1. Tobacco licensing dispute — Extension of Central Excises and Salt Act 1944 via Finance Act 1950 — Repeal of corresponding state laws under Section 13(2). (Para 1 , 2 , 3 , 4 , 5 , 6 , 19 , 20 )
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1962 Supreme(SC) 24
SUPREME COURT OF INDIA
24th January, 1962
B.P. SINHA, C.J.I., P.B. GAJENDRAGADKAR, K.N. WANCHOO, M. HIDAYATULLAH AND J.C. SHAH; JJ.
1. A. B. Abdulkadir and others (In C. A No. 89 of 61)
2. A. K. Mamoo (In C. A. No. 90 of 61)
3. T. E. Abraham (In C. A. No. 126 of 61)
4. E. J. Mathew (In C.A. No. 127 of 61) and
5. E. P. Eapan (In A. C. No. 128 of 61), Appellants
Versus
The State of Kerala and another (In all the Appeals), Respondents.
Civil Appeals Nos. 89, 90 and 126 to 128 of 1961.
Advocates appeared
Mr. M. C. Setalvad, Attorney-General for India (Mr. R. Gopalakrishnan, Advocate, with him), for Appellants (In C. As. Nos. 89 and 90 of 61); Mr. G. S. Pathak, Senior Advocate (Dr. V. A. Seyid Muhammad Advocate, with him), for Respondent (In C. As, Nos. 89 and 90 of 61); Mr. A. V. Viswanatha Sastri, Senior Advocate (M/s. A. George Titus, R. Mahalingier and M. R. Krishna Pillai, Advocates, with him) for Appellants (In C. As. Nos. 126 to 128 of 61); Mr. G. S Pathak, Senior Advocate (Mr. Sardar Bahadur, Advocate with him), for Respondents (In C. As. Nos. 126 to 128 of 61)
A law is "corresponding" to another if it substantially provides for the same matters, regardless of complete identity. If a repealing act removes corresponding laws, any subsequent rules framed under the repealed laws are void ab initio and cannot legally impose taxes.
Headnote:(A) Finance Act, 1950 - Sections 11 and 13(2) - Central Excises and Salt Act, 1944 - Sections 3 and 6 - Constitution of India - Article 265 - Seventh Schedule, List II, Item 62 - Repeal of corresponding laws - Extension of Central Act to Part B States - Whether state laws regulating tobacco trade and licensing correspond to the Central Act - If state laws are repealed, whether subsequent rules framed under them are valid - A law is "corresponding" if it substantially provides for the same matters, even if not identical in every respect (Para 11) - Control of tobacco from cultivation to retail sale under state laws is substantially similar to the regulatory framework of the Central Act (Para 13) - Absence of a specific charging section in state laws does not prevent them from being "corresponding" if the overall scheme of revenue collection and control is similar (Para 14).
(B) Tax - Validity of rules - Rules framed under a repealed Act are void ab initio and cannot impose a tax, as it would violate Article 265 of the Constitution (Para 14).
Facts of the case:
Appellants were tobacco dealers holding licenses in former states. Following the extension of a Central Act on excise and salt to Part B states via a Finance Act, the state government introduced new rules for license fees under existing state tobacco laws. The appellants challenged these rules, contending that the state laws had been repealed as "corresponding laws" under the Finance Act, rendering the new rules void.
Findings of Court:
The state laws regulating tobacco from cultivation to retail sale substantially corresponded to the Central Act. Therefore, they stood repealed on the date of the Central Act's extension. The subsequent rules framed under these repealed acts were invalid and had no force of law.
Issues: Whether the state tobacco laws were "corresponding laws" to the Central Excises and Salt Act, 1944, and thus repealed by Section 13(2) of the Finance Act, 1950, rendering subsequent rules framed under them void.
Ratio Decidendi: The court held that "correspondence" between two acts does not require complete identity but substantial similarity in the matters they provide for. Since both the state laws and the Central Act aimed to control the movement and sale of tobacco to realize revenue, they were corresponding laws. Once repealed, no legislative power remained to frame new rules or impose taxes under those acts.
Result: Appeals allowed.
Legal Category Hierarchy
Table of Contents
2. Appellants claimed state tobacco laws were repealed as corresponding laws under Finance Act 1950; State contended laws survived and fees were sustainable under List II. (Para 7 , 8 , 22 )
3. The court found state laws substantially provided for the same control and revenue purposes as the Central Act, despite differences in charging mechanisms or auction systems. (Para 9 , 10 , 11 , 12 , 13 , 14 , 15 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 )
4. A law is corresponding if it substantially provides for the same matters as the repealing Act, regardless of complete identity or specific charging mechanisms. (Para 11 , 26 )
5. Appeals allowed — New Rules framed under state tobacco laws declared invalid ab initio and without force. (Para 17 , 32 )
6. What constitutes a corresponding law for the purpose of repeal under the Finance Act 1950?
A law is considered corresponding if it substantially provides for all matters contained in the Act effecting the repeal. Complete identity between the repealing Act and the Act repealed in every respect is not necessary. (Para 11 , 26 )
7. Does a system of auctioning the right to sell tobacco constitute an excise duty?
Yes, an auction system used to realize revenue through licenses for excisable goods is a method of realizing excise duty, even if it lacks a formal charging section like the Central Act. (Para 14 )
8. Are rules framed under a state act valid if that act was repealed by a central legislation?
No, if the enabling Act is repealed, there is no law in operation to justify the framing of new rules, and any tax imposed thereunder would violate Article 265 of the Constitution. (Para 9 , 14 )
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& 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.
2. In 1909, Act VII of 1084 Was passed by the Maharaja of Cochin to consolidate and amend the law relating to tobacco and was called the Cochin 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, & also to regulate the possession for sale, transport, import or export, sale and cultivation of tabacoo as well as the form of duty leviable on the sale of tobacco by retail. The remaining provisions of the Act deal with offences, prosecutions, punishment, confiscation and other ancillary matters such as arrest and seizure, 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 law for the time being in force relating to tobacco revenue".
3. Rules were framed under the Cochin Act called the Tobacco Cultivation Rules, which, by the first rule provided that the cultivation of tobacco plant is prohibited except under a licence and shall be restricted to such parts or localities of the State, as may, from time to time, be fixed by the Diwan. . . . . . . . . . . ." Rule 3 provided for drying curing, manufacturing & storing of the tobacco , cultivated in the State, to be done under these supervision of an officer of the Excise Department in licensed manufacturing yards and store-houses. Rule 4 provided or licences for manufacturing yards and store-houses. Rule 5 laid down that the licences would be in force for one official year and were to be issued on payment of a fee of Rs. 50/- for each licence. Under R. 6, the tobacco crop could only be harvested after permission obtained from the Inspector of Excise and under R. 7 the harvesting was to be done by the licensed cultivator under the general superintendence of the Sub-inspector of the locality in which the area cultivated lay and the harvested crop was to be transporated only under permits granted by him from such area to the manufacturing yard where alone manufacture was to be undertaken. Rule 8 provided for the maintenance of a stock book by a licensee of a storehouse or a 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 licence to possess the same. Rule 15 made it an offence for any one to cultivate, dry, cure, manufacture, store, transport, sell or otherwise dispose of tobacco in contravention of the Rules.
4. 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 prescribing 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.
5. It
