Judgement

Appeal (No. 14 of 1944) from a decree of the Federal Court of India exercising original jurisdiction (March 17, 1943) which dismissed an action brought by the appellant, the Governor-General in Council, as plaintiff, against the respondent, the Province of Madras, as defendant, claiming a declaration that the provisions of the Madras General Sales Tax Act, 1939, were ultra vires the legislature of the Province of Madras in so far as that Act imposed a tax on the manufacturer or producer of goods on the first sale thereof.

The main question raised by this appeal was whether a tax imposed on the manufacturer or producer of goods on the first sale thereof was, as the appellant contended and the respondent denied, a duty of excise within the meaning of entry 45 of the Federal Legislative List contained in the seventh schedule to the Government of India Act, 1935, and therefore within the exclusive legislative competence of the appellant. By s. 100 of the Government of India Act, 1935 "(1.) Notwithstanding anything in the two next succeeding subsections, the Federal Legislature has, and a Provincial Legislature has not, power to make laws with respect to any of the matters enumerated in List I. in the Seventh Schedule to this Act (hereinafter called the ‘Federal Legislative List’).

"(2.) Notwithstanding anything in the next succeeding subsection, the Federal Legislature, and, subject to the preceding sub-section, a Provincial Legislature also, have power to make laws with respect to any of the matters enumerated in List III in the said Schedule (hereinafter called the Concurrent Legislative List).

"(3.) Subject to the two preceding subsections, the Provincial Legislature has, and the Federal Legislature has not, power to make laws for a Province or any part thereof with respect to any of the matters enumerated in List II in the said Schedule (hereinafter called the Provincial Legislative List).

"(4.) The Federal Legislature has power to make laws with respect to matters enumerated in the Provincial Legislative List except or a Province or any part thereof.” Entry No. 45 of the Federal Legislative List is as follows

"45. Duties of excise on tobacco and other goods manufactured or produced in India except.... [there follow certain exceptions]."

Entry No. 48 of the Provincial Legislative List is as follows

"48. Taxes on the sale of goods and on advertisements.”

The relevant provisions of the Madras General Sales Tax Act, 1939, appear from the judgment of the Judicial Committee.

The Federal Court of India (Gwyer C.J., S. Varadachariar and T. Ameer Ali JJ.) held that the plaintiff was not entitled to the declaration prayed for, saying "We agree that substantially the same issue is raised in the present suit as in the appeal last year [Province of Madras v. Boddu Paidanna & Sons ([ 1942] F. C. R. 90.)] and we see no reason to modify the decision which we then gave."

1944. Nov. 6, 7, 8; Dec. 18, 19. Sir Walter Monckton K.C. and B. MacKenna for the appellant. This appeal will in fact determine the Boddu Paidanna & Sons case (1) in which an appeal to, the Board is pending. The Madras General Sales Tax Act, 1939 (hereinafter called "the Madras Act ") imposes a tax on all sales, including the first sale, and a tax on the first sale is an excise duty and is not open to the respondent. In short, (a) any tax on commodities produced within a country levied on the producer is a duty of excise; and (b) any tax levied on commodities before they become part of the general stock is a duty of excise. The first point is who is to pay? The second, at what stage? In 1935, when the Constitution Act was passed, the great bulk of excise duties in India were levied on producers, and levied before the goods had become part of the common stock, i.e., before they reached the stage of retail sales. There is no doubt that in its ordinary meaning "excise duty" has a wider connotation than the appellant here now seeks to give it, but the wider meaning is n