Judgment

SINHA C.J.I. : (on behalf of himself and Gajendragadkar, Wanchoo and Shah JJ.) The main question, on this reference by the President of India Art. 143 (1) of the Constitution, depends upon the true scope and interpretation of Art. 289 of the Constitution relating to the immunity of States from Union taxation. On receipt of the reference notices were issued to the Attorney-General of India and to the Advocates General of the States. In pursuance of that the case of the Union Government has been placed before us by the learned Solicitor-General and that of the States of Andhra Pradesh, Assam, Bihar, Gujarat, Kerala, Madhya Pradesh, Madras, Maharashtra, Mysore Orissa, Punjab and West Bengal was presented to us by their respective counsel on the date the hearing of this case started, an application was made on behalf of the State of Uttar Pradesh also to be heard, but no statement of case had been put in on behalf of that State, and as no grounds were made out for condoning the delay, we refused the application.

2. The reference is in these terms:

"Whereas sub-section (1) of S. 20 of the Sea Customs Act, 1878 (Act 8 of 1878), provides for the levy of customs duties on goods imported or exported by sea to the extent and in the manner specified in the said sub-section;

And whereas sub-section (2) of S. 20 of the said Act applies the provisions of sub-section (1) of that section in respect of all goods belonging to the Government of a State and used for the purposes of a trade or business of any kind carried on by, or on behalf of, that Government, or of any operations connected with such trade or business as they apply in respect of goods not belonging to any Government;

And whereas it is proposed to amend sub-section (2) of S. 20 of the said Act so as to apply the provisions of sub-section (1) of that section in respect of all goods belonging to the Government of a State; irrespective of whether such goods are used or not for the purposes set out in the said sub-section (2) as at present in force;

And whereas sub-section (1) of S.3 of Central Excises and Salt Act, 1944 (Act 1 of 1944), provides for the levy of duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India in the manner specified in the said sub-section;

And whereas sub-section (1A) of S.3 of the said Act applies the provisions of sub-section (1) of that section in respect of all excisable goods other than salt which are produced or manufactured in India by, or on behalf of, the Government of a State and used for the purposes of a trade or business of any kind carried on by, or on behalf of, that Government, or of any operations connected with such trade or business as they apply in respect of goods which are not produced or manufactured by any Government;

And whereas it is proposed to amend sub-section (1A) of S. 3 of the said Act so as to apply the provisions of sub-section (1) of that section in respect of all excisable goods other than salt which are produced or manufactured in India by, or on behalf of, the Government of a State, irrespective of whether such goods are used or not for the purposes set out in the said sub-section (1 A) as at present in force;

And whereas it is proposed to introduce in Parliament a Bill, the draft of which is annexed hereto and marked Annexure , to amend for the purpose aforesaid sub-section (2) of S. 20 of the Sea Customs Act, 1878 (Act 8 of 1878) and sub-section (1A) of S. 3 of the Central Excises and Salt Act, 1944 (Act 1 of 1944)

And Whereas Governments of certain States have expressed the view that the amendments as proposed in the said draft of the Bill may not be constitutionally valid as the provisions of Article 289 read with the definitions of taxation and tax in clause (28) of Article 366 of the Constitution of India preclude the Union from imposing or authorising the imposition of any tax, including