TMI Blog1938 (10) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... he statement of facts and argu- ments submitted by the Advocate-General of India on behalf of the Government of India and by the Advocates-General of the Central Provinces and Berar, Bengal, Madras, Bihar and Orissa on behalf of the Provinces are printed below. Reference by the Governor-General. Whereas it appears to me that the following questions of law have arisen and are of such public importance that it is expedient that the opinion of the Federal Court of India should be obtained thereon, now therefore I, Victor Alexander John, Marquess of Linlithgow, Governor- General of India, hereby refer the said questions to the Federal Court of India for consideration and report thereon: "Is the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, or any of the provisions thereof and in what particular or particulars or to what extent ultra vires the Legisla- ture of the Central Provinces and Berar? " Case for the Governor-General in Council. 1.. The question referred to the Court by the Governor-General is: Is the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, or any of the provisions thereof and in what particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncroaches upon the Federal Legislative List schedule to the Government of India Act, 1935, and also offends against Section 297 (1) (b) of the same Act. (b) Section 100(1) of the Government of India Act, 1935, deals with the Federal Legislative List and confers on the Federal Legislature exclusive power to legislate with respect to matters mentioned in that list notwithstanding any powers conferred on Pro- vincial Legislatures by the Concurrent and Provincial Lists. The power conferred on the Provincial Legislatures to legislate with respect to matters on the Provincial List in Section 100 [sub-section (3)] is subject to the provisions conferring legislative power on the Federal Legislature by the two previous sub-sections. (c) The Federal legis- lative entry 45 is as follows: "Duties of excise on tobacco and other goods manufactured or produced in India except-(a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics; non-narcotic drugs; (c) medicinal and toilet preparations containing alcohol, or any substance included in sub- paragraph (b) of this entry." (d) It is contended that the taxation imposed by Section 3 of the impugned A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the State, from the price of the article as paid by the consumer. If there were no duty the consumer would pay a lower price for the article. The price, therefore, that he actually pays includes the duty; whence it follows that the duty itself is something deducted or subtracted from the actual price paid. The price in fact is divided into two parts, one part being subtracted from the whole for the benefit of the State, and the remainder going to the vendor." 9.. From these definitions it follows that a tax levied, inter alia, upon the retail sale of a home commodity and levied in such a manner as to enter into, and form an identifiable part of the price of the com- modity to the consumer is a duty of excise. 10.. Reliance is also placed on the following cases which lead to the same conclusion: (a) Commonwealth and Commonwealth Oil Refiner- ies, Ltd. v. South Australasia, 38 C.L.R. (1926) 408, where a tax of 3d. on every gallon of petrol sold for the first time was held to be a duty of customs or excise and one of the judges stated that an excise duty means a duty on the manufacture, production, etc., within the country itself and it matters not whether the duty is imposed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intoxicating liquor to be supplied in or to the club or on behalf of the club to the members thereof, in such form and containing such particulars as may be prescribed by the Commissioners, and every such statement shall be charged with an excise duty of six pence for every pound of the purchases shown in the statement." Legislative practice in India is similar, duties or fees on retail sales being provided for in all the Provincial Excise Acts. 13.. It follows therefore that even on the criterion of legislative practice, whether of the United Kingdom or of India, duties of excise may be levied at the sale stage as at any previous stages. 14.. The tax being bad for the above reasons so far as it falls or might fall on Indian Motor Spirits and Lubricants, the effect of the legislation in question is exactly the same as if it were directed in terms only against foreign spirit and lubricants. In other words, the effect is to discriminate between Indian Motor Spirit and Lubricants on the one hand and foreign motor spirit and lubricants on the other, and any such discriminatory Provincial law offends against Sec- tion 297(1)(b) of the Government of India Act, 1935. As part of the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme of distribution of legislative powers under that Act. Section 100 and the legislative lists thereunder must be interpreted according to the well established canons of interpreta- tion of the federal constitutions as laid down by the Judicial Committee of the Privy Council in the following cases: (a) Citizens' Insurance Company of Canada v. Parsons [1881] (7 A.C. 96). (b) Bank of Toronto v. Lambe [1887] (12 A.C. 575). (c) Mar- riage Legislation in Canada, In re ([1912] A.C. 880 at p. 887). (d) Great West Saddlery Company v. The King ([1921] A.C. 91 at pp. 100 and 116). (e) Attorney-General for Ontario v. Reciprocal Insurers ([1924] A.C. 328 at PP. 337 and 345). (f) James v. Commonwealth of Australia ([1936] A.C. 578, at p. 613). 10.. Para 7.-The illustrations chosen are far from apposite. Neither a postage stamp nor a railway ticket can be brought within the meaning of goods in entry No. 48 of the Provincial Legislative List read with the definition of this term in section 311. The former is a stamp for revenue collected. The latter is a receipt for the fare paid. So neither is a commodity sold. 11.. Para 8.-The definitions of "Excise duty" relied upon by the Governor-Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elements of a duty of excise are as stated. It is further denied that the tax imposed by Section 3 of the impugned Act is an excise duty. 15.. Paragraphs 12 and 13-(i) Legislative practice may be a useful but cannot be a conclusive test. Torn out of its fiscal and historical context legislative practice with respect to excise in England is positively misleading for the understanding of the same term in a recent enactment pertaining to India. The connotation behind the term "Excise" in the Government of India Act, 1935, is not as comprehensive as in the English fiscal administra- tion. A licence to sell or carry on a trade or occupation, taxes on animals and luxuries, which all come under "Excise" in the English legislative practice, have merited individual mention in the Provincial Legislative List under the Government of India Act and are given under separate heads outside excise. Cf. Entry No. 40 with entries No. 47 and No. 50 of the Provincial Legislative List. (ii) It is denied that the legislative practice relating to excise in India is the same as in England or that by virtue of entry No. 4o duties or fees on retail sales are provided for in the provincial Excise Acts. Lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sales or of gross receipts from sales..................The sales taxes now in effect are not easily classified. The most clearly defined type is the retail sales tax, which is levied upon the sale of tangible personal property at retail. Page No: 10 The tax may apply to sales made by wholesalers and manufacturers as well as by retailers. Or it may be still broader in scope and apply to the sales of services by public utilities and to admissions, in addition to sales of tangible property." [HARLEY LEIST LUTZ: Public Finance, at pp. 631-632-Third (1936) Edition]. 20.. The Provincial Government contends that a duty of excise (i) is a tax on commodities produced or manufactured in the taxing state; and (ii) is imposed on the production or manufacture of those commodities. (a) "By 'excise' is ordinarily meant a tax or duty on home-produced goods, either in the process of their manufacture or be- fore their sale to consumers, especially on spirits, beverages, gasoline, sugar and tobacco. It includes also certain licences, commodities, and licences to conduct certain trades. It is usual to exclude from excise sales or turnover taxes." (FINDLAY SHIRRAS: Science of Public Finance, Volu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in the same breath contravene Section 297(1)(b) by exercising the only power left to it under entry No. 48 of the Provincial Legislative List. 23.. The result of the foregoing analysis is as follows: (i) Sales tax and excise duty are different-one is a tax on a transaction and the other a tax on a commodity. (ii) That Parliament intended entry No. 45 of the Federal Legis- lative List and entry No. 48 of the Provincial Legislative List to be mutually exclusive is apparent from the fact that the stages at which the tax falls under the two entries are clearly demarcated. Under the former the tax is imposed at the stage of manufacture or production while under the latter the tax is levied at the sale. (iii) Legally there is no competition between entry No. 48 of the Provincial Legislative List and entry No. 45 of the Federal Legislative List. Such competition as is suggested arises only if we add the word "sold" in entry No. 45 of the Federal Legislative List after the words -manufactured or produced". For the conten- tion of the Governor-General in Council to prevail entry No. 45 of the Federal Legislative List must be read as if it were as follows: "Duties of excise on tobacco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " (per SIR MONTAGUE SMITH in Citizens' Insurance Company of Canada v. Parsons [1881] 7 A.C. 97 at p. 108). (b) Again in the same case at p. 109: "It could not have been the intention that a conflict should exist; and, in order to prevent such a result, the two sections must be read together, and the language of one interpreted, and, where necessary, modified, by that of the other. In this way, it may, in most cases, be found possible to arrive at a reasonable and practical construction of the language of the sections, so as to reconcile the respective powers they contain, and give effect to all of them." (c) "If they find that on the due construction of the Act a legisla- live power falls within Section 92, it would be quite wrong of them to deny its existence because by some possibility it may be abused, or may limit the range which otherwise could be open to the dominion parlia- ment" (per LORD HOBHOUSE in Bank of Toronto v. Lambe [1887] 12 A.C. 575 at P. 587). 24.. It is maintained that the impugned Act is intra vires the legislature of the Central Provinces and Berar. Case for the Advocate-General of Bengal (Sir A.K. Roy) 1.. The Province of Bengal accepts the statements in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to their place of manufacture or production. (b) Notwithstanding that a Provincial Legislature has the exclusive right to make laws with respect to a tax on the Sale of Goods without reference to their place of manufacture or production, the Federal Legislature has the exclusive power to make laws regarding the imposition of Duties of Excise on tobacco and other goods (with certain exceptions) manufactured or produced in India. 5.. This Province submits that List I and List II of the Legislative Lists were intended to define the exclusive legislative powers respectively of the Federal Government and of the Provinces, and, upon a fair and proper reading, there is nothing conflicting or irreconcilable between Entry No. 45, List I, and Entry No. 48, List II. There is no overlap- ping and no question of competition or encroachment can arise. 6.. This Province submits that the examples put forward in para- graph 7 of the said Case of the Governor-General in Council would not be "Taxes on the Sale of Goods" under the aforesaid Entry No. 48, List II, nor would they come within any of the other entries in the said List II, and would therefore be clearly outside the legislative powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to paragraphs 10 and 11 of the said Case of the Governor-General in Council, this Province submits that the decisions in the cases referred to do not afford any real assistance in construing the Government of India Act, 1935, or in determining the question in issue in the present reference. This Province denies that the effect of the defini- tions and decisions cited is as stated. 12.. With reference to paragraph 12 of the said Case, this Pro- vince submits that the observations in Croft v. Dunphy [1933] A.C. 156, and the alleged legislative practice referred to in the said paragraph have no bearing and are ineffectual for the purpose of nullifying or taking away from the legislative powers of a Province expressly given under Entry No. 48 of the Provincial Legislative List by the Government of India Act, 1935. 13.. With reference to paragraph 13 of the said Case, it is sub- mitted that, assuming that the Federal Legislature, in imposing a Duty of Excise under the aforesaid Entry No. 45 on the manufacture or pro- duction of any particular kind of goods, could provide for collection thereof at the stage of sale, it would only be as a matter of administrative convenience and cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith exclusive authority to legislate in regard to "tax on the sale of goods" and there is nothing in the Federal List to detract from or take away the power vested in the Provincial Legislature under item 48 of the Provincial List. 2.. The expression 'duty of excise on tobacco and other goods manufactured or produced in India' in item 45 of the Federal List is not susceptible of and cannot bear the interpretation sought to be placed upon the same by the Government of India. The words 'duties of excise' in that item have necessarily to be read with the words 'manufactured or produced', and a duty to attract item 45 must be on or must relate to manufacture or production. There is no warrant for construing the expression 'excise' without reference to the words following it and treating it as an isolated or independent expression and importing into it any special connotation derived from constitutions differently framed or enactments not in pari materia. 3.. There is no suggestion in the case for the Government of India that the tax dealt with in the Central Provinces Act does not fall within the terms of item 48 of the Provincial List. It is therefore unnecessary to deal with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... content of the words 'excise duty' as used in the constitution. The Australian decisions have also held, on the same ground, that a licence fee for sale does not come within the purview of the expression 'excise'. The Australian cases, therefore, far from helping the case for the Government of India, lend support to the case for the Central Provinces and Berar. 8.. In relying upon the analogies of other constitutions the Govern- ment of India mix up the connotation of the expression 'excise' in different constitutional and other enactments. 9.. The analogy of the United States is misleading. In the United States, the expression 'excise' is used to denote any tax levied for the grant of some privilege or one of the incidents or rights of ownership including an inheritance tax and even a tax upon licences to pursue occupations or to carry on business in a corporate capacity or on the transfer of property. See WILLIS Constitutional Law of the United States, pages 372 and 693. To appreciate fully the import of the expression 'excise' in the American cases, it is necessary to bear in mind the actual terminology employed in Sections 8, 9(4) and 10 of Article I of the American Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey 1 C.L.R. 497, at 506). 14.. Taxes on professions, trades, callings and employments, taxes on animals and boats, and taxes on luxuries including taxes on enter- tainments, etc., which are treated as part of excise in the English scheme of administration are expressly mentioned in the Provincial List and are put under a heading different from excise, which clearly points to the conclusion that the expression 'excise' is not used as understood in the English enactments. 15.. Any practice in India prior to the Government of India Act, 1935, cannot throw any light on the interpretation of the lists, as the distribution of Legislative power is a special feature of the Govern- ment of India Act, 1935: (cf. Attorney-General for Canada v. Attorney- General for British Columbia, [1930] A.C. III). 16.. If, as is contended in paragraphs 4 and 5 supra, the construc- tion of the lists is clear, no question of the dominance of federal over provincial power by force of Section 100 can possibly arise. 17.. The construction sought to be placed by the Government of India on the opening words of Section 100 (1) and (3) is unsustainable. The attempt on the part of the Government of India to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of federal constitutions, conferring power on the federal and provincial legislatures under separate or independent heads. Where a mutually exclusive power is given under independent heads to the Federal and, Provincial Legis- latures the two lists must be read together, each list in the light of the other, and the general expressions used in the Federal List which may take in subjects included in the Provincial List must receive a restricted construction so as to give effect to the scheme of Government under which Provincial constitutions are expected to function with plenary legislative power in respect of matters which are confided in or entrusted to them. Bank of Toronto v. Lambe, 12 A.C. 575; Citizens Insurance Co. v. Parsons, 7 A.C. 96; In re Marriage Legislation in Canada, [1912] A.C. 880; King v. Barger, 6 C.L.R. 41 at 72; Attorney-General for New South Wales v. Brewery Employees, 6 C.L.R. 4 at 503; Lefroy on Canada's Federal System, at p. 114. 21.. The two legislatures are within their appointed spheres absolute and supreme and the constitution must be construed as a whole so as to give effect to all its terms (Vide Citizens Insurance Co. v. Parsons, 7 A.C. 96; Hodge v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Governor-General in Council in paragraph 6 that entry No. 48 of the Provincial Legislative List, "Taxes on the sale of goods- must be read in view of sub-section (3) of Section 100 as if it ran as follows: "Taxes on the sale of goods, but excluding such taxes or duties as fall in the Federal Legislative List." (f) It is also contended in paragraph 13 that on the criterion of legislative practice, whether of the United Kingdom or of India, duties of excise may be levied at the sale stage or at any previous stage. (g) For the above reasons the Governor-General in Council has referred the case to the Federal Court under Section 213 of the Govern- ment of India Act, 1935, for the determination of the question: "Is the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, or any of the provisions thereof and in what parti- cular or particulars or to what extent ultra vires the Legislature of the Central Provinces and Berar?" 2.. It is the contention of the Advocate-General of the Province of Bihar that it was fully within the competence of a Provincial Legis- lature to have passed an Act of the kind the Legislative Assembly of the Central Provinces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not there and this is not permissible: (Thompson v. Gould Co. [1910] A.C. 409). 8.. If the contention of the Governor-General in Council based on certain decisions given in paragraph 10 be accepted, item 48 of the Provincial Legislative List would become redundant, because any tax on imported article in its imported state would be a customs duty, any tax on it after it is incorporated with other goods be an excise duty, and also any tax on the sale of goods produced in the country would also be excise duty and one cannot conceive of any position in which this item can be operative. 9.. The meaning of the terms customs duty and excise duties was discussed and considered in the case of Commonwealth Oil Refineries Ltd. v. South Australia [1926] 38 C.L.R. 408. In this Australian case, the State contended that the right of the State to tax commences as soon as a commodity enters the State boundary. The Commonwealth's con- tention was that levying a tax on a commodity soon after its entry would be a tax on import. In this case, STARKE, J., held: "Upon the first sale of the commodity in Australia, the importer, if the vendor must pay a duty. The duty is in this case also a burden up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case. (c) Patton v. Brady (184 U.S. 608) was a tax on manufacture of tobacco. (d) Rex v. Caledonian Collieries [1928] A.C. 358 is concerned with a different question altogether. 14.. It is contended that the effect of these decisions is not what is claimed for it. 15.. The impugned Act does not contravene the provisions of sub- sections (1) and (2) of Section 100 of the Government of India Act and therefore, the power given to the Provincial Legislature under sub- section (3) of Section 100 to make laws for the Province on any of the matters enumerated in the Provincial Legislative List is not controlled by any other provision of the Government of India Act. 16.. It has been suggested that according to the legislative practice in India, duties of excise may be levied at the sale stage, but a reading of the following Excise Acts among others will make it clear that the duty has been levied either at the stage of production on the output or at the first sale by the producer but never at the stage of retail sale, e.g., (a) According to the Sugar Excise Duty Act, 1934, the Duty of Excise is "levied on all sugar produced in any factory in British India" on the output. (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and "its pith and substance". Because, as laid down in Attorney-General for Ontario v. Reciprocal Insurers, ([1924] A.C. 328 at page 337). "It is the result of this investigation, not the form alone which the statute may have assumed under the hand of the draftsman, that will determine within which of the Legislative List the Legislation falls and for this purpose the Legislation must be scrutinised in its entirety." (STATEMENTS OF ARGUMENTS) 4.. It is respectfully urged that the contention of the Governor- General in Council that the impugned Act, or, for the matter of that, the provision contained in Section 3(1) is ultra vires the Legislature of the Central Provinces and Berar is erroneous and is not warranted by the different provisions of the Government of India Act, 1935, relied upon by the Governor-General in paragraphs 5, 6 and 7 of his Case. Particularly, the interpretation put upon Section 100 of the Govern- ment of India Act, 1935, is untenable. The intention of the section is to distribute the legislative powers as between the Provincial and Federal Legislatures. For the purpose of such distribution the subjects enumerated are divided into three Lists, called the Fed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny particular duty is one of excise or is one on the sale of goods, is not determined from the stage at which it is imposed and realised but from their nature. 8.. With regard to the apparent conflict between the Federal Legislative List, Item No. 45, and the Provincial Legislative List Item No. 48, the best solution is to be obtained "by looking to the terms of the instrument by which, affirmatively, the legislative powers were created, and by which, negatively, they are restricted"- WYNESS on Legislative and Executive Powers in Australia, page 11, paragraph 1. 9.. It is to be borne in mind that although the Legislatures in India are all subject to the legal supremacy of the Imperial Parliament, yet they are, within the appointed limits, not mere delegates, but supreme bodies and sovereign in a very wide sense. Therefore, it follows that if a taxation proposed under the impugned Act, answers the description of taxes proposed in the Provincial Legislative List, in this particular case Item No. 48, the Provincial Legislature is supreme in legislating on the subject notwithstanding that under a different head, namely, that of excise, the Federal Legislature may also tax the same good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pages 14-15.) 12.. The meaning of the words "Excise Duty" is "duty charged on home-goods during manufacture or before sale to home-consumers (Oxford Dictionary)." According to certain other dictionaries "Excise Duty" means an inland duty or impost on articles produced and con- sumed in a country or a tax on licences to pursue certain trades and deal in certain commodities. These meanings apparently have been attached to the word according to the legislative practice in England. But if in any particular Instrument Excise Duty and Tax on sale of goods are used in juxtaposition the necessary inference is that the use of the latter term should be taken to restrict the meaning of the former to that extent. In support of this argument the quotation below from the case of Citizens' Insurance Company of Canada v. William Parsons reported in [1881] 7 A.C. 96, per SIR MONTAGUE SMITH, J., will be quite apposite: "Notwithstanding this endeavour to give pre-eminence to the Dominion Parliament in cases of a conflict of powers, it is obvious that in some cases where this apparent conflict exists, the legislature could not have intended that the powers exclusively assigned to the provincial legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom "tax on sale of goods," the former will be interpreted as including the latter. 14.. Item No. 45 of the Federal Legislative List, as worded, would force upon oneself the construction that "Excie Duty" in the list refers to duty on "manufacture" in India irrespective of "consumption," whereas in England it includes duty on home consumption. This makes the intention of the Legislature clear that here the "Excise Duty" is one that is referable to manufacture only; whereas tax on consumer in India is a "tax on sale of goods". Besides, it is further suggested that the tax of the impugned Act may also come under "taxes on trades, callings etc." enumerated in item No. 46 of the Provincial Legislative List. "Excise Duty" should not be so interpreted as to make all these items in Provincial Legislative List as of no effect with regard to the articles produced or manufactured in India. 15.. The cases relied upon in paragraph (10) of the Governor- General's case have been sufficiently replied in paragraph (13) of the case by the Government of the Central Provinces and Berar and the undersigned is in full agreement therewith. These cases do not deal with cases in which apparently conflicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the provisions thereof, and in what particular or particulars, or to what extent, ultra vires the Legislature of the Central Provinces and Berar?" The Court directed notice of the Reference to be given to the Government of India and the Provincial Government; and intimated that in view of their contingent interest in the matter, the other Provinces ought to be informed. This the Advocate-General of India undertook to do; and subsequently leave was given to the Advocates- General of Bengal and Madras to appear and argue in support of the case of the Government of the Central Provinces and Berar, not on behalf of any particular Province but as representing the general pro- vincial interest. The Court is much indebted to all the counsel engaged for the assistance which they have afforded it. Notwithstanding the very wide terms in which the Special Reference is framed, the question to be determined lies essentially in a small compass. It has arisen in the following way. Section 3(1) of the Provincial Act, to which it will be convenient to refer hereafter as the impugned Act, is in these terms: "There shall be levied and collected from every retail dealer a tax on the retail sales of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, "notwithstanding anything in the two next succeeding sub-sections" of that section. Sub-section (2) is not relevant to the present case, but sub-section (3) is, as I have stated, the enactment which gives to the Provincial Legislatures the exclusive powers enu- merated in the Provincial Legislative List. Similarly Provincial Legis- latures are given by Section 100(3) the exclusive powers in the Provincial Legislative List "subject to the two preceding sub-sections," that is, sub-sections (1) and (2). Accordingly, the Government of India further contend that, even if the impugned Act were otherwise within the competence of the Provincial Legislature, it is nevertheless invalid, because the effect of the non obstante clause in Section 100(1), and a fortiori, of that clause read with the opening words of Section 100(3), is to make the federal power prevail if federal and provincial legislative powers overlap. The Provincial Government, on the other hand, deny that the two entries overlap and say that they are mutually exclusive. The Government of India raise a further point under Section 297 of the Constitution Act, but it will be more convenient to deal with this separately and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to stretch or pervert the language of the enactment in the interests of any legal or constitutional theory, or even for the purpose of supplying omissions or of correcting supposed errors. A Federal Court will not strengthen, but only derogate from, its position, if it seeks to do anything but declare the law; but it may rightly reflect that a Constitution of government is a living and organic thing, which of all instruments has the greatest claim to be construed ut res magis valeat quam Pereat. Disputes with regard to central and provincial legislative spheres are inevitable under every federal Constitution, and have been the subject-matter of a long series of cases in Canada, Australia and the United States, as well as of numerous decisions on appeal by the judicial Committee. Many of these cases were cited in the course of the argu- ment. The decisions of Canadian and Australian Courts are not binding upon us, and still less those of the United States, but, where they are relevant, they will always, be listened to in this Court with attention and respect, as the judgments of eminent men accustomed to expound and illumine the principles of a jurisprudence similar to our own; a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more fully expounded. After pointing out that with regard to certain classes of Dominion (or Central) subjects, generally described in Section 91 of the British North America Act, legislative power may nevertheless reside as to some matters falling within that general description in the Legislatures of the Pro- vinces, under Section 92, the Committee proceeded thus: "In these cases it is the duty of the Courts, however difficult it may be, to ascertain in what degree, and to what extent, authority to deal with matters falling within these classes of subjects exists in each Legislature, and to define in the particular case before them the limits of their respective powers. It could not have been the intention that a conflict should exist; and in order to prevent such a result, the two sections must be read toge- ther and the language of one interpreted, and, where necessary, modified by that of the other. In this way it may, in most cases, be found pos- sible to arrive at a reasonable and practical construction of the langu- age of the sections, so as to reconcile the respective powers they contain, and to give effect to all of them. In performing this difficult duty it will be a wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of excise; and the expression was still later extended to licence fees imposed for revenue, administrative, or regulative purposes on persons engaged in a number of other trades or callings. Even the duty payable on payments for admission to places of entertainment in the United Kingdom is called a duty of excise; and, generally speaking, the expression is used to cover all duties and taxes which, together with customs duties, are collected and administered by the Commissioners of Customs and Excise. But its primary and fundamental meaning in English is still that of a tax on articles produced or manufactured in the taxing country and intended for home consumption. I am satisfied that that is also its primary and fundamental meaning in India; and no one has suggested that it has any other meaning in entry (45). It was then contended on behalf of the Government of India that an excise duty is a duty which may be imposed upon home-produced goods at any stage from production to consumption; and that therefore the federal legislative power extended to imposing excise duties at any stage. This is to confuse two things, the nature of excise duties and the extent of the federal legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee that in no circumstances could an excise duty be levied at a stage subsequent to production or manufacture. If therefore a Legislature is given power to make laws 'with respect to' duties of excise, it is a matter to be determined in each case whether on the true construction of the enactment conferring the power the power itself extends to the imposing duties on home-produced or home-manufactured goods at any stage up to consumption, or whether it is restricted to imposing duties, let us say, at the stage of production or manufacture only. A grant of the power in general terms, standing by itself, would no doubt be construed in the wider sense; but it may be qualified by other express provisions in the same enactment, by the implications of the context, and even by considerations arising out of what appears to be the general scheme of the Act. The question must next be asked whether such a tax as is imposed by the impugned Act, though described as a tax on the sale of goods, could in any circumstances be held to be a duty of excise; for it is common ground that the Courts are entitled to look at the real substance of the Act imposing it, at what it does and not merely at what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislative spheres. In the United States the Central Legislature has power to levy "taxes, duties, imposts and excises", provided that they are uniform through- out the States. This is not an exclusive power, and the States can levy what taxes they like (other than imposts or duties on imports or exports), subject to the provisions of the Constitution, though certain of those provisions, such as the commerce clause, operate in practice as a very effective restriction upon State powers. Only in the Indian Constitution Act can the particular problem arise which is now under consideration; and an endeavour must be made to solve it, as the judicial Committee have said, by having recourse to the context and scheme of the Act, and a reconciliation attempted between two apparently conflict- ing jurisdictions by reading the two entries together and by interpreting, and, where necessary, modifying, the language of the one by that of the other. If indeed such a reconciliation should prove impossi- ble, then, and only then, will the non-obstante clause operate and the federal power prevail; for the clause ought to be regarded, as a last resource, a witness to the imperfections of human expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed by a large number of the State Legislatures in the United States seem to be often of the latter variety. [H.L. Lutz, Public Finance (3rd Ed., 1936) ch. 26]. Two citations from these writers will be sufficient to show that neither "turnover tax" nor "sales tax " has yet achieved a recognized and certain meaning: "The scope of sales and turnover taxes has varied greatly. Some extended to all transactions, both wholesale and retail, and others to wholesale transactions only. The first of these are usually called turnover taxes. Certain taxes include both goods and services, while others include only goods. The German turnover tax is an example of a tax which includes nearly every type of transaction in the line of goods and services. " [Comstock, ibid p. 113]. And again: "The tax (i.e., the sales or turnover tax) may be general, as in France or Germany, or retail transactions may be excluded, as in Belgium. It may be, as is common in the States of the American Union, confined to retail transactions. It may be imposed, as in Canada and Australia, as a producers' or manufacturers' tax, and it may be on classified industries or trades only. It may be levied on nearly all goods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on when it would have been so simple a matter to make that intention clear beyond any possibility of doubt. I therefore proceed to inquire if it is reasonably possible to avoid the conflict by construing the power to make laws 'with respect to' duties of excise as not extending to the imposition of a tax or duty on the retail sale of goods. This is the crucial issue in the case. In my opinion the power to make laws with respect to duties of excise given by the Constitution Act to the Federal Legislature is to be construed as a power to impose duties of excise upon the manufacturer or producer of the excisable articles, or at least at the stage of, or in connexion with, manufacture or production, and that it extends no further. I think that this is an interpretation reasonable in itself, more consonant than any other with the context and general scheme of the Act, and supported by other considerations to which I shall refer. I have said that it seems to me impossible, without straining the language of the Act, to construe a power to impose taxes on the sale of goods as a power to impose only turnover taxes. To construe the power to impose duties of excise as I think it ought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an excise duty at a stage later than production or manufacture was obviously regarded as an unusual thing and that the duty about which the litigation arose was not intended as a permanent duty but was imposed once for all. The other case was Commonwealth Oil Refineries Co. v. South Australia 138 Commonwealth L.R. 408]. There a State law had (inter alia) purported to impose an additional income-tax (for so the duty was described) at the rate of 3d. for every gallon of motor spirit sold by any person who sold and delivered it within the State to persons within the State for the first time after its production or manufacture, but not including any purchaser who subsequently sold it. It was argued that this was in substance a duty of excise which under the Constitution only the Commonwealth had the right to impose, and that contention prevailed. It might at first appear that the deci- sion supported the Government of India's case; for, as already pointed out, the taxing power of the Australian States is unlimited, save in so far as the Constitution reserves the right of imposing certain specified taxes to the Commonwealth and indirectly limits the power of the States by giving the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 92 of the British North America Act, it was nevertheless invalid because it was legislation relating to banking and the incorporation of banks, the making of laws on which was by Section 91 of the Act vested solely in the Dominion Parliament. The Judicial Committee rejected this argument. They pointed out that in the case of Citizens Insurance Company v. Parsons, [7 App. Cas. 96], to which reference has already been made, it was found absolutely necessary that the literal meaning of the words defining the powers vested in the Dominion Parliament should sometimes be restricted, "in order to afford scope for powers which are given exclusively to the Provincial Legislatures"; and they summed up the matter thus: The question they [the Committee] have to answer is whether the one body or the other has power to make a given law. If they find that on the due construction of the Act the legislative power falls within Section 92, it would be quite wrong of them to deny its existence because by some possibility it may be abused, or may limit the range which would otherwise be open to the Dominion Parliament." This is not to ignore the non-obstante clause, still less to bring into exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenge here made": [38 Commonwealth L.R. 408, at P. 426]. There appears to be a sound basis for the above distinction and the case which the Court is now considering is indeed stronger than the Australian one, for in the latter the power of the State to levy taxes on sale other than duties of excise was implied in its general powers of taxation and was not conferred expressly as in entry (48). No doubt there will be borderline cases, in which it may be difficult to say on which side a particular tax or duty falls; but that is one of the inevitable consequences of a division of legislative powers. If however the facts in Patton v. Brady had been such as to make the decision turn upon the distinction between the two kinds of taxes men- tioned above, it seems probable that the special duty there imposed would still have been held to be a duty of excise, because it was an at- tempt, as it were, to relate the duty back to the stage of production, even though the person made liable for payment was not (and indeed could seldom have been) the original producer himself. In the present case it could not be suggested that the tax on retail sales has any con- nection with production; it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind it exceedingly difficult to adopt an interpretation of the two en- tries which would have consequences such as these. Lastly, I am entitled to look at the manner in which Indian legis- lation preceding the Constitution Act had been accustomed to provide for the collection of excise duties; for Parliament must surely be pre- sumed to have had Indian legislative practice in mind and, unless the context otherwise clearly requires, not to have conferred a legislative power intended to be interpreted in a sense not understood by those to whom the Act was to apply. There were several central excise duties in force in India at the date of the passing of the Constitution Act, imposed respectively upon motor spirit, kerosene, silver, sugar, matches, mechanical lighters, and iron and steel. In all the Acts(1) by which these duties were imposed it is provided (and substantially by the same words) that the duty is to be paid by the manufacturer or producer, and on the issue of the excisable article from the place of manufacture or (1)Motor Spirit (Duties) Act (No. II of 1917), extended to kerosene by Indian Finance Act (No. XII of 1922); Silver Excise Duty Act (No. XVIII of 1930); Sugar (E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Rules entry in addition to excise duties and are therefore something different from them. Thus at the date of the Constitution Act, though it seems that the word "excise" was not infrequently used as a general label for the system of internal indirect taxation or for the administration of a particular indirect tax (as salt excise or opium excise), the only kind of (1)Cotton Duties Act (No. XVII of 1894); Cotton Duties Act (No. II of 1896). excise duties which were known in India by that name were duties collected from manufacturers or producers, and usually payable on the issue of the excisable articles from the place of manufacture or produc- tion. This also may not be conclusive in itself, but it seems a not unreasonable inference that Parliament intended the expression "duties of excise" in the Constitution Act to be understood in the sense in which up to that time it had always in fact been used in India, where indeed excise duties of any other kind were unknown. Nor indeed are excise duties properly so called often to be found at the present day which are not collected at the stage of production or manufacture, whatever may have been the case in Blackstone's time, and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deprive the Centre of any source of revenue which it enjoys at present, nor of any which it is reasonable to anticipate that it might have enjoyed in the future. If I may be permitted to hazard a guess, the anxiety of the Government of India arises from the probability that a general adoption by Provinces of this method of taxation will tend to reduce the consumption of the taxed commodities and thus indirectly diminish the Central excise revenue. This, however, is a circumstance which this Court cannot allow to weigh with it if, as I believe, the interpretation of the Act is clear; though it might be an element to take into consideration if there were real ambiguity or doubt. But I do not think there is either ambiguity or doubt, if the two entries are read together and interpreted in the light of one another. The difficulty with which the Government of India may be faced is of a kind which must inevitably arise from time to time in the working of a Federal Constitution, where a number of taxing authorities compete for the privilege of taxing the same taxpayer. In the present case, the result may well be that the Central Government will find itself unable to make such a distribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g entries, and on the question whether they are mutually exclusive or overlap. If the meaning of the words used in No. 45 includes taxes on retail sales, then the power of the Central Legislature to make laws with respect to the latter would follow as a matter of course. In such an inevitable overlap the Provinces must give way. The meaning of the latter expression 'taxes on the sale of goods' is perfectly plain; the ambiguity, if any, lies in the interpretation of the words "duties of excise" which have not been defined in the Act. Economists' Definition of "excise" cannot be conclusive. But there are even some economists who think that an excise duty does not include sales to consumers. Findlay Shirras in his Science of Public Finance, Vol. II (3rd edition), p. 652, has defined "excise" as ordinarily meaning "a tax or duty on home-produced goods, either in the process of their manufacture or before their sale to consumers, especially on spirits, beverages, gasoline, sugar, and tobacco. It includes also certain licences, commodities, and licences to conduct certain trades. It is usual to exclude from excise or excises sales or turnover taxes". At p. 653 he has again remarked, "I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ftsmen who again revised and recast the Lists; and it was then passed by the Imperial Parliament. The English Sense of the word "excise" must therefore be examined first. Stephen in his Commentary (Vol. II, Ch. VII) following Black- stone's old definition (Commentary, Vol. I, Ch. VIII) has stated "Excise duties are those duties which are imposed by Parliament upon commodities produced and consumed in this country. They are directly opposite in their nature to the Customs duties, for they are an inland imposition, paid sometimes on the consumption of the commodities, frequently upon the retail sale." This was apparently based on the fact that about the middle of the 17th century there were excise duties laid on the makers and vendors of ale, etc. It does not however appear that their Lordships of the Privy Council have in any Dominion case adopted Blackstone's definition of "excise". In the Encyclopaedia Britannica, Vol. 8, P. 955 (14th ed.) it is pointed out that "in modern times, however, the term generally connotes a tax on articles of home manufacture in contradistinction to customs duties which are levied on certain articles imported". Thus the term has assumed a more restricte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition, they could not as regards the stages of levy be coextensive. It is no wonder therefore that the term "excise" is freely used in England in a very general and comprehensive sense, and for convenience includes even collection of revenue on goods manu- factured, produced or sold in the country, that is to say on home products and home consumption, as well as certain licences. There are several reasons why the wider English meaning may be inapplicable to the Indian Constitution. (1) There are no his- torical reasons for applying excise duty to all inland impositions in contrast with customs only. (2) Unlike England, where there can be no conflict of legislative powers, the Indian Constitution is a federal one, and the Federation need not necessarily as against the Provinces have power to impose duties up to the stage of consumption. (3) In the Indian Act, the Federal and the Provincial Legislative Lists are separate and have to be read together and reconciled as far as possible. (4) The power to impose taxes on the sale of goods has been assigned exclusively to the Provinces, and the excise duties assigned to the Federation may not presumably include it. (5) In the Indian Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98. Patton claimed a refund of the duty levied and collected from him on his tobacco under the last provision. In argument it was prac- tically conceded by one counsel that it was an excise tax, but they all "specifically insisted that the power of imposing an excise once exer- cised is gone". BREWER, J., held (HARLAN and GRAY, JJ., not taking part in the decision) that the tax was not a direct tax but an excise duty; and also that an additional tax was not illegal. This conclusion was, of course, obvious. The general tendency of the duty was to be passed on to the consumer, and it could not possibly be regarded as direct taxation. Further, the duty was on tobacco manufactured (or imported) and removed from factory (or customs house). It was intend- ed to be one tax in relation to both manufacture and removal, and not two taxes in relation to manufacture and removal separately. It was in reality a tax on the manufacture 'and removal of tobacco, and was assessed at a subsequent stage, simply because it had not been paid previously at the time of the removal from the factory. The obser- vations of the learned judge, however, went a little further. He quoted with approval the definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns turn on the meaning and scope of the words "direct taxation" and are easily distinguishable. Up to the Confederation, the distinction between direct and indirect taxation was solely of academic or scientific importance. Until the Act of 1867 was passed, the division of taxation into direct and indirect belonged soley to the province of political economy so far as taxation in Great Britain, Ireland or any of the Colonies was concerned, and there was no recognised definition of either class universally accepted. But "it became from that moment essential for courts for the purposes of that statute to ascertain and define the meaning of the phrase 'direct taxation' as used in such legislation": Per LORD MOULTON in Cotton v. Rex, ([1914] A.C. 176 at p. 190). According to the rule first laid down in Attorney-General for Quebec v. Walter Reed [10 A.C. 141 (1884)] one had to look, following John Stuart Mill, "to the ultimate incidence of the taxation as compared with the moment of time at which it is to be paid, a direct tax being one demanded from the very persons who it is intended or desired should pay it": (P. 143). "The best general rule is to look to the time of payment; and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be paid by every occupier of real property for the purposes of any trade, profession or other calling carried on for the purpose of gain, the owner being deemed to be the occupier where property was let to the Crown or any person exempt from taxation, VISCOUNT CAVE laid down, "Taxes on property or income were everywhere treated as direct taxes" and that Mill's formula could not alter their classification. In the case of the Attorney-General for British Columbia v. Cana- dian Pacific Railway Company ([1927] A.C. 934), the Provincial Fuel- Oil Tax Act, 1923, enacted that every person who purchases within the Province fuel-oil sold for the first time after its manufacture in or importation into the Province should pay for Provincial purposes a tax equal to one-half cent per gallon on the oil so purchased. "Pur- chaser" (who was to pay the tax) was defined as a person who within the Province purchases fuel-oil when sold for the first time after its manufacture in or importation into the Province; and "vendor" (who was to levy, collect and pay it to Government) was to mean any person who within the Province sells fuel-oil for the first time after its manu- facture in or importation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t does not relate to any commercial transaction in the commodity between the tax-payer and some one else. (3) There is no justification for the suggestion that the tax is truly imposed in respect of the transaction by which the tax, payer acquired the property in the fuel-oil, nor in respect of any contract or arrangement under which the oil is consumed, though it is, of course, possible that individual tax-payers may recoup themselves by such a contract or arrangement. It was further held that except that the Act taxes persons in respect of a commercial commodity, which is not produced in its raw state within the Province, there is nothing in the Act to suggest that its purpose was the regulation of trade or com- merce. His Lordship laid down at p. 57: "The ultimate incidence of the tax in the sense of the political economist is to be disregarded when the tax is imposed in respect of a transaction, the taxing authority being indifferent as to which of the parties to the transaction ultimately bears the burden.....................Where the tax is imposed in respect of some dealing with commodities, such as their import or sale or produc- tion for sale, the tax is not a peculiar con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c- tion 93, the High Court held that a licence fee is not a tax on the goods themselves, and is not an indirect tax, as the amount in no way depends on the quantity of beer manufactured, and there is no expectation or intention that the person paying it should indemnify himself by pass- ing it on. Rejecting the larger view, it was held that "the basic principle of excise duties was that they were taxes on the production and manufacture of articles which could not be taxed through the Customs House" (p. 508), that "the fundamental conception of the term (excise) is that of a tax on articles produced or manufactured in a country" and that "the conclusion is almost inevitable that when- ever it is used, it is intended to mean a duty analogous to a customs duty imposed upon goods either in relation to quantity or value when produced or manufactured and not in the sense of a direct tax or personal tax" (p. 509). It was further remarked that the term "duties of excise in the Constitution was limited to taxes imposed upon goods in process of manufacture." Notwithstanding the modern tendency in England to use the word 'excise' as including all kinds of inland revenue taxation which come un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was not a tax even on gross income, much less on net income, but on the first sale of a quantity, irrespective of quality or value. (2) The tax on imported goods before they had become part of the general mass of property of the State, first sale taking place mostly while the spirit was still contained in the original tins and cases, would be in the nature of an impost levied on imports. (3) The tax on the first sales of the goods after production, refinement, manufacture or compounding was bound to be added on to the price and passed on to the vendee and ultimately to the consumer, and therefore was not a direct tax, but an excise duty. (4) Constitutional prohibition does not cease the moment the goods entered the State, and the tax on the first sales though imposed after entry was as effectual in the way of hampering commerce between State and State as a tax imposed on entry. It is clear that the decision. went in favour of the Commonwealth, because the tax was on first sales. The majority of the learned judges held it to be an excise duty not merely because it was a tax on sales, but because it was a tax on first sales. KNOX, C.J., with whom POWERS, J., agreed said, "In effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . His Lordship did not say that Section go was infringed (pp. 623-4). There is thus no doubt whatsoever that in Australia a tax imposed on first sales being connected with either import or manufacture or production of goods is outside the competence of a State. But not a single Australian case has been cited where a tax on retail sale has been held to be an excise duty. Fortunately in India it is not necessary to revive the fine niceties of distinction between direct and indirect taxation, as no such division exists in the Act. Indeed, there are several taxes like taxes on luxuries or trade which can be indirect; and some taxes like succession duties (and even excise) have in part been assigned to both. The ultimate incidence of the tax is certainly not a crucial test under the Indian Constitution. There is no justification for adopting any such principle as that certain classes of duties which are to be regarded as direct have been assigned to the Provinces, and other classes regarded as indirect have been reserved for the Federation. The rules of interpretation are perfectly clear. It was observed by the LORD CHANCELLOR in Brophy v. Attorney-General for Manitoba, ([1895] A.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notwithstanding anything in the next succeeding sub-section". Whereas a Provincial Legislature also has power to make laws with regard to matters in List III "subject to the first sub-section" and has power to make laws with respect to matters in List II "subject to the two preceding sub-sections". It follows that in the case of an inevitable conflict between the powers of the Federal and the Provincial Legislatures the former would prevail in respect of Lists I and Ill, Section 100 being the last refuge. As two separate Lists exist, the Imperial Parliament should be presumed to have intended to keep the Federal and Provincial Lists mutually exclusive as far as possible. It should certainly be our earnest endeavour to avoid a conflict between two apparently competing entries. Too liberal an interpretation given to both of them would simply create a conflict. As it is a Provincial Act which is challenged, the proper way of approach is to see whether the taxation imposed falls within the Provincial Entry, and then to see whether it is in any way cut down or restricted. In The Queen v. Burah (3 A.C. 889), LORD SELBOURNE remarked, "The established Courts of justice, when a question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or produced in India. For purposes of such goods the wider English sense is necessarily excluded. And the word 'goods' has been used in the widest possible sense, for under Section 311 "goods" includes all materials, commodities and articles. It can hardly be disputed that if there were nothing else in the Act, tax on retail sale of motor spirits and lubricants would fall with- in the scope of the express words "tax on the sale of goods" used in List II, Entry No. 48. The main question in the present case there- fore is whether the tax on retail sales also comes within the category "duties of excise on goods manufactured or produced in India" so far at any rate as concerns goods manufactured or produced in this country. In the same List II there are two separate categories. Entry No. 40 refers to "Duties of excise" on certain specified goods and Entry No. 48 to "taxes on the sale of goods". The Imperial Parlia- ment presumably intended these categories to be separate and distinct, and not that "sale" of the specified goods be included in the "duties of excise" on them. Similarly it should be presumed that when "duties of excise" were assigned to the Federation and "taxes on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rresponding to the entries now under consideration, and then to speculate why the phraseologies were changed. If the removal of the words 'on the production and manufacture' in the old entry No. 36 of List I would support one view, then the deletion of the word 'turnover' from the old entry No. 10 of List II might strongly support the other. It would not, strictly speak- ing, have been correct to use the words 'duty of excise on manufacture or production of goods', unless the duty were intended to be levied on the processes of manufacture or production, irrespective of the quantity manufactured or produced. Those words would also have necessarily excluded first sales. If the intention is to impose the duty on the goods themselves provided they are manufactured or produced in India, then the only correct way to express the idea is to say 'duty of excise on goods manufactured or produced in India.' Opinions expressed by Committees, prior even to the joint Committee, are all the more irrelevant. There is really nothing absolutely irreconcilable between excise duty mentioned in Entry No. 45 of List I and tax on retail sales in- cluded in Entry No. 48 of List II. They can be mutually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale. The object of the taxation is not to impose any special burden on goods manufactured or produced in India. The principal object is to recover revenue on all sales irrespective of the origin of the goods. The amount assessed depends exclusively on the sale price and on nothing else. A tax on the sale of goods, whether originally imported or locally produced or manufactured in a Province, which have become mixed up with the general mass of property in that Province about to pass into the hands of the consumer has hardly any resem- blance to an import duty or even an excise duty on manufacture or production. In its nature, it is a purely domestic transaction with which the other Provinces of India as a whole cannot be concerned. When last sales are taxed, the imposition is simply on goods as an existing substance in the Province, no longer subject to all India considerations and sold in the Province to local consumers for con- sumption or use. Such sales being a purely provincial operation ought to be within the power of the Province to tax them. Some petrol is admittedly produced in Attock in the Punjab; but the vast bulk of petrol consumed in this country comes from outside, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . But that is not a conclusive test under the Indian Act. The fact that it is an indirect taxation does not exhaust the whole question, as it would not necessarily follow that the tax is an excise duty within the meaning of entry No. 45. A clear distinction exists between the first sale and the last sale, as the latter is not intimately connected with the manufacturer or the producer and cannot come within the scope of excise duty. In the Commonwealth Oil Refineries case, the observation of ISAACS, J., at P. 426 already quoted supports the view that if the tax is unconnected with production or manufacture, then it is not an excise duty. His observa- tion was not confined to licences only but expressly referred to a 'tax on the sale'. In that case most of the learned Judges took the view that ordinarily a tax on first sale of home products is connected with production and manufacture and is therefore a tax on production and manufacture and as such an excise duty. They had not to consider and therefore did not deal with retail sales at all; nor could their reasoning have applied to the last retail sale to the consumer. Taking goods manufactured or produced in India, the time of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true that in some cases the first sale in the Province may itself be a retail sale to the consumer, for instance a sale by a manufacturing retailer. This would not ordinarily be so where the goods are manufactured or produced outside the Province, except in the very special case where a consumer orders goods direct from an outside manufacturer or producer, and under the terms of the contract between them, the transaction of sale is completed within the Province. But an Act cannot be invalidated merely on ac- count of its peculiar operation in special individual cases, and must be judged by its ordinary effect. "The Legislature cannot possibly have meant to give a power of taxation valid or invalid according to its actual results in particular cases. It must have contemplated some tangible dividing line referable to and ascertainable by the general tendencies of the tax and the common understanding of men as to those tendencies." [Per LORD HOBHOUSE in Bank of Toronto v. Lambe, (12 A.C. 575 at 581)]. When the Centre may never impose excise duty except on a few selected classes of articles there seems to be no good reason for depriving the Provinces of their power to tax the retail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible kind of home commodities is wholly outside the legis- lative competence of the Provinces, then practically the only power which would remain under Entry No. 48 would be to impose a tax on the sales of imported goods, which might in extreme cases conflict with Section 297(1)(a). The learned Advocate-General of India is forced to admit that if his contention prevails, then the only taxes that would not amount to excise duty and would be left over for the Provinces to impose under Entry No. 48 would be certain licence fees and certain turnover taxes. As regards licence fees, if we leave aside the wide meaning that has been given to the word 'excise' in England owing to historical reasons and convenience of collection, such fees can hardly be regarded as in themselves being a "tax on the sale of goods", and can come in only impliedly within that power. It can also hardly be suggested that the words "taxes on the sale of goods" are the exact equivalent of "sales tax" or "turnover tax". In the first place, it is dangerous to substitute for the words actually used in an Act new colloquial expressions which have come to connote a definite meaning in common parlance and then to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to sales of tangible property." In the Encyclopaedia of the Social Sciences, by SELIGMAN and JOHNSON, VOL. 13, p. 516, it is stated: "The sales tax is a levy im- posed upon the sales of commodities or services. The tax may be levied upon sales: in general, as in Germany; in general, except at retail, as in Belgium; in general, with other special taxes, as in France of classified enterprises, as in Washington; of producers, as in Canada or of retailers, as in Kentucky." At p. 517 it is also stated, "sales taxes may be imposed upon total receipts, with deductions for returns, allowances and possibly other items; upon the individual transaction; upon the privilege of conducting business, which is supposedly measured by sales; upon sales in general; or upon specified types of sales.........Customarily the vendor rather than the vendee is liable for taxation, although both may be held responsible for proper payment of the tax." A. COMSTOCK in his Taxation in the Modern State, P. 113, has observed-"The scope of sales and turnover taxes have varied greatly. Some extended to all transactions, both wholesale and retail, and others to wholesale transactions only. The first of these a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The tax in question comes within the special and specific provision "taxes on the sale of goods" and can, only by defining and enlarging the meaning of the words "duties of excise on goods manufactured or produced in India", be brought within the scope of the latter. The special provision, even from this point of view, should be considered to be exclusive of the other. Another principle which emerges from the Dominion cases is that in a Federal Constitution, Provincial Legislatures are independent within the spheres allowed to them and within the prescribed limits. They are co-ordinate Governments and possess full legislative power and capacity to pass laws, so far as matters assigned to the Provinces exclusively are concerned. The Provinces are entrusted with the exclusive authority in certain specified matters, not of an all-India concern, but of Provincial interest. Subject to certain restrictions each Province retains its independence and autonomy and is not under the control of the Federal Legislature. "Within these limits of area and subjects,.................its local legislature was to be supreme and had such powers as the Imperial Parliament possessed in the plenitude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preference is prohibited. The second part also is probably inapplicable inasmuch as there is no discrimination at all between goods manufactured or produced in one locality and those in another locality. The word "locality" may mean a local area, i.e., some part of India and may not refer to countries outside India, or it may possibly have a wider application. To hold that the taxation is wholly invalid we would have to hold that it is both an excise duty and an import duty, according to the respective origin of the goods sold. The nature and character of the taxation would then depend on particular goods sold, and not merely on the sales of goods of a particular class. These matters can be considered when it becomes necessary to decide the point. Reliance has been placed on the observation in E.R. Croft v. Sylvester Dunphy ([1933] A.C. 156) that "When a power is conferred to legislate on a particular topic it is important, in determining the scope of the power to have regard to what is ordinarily treated as embraced within that topic in legislative practice and particularly in the legislative practice of the State which has conferred the power" (p. 165). That was a case where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been drawn to any Provincial enactment, which might have imposed any excise duty on the retail sale of motor spirits and lubricants, or for the matter of that on the retail sale of any other goods. In particular, the Central Provinces Excise Act, II of 1915, did not do that. Under Section 17 a licence is required for sales. Section 18 only provides that the local Government may lease out the right among others "of selling by wholesale or retail" on the grant of a lease or licence but, neither the premium (or monopoly) price, nor the licence fee can be regarded as a "tax on the sale of goods" itself. Under Section 25 duty is leviable on all excisable articles imported, exported, transported, manufactured, cultivated or collected. But that too is not an excise duty on the sale of goods. Under Section 26 duty is leviable on spirit or beer manu- factured in any distillery, and "on payment made upon the issue of excisable article for sale from a warehouse." Here too retail sale is left out. The Provincial Excise Acts show that although there had been premia charged for leases of the right to sell, and licence fees made payable for carrying on business in excisable articles, there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed a duty on retail sales, because apparently this post-war fiscal measure had not been introduced in India till 1935. The previous Legislative Practice can certainly not help the Centre. There is, of course, a remote danger that a Province may impose an almost prohibitive duty on the sale of articles, which are not pro- duced within the Province nor are manufactured or produced in other Provinces of India, with the result that the sale of such articles would be almost prevented, and the duty in such circumstances may amount to a restriction on imports of these articles. For example, if motor cars and radio sets are not manufactured in India, an extremely heavy duty on their sales may seriously handicap business dealings. In such cases, an imposition even after entry may be as effectual in the way of hampering commerce and trade as a direct import duty, unless the goods have become incorporated and mixed up with the mass of the property in the Province so as to be treated as part of the goods in existence at that time in that Province (e.g., secondhand cars). If too wide an interpretation is put on words used in a section, there is always a danger of the bounds being over-stepp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore consider the Act as it stands, unperturbed by the possibility of any drastic consequences following if authority is held to be vested in any particular Legislature. Much less should our conclusion be affected by any consideration of the financial loss suffered by the Centre or the Provinces if one or the other view were to be accepted. Nor am I able to apply the principle that where a particular power comes within both of two mutually exclusive jurisdictions, as in Canada, it should be regarded as an exception to the general rule. An exception falls within and not outside a general provision. The essence of the principle is that a particular exception restricts a general provision, although covered by it. In the Indian Constitution there is a definite provision in the case of an overlapping, and where such an overlapping is inevitable, the general power of the Centre would override even a particular power of a Province. The Privy Council has held that an excise duty is a typical instance of indirect taxation, and that a tax on consumer or consumption is direct. Excise duties cannot therefore include taxes on consumption. Were I to hold that, I would feel compelled to go further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m with the words, "duties of excise on goods manufactured or produced in India" as used in the Federal List, entry No. 45, my conclusion is that the tax on the retail sales to the consumers is in pith and substance not an excise duty, and that therefore the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, and all the provisions thereof are not ultra vires of the Legislature of the Central Provinces and Berar. As this Reference was made with mutual consent, the parties should bear their own costs. The Advocates-General, who on their own appli- cations under O. 36, r. 2, F.C.R., were permitted to appear and were heard, should also bear their own costs. JAYAKAR, J.-The material facts connected with this Reference are stated in the opinion of the Chief justice and I need not repeat them. Cases of conflict between the jurisdiction of the Parliament of a Dominion and the provincial jurisdiction have frequently arisen before the Judicial Committee of the Privy Council and certain principles have been evolved as a result of the decisions of that Board. These will, I think, prove a useful guide to a proper elucidation of the ques- tion involved in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in order to prevent such a result, the two sections must be read together, and the language of the one interpreted and, where necessary, modified by that of the other. In this way, it may, in most cases, be found possible to arrive at a reasonable and practical construction of the language of the sections so as to reconcile the respective powers they contain and give effect to all of them. In performing this difficult duty, it will be a wise course for those on whom it is thrown to decide each case which arises as best they can, without entering more largely upon an interpretation of the statute than is necessary for the decision of the particular question in hand." See The Citizens Insurance Company of Canada v. Parsons etc. (7 A.C., 96, 108, 109). (5) "In the interpretation of a completely self-governing Con- stitution founded upon a written organic instrument (such as the Govern- ment of India Act of 1935) if the text is explicit, the text is conclusive, alike in what it directs and what it forbids. When the text is ambiguous, as, for example, when the words establishing two mutually exclusive jurisdictions are wide enough to bring a particular power within either, recourse mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 3 which enacts that: "There shall be levied and collected from every retail dealer a tax on the retail sales of motor spirit and lubricants at the rate of five per cent. on the value of such sales." "Lubricant" is defined in section 2(b) as meaning any form of oil, grease or other lubricating substance ordinarily used for lubricating the internal machinery of motor vehicles. "Motor spirit" is defined in section 2(c) as meaning any inflammable hydrocarbon................ which is ordinarily used for providing reasonably efficient motive power for any form of motor vehicle. "Retail dealer" is defined in section 2(e) as meaning any person who, on commission or otherwise, sells, or keeps for sale, motor spirit or lubric- ant for the purpose of consumption by the person by whom or on whose behalf it is or may be purchased. "Retail sale" is defined in section 2(f) as meaning a sale by a retail dealer of motor spirit or lubricant to a person for the Purpose of consumption by the person by whom or in whose behalf it is or may be purchased. (The italics are mine). It is clear that the tax in question is a tax on consumption within the Province as shown by the retail sales, or, as it m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist I) means an indirect tax on the con- sumption of indigenous goods, levied and collected at any stage between their production and manufacture on the one hand and the time when they reach the consumer, on the other. Fortunately, we are not here troubled with the distinction, observed in some cases, between a "duty" and a "tax", for according to Section 311 of the Government of India Act, 1935, "taxation' includes the imposition of any tax, whether general or local or special and "tax" shall be construed accordingly. The Advocate-General of the Central Provinces, on the other hand, defines an "excise duty" in item 45 (List I) as a tax on the manufacture and production of indigenous goods, which can be levied up to, but not inclusive of, the stage of their first sale, and that a tax levied from and after that stage cannot be an "excise duty". The Advocate- General of Madras, when he at a later stage came in to reinforce the Central Provinces Government's argument, admitted that the Australian cases, which he cited in the course of his able argument, went further and included in the term "excise duties" taxes levied on or at the time of the first sale. As will appear from my later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture up to sale. The first part of this clause may relate only to the administrative power of control of the Provincial Government over the several stages from manufacture up to sale of the said commodity. Then follow the words "the levying of excise duties............on or in relation to such articles" that is, alcoholic liquor and intoxicating drugs. This part of the clause clearly relates to the power of the Provincial Legislature to "levy excise duties" on the same commodity. It would not be unfair to infer, from this juxtaposition, that the power of control enjoyed by the Provincial administration under the first part of the item is coextensive with the power enjoyed by the Legislature of the same Province of levying excise duties mentioned in the second half of the item. For, it could hardly have been intended that the power of control of the Provincial Government was to be of a different range from their legis- lative power of "levying excise duties" oil the same commodity. On a proper interpretation of this item, therefore, the conclusion seems to me inevitable that the Provincial Legislature's power, under this item, of "levying excise duties" could be exercised, "on or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present Act bear a wide signification and include all duties levied on the consumption of the excisable commodity in the Province at any stage from production to sale. If this is so, I see no reason for withholding from that term the same signification in item 45 (List I) taking that item as if it stood by itself and item 48 (List II) did not exist. There is no definition of the words "excise duty" in the Act and one has, therefore, to find out its meaning from the indications as the above, which the Act itself provides or from the definitions of that term occurring in recognised text books, or from circumstances throw- ing light on what the Legislature had in mind at the time of passing the Act. I have already commented upon the glossary which the Act itself provides, and I proceed now to the definitions given by text book writers. Stephen, in his Commentaries on the Laws of England, 1928 edition, Volume IV, p. 420, following Blackstone, says: "Excise duties are those duties which are imposed by Parliament upon commodities produced and consumed in this country. They are directly opposite in their nature to the customs duties for they are an in- land imposition laid someti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause such definitions embody the common understanding of those who knew the subject and were, therefore, to that extent, likely to have been present to the minds of those who passed the Federation Act. The answer of the Provinces to the definition of "excise duties", as given above, is as follows: in item 45 (List I) the words show that the duty mentioned in it is on manufacture or production. I find some difficulty in accepting this contention, for looking only to the words of item 45, the duty is on the goods and the words "manufactured or produced in India" are descriptive of the goods only. In the corres- ponding item 40 in List II, the same grouping appears, namely, duties on goods manufactured or produced in the Province. Relying, there- fore, on the words only, it is clear that the duty is not "on" the "manufacture or production", but "on" the "goods" manufactured or produced. The words "manufactured or produced" in item 45 (List I) are descriptive of the goods and are not mentioned as the basis of incidence. They also occur, as said above, in item 40 of List II where, too, they are descriptive of the goods as in item 45 (List I), the only difference between the two items ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reforms, 1933-34, (and I think it is permissible to do so, as it is a part of the history of the legislation), I may state that the item, in the form in which it was placed before the Committee, was worked as follows: "Duties of excise on the manufacture and produc- tion of tobacco and other articles," etc. The wording of this draft was subsequently changed to its present form, and it is not unfair to infer that the alteration was made in order to include in item 45 all duties on the goods (provided that they were duties of excise and the goods were manufactured or produced in India) and not only those which were levied at the stage of their manufacture or production. And this, in my opinion, is as it should be, for if the proper import of an "excise duty" is that it is a tax on consumption, there is no reason why the State should not have power to levy and collect it at any stage before consumption, namely, from the time the com- modity is produced or manufactured up to the time it reaches the con- sumer. I will presently refer to certain authorities in support of the view that a duty of excise is essentially a tax on consumption, but apart from it, I see no rational ground for l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, an increased taxation was placed on all tobacco manu- factured, sold and removed before the Act. This tax was said to be in lieu of the previous tax. Brady, the Collector of Internal Revenue, demanded the new tax, in addition to what had been paid only a month before on the entire quantity of the tobacco. The fresh tax was paid by the plaintiff under protest, and, later, an action was brought, asking for its refund, on the ground that the charging section 3 under which the tax was levied was invalid and that the tax was not an excise. Brewer, J., went into the nature of the tax and defined an "excise tax" in terms which I find no difficulty in accepting. After going through several authorities he defines "excise" as a tax on an article indigenously manufactured for consumption and imposed at a period intermediate the commencement of manufacture, and the final consumption of the article. This, he says, was the meaning of the word, as understood in England at the time the Act was framed and he saw no necessity for giving the word a different meaning. He then goes into the question, which was also suggested by the Provincial Advocates-General in their argument before us, that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of the Constitution which it establishes, as to receive much guidance from legislative practices operative during the time of its predecessors. As is well-known, the Government of India Acts previously to 1935 were all enacted as parts or instalments of an evolutionary or progressive scheme of unitary government, under which the Government of India were supreme, except in such adminis- trative and legislative matters as were given to the Provinces by devolution. The residuary powers mostly remained with the Govern- ment of India, which had the ultimate power of control and superinten- dence over Provincial Governments. This scheme of things was radically altered by the Act of 1935, which, in effect, replaced the previous unitary government by a form of Federal Government, under which it could not be said, as previously, that the Government of India had supreme control or superintendence, etc., over Provincial Govern- ments. By the Act of 1935 the fields of the two Governments were demarcated and made distinct. Each was to be mistress in her own affairs. I doubt, therefore, whether the legislative practices of the pre- vious times can furnish any decisive clue to the interpreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the mode in which the several duties have been charged under the various sections of these Acts cannot be regarded as furnishing a glos- sary of the word "excise" as used in the new Act. To me, these several modes merely indicate that, having regard to the exigencies of the State in the days of the passing of those Acts and having regard also to the nature of the commodity, the mode of its manufacture, consumption, and transport, and also the possibility of the evasion of the tax, the Legislature thought, in these several instances, that the most effective way of levying and collecting the duty, so as to protect the fiscal interests of the State, was to charge it at the several initial stages mentioned in the said Acts. I am not inclined to attach a greater significance to the modes of charging under these Acts nor to construe them as limiting the right of the new Federal Government, established for the first time under the Act of 1935, to charge any duties, which could be shown aliunde to be included within the words defining their powers of taxation under the new Act. A State levies taxes for public needs and the obligation of the individual to the State is proportioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax on commodities of domestic manufacture levied either at some stage of production or before the sale to home con- sumers". In commenting on the power of the State to levy an excise tax at any convenient stage according to the requirements of the case, the editors say (p. 670): "The excise tax may be levied on the raw material or the finished article or it may attach to an intermediate stage of the production process..........a raw material tax is disadvan- tageous to producers inasmuch as it is collected at the very beginning of the production process, long before the manufacturer has the opportunity to recover it by selling the finished product.........The manufacturer may also resort to storing the goods in bonded ware- houses, thus postponing the payment of the tax until the commodities are withdrawn for sale." Mr. FINDLAY SHIRRAS in his "Science of Public Finance", Vol. II, (3rd Edn.) states (p. 654): Excise or taxes on commodities of domestic manufacture may be levied on the raw materials or at an intermediate stage of their production or when the articles are ready for consumption.........The taxes should be levied in accordance with the canon of convenience". He further ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpretation has to be placed upon the two items which must conform with the presumption that Parliament could not have intended that the powers exclusively assigned to the Provincial Legislature under item 48 (List II) should be absorbed in those given to the Central Legislature in item 45 (List I). The item, therefore, has to be reconciled with item 48 and the reconciliation must be such as will not do violence to the words contained in the item. It could not have been the intention of the Legislature that a conflict should exist between that item and item 45, and, in order to prevent such a result, the two items must be read together and the language of the one interpreted, and, where necessary, modified by that of the other. I will add that the reconciliation to be made between the two items as stated in this paragraph is irrespective of the provisions of the non-obstante clause in Section 100 which, as pointed out by the Chief Justice in his opinion, does riot come into operation except in the last resort. Item 48 (List II) is entirely a new item and did not occur in the classification of Central and Provincial subjects which found a place in the earlier Acts relating to the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even when such goods fell under item 45 (List I), should be given exclusively to the Provinces. Item 49 (List II) is particularly significant and throws light on item 48 (List II). It relates to "cesses on the entry of goods into a local area for con- sumption, use or sale therein". The word "goods" in that item includes, under Section 311 of the Government of India Act, 1935, all materials, commodities and articles. The expression is therefore wide enough to include goods which fall under item 45 of List I. If so, "cesses" on commodities ordinarily excisable by the Centre under item 45 (List I) would be within the exclusive competence of the Provincial Legislature, if levied on the entry of the goods into the local area for the purpose of consumption, use or sale therein. Similarly, item 50 (List II) relates to "taxes on luxuries". These "luxuries" may be excisable under item 45 (List I); yet, being objects of consumption within the Province, they appear to have been taken out of the purview of item 45 (List I) and allocated to the Provinces. It is not, therefore, unfair to infer from this grouping that the scheme of taxation was intended to be that an excisable commodity is subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale of goods is only another expres- sion for a "sales tax" which became popular after the War, there is authority for the view that "sales taxes" include turnover taxes and something more. It is difficult to understand why, if Parliament in- tended only turnover taxes to be included in item 48, they did not use that expression, which was certainly clearer than the somewhat inap- propriate formula "taxes on the sale of goods". The interpretation of item 48 (List II), at which I have arrived independently, may receive some support from the wording of the draft of item 48, as it appeared in the White Paper and before the Joint Committee on Indian Con- stitutional Reform (1933-34). [See item 10 at page 118 of the "Pro- posals for Indian Constitutional Reform" presented to Parliament in March 1933, and see also page 158 of Vol. I, Part I, of the Report of the Committee.] This interpretation of item 48 (List II) will, I think, give a definite and clear field of taxation to the Provinces and another field, equally clear and definite, to the Centre, and thus the possibilities of conflict will be removed. A powerful appeal was made to us by the Advocates-General of the Provinces that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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