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1963 Supreme(Ker) 297
Judges : M.S.MENON,M.MADHAVAN NAIR
M.T.Kumaran and Co. - Appellant
Versus
Secretary, Market Committee - Respondent
Case No : O. P. No. 2314, 2363 of 1962
Decided On : 11/28/1963
Advocates Appeared :
V. R. Krishna Iyer; K. Raghavan Nair; For Petitioner V. B. Eradi; K. P. G. Menon; For 1st Respondent
The main legal point established is that the levy under S.11 of the Madras Commercial Crops Markets Act, 1933, is a sales-tax, and the absence of a ceiling for the levy indicated excessive delegation of legislative power, rendering it invalid.
Headnote:
Validity of S.11 of the Madras Commercial Crops Markets Act, 1933 - Sales-tax - S.11, Madras Commercial Crops Markets Act, 1933, S.14 and S.15, Central Sales-tax Act, 1956 - Coconuts as oil-seeds - Delegation of legislative power - Constitutional validity of levy under S.11
Fact of the Case:
The court considered the validity of S.11 of the Madras Commercial Crops Markets Act, 1933, which allowed the Market Committee to levy a cess by way of sales-tax on commercial crops. The main issue was whether the levy under S.11 was constitutional.
Finding of the Court:
The court found that coconuts are oil-seeds under S.14 of the Central Sales-tax Act, 1956, and that the levy under S.11 is a sales-tax. It also held that the absence of a ceiling for the levy under S.11 indicated excessive delegation of legislative power, rendering it invalid.
Issues: The issues included the classification of coconuts as oil-seeds, the constitutional validity of the levy under S.11, and the absence of a ceiling for the levy indicating excessive delegation of legislative power.
Ratio Decidendi: The court held that coconuts are oil-seeds, the levy under S.11 is a sales-tax, and the absence of a ceiling for the levy indicated excessive delegation of legislative power, rendering it invalid.
Final Decision: The court decided that the levy of a cess by way of sales-tax under S.11 of the Madras Commercial Crops Markets Act, 1933, cannot be made and allowed the petitions accordingly with no costs.
1. The sole question for determination in these petitions relates to the validity of S.11 of the Madras Commercial Crops Markets Act, 1933. That section as amended by the Madras Commercial Crops Markets (Amendment) Act, 1955, reads as follows:
"(1) Notwithstanding anything contained in the Madras General Sales-tax Act, 1939 (Madras Act IX of 1939), the Market Committee shall, subject to such rules as may be made in this behalf, levy a cess by way of sales-tax on any commercial crop bought and sold in the notified area at such rates as the State Government may, by notification, determine.
Explanation - For the purposes of this sub-section, all commercial crops leaving a notified area shall, unless the contrary is proved, be presumed to be bought and sold within such area.
(2) The cess referred to in sub-section (1) shall be paid by the purchaser of the commercial crop concerned:
Provided that where the purchaser of a commercial crop cannot be identified, the cess shall be paid by the seller.
(3) Out of the cess levied under sub-section (1) on the commercial crop or crops bought and sold in any part of the notified area which constitutes a village as defined in S.2 of the Madras Village Panchayats Act, 1950, such proportion as may be prescribed shall be paid by the market committee to the panchayat concerned.
(4) The cess levied under sub-section (1) shall be subject to the provisions of Art.286 of the Constitution."
The expression "cess by way of sales-tax" in sub-section (1), and the reference to Art.286 - the Article intended to ensure that the sales-tax imposed by the States do not interfere with imports and exports, and inter-State trade and commerce - in sub-section (4), we think, clearly indicate that the impost is a tax coming under entry 54 of the State List (List II) of the Seventh Schedule to the Constitution - "Taxes on the sale or purchase of goods other than newspapers" - and that it is part of the sales-tax law of the State.
2. The main changes effected by the Madras Commercial Crops Markets (Amendment) Act, 1955, were the substitution of the words "levy a cess by way of sales-tax" for the original words "levy fees" and the introduction of sub-section (4). The reason for the amendments was the decision of the Madras High Court in Kutty Keya v. State of Madras AIR. 1954 Mad. 621 wherein the Court said that "a fee is what is charged for services rendered by the person who charges it," that the levy under S.11 of the Madras Commercial Crops Markets Act, 1933, was "for no services :rendered" and that it should accordingly be held
"that the amounts to be collected under S.11 are taxes notwithstanding that they are not brought into the consolidated fund of the State under Art.266 (1) but constituted into a separate fund and that the levy is only on a section of the public."
3. S.14 of the Central Sales-tax Act, 1956, declared that the goods specified in that section "are of special importance in inter-State trade or commerce." Item (vi) of the goods so specified is:
"Oil-seeds, that is to say, seeds yielding non-volatile oils used for human consumption, or in industry, or in the manufacture of varnishes, soaps and the like, or in lubrication, and volatile oils used chiefly in medicines, perfumes, cosmetics and the like."
S.15 of the Act deals with the restrictions and conditions in regard to tax on the sale or purchase of declared goods within a State. That section reads as follows:
"Every sales-tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely:
(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed two per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage;
(b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declare
