2004 (1) TMI 71 - SC - VAT and Sales Tax

Constitutional significance centering around entries 52,54 and 97 in List I and entries 23,49,50 and 66 in List II of the Seventh Schedule to the Constitution of India as also the extent and purport of the residuary power of legislation vested in the Union of India.

Held that:- The federalism under the Indian context points out to the supremacy of Parliament and the legislative entries contained in different Lists of the Seventh Schedule must be construed accordingly.

The interpretation of the legislation will depend upon the legislative entries to which it relates and intent and purport of the makers of the Constitution and no principle of interpretation can be introduced to the effect that the court should lean towards a State.

Tea and coal being subjects of great importance, Parliament has taken over complete control of the entire field in respect thereof and other minerals in terms of the Tea Act, 1953, and the Mines and Minerals (Regulations and Development) Act, respectively.

Having regard to the purport and object of the said Parliamentary Acts and the declarations contained in section 2 of the 1957 Act and the 1952 Act, the State must be held to be denuded of its power to levy any tax on coal or tea, particularly, having regard to the provisions of sections 9, 9A, 13, 18 and 25 of the 1957 Act and sections 10, 13, 15, 25 and 30 of the Tea Act. Field of taxation on minerals is also covered by section 25 of the 1957 Act. The field of taxation under the Tea Act is specifically covered by section 25 thereof.

The State being owner of the minerals and grant of mineral right being controlled by the Parliamentary statute, the State is denuded of its power to impose any tax on mineral right in terms of entry 50 of List II of the Seventh Schedule to Constitution of India.

Having regard to the underlying object of the 1953 Act and the 1957 Act, even if the doctrine of pith and substance is applied, it may not be possible to hold that the State Legislature has only incidentally encroached upon the legislative field occupied by Parliament.

Levy of tax on coal bearing lands and mineral bearing lands where mining operations are being carried out through the process of incline or digging pits is illegal, inasmuch as the underground mining right would be larger in area than the surface right and, thus, it is not possible to uphold the validity of such statute with reference to the extent of the surface right as mineral is being extracted from a larger underground area. Different rights may belong to different persons over the same surface land and similarly different rights may belong to different persons in respect of or over underground rights and the impugned statutes having not made any provision of different method of levy, the impugned statutes are ultra vires.

The impugned provisions do not specify who would be liable to pay in relation to different rights and who would be considered to be the owner of the land and to what extent. If the extent of surface land is treated to be the unit, the same having regard to different mining rights granted to different persons over different minerals would all be liable to pay cess although they may not have any right over the surface at all or exercise such right thereover only over a part thereof.

As mineral bearing lands cannot be treated as an independent unit in respect of which tax can be invoked, the impugned Acts must be held to be unconstitutional.

Tax on lands and buildings in terms of entry 49 of List II of the Seventh Schedule to the Constitution of India can be levied on land as a unit and not otherwise.

As green tea leaves are marketable, the decision in Goodricke Group [1994 (11) TMI 353 - SUPREME COURT OF INDIA] having mainly been rendered on the premise that green tea leaves are not marketable must be held to have passed sub-silentio and, thus, does not lay down correct legal position.

In view of the definitions of "land" and "immovable property" contained in the Bengal Cess Act, 1880, as no road cess or public works cess can be imposed on standing crops or any kind of structures, houses, shops or other buildings which would include factories and workshops for processing tea, no levy by way of cess can be imposed by reason of the impugned Acts either on the mining leasehold or the tea estate containing standing crops as also houses and buildings.

Measure of a tax although may not be determinative of the nature thereof, the same will play an important role in determining the character thereof particularly keeping in view the purpose and object the Parliamentary Acts seek to achieve. In determining the legislative competence the taxing event also plays an important role.

The Tea Act having been enacted in terms of entries 10 and 14 of List I as also article 253 of the Constitution, the State is completely denuded of its legislative power in relation thereto. The expression "tea" should be given a broad meaning and entry 52 of List I of the Seventh Schedule to the Constitution should be interpreted in relation to tea having regard to the purport and object it seeks to achieve.