TMI Blog1962 (1) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... g to be framed either 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. - Civil Appeals. Nos. 89, 90 and 126 to 128/61 - - - Dated:- 24-1-1962 - WANCHOO, K.N., SINHA, BHUVNESHWAR P.(CJ), GAJENDRAGADKAR, P.B., HIDAYATULLAH, M. AND SHAH, J.C., JJ. M.C. Setalvad, Attorney-General of India and R. Gopalakrishnan, A. V. Viswanatha Sastri, A. George Titus, R. Mahalingier and M. R. Krishna Pillai, for the appellant G. S. Pathak and V, A. Seyid Muhammad and Sardar Bahadur, for the respondent JUDGMENT WANCHOO, J.- These five appeals on certificates-granted by the High Court of Kerala raise a common question of law and will be dealt with together. Two of them (appeals 89 and 90) are from what was formerly the Cochin area and the other three are from what was the Travancore area. They relate to a tax on tobacco in these areas. As the facts, laws and rules in the two areas are similar we propose to deal in detail with the appeals from the Cochin area. In 1909, Act VII of 1084 was passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was to be undertaken. Rule 8 provided for the maintenance of a stock book by a licensee of a storehouse or n manufacturing yard. Rule 13 provided that the licensed manufacturer and the storehouse keeper would sell or otherwise dispose of his stock only to licensed dealers and there was prohibition against the disposal or sale of tobacco to any person who had not the required license to possess the same. Rule 15 made it an office for any one to cultivate, dry, cure, manufacture, store, transport, sell or otherwise dispose of tobacco in contravention of the Rules. In addition to these Rules, there were further Rules also framed under the Cochin Act with, respect to import of tobacco into the State, and all import was prohibited except under the provisions of the Diwan's notification describing the sale of tobacco shops and licences. Possession of tobacco for the purpose of sale was also prohibited except under the provisions for the sale of tobacco shops and licences. Export of tobacco was also prohibited except with the special sanction of the Commissioner of Excise. It further appears that the system in force for the collection of tobacco revenue up to August 1950 was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellants of Cochin area were tobacco dealers and holders at the time they filed their petitions in 1956 of A class licences. The main contention raised on their behalf in their petitions was that the Cochin Act stood repealed by the Finance Act 1950, on the introduction of the Central Act in the part State of Travancore- Cochin from April 1, 1950 in consequence, the notification which was issued on August 3, 1950, or on January 25, 1951, framing new Rules for the issue of licences and prescribing rules therefor under the powers conferred under the Cochin Act or the similar Travancore Act were ab initio void, because the Acts under which the notifications were; purported to be issued stood repealed from April 1, 1950. In addition various other grounds were raised challenging the validity of the new Rules which, however, we do not think it necessary for the purposes of these appeals to set out here, The petitions were opposed on behalf of the State and it was contended that the Cochin Act or the similar Travancore Act did not stand repealed from April 1, 1950, In consequence it was urged that the State was competent to frame new Rules which it did under the Cochin Act or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tood repealed as from April 1, 1950, under B. 13(2) of the Act. and it is this contention that we have to examine. It was pointed out by this Court in The Custodian of Evacuee Property v. Khan Saheb Abdul Shakoor, etc. (1) that where the Act repealed provides substantially for all matters contained in the Act effecting the repeal there is correspondence between the two Acts and the earlier Act would thus stand repealed; it is not necessary that there should be complete identity between the repealing Act and the Act repealed in every respect, Therefore, when s. 13 (2) of the Finance Act provides that on the extension of the Central Act from April 1, 1950, to the Part State of Travancore Cochin, any law corresponding to the Central Act is repealed with effect from that date, all that we have to see whether the law repealed substantially provided for the same matters as the Central Act, even though it may not be identical in all respects. Let us therefore turn to the Cochin Act and the rules framed thereunder to see if it substantially provides for the same matters with which the Central Act and the Rules and Orders made thereunder deal. The main contention on behalf of the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Travancore Act. Now the Central Act provides by s. 3 for the levy and collection of duties of excise on all excisable goods other than salt which are produced or manufactured in India and also a duty on salt manufactured in or imported by land into any part of India. Further s. 6 of the central Act gives power to the central Government to issue licences and prohibits any person from engaging in the wholesale purchase or also whether on his own account or as a broker or commission agent or the storage of any excisable goods except under the authority and in accordance with the terms and conditions of a licence granted under the Central Act. In Chaturbhai.M. Patel v. The Union of India (1) where the various provisions of the Central Act (including s. 6) and the rules framed thereunder were attacked on the ground that they had nothing to do with the levy and collection of duties of excise, this court held that the various provisions of the Central Act and the Rules made thereunder were essentially Connected with levying and collection of excise duty and in its true nature and character the Central Act remained one under item 45 of List I and that the incidental trenching upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are rules for the manufacture of cigars, cheroots and snuff in bond. It will thus be clear r that the Cochin as well as the Travancore Rules provided for similar central of tobacco as under the Central Act and show that the authorities in Travancore and Cochin were also on the track of the movement of tobacco from the time it was grown and manufactured to the time it was sold in the market. It would therefore follow that the Cochin Act as well as the similar Travancore Act along with the Rules corresponded to the Central Act substantially and would thus be repealed by s. 13(2) of the Finance Act, 1950. But it is urged on behalf of the State that there is no provision for charging duty in the Cochin Act or the similar Travancore Act and therefore all these provisions in the Rules for control from the time of cultivation to the time of the final stage of sale to the consumer, even though they are similar to the Rules under the Central Act, would not make the Cochin Act or the similar Travancore Act a corresponding Act to the Central Act. There is no doubt that there is no provision corresponding to s. 3 of the Central Act in the Cochin Act or in the similar Travancore Act. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise revenue. It is also obvious that this system of auction is not a system of levying sales tax because it has nothing to do with the levy on each sale, which is the essence of a sales tax. It seems that in the former States of Travancore and Cochin, auction system continued right up to the time the constitution came into force and even for sometime thereafter. It seems under the circumstances that the auction system which was in force was only a method of realising duty through the grant of licences to those who made the highest bid at the auctions. The fact therefore that this system was used instead of the system of charging of duty as provided in s. 3 of the Central Act would not in our opinion make any difference to the nature of the impost which was in force on the relevant date, namely, April 1, 1950. It was however urged that under this system even tobacco which was not produced or manufactured in the State but was imported from outside was included for the purpose of licences granted under it. That is undoubtedly so. But from the Rules which were in force regarding cultivation, curing, manufacturing and so on of tobacco within the State it would not be unreasonable to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules framed thereunder were also a law corresponding to the Central Act and the Rules framed thereunder. The Travancore Act therefore also stood repealed from April 1, 1950. There would thus be no law to support the Rules framed by the State Government in January 1951 and, therefore the Rules must fall. It appears that these new Rules have been abrogated as from January 1958. So it Was urged on behalf of the State that this Court should not grant a mere declaration as to the invalidity of the Rules when they are no longer in existence. This argument in our opinion has no force because we must look to the situation as it was when the petitions were presented. The Cochin petitions were presented in 1956 and the Travancore petitions were presented in 1955 and at that time the Rules were in force and they continued in force till December 1957. Therefore the petitioners would be entitled to a declaration that the Rules were invalid because at any rate that would give them relief so far as the period after their petitions is concerned while the Rules remained in force. We therefore allow the appeals and set aside the order of the High Court. The petitions are allowed and it is here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or fee or to any other conditions and regulating within the whole or to any other conditions and regulating within the whole or any specified part of the State of Travancore, cultivation manufacture possession transportation import and sale of tobacco; authorising the establishment of warehouses or bankshalls for storing tobacco legally cultivated or imported into the territory fixing the mode, time and place of levy T of duty, regulating the special custody of tobacco warehoused and the levy of fees for warehousing and transport, and generally to carry out the provisions of the Act. Rules were framed in 1913 in exercise of the powers under s. 31 of the Tobacco Act whereby restrictions were imposed upon the import and export of tobacco and provision was made for bonding tobacco in warehouses and for the issue of licences for bonding tobacco. Provision was also made for licensing retail sale for tobacco and for transport and possession thereof. Certain other rules regulating cultivation, curing and warehousing tobacco and for the issue of licences for those purposes were promulgated in 1937. Rules were also framed regulating the manufacture of cigars, cigarettes and cheroots in bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e continued even after the Union of Travancore and Cochin as formed, and by Art. 372 of the constitution the provisions of the two Acts remained in operation in the respective area of the former States even after the Part`B State of Travancore-Cochin came into being on January 26, 1950. By s.11 of Finance Act 25 of 1950 certain Acts including the Central Excises Salt Act, 1 of 1944, and all Rules and orders made thereunder in force from time to time before the commencement of the Finance Act were extended with effect from April 1, 1950, to the part B States (except the State of Jammu Kashmir), It was provided by s. 13(2) that if immediately before the 1st of April, 1950, there was in force in any State other than Jammu Kashmir a law corresponding to but other than the Act referred to in sub-s. (1) s. 11 such law shall stand repealed with effect from the said date. Presumably, on account of the application of the Central Excises Salt Act, I of 1944, by s. 11 of the Finance Act, 1950, the Part B State of Travancore-Cochin published fresh sets of Tobacco Rules. These Rules were issued on January 25, 1951, in purported exercise of the powers conferred by the Travancore Regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t an excise duty and presumably on that account declined to consider the question whether the Tobacco Acts of the States of Travancore and Cochin had been superseded either wholly of partially by the application of the Central Excises and Salt Act of 1944. The Travancore and the Cochin Acts do not directly levy any duty on production or manufacture of tobacco. Restrictions, it is true, are imposed the growing, curing, manufacture, storage, import and export by requiring that licences shall be obtained for those purposes and prescribing penalties for violating the provisions of the Acts and the Rules. It also appears that the trade in tobacco was regulated before the formation of the B State of Travancore-Cochin, by holding auctions for the rights to sell tobacco. These auctions were held by Excise Commissioners and the highest bidder in the auction got the right to deal in tobacco, and the two Acts were enacted for regulating and controlling the sale of tobacco, but the State did not levy any duty on the manufacture or production of tobacco. The licence fee for the issue of a licence for growing, curing, manufacturing, exporting, importing or storing is not in itself an excise d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n legislative duplication or overlapping, the law in force in Part B State would be regarded as corresponding to the law extended by the Indian Finance Act and hence repealed by the operation of s. 13(2). Let us examine the scheme of the Central Excises and Salt Act of 1944 for the purpose of ascertaining whether the Travancore and the Cochin Tobacco Acts and Rules frame thereunder are law corresponding to the Central Excises and Salt Act, 1944, wholly or partially. The Central Excises and Salt Act, 1944, was enacted to consolidate and amend the law relating to Central duties of excise on goods manufactured or produced in certain parts of India and to salt. The expression excisable goods is defined in s. 2(d) as meaning goods specified in the First Schedule as being subject to a duty of excise and includes salt . By s. 2(f) the expression manufacture is defined as inclusive of any process incidental or ancillary to the completion of a manufactured product, and (i) in relation to tobacco includes the preparation of cigarettes, cigars, cheroots, biris, cigarette or pipe or hookah tobacco, chewing tobacco, or snuff x x x . By s. 3 it is provided that there shall be levied and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of tobacco. By s. 6(b) wholesale purchase or sale, or storage of excisable articles is prohibited. By Rule 7 of the Central Excise Rules, 1944, duty is made payable by every person, who produces, cures, manufactures or who stores in any warehouse any excisable goods. Rule 174 which occurs in Chapter VII deals with licensing. It provides, in so far as it is material, that. Every manufacture, trader or person hereinafter mentioned, shall be required to take out a licence and shall not conduct his business in regard to such goods otherwise than by the authority, and subject to the terms and conditions of a licence granted by a duly authorised officer in the proper From:- (1) Matches x x x (2) Unmanufactured products. -Curers, brokers, Commission agents and wholesale dealers who purchase such products from cures, all brokers, commission agents and wholesale dealers doing business in unmanufactured tobacco; all holders of private bonded store-rooms or warehouses; (3) Other excisable goods except salt- (a) Manufacturers; and (b) x x x x Rule 175 deals with the procedure for obtaining a licence. By the 1st clause it provides that every person desiring to engage in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were not provision corresponding to the provisions of s. 6(b) under the Central Excises and Salt Act, 1944 and the rules framed under the Act requiring that licences shall be taken out for storage of tobacco for sale and fee shall be paid in respect thereof. In my judgment the relevant rules made under the Travancore and the Cochin Tobacco Acts requiring licences to be taken for storage of tobacco and in force on April, 1, 1950, were law corresponding to the provisions of the Central Excise and Salt Act, 1944, and the rules framed thereunder which required licences to be taken out for storage of tobacco and for payment of licence fee in respect thereof and to that extent the provisions imposing an obligation to take out licences and to pay licence fees under the Tobacco Acts of Travancor and the Cochin States were superseded and the State of Travancore Cochin had no authority to promulgate rules 14, 15 and 16 under the Notification issued in the Travancore Cochin Government Gazette dated January 25,1951, and to levy licence fee for storage of tobacco. It is unnecessary to consider whether the remaining provisions of the Travancore and the Cochin Tobacco Acts and the Rules fram ..... X X X X Extracts X X X X X X X X Extracts X X X X
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