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TMI Blog1962 (1) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... Tobacco Act, VII of 1084 (hereinafter called the Cochin Act). Section 4 of the Cochin Act prohibited the possession for sale, transport, import or export, sale and cultivation of tobacco except as permitted under the Act or the rules framed thereunder. section 5 of the Act gave power to the Diwan to make rules - from time to time consistent with the Act to permit. absolutely or subject to any conditions, and also to regulate the possession for sale, transport, import or export, sale and cultivation of tobacco as well as the form of duty leviable on the sale of tobacco by retail. The remaining provision of the Act deal with offences, prosecutions punishment, confiscation and other ancillary matters such as arrest and siezure, with which we are not concerned in the present appeals. Reference may however be made to s. 18 which provided that "no action shall lie against the sirkar or against any officer of the Excise department for damages in any civil court for any act bona fide done or ordered to be done in pursuance of this Act, or of any law for the time being in force relating to tobacco revenue. Rules were framed under the Cochin Act called the Tobacco Cultivation Rules, which, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification dated May 30, 1919. In addition there were a class shops, the licence for which was granted either on the recommendation or in consultation with class licensees at the discretion of the Excise Commissioner or any other officer authorised by him on payment of the prescribed fee. This system along with the Rules already referred to was in force on April 1, 1950. On April 1, 1950, after the Constitution had come into force and Travancore-Cochin has become a Part State thereunder, the Finance Act, No. XXV of 1950, extended the Central Excises and Salt Act, No.1 of 1944 - (hereinafter called the Central Act), to the Part State of Travancore Cochin by s. 11 thereof. Section 13 (2) of the Finance Act, further provided that "if immediately before the 1st day of April, 1950, there is in force in any State other than Jammu and Kashmir a law corresponding to, but other than, an Act referred to in sub-s. (1) or (2) of s. 11, such law is hereby repealed with effect from the said date.. " It seems that in consequence of this provision in the Finance Act, 1950, the rules which were in force on April l, 1950, were changed in the Cochin area by a notification dated August 3, 1950, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 1, , was a tax which was sustainable under item 60 or 62 of List II of the Seventh Schedule to the constitution. The High Court dismissed the petitions holding that the laws under which the new Rules were framed were in force and were justifiable under item 62 of List II of the Seventh Schedule. Unfortunately, though the judgment of the High court mentions the contention of the appellants that on the extension of the Central Act with effect from April 1, 1950, by the Finance Act, 1950, the Cochin Act as well as the similar Travancore Act ceased to be operative from that date, there is no discussion in the judgment with regard to this contention, and the High Court did not consider whether in view of s.13(2) of the Finance Act, 1950, the Cochin Act as well as the similar Travancore Act stood repealed from April 1, 1950. If the effect of s. 13(2) of the Finance Act, 1950, was to repeal the Cochin Act as well as the similar Travancore Act, from April 1, 1950, there will be no law in operation which would justify the framing of the new Rules either in August 1950 or`in January 1951 and it would then be unnecessary to consider whether a law contain in,as provisions similar to tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f List I of the Seventh Schedule to the Government of India Act, 1935 (now corresponding to item 84 of List I of the Seventh Schedule to . the constitution), and such duty of excise is a duty on goods manufactured or produced in India. Thus according to the respondent, the main feature of the Central Act is the imposition of a tax on goods produced or manufactured in India and unless the Cochin Act or the similar Travancore. Act also imposes a tax on goods produced or manufactured in what was formerly Cochin or Travancore State these would be no question of correspondence between the Central Act and the Cochin Act or the similar Travancore Act. Reference was also made to In Re the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act. 1938 Central Provinces and Berar Act XIV of 1938) Province of Madras v Messrs. Boddu Paidanna and Son(2) and Governor- General in Council v. Provinces of Madras (3), where the nature of a duty of excise was considered. In the first case it was held that the primary meaning of "excise duty" was of a tax on articles produced or manufactured in the taxing country (see p. 40). It was also observed in that case that it could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following observations at p. 371: "It (the Central Act) is a fiscal measure to levy and realise duty on tobacco. The method of realising duty must be left to the wisdom of the legislature taking each individual trade and its peculiarities and difficulties which arise in that matter. Various provisions of the Act and the Rules show that the authorities are on the track of the movement of tobacco from the time it is grown to the time it is manufactured and sold in the market and the various provisions of the Act and the Rules made thereunder have been considered necessary for effectuating the purpose of the Act." It is true that the Central Act provides for the levy of excise duty under s. 3 but in order to carry out that purpose it has provided for licences under s. 6. The Rules also provide in Chap. III for levy and refund of duty, in Chap. V for manufactured goods other than salt, in Chap. VII for warehousing, in Chap. VIII for licensing. Thus in order to levy excise duty under the Central Act, there are provisions in the Rules which start in the case of tobacco from the stage of cultivation and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r conferred on the Diwan under s. 5 to make rules for the purpose. Under the similar Travancore Act, the provision is contained in s. 31 which provides that the Diwan may with the sanction of the ruler make rules permitting absolutely or subject to the payment of any duty or fee or to any other conditions, and regulating within the whole or any specified part of Travancore, the cultivation, manufacture, possession, transport, import and sale of tobacco. So in both the former States, the Act did not contain a charging section and the duty was levied by the Rules framed by the Diwan under the powers conferred on him by the Act. In essence, therefore, the provision for charging the tax was made in the Rules. Further it is true that the method by which the tobacco revenue was realised was through auction sales of the right to possess and sell tobacco. But we must not forget that the Cochin Act as well as the similar Travancore Act was passed by a Ruler who was not trammelled by a constitution like the Government of India Act, 1935, and its Legislative Lists. The method evolved for realising tobacco revenue was to auction the right to poses and sell tobacco and the amounts received at s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns was still in the nature of excise duty. Even in the case of imported tobacco, only with respect to that part of it which was eventually sold to the consumer as it was imported without any processing or treatment in the State, it can be said that the impost which fell on it was not in the nature of excise duty. However, there is no way of differentiating this part of the revenue from the rest and considering the elaborate provisions as to the control of tobacco trade from the grower right up to the time that the goods were sold to the public in retail sale it would r in our opinion be not unreasonable to hold that the Cochin Act as well as the Travancore Act was in substance an Act corresponding to the Central Act. Therefore when the Central Act was extended to the Part State of Travancore-Cochin by s. 11 (1) of the Finance Act and the Finance Act specifically provided by s. 13 (2) for the repeal of corresponding law, the result was that the Cochin Act as well as the similar Travancore Act stood repealed. There would be no power in the State Government thereafter to frame new Rules either in August 1950 or in January 1951 for there would be no law to support the new Rules and wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the cochin Act or under the Travancore Act in August 1960 and thereafter in January 1951 were invalid ab initio and have no force and effect. The appellants will get their costs from the State-one set of hearing costs. SHAH, J.- In this group of five appeals the principal question which falls to be determined is whether within the meaning of a 1:3(2) of the Finance Act, 1950 (which by s. 11 thereof extended the Central Excise & Salt Act, I of 1944, to the Part b States), there was, immediately before the 1st of April 1950, in force in Part State of Travancore-Cochin, a law Corresponding to the Central Excise & Salt Act, 1944 It is common ground that if there was such a law in force, by virtue of s.13(2) of the Finance Act of 1950, that law stood repealed, The appellants in Civil Appeals Nos.89 and 90 of 1961 were carrying of the former state of Cochin. Appellants in Civil Appeals 126 to 128 of 1961 were residents of and carried on business in tobacco with in territory of the former State of Travancore. On July 1, 1949 the States of Travancore and Cochin from themselves into a Union under a common administration, but by the virtue of Travancore Cochin Administration Law ,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, it may suffice to observe that cultivation, curing, manufacture, possession, transport, importation and exportation and sale of tobacco was controlled by a system of licensing. Certain licences were issued free of charge and in respect of certain other licences, especially storage and sale, fee had to be paid to the State. Similarly, in the State of Cochin there was enacted by the Ruler of Cochin the Cochin Tobacco Act of 1084 (M.E.) on May 3, 1909. By s. 3(d) of that Act, tobacco was defined as inclusive of "snuff, cigars and preparations of which tobacco forms a part " By s. 4, except as permitted by the Act or by the Rules made thereunder, possession for the purposes of sale, transport, import, export, sale and cultivation of tobacco were prohibited. By a 5, the Diwan of the State was authorised from time to time after previous publication, to make rules consistent with the Act to permit absolutely or subject to any Conditions regulating the possession, transportation, importation or exportation and sale and cultivation of tobacco. Contravention of the Act and the Rules or orders made under the Ace were penalised by s. 6. Rules were framed in 1923 under the Cochin Tobacco Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (which is common to both the sets of Rules) provides that "the vend of tobacco of all kinds is prohibited throughout the state, except under a licence". Rule 15 provides that the "licence for the vend of tobacco shall be of the following description:- (i) Stockist or 'A' Class licence; (ii) Wholesale or 'B' Class licence ; and (iii)Retail or 'C' Class licence." Rule 16(i) and (ii) provides: "(i) Holders of Stockist or 'A' Class licences shall be entitled to purchase tobacco from any deale within or without the State without any quantitative restriction. This class of licensees shall sell only to other 'A' Class licensees or to 'B' Class licence, (ii) The annual fees for these licences shall be as follows:- (Then follows a table which sets out minimum fee prescribed for varieties of tobacco stocked upto the maximum prescribed quantity and the additional fee payable for stocking additional quantities.)" The appellants in all these appeals were 'A' Class stockists and were called upon to pay licence fee prescribed by these Rules. They claimed that they were not liable to pay licence fee under the Rules framed in 1951 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces and Berar Sales of Motor Spirit and lubricants Taxation Act, 1938 observed: ....... at the date of the Constitution Act (Government of India Act 1935) though it seems that the word 'excise' was not infrequently for the administration of a particular indirect tax (as salt excise or opium excise), the only kind of 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 production. 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 upto 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 whatever may have been the reasons for Johnson's definition of 'Excise' in the first edition of his Dicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alt which are produced or manufactured in India x x x and at the rates set forth in the First Schedule. By s. 6, certain incidental operations are made subject to licence and it is provided: The Central Government may, by notification in Official Gazette, provide that, from such date as may be specified in the notification, no person shall, except under the authority and in accordance with the terms and conditions of a licence granted under this Act, engage in (a) the production or manufacture of any specified goods included in the First schedule or of saltpetre or of any specified component parts or ingredients of such goods or of specified containers of any specified excisable goods, or (b) the wholesale purchase or sale (whether on his own account or as a broker or commission agent or the storage of any excisable goods specified in this behalf in Part A of the Second Schedule". By virtue of these provisions power is conferred upon the Central Government to impose restrictions upon the rights to produce, manufacture and to engage in any process of production or manufacture of the excisable goods or in the wholesale purchase or sale of excisable goods this power is conferred indis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal thereof to the licensing authority who shall be such officer as the Central Board of Revenue may authorise in this behalf. Rule 176 prescribes Forms application for licences and cl. (2) provides that every such application for licence shall, where a fee is prescribed in the subjoined Table, be accompanied by a Central Excise Revenue Stamp showing payment of such fee under item No. 2 in the Table "a wholesale dealer in unmanufactured tobacco who purchases for the purpose of trade or manufacture" the to pay graded fee set out in the second and the third columns. Item 6 deals with the duty payable by the holder of a private bonded store-room or warehouse. Rule 178 provides for the Forms of licence. The appropriate forms of licence in respect of storage of tobacco for sale are Form L-2 (application for licence to carry on wholesale trade in unmanufactured products liable to a central duty of excise), Form L-3 (application for licence as broker or commission agent in respect of unmanufactured products liable to a central duty of excise), and Form L-5 (application for licence for a private bonded warehouse-storeroom for the storage of excisable goods). It is manifest that under the R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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