PETITIONER: RAM KRISHNA RAMNATH AGARWALOF KAMPTEE Vs. RESPONDENT: SECRETARY, MUNICIPAL COMMITTEE,KAMPTEE.UNION OF INDIA AND GO DATE OF JUDGMENT: 14/03/1950 BENCH: KANIA, HIRALAL J. (CJ) BENCH: KANIA, HIRALAL J. (CJ) FAZAL ALI, SAIYID SASTRI, M. PATANJALI MAHAJAN, MEHR CHAND DAS, SUDHI RANJAN MUKHERJEA, B.K. CITATION: 1950 AIR 11 1950 SCR 15 CITATOR INFO : RF 1966 SC1089 (55) ACT: Government of India Act, 1935, es. 100, 143, 292; Sch. VII, List 1, Entry 45; List 11, Entry 49--Central Excises and Salt Act (1 of 1944, es. 2, 3--Central Provinces Munici- palities Act (11 of 1922), s. 66 (1) (e)--Import of tobacco within municipality .for manufacturing bidis--Tobacco liable to Central excise duty--Levy of octroi duty by munic- ipality--Legality. HEADNOTE: Section 66 (1) (e) of the Central Provinces Municipali- ties Act, 1922, empowered municipalities within the Province to levy an octroi duty on goods brought within their limits for sale, consumption or use within those limits. Section 3 of the Central Excises and Salt Act, 1944, an Act of the Central Legislature, provided that there shall be levied and collected duties of excise on all excisable goods other than salt which were produced or manufactured in British India, and included tobacco in the list of excisable goods. The question being whether a municipality situated in the Cen- tral Provinces could levy octroi duty on tobacco brought within its limits for the purpose of manufacturing bidis, in view of the exclusive power of the Central Government to levy excise duty under Entry 45 of List I of the Seventh Schedule to the Government of india Act, 1935, and the provisions the Central Excises and SaIt Act: Held, that excise duty and octroi were taxes essentially different in their nature and the power of the Province to levy octroi was not inconsistent with the power of the Centre to levy excise duty on the some goods, and a munici- pality could therefore validly levy an octroi duty on such tobacco under s. 66 (1)(e) of the Central Provinces Munici- palities Act of 1922. Held further, that there was nothing in the Central Excises and Salt Act or its provisions contrary to the provisions of s. 66 (1) (e) of the Central Provinces Munici- palities Act or to the levy of octroi duty under the same and s. 143 of the Government of India Act, therefore, pre- served the right of the municipality to levy octroi duty under the Act of 1922. Province of Madras v. Boddu Paidanna and Sons [1942] F.C.R.. 90, Governor-General in Council v. Province of Madras [1942] F.C.R. 129, In re the Central Provinces and Berar Act No, XIV of 1938, 16 [1939] F.C.R. 80, Miss Kishori Sherry v. The King [1949] F.C.R. 650 referred to. Administrator, Lahore Municipality v. Daulat Ram [1942] F.C.R. 31 distinguished. Judgment of the High Court of Nagpur affirmed. JUDGMENT:
APPEAL from the High Court of Judicature at Nagpur: Case
No. III of 1948.
This was an appeal from a judgment and order of the High
Court of Nagpur (Mis. Civil No. 158 of 1946) dated 9th
April, 1948, made on a reference under s. 83 (2)of the
Central Provinces Municipalities Act (11 of. 1922) by the
Extra Assistant Commissioner, Nagpur. The facts of the case
and the arguments of counsel appear in the judgment.
T.J. Kedar and B.B. Tawakley (Sir Narain Andley
with them) for the appellant.
Lobo, for the respondent.
M. C. Setalvad, Attorney-General of India, (S.M.
Sikri with him), for the Union of India.
1950 March, 14. The Judgment of the Court was delivered
by
KANIA C.J.–This is an appeal from the judgment and
order of the High Court at Nagpur, made on a reference under
Section 83 (2) of the Central Provinces Municipalities Act
11 of 1922, by the EXtra Assistant Commissioner, Nagput.
The appellant is a trader in Kamptee who manufactures bidis.
On the 30th of November, 1945, he brought to Kamptee from
outside tobacco to make bidis. A declaration form signed on
his behalf stated that the 254 bags of tobacco liable to
octroi duty, which had that day arrived at octroi post No.
3, had been brought for use and consumption within the
limits of the Municipality. He however put on record his
protest against the recovery of the duty which was fixed at
Rs. 1,128-2-0. Against the order claiming the amount, the
appellant filed an appeal to the Extra Assistant Commission-
er with revenue appellate powers, Nagput. He contended that
the municipality claimed to levy the duty under Section 66
(1) (e) of the Municipal Act, but they had
17
no right to do so as under Section 3 of the Central Excises
and Salt Act, 1944, that excise duty was levied on tobacco
by the Central Government and the levy of the octroi duty on
the tobacco in question was covered by the excise duty and
therefore not permissible. The Appellate Assistant Commis-
sioner in making the reference to the Nagpur High Court
expressed his opinion that the appellant’s contention that
as the bidis were not sold within the municipal limits, duty
was not leviable, was unsound. He however thought that
because under Section a of the Excise Act, excise duty was
levied by the Central Government the levy of the octroi duty
was ‘not in consonance with Section 100 of the Government of
India Act, 1935, and was ultra vires the Provincial Govern-
ment. The High Court rejected the appellant’s contention and
disagreed with the view of the Appellate Commissioner. The
High Court however granted a certificate under Section 205
(1) of the Constitution Act and the appellant has come in
appeal to this Court.
The Central Provinces Municipalities Act was passed in
1922 and the relevant notifications fixing the rates of
octroi duty were issued in 1928. No question about the
validity of the Act when passed, or of the notifications
issued in pursuance thereof has been raised before us. The
argument on behalf of the appellant is that as under the
Central Excises and Salt Act, I of 1944, tobacco became
excisable goods under Item 9 in Schedule I to that Act and
continued to be so till it got converted into bidis, the
Central Government alone was entitled to levy excise duty on
it till then. According to the definition of ‘manufacture’
in the Excise Act that duty could be levied at any stage in
the manufacture of bidis and therefore any tax imposed,
while tobacco was being converted into bidis, was excise
duty. Legislation in connection with excise duty is within
the exclusive province of the Central Legislature as shown
by Entry 45 of List I in Schedule VII of the Constitution
Act. The impost of octroi duty in pursuance of the Municipal
Act, before tobacco was made into bidis, is it was argued in
conflict with the legislative powers of the Centre. In this
18
connection our attention was drawn to Administrator Lahore
Municipality v. Daulat Ram Kapur(1), in which it was held
that the levy of octroi duty on salt was not within the
powers of the Provincial legislature. It was argued there-
fore that under Section 100 of the Government of India Act,
octroi duty levied on tobacco under the legislative powers
of the Provincial Government was invalid. The only way to
reconcile the two Entries, namely, Entry 45 in List I and
Entry 49 in List II of the Seventh Schedule, was to read the
words “for consumption or use” in Entry 49 as meaning for
consumption or use except for manufacture of excisable
articles”. So read, the levy of octroi duty on the facts of
this case was invalid. In reply to the argument that Sec-
tion 292 of the Government of India Act kept alive the old
Provincial legislation, namely, the Central Provinces Munic-
ipalities Act, and the right to levy octroi duty was saved
under Section 143 of the Constitution Act, it was urged on
behalf of the appellant that the. provisions of the Excise
Act were contrary to the right to levy octroi duty and as
that Act was passed in 1944 the right to levy octroi duty
saved by Section 148 of the Constitution Act had lapsed. It
was argued that although there was no express provision in
the Excise Act to that effect, the definition of “excisable
goods” and “manufacture” read with Entry 9 in Schedule I and
the charging Section 3 in the Act led to that conclusion.
It is clear that both parts of this argument are thus based
on the plea that the impost of any duty at any stage before
bidis are manufactured is excise duty and therefore the levy
of octroi duty is illegal.
Section 66 (1) (e) of the Central Provinces Municipali-
ties Act, 1922, runs as follows :–
“an octroi on animals, or goods brought within the
limits of the municipality for sale, consumption or use
within those limits;”
The words “excisable goods” and. ” manufacture ” are
defined in Section 2 of the Central Excises and Salt Act,,
1944,. as follows .–.’
(1) [1942] F.C.R. 91 .
19
2. (d) “excisable goods” means goods specified in the
First Schedule as being subject to a duty of excise and
includes salt;”
2. (f) “manufacture” includes any process incidental or
ancillary to the completion of a manufactured product; and
(i) in relation to tobacco includes the preparation of
cigarettes, cigars, cherots, bidis, cigarette or pipe or
hokkah tobacco, chewingtobacco or snuff; and
(ii) ……
Section 3 of the Excise Act runs as follows :–
“There shall be levied and collected in such manner as
may be prescribed duties of excise on all excisable goods
other than salt which are produced or manufactured in Brit-
ish India, and a duty on salt manufactured in, or imported
by land into any part of British India as, and at the rates,
set forth in the First Schedule …… ”
Entry 9 to the First Schedule of the Excise Act is in
these terms :–
“9. TOBACCO, CURED-
” Tobacco’ means any form of tobacco, whether cured or
uncured, and whether manufactured or not,and includes the
leaf, stalks and stem of the tobacco plant but does not
include any part of a tobacco plant while still attached to
the earth;”
(Then follows a list of various articles into which tobacco
can be converted, like bidis, cigarettes, snuff,etc. with
different rates of duty mentioned against each article.)
Sections 143 and 292 of the Government of India
Act, 1935, run as follows :–
“143. (1) Nothing in the foregoing provisions. of this
Chapter affects any duties or taxes levied in any Federated
State otherwise than by virtue of an Act of the Federal
Legislature applying in the State.
(2) Any taxes, duties, cesses or fees which, immedi-
ately before the commencement of Part III,of this Act
20
were being lawfully levied by any Provincial Government,
municipality or other local authority or body for the pur-
poses of the Province, municipality, district or other local
area under a law in force on the first day of January,
nineteen hundred and thirty-five, may, notwithstanding that
those taxes, duties, cesses or lees are mentioned in the
Federal Legislative List, continue to be levied and to be
applied to the same purposes until provision to the contrary
is made by the Federal Legislature”.
“292. Notwithstanding the repeal by this Act of the
Government of India Act, but subject to the other provisions
of this Act, all the law in force in British India immedi-
ately before the commencement of Part III of this Act shall
continue in force in British India until altered or repealed
or amended by a competent legislature or other competent
authority.”
Section 143 can be considered in two ways. If the
Government of India Act did not bring the particular impost
of tax by the Provincial Government within the legislative
powers of the Centre, by reason of the inclusion of such tax
in List I of the Seventh Schedule, the pre-existing right of
the Provincial Government to levy such tax remained unaf-
fected. If so, Section 143 of the Government of India Act
did not affect such legislation and the same continued to be
valid and operative under Section 202 of the Constitution
Act. If however the levy of .such tax by the Provincial
Government was a subject which was within the exclusive
legislative power of the Centre by reason of such tax being
included in List I of the Seventh Schedule, the levy of such
tax under the Provincial legislation continued to be valid
until the Central Legislature passed an Act the provisions
whereof were contrary to the provisions of the Provincial
legislature or to the levy of a tax under the Provincial
Act. Examining next the contentions of the appellant it
seems clear that octroi duty as levied by the respondent
comes within the exact wording of Entry 49 of List 11 of the
Seventh. Schedule to the Constitution Act. Prima facie,
therefore, there is no reason, to
21
consider the levy of the octroi duty under the Provincial
legislation invalid. Such levy remained unaffected by
reason of Section 292 of the Constitution Act. The argument
of the appellant is that the levy of the octroi duty being
at a stage after the excisable article, viz., tobacco, came
into existence and became liable to excise duty under the
Excise Act, the levy of octroi duty before bidis were made
from tobacco, is invalid. In support of this argument the
definition of ‘excisable goods’, ‘manufacture’ and the Entry
9 in the Schedule to that Act were relied upon. The error
underlying the argument of the appellant is the assumption
that any impost of tax from the time tobacco came into
existence till the same was converted into bidis is neces-
sarily excise duty.
The Federal Court had to consider the distinction be-
tween the duty of excise and a tax on sale in The Province
of Madras v. Boddu Paidanna and Sons(1). It is there ob-
served as follows:–“Plainly, a tax levied on the first sale
must, in the nature of things, be a tax on the sale by the
manufacturer or producer; but it is levied upon him qua
seller and not qua manufacturer or producer. It may well be
that ‘a manufacturer or producer is sometimes doubly
hit …… If the tax-payer who pays a sales tax is also a
manufacturer or producer of commodities subject to a central
duty of excise, there may no doubt be overlapping in one
sense, but there is no overlapping in law. The two taxes
which he is called on to pay are economically two separate
and distinct imposts. There is, in theory, nothing to
prevent the Central Legislature from imposing a duty of
excise on a commodity as soon as it comes into existence, no
matter what happens to it afterwards, whether it be sold,
consumed, destroyed, or given away …… It is the fact
of manufacture which attracts the duty even though ‘it may
be collected later. In the case of a sales tax, the liabil-
ity to tax arises on the occasion of a sale and a sale has
no necessary connection with manufacture or production.”
The Court further observed that in the Constitution Act the
whole
(1) [1942] F.C.R. 90.
22
of the taxing power in this particular sphere (power to
impose duties of excise) is expressly apportioned between
the Centre and the Provinces, to the one being assigned the
power to impose duties of excise, to the other taxes on the
sale of goods. It is natural enough, when considering the
ambit of an express power in relation to an unspecified
residuary power, to give a broad interpretation to the
former at the expense of the latter. The case however is
different where as in the Constitution Act there are two
complementary powers,each expressed in precise and definite
terms. There can be no reason in such a case for giving a
broader interpretation to one power rather than to the
other; and there is certainly no reason for extending the
meaning of the expression “duties of excise” at the expense
of the Provincial power to levy taxes on the sale of goods.
In The Governor-General in Council v. The Province of
Madras (1), the Judicial Committee approved of the distinc-
tion drawn in this case between the excise duty and a tax on
sale. There the question arose in respect of tax on the
sale of excisable goods. Their Lordships observed as fol-
lows :–” An exhaustive discussion of this subject (namely,
the meaning of the term duty of excise )from which their
Lordships have obtained valuable assistance is to be found
in the judgment of the Federal Court in Re The Central
Provinces and Berar Act No. XIV of 1938(2). Consistently
with this decision their Lordships are of opinion that a
duty of excise is primarily a duty levied on a manufacturer
or producer in respect of the commodity manufactured or
produced. It is a tax on goods not on sales or the proceeds
of sale of goods. Here, again,their Lordships find them-
selves in complete accord with the reasoning and conclusions
of the Federal Court in Boddu Paidann case (3). The two
taxes, the one levied on a manufacturer in respect of his
goods, the other on a vendor in respect of his sales, may,as
is there pointed out, in one sense overlap. But in law
there is no overlapping. The taxes are separate and
(1) [1942] F.C.R. 129. (3) [1942] F.C.R. 90
(2) [1939] F.C.R. 80.
23
distinct imposts. If in fact they overlap, that may be
because the taxing authority, imposing a duty of excise,
finds it convenient to impose that duty at the moment when
the excisable article leaves the factory or workshop for the
first time on the occasion of its sale. But that method of
collecting the tax is an accident of administration; it is
not of the essence of the duty of excise, which is attracted
by the manufacture itself. That this is so is clearly
exemplified in those excepted cases in which the Provincial,
not the Federal, legislature has power to impose a duty
of excise. In such cases there appears to be no reason why
the Provincial legislature should not impose a duty of
excise in respect of the commodity manufactured and then a
tax on first or other sales of the same commodity. Whether
or not such a course is followed appears to be merely a
matter of administrative convenience. So, by parity of
reasoning, may the Federal Legislature impose a duty of
excise on the manufacture of excisable goods and the Provin-
cial legislature impose a tax on the sale of the same goods
when manufactured.”
This discussion clearly shows that the relevant question
is what is the nature of the tax. Excise duty is a tax on
manufactured goods. Octroi duty is a tax levied on the
entry of goods within a particular area. Under the Excise
Act, tobacco becomes excisable goods within the meaning of
Item 9 in the Schedule. The subsequent use of such manufac-
tured. goods in making different articles only affects the
rate of tax. Therefore, tobacco becomes subject to excise
duty when it reaches the stage of manufacture mentioned in
Item 9 of the Schedule to the Excise Act. Even before it is
converted into bidis or any other article mentioned in the
entry it has become excisable goods and liable to pay excise
duty. The levy of such duty is therefore not in conflict
with the levy of an impost on the entry of the goods within
a certain area.
It was argued that under the rules framed by the Govern-
ment under the Central Excises and Salt Act, 1944, Govern-
ment retained control over the movement of the
24
goods from the beginning till the end. This argument is not
of assistance in determining the nature of the octroi tax.
As Government has to collect excise duty and the rate of
duty varies in respect of different shapes in which the
excisable goods are ultimately converteD, there is nothing
unnatural in the Government keeping a control and note of
the articles till the manufactured article becomes a commod-
ity, and is mixed up with the commodities used by the people
at large. The argument that Entry 49 in List 11 being in
conflict with Entry 45 in List I of Schedule Seven to the
Constitution Act, Entry 49 should be read as “for consump-
tion or use, except for manufacture of goods”, in our opin-
ion, is unsound. In the first place, the approach to the
question itself is wrong. When a particular legislation
falls within the exact words of an Entry in the Provincial
List, under section 100 it is valid and no question of
reconciliation arises. A similar argument advanced in
regard to a supposed conflict between Entry 19 of List I and
Entry 31 of List II was rejected by us in Case No. 27 of
1949: Miss Kishori Shetty v. The King (1). In the present
case if the question of the validity of the Provincial
legislation arises, on the interpretation of Entry 49 in
List II, it appears that the answer must be in favour of the
validity of the legislation. The decision in Administrator,
Lahore Municipality v. Daulat Ram Kapur(2) does not help the
appellant because in that case Entry 47 in List I is only
“salt”. A comparison with Entry 45 in List I shows dis-
tinctly that Entry 45 is limited to excise duty and is not
wide enough to cover tobacco or other goods generally for
all purposes of legislation. The observations in that case
therefore are not helpful to the appellant.
On the second part of the contention the appellant can
succeed only if he establishes that the provisions of the
Excise Act are contrary to the levy and recovery of duty
under the Provincial Act of 1922. There is no express provi-
sion in the Excise Act contrary to the provisions of the
Municipal Act. Unless, therefore, it is necessarily implied
under the Excise Act, the levy of
(1) [1949] F.C.R. 650 (1) [1942] F.C.R. 31
25
the octroi duty under the Municipal Act continues to be
valid. On this point again the appellant’s argument is that
the levy of a duty at any stage of the manufacture of bidis
out 01 tobacco would be the levy of the excise duty and
therefore those provisions were contrary to the provisions
permitting the levy of the octroi duty. We have already
discussed and rejected in the first part of the judgment
this contention. It is wrong to think that two independent
imposts arising from two different sets of circumstances
were not permitted in law. In our opinion, therefore, there
is nothing in the Excise Act to make its provisions contrary
to the provisions of Section 66 (1) (e) of the Central
Provinces Municipalities Act or to the levy of octroi duty
under the same. The appeal therefore fails and is dismissed
with costs.
Appeal dismissed.
Agent for the appellants: Rajinder Narain.
Agent for the respondent: S.P. Varma.
Agent for the Union of India: P.A. Mehta.
