9911796707
TMI Blog1975 (11) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... govern those other cases. The appellants were dealers in tobacco and tobacco preparations in Mattancherry in erstwhile Cochin State. In 1909 Cochin Tobacco Act (Act 7 of 1084 M.E.) was enacted by the Maharaja of Cochin. Section 4 p of that Act prohibited the transport, import or export, sale and cultivation of tobacco, except as permitted by the Act and the rules framed thereunder. In pursuance of the power given by that Act the Diwan of Cochin made rules relating to matters specified in the Act. Under the rules it became necessary to obtain a licence for cultivation of tobacco plant. Drying, curing, manufacturing and the storing of tobacco cultivated in the State was to be done under the supervision of an Excise officer in licenced manufacturing yards and store houses. The system which was in force for the collection of tobacco revenue up to August 1950 was to auction what were called A class and class shops. In addition, there were class shops, the licence for which was granted either on the recommendation of or in consultation with class licensees. A somewhat similar law was in operation in the erstwhile Travancore State. On April 1, 1950 after the Constitution had come in force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were in force and were valid under entry 62 of List II of the Seventh Schedule. The 13: appellants then came up in appeal to this Court. It was held by this Court in its judgment dated January 24, 1962 reported in (1962) Supp. 2 SCR 741 that the Cochin Tobacco Act of 1084 and the rules framed thereunder as also similar provisions in Travancore, requiring licences to be taken out for storage and sale of tobacco and for payment of licence fee in respect thereof were law corresponding to the provisions of the Central Excises and Salt Act, 1944 and hence stood repealed on April 1, 1950 by virtue of section 13(2) of the Finance Act, 1950. It was further held that as the parent Acts, namely, the Cochin Tobacco Act and corresponding Travancore Act had stood repealed, the new rules framed in August 1950 and January 1951 under those Acts for the respective areas of Cochin and Travancore for the issue of licences and payment of fee therefore for storage of tobacco were invalid ab initio. After the above decision of this Court the appellants made a demand to the respondent-State that the amounts of Rs. 1,14,750 collected by the State from them by way of licence fee under the invalid rules m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s power to the State Government to make rules by publication in the gazette to carry out the purposes of the Act. According to sub-section (3) of section 4 of the Act, 'the rules and notifications specified below purported to have been issued under the Tobacco Act of 1087 (Travancor Act 1 of 1087) or the Cochin Tobacco Act, VII of 1084, as the case may be, in so far as they relate or purport to relate to the levy and collection of fees for licences for the vend and stocking of tobacco, shall be deemed to be rules issued under this section and shall be deemed to have been in force at all material times." Along the rules and notifications specified in subsection (3) of section 4 are rules published on August 3, 1950 and January 25, 1951. Sections 5 and 6 read as under: "5. Validation-Notwithstanding any judgment, decree or order of any court, all fees for licences for the vend or stocking of tobacco levied or collected or purported to have been levied or collected under any of the rules or notifications specified in sub-section (3) or s. 4 for the period beginning with the 17th day of August, 1950 and ending on the 31st day of December, 1957, shall be deemed to have been validly lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from outside the State. The provisions of Act 9 of 1964 were held to violate article 301 of the Constitution and not protected by article 304. The learned Judges also set aside the judgment (1) [1966] 1 S.C.R. 865. Of the single Judge and allowed the appeals against that judgment in original petition No. 1268 of 1963. The State of Kerala thereafter came up in appeal to this Court. As per judgment dated July 30, 1969 reported in (1970)1 SCR 700 this Court held that the High Court had not correctly appreciated the import of the decision in Kalyani Stores (supra). It was held that only such restrictions or impediments which directly and immediately impeded the free flow of trade, commerce and intercourse fell within the prohibition imposed by article 301. This Court further observed that unless the High Court first came to the finding whether or not there was the infringement of the guarantee under article 301 of the Constitution, the further question as to whether the statute was saved under article 304 (b) did not arise. The case was accordingly sent back to the High Court with the direction to take further affidavits in the matter. The Court left it open to the parties to argue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same operates as res judicata. As against that, Mr. Patel on behalf of the respondent-State submits that the question decided by this Court on January 24, 1962 was different from that which arises in these appeals and that the said decision does not operate as res judicata. The above submission of Mr. Patel, in our opinion, is wellfounded. What was decided by this Court in its judgment dated January 24, 1962 was that the Cochin Tobacco Act r and the similar Travancore Act taken along with the rules framed under those Acts by the respective Diwans were in substance law corresponding to the Central Excises and Salt Act. The Cochin Tobacco Act and the similar Travancore Act, it was further held, stood repealed on April 1, 1950 by virtue of section 13(2) of the Finance Act, 1950. So far as the rules are concerned which were issued on August 3, 1950 and January 25, 1951, this Court held that as the parent Acts under which those rules were issued stood repealed on April 1, 1950, there would be no power in the State Government thereafter to frame new rules in August 1950 and January 1951 for there would be no law to support the new rules. The above question does not arise for det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned with production or manufacture of tobacco or which links the tax under its provisions with the manufacture or production of tobacco. The same is the position of the rules issued on August 3, 1950 and January 25, 1951 and Mr. Krishnamurthy Iyer on behalf of the appellants has frankly conceded that those rules are in no way concerned with the production or manufacture of tobacco. It would, therefore follow that the levy of tax contemplated by the provisions of section 3 of the Act has nothing to do with the manufacture or production of tobacco and, as such, cannot be deemed to be in the nature of excise duty. Argument that the provisions of the Act fall under entry 84 of List I of the Seventh Schedule to the Constitution must, therefore, be held to be bereft of force. The next argument which has been advanced on behalf of the appellants is that the tax on the vending and stocking of tobacco cannot be considered to be luxury tax, as contemplated by entry 62 of List II of the Seventh Schedule to the Constitution. According to that entry, the State Legislatures can make laws in respect of "taxes on luxuries, including taxes on entertainments, amusements, betting and gambling". Q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erious effect upon health and a tax on tobacco has been recognized as a tax in the nature of a luxury tax. One of the earliest indictments of tobacco is in Robert Burton's Anatomy of Melancholy wherein he says: "It's a plague, a mischief, a violent purger of goods, lands, health, hellish, devilish, and damned tobacco, the ruin and overthrow of body and soul." Another indictment is from James I of England (Counterblaste to Tobacco) when it is said: "A custom (smoking) loathsome to the eye, harmful to the brain, dangerous to the lungs, and in the black stinking fume thereof, nearest resembling the horrible Stygian smoke of the pit that is bottomless." The taxation of the objects or procedures of luxurious consumption has aimed at two purposes, on the surface contradictory: the suppressing or limiting of this consumption and the deriving of a public income from it. On closer inspection a good deal of this contradiction vanishes when it is seen that prohibition and taxation of luxury tend equally to fix certain levels and standards of living, as against economic and social progress, which is tending to "level" such differences (see page 634 of the Encyclopaedia of the Social Sciences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the freedom of trade. commerce or intercourse with or within that State as may be required in the public interest; Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President." We may observe that the requirement of the proviso regarding the sanction of the President has been satisfied. It is no doubt true that the assent of the President was given subsequent to the passing of the Bill by the legislature but that fact would not affect the validity of the impugned Act in view of the provisions of article 255 of the Constitution. Clause (b) of article 304 empowers the Legislature of a State notwithstanding anything in article 301 or article 303 but subject to the sanction of the President to impose reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest. Article 302 confers power upon Parliament to impose by law such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also be no doubt that the law of taxation in the ultimate analysis is the result of the balancing of several complex considerations. The legislatures have a wide discretion in the matter. In considering the question as to whether the restriction is reasonable in public interest, the court will have to balance the importance of freedom of trade as against the requirement of public interest. Article 304(b) necessarily postulates that considerations of public interest may require and justify the imposition of restrictions C` on the freedom of trade provided they are reasonable. In determining the reasonableness of the restriction, we shall have to bear in mind the importance of freedom of trade and the requirement of public interest. It is a question of weighing one relevant consideration against another in the context of the larger public interest [see Khyerban Tea Co. Ltd. v. State of Madras([1964] 5 S.C.R.9 75)]. We agree with Mr. Krishnamurthy Iyer that the onus of showing that the restrictions on the freedom of trade, commerce or intercourse in the public interest are reasonable, is upon the State. It is also true that no effort was made in the affidavit filed on behalf of the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares and freights imposed by the Andhra Pradesh Motor Vehicles (Taxation of Passengers and Goods) Amendment and Validation S Act, 1961. It was urged that the Act fell within the mischief of article 301 of the Constitution and was not protected by article 304(b) and article 19(1)(f) of the Constitution. Contention was also advanced that the provisions of the said Act were violative of article 14 of the Constitution. In support of the above contentions, reference was made to the fact that the Act had been made applicable to the Andhra area and had not been made applicable to the Telengana area. Some other grounds were also relied upon to challenge the validity of the Act. This Court upheld the validity of the Act and repelled the contentions. No doubt this Court referred to the circumstance that the levy of tax was confined only to the Andhra area and was not operative in the Telengana area in the context of the argument that the Act was violative of article 14 of the Constitution, the fact all the same remains that one of the grounds advanced with a view to assail the validity of the Act was that its provisions were not applicable to the Telengana area. We are unable to accede to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction and manufacture of tobacco. The levy is sought to be made as luxury tax which is within the competence of the State Legislature and not as excise duty which is beyond the legislative competence of the State Legislature. If the levy in question can be justified under a provision which is within the legislative competence of the State Legislature, the levy shall be held to be validly imposed and cannot be considered to be impermissible. Where a challenge to the validity of a legal enactment is made on the ground that it is a colourable piece of legislation, what has to be proved to the satisfaction of the court is that though the Act ostensibly is within the legislative competence of the legislature in question, in substance and reality it covers field which is outside its legislative competence. In the present case we find that in enacting the impugned provisions, the State Legislature, as already pointed out above, has exercised a power of levying luxury tax in the shape of licence fee on the vend and stocking of tobacco. The enactment of a law for levying luxury tax is unquestionably within the legislative competence of the State Legislature in view of entry 62 in List II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve contentions. It was held by this Court that if collections are made under statutory provision which are invalid because they deal with a topic outside the legislative competence of the State Legislature, the Parliament can in exercise of its undoubted legislative competence, pass a law retrospectively validating the said collections by converting their character into collections made under its own statute operating retrospectively. So far as the present case is concerned, we have already pointed out above that it was within the competence of the State Legislature to make a law in respect of luxury tax and to recover that tax in the shape of licence fee for vend and stocking of tobacco. The State Legislature has sought to validate the recovery of the amounts already made by treating those amounts as luxury tax. The fact that the validation of the levy entailed converting the character of the collection from an impermissible excise duty into permissible luxury tax would not render it unconstitutional. The only conditions are that the levy should be of a nature which can answer to the description of luxury tax and that the State Legislature should be competent to enact a law for re ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
