the State's inherent power to levy taxes is simultaneously vast and bounded. In India, this tension is resolved not by denying the sovereign nature of taxing power, but by subjecting it to a rigorous constitutional framework that demands competence, statutory authority, equality, and federal discipline.

The Supreme Court in Raja Jagannath Baksh Singh v. State of U.P. (MANU/SC/0184/1962 : AIR 1962 SC 1563) drew upon Chief Justice Marshall's celebrated observation in M'Culloch v. Maryland (4 Law Edn. 579 p. 607) to affirm that the power of taxation is essential to the very existence of government. Yet, acknowledging this essentiality is only the starting point. Under a written constitutional order, the sovereign's fiscal authority is not self-legitimising — it must earn its validity through strict adherence to constitutional norms.

This article examines how the Indian Constitution structures, distributes, and constrains the taxing power through four principal mechanisms:

  1. Procedural authorization under Article 265
  2. Legislative competence under Article 246 and the Seventh Schedule
  3. Fundamental rights discipline under Part III, particularly Article 14
  4. Federal trade protection under Part XIII, especially Articles 301 and 304(a)

The Dual-Key Framework: Articles 265 and 246

Article 265 — Statutory Authority as an Absolute Prerequisite

Article 265 of the Constitution lays down one of the most categorical prohibitions in India's constitutional text: "No tax shall be levied or collected except by authority of law." This provision is not a mere procedural formality — it is the primary safeguard against arbitrary executive imposition of fiscal burdens on the assessee.

The expression "authority of law" carries a precise legal meaning. As settled in Chottabhai v. Union of India (1962 SCR Suppl. 2 1006), this phrase refers exclusively to valid statutory law enacted by a constitutionally competent legislature. It does not permit executive orders, administrative circulars, or delegated instruments to serve as independent bases for tax imposition where the parent statute itself lacks adequate authority.

Equally significant is the judicial interpretation of the word "levy" in Article 265. The Court clarified that the term is not limited to the initial charge or imposition — it extends to and encompasses the entire assessment machinery and the collection process executed by the executive. This broader reading ensures that every stage of the taxation cycle, from the initial chargeability to the final recovery, must be traceable to a clear statutory provision.

In Asstt. CCE v. National Tobacco Co. of India Ltd. ([1972] 2 SCC 560), the Court reinforced this principle by holding that charging provisions in a taxing statute must be accompanied by a sufficiently robust machinery for computation. The character and structure of assessment provisions bear a direct legal relationship to the nature of the charge itself — an incomplete or ambiguous machinery may render even an otherwise valid charge legally unenforceable.

The corollary of Article 265's mandate is the strict construction rule in taxing statutes. In Commissioner of Customs v. Dilip Kumar & Co. ([2018] 95 taxmann.com 327 (SC)), the Supreme Court endorsed strict and literal interpretation of tax charging provisions. The liability of the assessee must be certain and unambiguous — there is no room for equity, presumption, or beneficial intendment when the State seeks to impose a fiscal burden. If the charging provision does not clearly bring a transaction or subject within its scope, the benefit of ambiguity goes to the assessee, not the revenue.

Key Principle: Every step in the taxation process — both substantive and procedural — must have clear, valid, and competent statutory backing. Gaps cannot be filled by executive discretion or judicial implication.

Article 246 and the Mutual Exclusivity of Taxing Fields

Constitutional legitimacy of a tax does not rest on Article 265 alone. A separate and equally fundamental requirement is that the legislature imposing the tax must possess legislative competence over the relevant taxing field. This competence is allocated through Article 246 read with the Seventh Schedule, which distributes legislative subjects among Parliament (List I), State Legislatures (List II), and the Concurrent List (List III).