1991 Supreme(SC) 328
SUPREME COURT OF INDIA
T.K. THOMMEN, R.M. SAHAI, JJ.
STATE OF U.P., ANOTHER
Versus
SYNTHETICS, CHEMICALS LTD., ANOTHER .
Civil Appeal No. 2722(NT) of 1991{From the Judgment, Order dated July 12, 1990 of the Allahabad High Court in Civil Misc. W.P. No. 361 of 1976}
Decided on 18-7- 1991
Advocates appeared
Umesh Chandra, Advocate General of U.P. (Rakesh Srivastava A.K. Srivastava, K.D. Misra, Advocates, with him) for the Appellants;
M.H. Baig, Senior Advocate (P.S. Shroff, R. Sasiprabhu, S.S. Shroff, Suresh A. Shroff, Rajen Mahapatra, Advocates, with him) for the Respondents.
Advocates:
A.K.SRIVASTAVA, K.D.MISHRA, M.H.BAIG, P.S.SHROFF, R.SASIPRABHU, Rajen Mahapatra, RAKESH SRIVASTAVA, S.A.SHROFF, S.S.SHROFF, UMESH CHANDRA
Headnote:
Constitution of India, 1950 - Article 246(1) and Article 246(3) - Industries (Development and Regulation) Act, 1951 - Section 18-G – United Provinces Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939 - Section 3 (1) - Uttar Pradesh Sales of Motor Spirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976 - Taxation - Levy of purchase tax on industrial alcohol - Intoxicating liquors, that is to say, production, manufacture, possession, transport, purchase and sale of intoxicating liquors - This levy was sought to be justified by the State, when challenged in writ proceeding, as a valid exercise of its legislative power on a matter falling under Entry 54 of List II of Seventh Schedule of Constitution - Writ petitioners, challenging the levy, contended that State legislature was incompetent to levy tax with reference to Entry 54 of List II in respect of industrial alcohol insofar as that article was the subject of regulation by the Central Government in exercise of its power under Section 18-G of Act, 1951 - Held, Price fixation of ethyl alcohol is an exercise of power for regulating distribution and supply of it. The general entry for regulating distribution and supply is different from exercise of taxing power - Two do not even remotely touch each other - Therefore, if the price goes up in exercise of taxing power then subject to its being arbitrary or confiscatory it could not be struck down as intruding in forbidden field - In Hoechst Pharmaceuticals10 this Court while examining ambit of Entry 54 of List II observed, Entry 54 of List II of Seventh Schedule is only subject to Entry 92-A of List I and there can be no further curtailment of status of power of taxation – Therefore entire basis for striking down levy that even though State had plenary power to impose tax on sales/purchase of goods it can exercise taxing power under Entry 54 of List II so long as it does not militate against legislative field occupied by Central Government under IDR Act or any other enactment made under Entry 52 of List I proceeded on complete misconception of taxing powers of State – Appeal allowed.
Legal Category Hierarchy
-
constitutional law
-
distribution of legislative powers
-
state taxation power under entry 54 of list ii
(Para 18, 25, 32, 33, 35, 44)
-
central regulatory power under entry 52 of list i
(Para 21, 22, 23)
-
taxation versus regulation distinction
(Para 24, 25, 33)
-
doctrine of precedent per incuriam and sub silentio
(Para 39, 40, 41, 42)
-
tax law
-
sales and purchase tax
(Para 2, 5, 14, 32, 35)
-
excise duty and fees
(Para 7, 11, 12, 13, 23, 34)
-
administrative law
-
price control and regulatory orders
(Para 4, 35, 36)
-
industries regulation under idr act
(Para 2, 21, 22)
Table of Contents
1. Whether the State's power to levy tax under Entry 54 of List II is curtailed by the Central Government's regulatory control over industrial alcohol under the IDR Act?
No. The taxing power under Entry 54 of List II is a specific and plenary power that cannot be curtailed by the general legislative and regulatory control exercised by the Central Government under Entry 52 of List I. The power of regulation is distinct from the power of taxation. (Para
25
,
32
,
33
)
2. Whether the Price Control Orders issued by the Central Government under the IDR Act fetter the State's power to levy purchase tax on industrial alcohol?
No. Price Control Orders govern the pricing of goods and do not curtail the constitutional power of the State to levy taxes on the sale or purchase of goods under Entry 54 of List II. The two are separate and distinct fields. (Para
35
,
36
)
3. Whether the observation regarding sales tax in paragraph 86 of Synthetics and Chemicals Ltd. v. State of U.P. constitutes binding precedent?
No. The observation was per incuriam and sub-silentio — the court did not discuss or consider sales tax in that case, the conclusion was not preceded by any argument or discussion, and it was founded on a mistake of fact. (Para
39
,
40
,
41
,
42
)
4. Whether the doctrine of repugnancy or occupied field applies to taxation powers between the Union and the States?
No. Since the Concurrent List does not contain any entry relating to taxing power, the concept of occupied field or repugnancy cannot arise in matters of taxation. The State's taxing power under Entry 54 of List II is not affected by the Central Government's regulatory legislation under Entry 52 of List I. (Para
22
,
44
)
5. Whether the State can levy vend fee, transport fee, or excise duty on industrial alcohol under Entries 8 or 51 of List II?
No. Entries 8 and 51 of List II are confined to potable alcohol and intoxicating liquors for human consumption. Industrial alcohol falls outside their scope, and any fee or charge on industrial alcohol trespasses upon the Central Government's control under the IDR Act. (Para
23
,
34
)
JUDGMENT
THOMMEN, J.— Leave granted.
2. This appeal is brought by the State of Uttar Pradesh against the judgment of the Allahabad High Court in Civil Miscellaneous Writ Petition No. 361 of 1976. The High Court, allowing the writ petition, declared the Uttar Pradesh Sales of Motor Spirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976 (U.P. Act 8 of 1976) to be null and void insofar as it purported to levy purchase tax on industrial alcohol. By this Act, sub-section (1) of Section 3 of the United Provinces Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939 was amended, so as to substitute the following sub-section:
"3.(1) There shall be levied with effect from May 2,1974-
(a)
(b) at the point of first purchase of alcohol in the State, a tax at the rate of 40 paise per litre for the first million litres and at the rate of 20 paise per litre for the remainder, payable by the purchaser, and which shall be collected and paid in the prescribed manner to the State Government: ...."
This levy was sought to be justified by the State, when challenged in the writ proceeding, as a valid exercise of its legislative power on a matter falling under Entry 54 of List II of the Seventh Schedule of the Constitution. The writ petitioners, challenging the levy, contended that the State legislature was incompetent to levy tax with reference to Entry 54 of List II in respect of industrial alcohol insofar as that article was the subject of regulation by the Central Government in exercise of its power under Section 18-G of the Industries (Development and Regulation) Act, 1951 (Act 65 of 1951) (hereinafter referred to as the IDR Act) and that the price of that article was regulated by the relevant Price Control Orders made by the Central Government under the said Act. Any levy of sales tax or purchase tax by the State by recourse to Entry 54 of List II, it was contended, would come into direct conflict with the law made by Parliament and the control exercised by the Central Government under that law in regard to an industry falling under Entry 52 of List I read with Entry 33 of List III. The writ petitioners, relying upon the decision of a Constitution Bench of this Court in Synthetics and Chemicals Ltd. v. State of U.P.{(1990) 1 SCC 109} contended before the High Court that, insofar as industrial alcohol was concerned, the State was incompetent to levy sales tax by reason of the operation of the Ethyl Alcohol (Price Control) Orders made by the Central Government in exercise of its power under Section 18-G of the IDR Act.
3. The State contended before the High Court that the aforesaid decision of this Court did not deal with any levy of tax falling under Entry 54 of List II. The power of the State to levy taxes on the sale or purchase of goods was not the subject of consideration in that decision. What was considered was the power of the State to collect vend fee or transport fee or the like by recourse to Entry 8 or 51 of List II with reference to the production, manufacture, possession, transport, purchase and sale of industrial alcohol during the operation of the IDR Act and the rules made there under.
4. The High Court accepted the contention of the writ petitioners and held that the impugned purchase tax, if allowed to be levied on industrial alcohol, would have the effect of raising its price beyond the limit prescribed under the Price Control Orders made by the Central Government in relation to industrial alcohol in exercise of its power under the IDR Act. The High Court accordingly declared that the impugned levy of purchase tax on industrial alcohol was, during the operation of the Price Control Orders of the Central Government, beyond the legislative competence of the State.
5. In Synthetics this Court held that vend fee, transport fee and the like levied by Uttar Pradesh, Maharashtra and certain other States by recourse to Entry 8 or Entry 51 of List II were null and void insofar as such impost came into direct conflict with th
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