# A.B. ABDULKADIR AND OTHERS v. THE STATE OF KERALA AND ANOTHER

- **Citation:** [1962] Supp. 2 S.C.R. 741
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** B. P; Sinha, P. B. Gajendragadkar, K. N. WANOHoo, M. Hu>Ayatullah ·, J.C. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/a-b-abdulkadir-and-others-v-the-state-of-kerala-and-another-2342
- **Pages:** 29

## Headnote

Central Exci.e-Control oj tobacco-System of auction8Licence for storage-Repeal qf state law-Cochin and Travancore
enactments, if lau• c.orrespond1"ng to Central E.xcises Act-'' Excise
duty", meaning of-Cochin Tobacco Act, 1084 (Cochin 7 of
1084 M. E.)-1'ravancore Tobacco Regulation, 1087 (Travancore
1of1087 M.E.) -Finance Act, 1950 (25 of 1950), 88. 11(1),
13 (2).
In 1909
the Ruler of the erstwhile State of Cochin
enacted the Cochin Tobacco Act of 1084 (M.E.) with the
object of controHing the cultivation, production, manufacture,
storage and sale of tobacco.
Rules were framed under the
Act for regulating the cultivation, possession, transportation
and sale of tobacco and a system of licensing was introduced
for that purpose.
Licences for storage \Vere to be annual and
to be issued on payment of licence fee. The authorities
administering the provisions of the Act and the Rules framed
thereunder were the Commissioner of Excise and his subordi"
natcs, The system in force
for
the collection of tobacco
revenue was to auction what were called A class and B class
shops.
A law similar to that prevailing in Cochin was promulgated in 1911 by the Ruler ofTravancore as the Travancore
Tobacco Regulation of 1087 (M.E.). The two States merged
themselves in 1919 as the State ofTravancore Co<"Mn but the
two Acts continued to remain in force in the respective
territories. On April I, 1950, after the Constitution of India
pad come into force and Travancore Cochin had become a
19111
B .. antB.,.
••
U•U..of l•'i•
--
1962
A. B. Al>iulkoiir
y,
n. ,..,. oJ lf".i.
742
SUPREME COURT REPORTS [1962) SUPP.
Part B State thereunder bys. 11 of the Finance Act, 1950, the
0:ntral,Excises and Salt.Act, 19#, was extended to that State.
Section 13(2) of the Finance Act, 1950, provided that "if
immediately before the !st day of April, !9j0, there is in force
in any State other than Jammu and Kashmir a law corresponding {o, but other than, 8'n Act referred to in subs. (I) or (2) of
r. 11, such Jaw is repealed with effect from the said date., ..
. . " After thi• provision in the Finance Act,
1950, the Rules
which we1c in force on April I, 1950, were changed in the
Cochin area by a notification dated August 3, l9j0, and the
system of auction sales of A Class and B Cla!S shops was done
away with and instearl
graded licence fees were introduced
for various classes of licensees. Similar change was made for
the Travancore area by notification dated January 25, 1951.
The appellants who were
carrying on busines.s in tobacco
within the territoriCJ of Travancore and Cochin challenged the
legality of the notifications of August 3, 1950, and January
25, 1951, on the ground
that the Cochin Tobacco Act and
the Travancore
Tobacco Regulation
under which the
notifications were purported to be issued, were law corresponding to the Central Excises and Salt Act, 1944, and so
they stood repealed from April I, 1950, by
virtue of the
operation of ss. 11
and 13(2) of the Finance Act.
It was
contended for the State of Kcrala that the main feature of the
Central Excises and Salt Act, 1944, was
the impo>ition of a
duty of excise on
goods produced or manufactured in India
and that there was
no provision for charging duty in the
Cochin Act or the similar Travancore Act and therefore all
these provisions in the Rules for the control of tobacco from
the time of cultivation to the time of the final stage of sale to
the consumer, evm though they were similar to the Rules
und<r the Central Act, would not make the Cochin Act or
the similar Travancore Act a law corresponding to the Central
Act.
Held, that the rults framed under the Cochin Tobacco
Act of 1084(M.E.) and the Travancore Tobacco Regulation of
1087 (M.E.) requiring licences to be taken out for storage and
sale of tobacco and for payment of licence fee in respect
th<reof were law corresponding to the provisions of the
Central Excises and· Salt Act, 1944, and, hence, were
superseded on April I, 1950, by virtue of s.
I 3(2) of the
Finance Ac

## Text

_Characters 0–39,841 of 58,218. This is a partial read: ask again with offset=39841 for what follows._

2 S.C.R.
SUPREME OOURT REPORTS
741
We should however like to make it clear that
we express no opinion on the controversy bet;ween
the appellants and the interveners who are left to
such remedies as may be avriilable to them under
the law.
--
A.B. ABDULKADIR AND OTHERS
v.
THE STATE OF KERALA AND ANOTHER
(AND CONNECTED APPEALS)
(B. P; SINHA, c. J., P. B. GAJENDRAGADKAR, K. N.
WANOHoo, M. HU>AYATULLAH ·and J.C. SHAH, JJ.)
Central Exci.e-Control oj tobacco-System of auction8Licence for storage-Repeal qf state law-Cochin and Travancore
enactments, if lau• c.orrespond1"ng to Central E.xcises Act-'' Excise
duty", meaning of-Cochin Tobacco Act, 1084 (Cochin 7 of
1084 M. E.)-1'ravancore Tobacco Regulation, 1087 (Travancore
1of1087 M.E.) -Finance Act, 1950 (25 of 1950), 88. 11(1),
13 (2).
In 1909
the Ruler of the erstwhile State of Cochin
enacted the Cochin Tobacco Act of 1084 (M.E.) with the
object of controHing the cultivation, production, manufacture,
storage and sale of tobacco.
Rules were framed under the
Act for regulating the cultivation, possession, transportation
and sale of tobacco and a system of licensing was introduced
for that purpose.
Licences for storage \Vere to be annual and
to be issued on payment of licence fee. The authorities
administering the provisions of the Act and the Rules framed
thereunder were the Commissioner of Excise and his subordi"
natcs, The system in force
for
the collection of tobacco
revenue was to auction what were called A class and B class
shops.
A law similar to that prevailing in Cochin was promulgated in 1911 by the Ruler ofTravancore as the Travancore
Tobacco Regulation of 1087 (M.E.). The two States merged
themselves in 1919 as the State ofTravancore Co<"Mn but the
two Acts continued to remain in force in the respective
territories. On April I, 1950, after the Constitution of India
pad come into force and Travancore Cochin had become a
19111
B .. antB.,.
••
U•U..of l•'i•
--
1962
A. B. Al>iulkoiir
y,
n. ,..,. oJ lf".i.
742
SUPREME COURT REPORTS [1962) SUPP.
Part B State thereunder bys. 11 of the Finance Act, 1950, the
0:ntral,Excises and Salt.Act, 19#, was extended to that State.
Section 13(2) of the Finance Act, 1950, provided that "if
immediately before the !st day of April, !9j0, there is in force
in any State other than Jammu and Kashmir a law corresponding {o, but other than, 8'n Act referred to in subs. (I) or (2) of
r. 11, such Jaw is repealed with effect from the said date., ..
. . " After thi• provision in the Finance Act,
1950, the Rules
which we1c in force on April I, 1950, were changed in the
Cochin area by a notification dated August 3, l9j0, and the
system of auction sales of A Class and B Cla!S shops was done
away with and instearl
graded licence fees were introduced
for various classes of licensees. Similar change was made for
the Travancore area by notification dated January 25, 1951.
The appellants who were
carrying on busines.s in tobacco
within the territoriCJ of Travancore and Cochin challenged the
legality of the notifications of August 3, 1950, and January
25, 1951, on the ground
that the Cochin Tobacco Act and
the Travancore
Tobacco Regulation
under which the
notifications were purported to be issued, were law corresponding to the Central Excises and Salt Act, 1944, and so
they stood repealed from April I, 1950, by
virtue of the
operation of ss. 11
and 13(2) of the Finance Act.
It was
contended for the State of Kcrala that the main feature of the
Central Excises and Salt Act, 1944, was
the impo>ition of a
duty of excise on
goods produced or manufactured in India
and that there was
no provision for charging duty in the
Cochin Act or the similar Travancore Act and therefore all
these provisions in the Rules for the control of tobacco from
the time of cultivation to the time of the final stage of sale to
the consumer, evm though they were similar to the Rules
und<r the Central Act, would not make the Cochin Act or
the similar Travancore Act a law corresponding to the Central
Act.
Held, that the rults framed under the Cochin Tobacco
Act of 1084(M.E.) and the Travancore Tobacco Regulation of
1087 (M.E.) requiring licences to be taken out for storage and
sale of tobacco and for payment of licence fee in respect
th<reof were law corresponding to the provisions of the
Central Excises and· Salt Act, 1944, and, hence, were
superseded on April I, 1950, by virtue of s.
I 3(2) of the
Finance Act, 1950. Consequently, the new Rules t'ramed in
August 1950 and January 1951 for the respective
areas of
Cochin and the respective areas of Cochin and Travancorc
for the iSBue of licences and payment of fee therefore for
storage of tobacco, were invalid ab i11itio.
Per Sinha, C. J., Gajendragadkar, Wanchoo and
flidayatullah, JJ.-(1) The Cochin
Tobacco Act, 1084
2 s.c.R.
SUPREME COURT REPORTS
743
(M.E.), as well as the Travancore Tobacco Regulation, 1087
(M.E.), were in substance law corresponding to the Central
Excises and Salt Act, 1944, and therefore, stood repealed on
April I, 1950.
(2) The auction system which was in force under the
Cochin and Travancore Acts was only a method of realising
duty through the grant of licences to
those who made the
highest bid at the auctions. The fact that this system was
used-instead of the system of charging of duty as provided in
s. 3 of the Central
Excis~s and Salt Act, 1944, would not
make any difference to the nature of the impost; the income
from auctions was in the nature of excise duty.
Per
Shah, J.-An Excise duty is, according to the
Indian statute, a duty on the manufacture or production of
goods and the duty which was levied in the States of
Travancore and Cochin on the storage of tobacco cannot be
regarded as a duty of excise.
In re The Oentral ProvinceB and Berar Sales of Mowr
Spirit and Lubricants Taxaiion Act, 1938, [1939]
F.C.R. 18,
The Province of Madras v. Messrs Boddu Paidanna and Sons,
[1942] F.C.R. 90, Governor-General·in-Oouncil v. Province of
Madras, (1945)
L.R. 72 I.A. 91 and Ohaturbhai M. Petal v.
The Union of India, [1960] 2 S.C.R. 362, considered.
CrvIL APPELLATE JURISDICTION: Civil Appe.-ils
Nos. 89, ~O and 126 to 128/61.
Appeals from
the judgment and order dated
November 8, 1957, of the Kerala High Court in
0. Ps. Nos. 70 and 71 of 1956(K) and 2, 6 and 7 of
1955 E.
M. 0. Set,alvad, Attorney-General of India and
R. Gopalakrishnan, for the appellants in C. As. Nos.
89 and 90 of 61.
G. S. Pathak and V. A. SeiJid MUhammad, for
the respondent in C. As. Nos. 89 and 90 of 61.
4· J'.· Vi .. wa11athn Sastri,
.A. Goorge TitWJ, R.
Mahal1n171er
and M. R.
J( rishnn
P.illa.i, for
the
appellants in C. As. Nos. 126 to 128 of 61.
0. 8. Pritltnk and Sardnr Bnhndur, for the
respondents in C. As. Nos. 126 to )28 of 1961,
1962
A. B. Abdulkattfr
v.
T/w Stal• of KwV.•
196!
........... Ii ..
v.
n, 81oh ef lrnola
WM<Ao.J.
744 SUPREME OOURT REPORTS [1962] SUP!>.
1962. January 24. The Judp:ment of B. P.
Sinha., C. J., P. B.
Gajendragadkar,
K. N .
Wanohoo and M. Hidayatullah, JJ., was delivered
by Wanchoo, J., J. C.
Shah, ,J.,
delivered a
separate 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 and 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 propoiie to deal in detail with the
appeals from the Cochin area.
In 1909, Act VII of 1084 was pa811ed by the
Maharaja of Cochin to consolidate and amend the
law relating to tobacco and was called the Cochin
Tobacco Act, VII of I 084 (hereinafter called the
Cochin Act). Section 4 of the Cochin Aot prohibited
tho p081!ession for sale, transport, import or export,
sale and cultivation of tobacco exoept as permitted
under the Act or the Rules framed thereunder.
l'ection 5 of the Act gave power to the Diwan to
make niles from time to time consistent with the
Act to permit absolutely or subject to any conditions, and also to regulate the possession for ea.le,
transport, import or export, ea.le and cultivation
of tobacco as well as the form of duty leviable on
the sale of tobacco by retail. The remaining provisions of the Aot deal with offences, prosecutions,
punishment, confiscation and other ancillary matters
~uch as arrest and eiezure, with which we are not
concerned in the present appeals. Rcferenoe may
however be made toe. 18 which provided that "no
action shall lie against the Sirkar or against any
officer of tho Excise department for damages in any
civil court for any act booa fid,e, done or ordered to
be done in pursuance of this Act, or of any law for
2 S.C.:i.:t.
SUPREME COURT REPORTS
745
the time being in force relating to tobacco
revenue.
Rules were framed under the Cochin Act
called the Tobacco Cultivation Rules, which, by
the first rule pMvided 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 and storing of the
tobacco, cultivated in the State, to be done under
the supervision of an officer of the Excise Depar~
ment in licen~ed manufacturing yards and storehouses. Rule 4 provided for 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
H.s. 50/- for each liccnce, Under r. 6, the tobacco
crop could only be harvested after permission
obtained from the Inspector of Exdse and nder
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
transported only under permits granted by him
from such area to the manufacturing yard where
alone manuf ... cture 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 pr0hibition against the disposal or sale
of tobacco to any person who had not the required
license to possess the same. Rule 15 made it an
off,nce for any one to cultivate, dry, cure, manufacture, store, transport, S<' II or otherwise dispose
of tobacco in contravention of the Rules.
In addition to these Rules, there were further
Rules also framed under the Cochin Act with
1962
A. B. Ab&lkadir ,,
v.
The Siok of K<rol.•·
Wa..-lloo J.
A. a. "bdolllodir
••
n, a,.,, •f E .. .i.
W..Ao.J.
746 SUPREME OOURT REPORTS [1962] SUPP.
respect to import of tobacco into the State, 1md
all import was prohibited except under the provisions of the Diwan's notifir.ation prescribing the
sale of tobacco shops and licences.
PoBBeBBion of
tobacco for the purpose of sale was also prohibited
except under the provisions for the sale of tobacco
shops and licences.
Export of tobaeco was also
prohibited except with tho special sanction of the
Commidsioner of Excise.
It further appears that the system in force for
the collection of tobacco revenue up to August
1950 was to auction what were called A riaBB and
B class shops and the last of such auction was held
under the notification dated May 30, l 9t9. In
addition there were C class shops,
the licence for
which wa.~ granted either on the recommendation or
in consultation with B class licensees at the discre·
tion of the Excise Commissioner or any other officer
authoridad by him on payment of the prescribed fee.
This system along with the 11.ules already referred
to was in force on April I, 1950.
On April l, 1950, after the Constitution had
come into force and Travo.ncore-Cochin had bec~me
a Part B State thereunder, the Finance Act, No.
XXV of l 950, extended the Central Excises and
Salt Act, No. I of 19H (hereinafter called tho
Central Act), to the Part B State of TravancorcCoehin br s. 11 thereof. Section 13 (2) of the
Finance Act, further provided that "if imincdialely
before the 1st day of April. 1950, there is in forco
in any State other than Jammu and Kashmir a law
corresponding to, but other than, an Act referred to
in sub·s. ( l) or (2)
of s. 11, such law is hereby
repealed with effect from the said date ............... "
It seems that in consequence of this provision in
the !!'inane" Act,
l!l50,
the HuleP which were in
force on April I, 1950, were clanged in the Cochin
area by a notification dated August 3, I 95U, and
the system of auction sales of A
cl&11s and
B class shops was done away with and instead
2 S.C.R.
SUPREME COURT REPORTS
747
graded licence fees were introduced for various
classes of licensees, including C class licensees.
Similar change was made for the Travancore area
by notification dated January 25, 1951.
These
Rules introduced by these two notifications also did
away with the control of cultivation, drying, curing,
manufacturing and ware-housing which were in force
under the earlier Rules, so that these new Rules
were only conc<Jrned with licensing of A, B and C
class shops. A class licensees under the new Rules
were called stockists, B class licensees were wholesale sellers and C class licensees were retailers. The
system for A class licensees was that they were to
pay a minimum annual fee for a maximum quantity
of tobacoo or tobacco goods possessed by them and
additional fee for further additional quantity. Thus,
for example, in the case of Jaffra tobacco it was
provided that maximum aLnual fee would be
Rs. 1,500/- for a minimum of 100 candies and
further fee of Rs. 1,000/- for additional quantity of
100 candies or part thereof.
The appellants of Cochin area were tobacco
dealers and holders at the time they filed their petitions in 1956 of A class licences. The main contention raised on their behalf in their petitions was
that the Cochin Act stood repealed by the Finance
Act, 1950, on the introduction of the Central Act
in the Part B State of Travancore-Cochin from
April 1, 1950; in consequence, the notification which
was issued on August 3, 1950, or on January 25,
1951, framing new Rules for the issue of licences
and prescribing rules therefor under the powers
conferred under the Cochin Act C\l' the similar
Travancore Act were ab initio void, because the Acts
under which the notifications were purpo1·ted to be
issued stood repealed from April 1, 1950. In addition various other grounds were raised challenging
the validity of the new Rules which, however, we
do not think it necessary for the purposes of theiie
appeals to set out 4ere.
lllfB
A. B . .u.lulhlir
v.
T!r, SIM of X .....
w .. c1t .. J.
19$
A. B. Jlbd»lkdir
v.
TAI ·614r. of 1' mua
Want1- J.
748 SUPREME OOURT REPORTS [1962] SUPP.
Tho petitions were opposed on behalf of the
State and it was contended that tho Cuchin Act or
the similar Travancoro Act did not stand repealed
from April l., 1950, In consequence it was urged
that the State wa.s competent to frame new Rules
which it did wider the Cochin Act or the similar
"Travancore Act. Further the ca.so of the State was
that the graded licence fee introduced after April l,
1951, was a tax which was sUBtainable under item
60 or 62 of List II of the Seventh Schedule to the
Constitution.
The High Court dismissed the petitions holding
that th" laws under which the new Rules were
framed were in force and were justifiable under
item 62 of List II of tho Seventh Schedule. Unfor.
tunatoly, though tbo judgment of the High Court
mon tions the contention of the appellants that on
the extension of the Central Act with effect from
April l, 1950, by ;he Finance Act, 1950, tho Cochin
Act as well as the similar Travancore Act ceased to
be operative from that date, there is no discussion
in the judgment with regard to this contention, and
the High Court did not consider whether in view of
s.13(2) of the Finanoe Act, I !!50, the Cochin Act as
well as the similar Travancore Act stood repcale1l
from April l, 1-950. If the effect of R. 13(2) of the
Finance Act, 1950, was to repeal the Cochin Act
as well as the similar Travancore Act, from April I.
19!">0, there will be no law in operation which wou Id
justify the framing of the new Ru !es either in
August 1950 or in January l!l;H and it would then
be unneePssary to consider whether a law contain·
ing provisions similar to those contaii!cd in the
notification would be within the oompetence of the
State l··gislature under item 62 of List IC of the
Seventh Schedule. That question would only arise
if the Cochin Act or tho similar Tra.vancorc Act
survived the repeal effected by s. 13(2) of the
Finance Act.
2 S.C.R.
SUPREME COURT REPORTS
749
We have therefore to see what the provisions
of the Finance Act are in this connection. As
already indicated, s. 11( 1) of the Finance Act
extends the Central Act and the Rules and Orders
made thereunder which were in force immediately
after the commencement of the Finance Act to all
Part B States, except the State of Jammu and
Kashmir. Consequently, the Central Act as well as
the Rules and Orders made thereunder
b~camo
applicable to the Part B State of Travancore-Cuehin
from April 1, 1950. Further s. 13(2) of the Finance
Act specifically provides that from April 1, 1050,
any law corresponding to the Central Act, will be
repealed from that date. The contention on behalf
of the appellants is that the Coehin Aet as well as
thto similar Travancore Act was a law corre~ponding
to the Central Act and therefore stood repealed. as
from April l, 1950, under s. 13(2) of the Act and it
is this contention that we have to examine.
It was pointed out b) this Court in The CUBtodia,n of Evacuee Property v. Khan Saheb Abdul Shakoor,
etc. (' ). that whete the Act repealed provides
substantially for
all matters contained in the
Act effecting the repeal there is correspondence
between the two Acts
and the earlier
Act
would thus stand repealed; it is not necessary that
there should be complete identity between the
repealing Act and the Act repealed in every respect,
Therefore, when s. 13 (2) of the Finance Act provides that on the extension of the Central Act from
April I, 1950, to the Pa.rt B State of TravancoreCochin, any law corresponding to the Central Act
is repealed with effect from that date, all that we
have to see is whether the law repealed substantially
provided for the same matters as the Central Act,
even though it may not be identical in all respects.
Let us therefore turn to the Cochin Act and
the rules framed thereunder to see if it substantially
(I) A.J.R. 1961S.C.1087.
1!Jt.i2
A. B. Abdulkadir
v.
TM Slalt of KeY.tila
Wanchoo J.
Illa
.4. II. AWolioiir
v.
Tit Bi.i, •I K11.I.
w ...... .r.
750 SUPRmf:E OOURT REPOR'rS [1962] SUPP.
provides for the same matters with which the Cen·
t.ral Act and the Rules and Orders ma.de thereunder
deal. The main contention on behalf of the respondent in this connection is that the Central Act is an
Act imposing u duty of excise on tobacco under
item 4f> of List I of the Seventh Schedule to the
Governmont of India Act, 1935 (now corresponding
to ik•m 84 of List I of the Seventh Schedule to the
Constitution), and l!IJ{)h duty of excise is a duty on
goods manufactured or produced in India. Thus
according to tho respondent, the main feature of
the Central Act is the impORition of a tax on goods
produced or manufactured in India and unless the
Cochin Act or the similar Travanooro .Act also
imposes a tax on goods produced or manufactured
in what was formerly Cochin or Travanoore State
there would be no question of correspondence
between the Cenh'al Act and the Cochin Act or the
similar Travancore Act. Reference was alao made
to In Re the Central Province.8 and Berar Sale.s of
Motm Spirit and Lubricants Taxation Act. 1938
(Central Promnces and Berar Act XIV of 1938)('), Tht,
Promnce of Madras v. Meaar~. Boddu Paidanna and
Bon('), and Governor-General in Oauncil v. Promnce of
MadraB(•). where the nature of a duty of excise was
oonsidered. In the first case it was held that the
primary meaning l1f' "e:tcise duty" was of a tax on
articles produced or manufactured in the taxing
count7 (see p. 40). It was also observed in that
case that it could not be denied that laws were to be
found which impose a duty of excise at eta.gee subsequent to the manufacture or production.
In
the second caee it was held that duties of exoille
were duties levied on the manufacture or producer
of the commodity taxed. In the the third ce.ee, the
Privy Counoil approved pf the view of the Federal
Court as to the nature of the duty of excise. It
may therefore be acoopted that a duty of exciee is a
(I l [1939) F.C.R. IS
(2) [ 1!142) F.C.R. 90.
(3) [1945) L.R. 72 I.A. 91.
•
..
I
2S.C.R.
SUPREME COURT REPORTS
751
tax on goods produced or manufactured in the
taxing country.
It may
also be accepted that
generally speaking the tax is on the manufacturer
or the producer, though it cannot be denied that
laws are to be found whioh impoHe a duty of excise
at
stages subsequent to the manufacture or
production. We cannot however forget that the
Cochin Act or the similar Travaucore Act was passed
by States in which there were no such constitutional
provisions as are to be found in the Government
of India Act and its legislative Lists and this aspect
will have to be borne in mind when judging the
question of correspondence between the Central Act
and the Cochin Act or the similar Travancore Act.
Now the Central Act provides by s. 3 for the
levy and: collection of duties of .excise on all
excisable goods other than salt which
are
produced or manufactured in India and also a duty
on salt manufactured in or imported by land into
any part of India. Further s. 6 of the Central Act
gives power to the Central Government to issue
licences and prohibits any person from engaging in
the wholesale purchase or sale whether on his own
account or as a broker or commission agent or the
storage of any excisable goods except under
the authority and in accordance wi*,h the terms
and conditions of a licence granted under the
Central Act. In Chaturbhai M. Patd v. The Union
of India (1) where the various provisions of the
Central Act (including s. 6) and the Rules framed
thereunder were attacked on the ground that they
had nothing to do with the levy and collection of
duties of excise, this Court held that the various
provisions of the Central Act and the Rules made
thereunder were essentially connected with levying
and collection of excise duty and in its true nature
and character the Central Act remained one under
item 45 of List r and that the incidental trenching
upon the provincial field would not affect its
constitutionality. The nature of the Rules there
(I) [ 1960) 2 S. C.R. 362.
19112
A. B. AU .. ll;air
v.
7'lu Stall ef ,.,,..,.
Wonc,,._J,
1962
A. B. d6dal.l:a<itr
v.
n, SMh of K'rr•/4
WM<>\ooJ.
752 SUPREME OOURT REPORTS [1962] SUPP.
considorcd will appear from the following observations at p. 371 :-
"It (the Central Act) is a fiscal measure
to levy and realise duty on tobacco. The
method of reali.sirig duty must be left to the
wisdom of the legi~lature taking each individual tradA and its peculiarities and difficulties
which ariEe in that matter. Various provisions
of th11 .Act and the Rules show that the
authorities are on the track of the movement
of tobacco from the time it is grown to the
time it is manufactured and sold in the
market and the various provisions of the Act
and the Rules made thereunder have been
considered necessary for effectuating the
purp08e of the Act."
It is true that the Central Act provides for the
levy of excise duty under s. 3 but in order to
carry out that purpose it has provided for licences
under s. 6.
The Rules also provide in Chap. III
for levy and refund of duty, in
Chap. V for
manufactured goods other than satt, in Chap. VII
for warehousing, in Chap. VIII for licensing. Thus
in order to levy excise duty under the Central Act,
there are provisions in the Rules which start in
the case of tobacco from the stage of cultivation
and continue right up to the time the finished
product reaches the hand of the retailer and thus
becomes a part of the common stock for purp080B
of sale to the consumers. We have also seen that
the Cochin Act similarly providas for control on
tobacco from the stage at which it is grown to
the stage till it reaches C class lioen8008 who sell
it in retail to the oonsumers. The Cochin Rules
may not be so detailed as the Rules under the
Central Act but their main object and purpose is
the same, namely, to koep a check on tobacco from
the time it is grown to the time it reaches the C
class licensee who
eventually
sells it to the
coil8Uiller.
Further if one looka at the Rules
-
2 s.c.R.
SUPREME COURT REPORTS
753
under the similar Travancore Act in vol. II of the
1962
Travancore Excise Manual which were in force on
A. B. Alxfulhiir
April 1, 1950, in relation to tobacco it will be fonnd
•·
that there are elaborate rules in Part III from
TlieBtat .. JKer<l•
pp. 257 to 325 dealing with all aspects of control
Wanc.V. .J. •
relating to tobacco. Chap. IV deal8 with bonding
and issue; Chap. V with licences for sales, Chap. VI
with transport and possession. Further there are
rules at p. 296 for cultivation, curing and warehousing. Then at p. :114 are rules for the manufacture of cigars, cheroots and snuff in bond. It will
thus be clear that the Cochin as well as the
Travancore Rules provided for similar control of
tobacco as under the Central Act and show that the
authorities in Travancore and Cochin were also on
the track of the movement of tobacco from the
time it was grown and manufactured to the time
it was sold in the market. It would therefore
follow that the Cochin Act as well as the similar
Travancore Act along with the Rules corresponded
to the Central Act substantially and would thus
be repealed bys. 13(2) of the l!'inance Act, 1950.
But it is urged on behalf of the State that
there is no provision for charging duty in the
Cochin Act or the similar
Travancore Act and
therefore all these provisions
in the Rules for
control from the time of cultivation to the time of
the final stage of sale to the consumer, even though
they are similar to the Rules under the Central
Act, would not make the Cochin Act or the similar
Tra.vancore Act a corresponding Act to the Central
Act.
There is no doubt that there is no provision
corresponding to s. 3 of the Central Act in the
Cochin Act or in the similar Travanuore Act.
Under the Cochin Act the tax was levied by virtue
of the power conferred on the Diwan under s. 5
to make rules for the purpose.
Under the similar
Travancore Act, the provision is contained in s. 31
which provides that the Diwan may with the
sanction of the Ruler make rules permitting
11162
A. B. Abdulhdir
v.
TN Stut1 of Kt<alo
w..,1tooJ.
754 SUPRElIE OOURT REPORTS [1962) SUPP.
absolutely or subject to the payment of any duty
or fee or to any other conditions, and regulating
within the whole or any specified part of Trav&ncore, the cultivation, manufacture, possession,
transport, import and sale of tobacco. So in both
the former States, the Act did not contain a
charging section and the duty was levied by the
Rules framed by the Diwan under the powers
conferred on him by the Act. In essence, therefore, the provision for charging the tax was made
in the Rules. Further it is true that the method
by which the tobacco revenue was realised was
through auction sales of the right to possess and
sell tobacco.
Bnt we must not forget that the
Cochin Act as w;ell as the similar Travanoore Act
was passed by a Ruler who was not trammelled
by a Constitution like the Government of India
Act, 1935, and its Legislative Lists.
The method
evolved for realising tobacco revenue was to auction the right to pOl.'sess and sell tobacco and the
amounts received at such auctions would cover
what would be duty under s. 3 of the Central Act
and licence fee under s. 6 thereof.
It is urged
however that this does not amount to duty on
goods produced, nor is the duty in such a case
. aid by the manufacturer or producer of the goods.
Ne have alrt'a.dy indica.ted that the essence of the
duty of excise as held by the Federal Court and
the Privy Council is that it is a duty on the goods
manufactured or produced in the taxing country.
l·'urther .as generally the duty is on the goods
produocd or manufactured it is paid by the
producer or manufacturer, though as in the case
of all indirect taxes it is passed on eventually to
the consumer in the shape of being included
in the price and is thus really borne by the
consumer.
Further the ca.ires on which reliance
has been placed on behalf of the State also show
that J~ws are to be found which impose duty of
excise at stages subsequent to manufacture or
...
2 S.C.R.
SUPREME COURT REPORTS
755
production. As a matter of fact, even in British
India before 1935 there used to be_ public auctions
of the right to poaaess and sell excisable goods
like country liquor, ganja and
bhang and the
amount realised was excise revenue. It is also
obvious that this system of auction is not a system
of levying sales tax because it has nothing to do
with the levy on each sale, which is the essence
of a sales tax. It seems that in the former States
of Travancore and Cochin; auction system continued
right up to the time the Constitution came into
force and even for sometime thereafter. It seems
under the circumstances that the auction system
whio.h was in force was only a method of realising
duty through the grant of licences to those who
made the highest bid at the auctions. The fact
therefore that this system was used instead of ·the
system of charging of duty as provided in s. 3 of
the Central Act would not in our opinion make any
difference to the nature of the impost which was in
force on the relevant date, namely, April 1, 1950.
It was however urged that under this system even
tobacco which was not produced or manufactured
in the State but was imported from outside was
included for the purpose of licences granted under
it. That is undoubtedly so. But from the Rules
which were in force regarding cultivation, curing,
manufacturing and so on of tobacco within the
State itwould not be unreasonable to infer that the
substantial part of the income from auctions was
still in the nature of excise duty. Even fa the case
of imported tobacco, only with respect to that part
of it which was eventually sold to the consumer as
it was imported without any processing or treatment
in the State, it can be said that the impost which
fell on it was not in the nature of excise duty.
However, there is no way of differentiating this
part of the revenue from the r<•st and considering
the elaborate provisions as to the control of tobacco
trade from the grower right up to the time that the
1962
A. B. Abdulkadi<
••
Th, S tah of K,,.la
Wan<hoo J.
l9n
~. B. '46dulkuir
v.
II, -
ef ,.,..i.
756 SUPREME COURT REPORTS (1962) SUPP.
goods wero sold to tho public in retail sale it would
in our opinion be not unreasonable to hold that the
Cochln Act as well as the Travancore Act was in
subs tan co an Act corresponding to the Central A ct.
Therefore when the Central Act was extended to the
Part B State of Travancore Cochin by s. 11 ( 1) of
the Finance Aot aud the Finance Act specifically
provided bys. 13 (2) for the repeal of corresponding
law, the result was that the Cochin Act as well as
the similar Trava.ncore Act stood repealed. There
would be no power in the State Government thereafter to frame new Rules either in August 1950 or
in January 19!)1 for there would be no law to support
the new Hules and without such law the new Rules
could not impose a tax as that would clearly offend
Art. 265 of the Constitution. Further as soon as the
Cochin Act as well as the similar Tra.vancore Act
stood repealed on April 1, 1950, by virtue ofs.13(2)
of thi; Fina.nee Act there could be no question of
their being sustained under item 62 of List II of the
Seventh Schedule for that would only a.rise if these
were not repealed as corresponding law by s.13(2 ).
Turning now to thl' three Travancore appeals
it is enough to say that they stand on tho same
footing as the two Cochin appeals. If anything the
Travancore Act as well as the Travancore Rules
whicli wue in force on April 1, 1950 a.re more
elaborate than theCochinAct and thfl Cochin Rules.
Further the Travancore Act bys. 31 actually refers
tc.. manufacture also. The Coohin Act did not refer
to manufacture in the Act itself though there was
provision for manufacture in the Rules framed
under the Act. What applies therefore to tho Cochin
Act and the Rules framed thereunder applies in
force to the Trava.ncorc Act and the Rules framed
thereunder and there is no doubt that the Travan·
core Act and tho Rule11 framed thereunder were also
a. law corr~sponding to the Central Act and the
Rule.a framed thereunder. The TravancoroAct there·
fore a)Ho stuu<l repealed from April 1, 1950. There
2 S.C.R.
SUPREME COURT REPORTS
757
would thus be no law to support the Rules framed
by tbo State Government· in January 1951 and
therefore the Rules must fall.
It appears that these new Rules have been
abrogated as from January 1958. So it was urged
on behalf of the State that this Court should not
grant a mere declaration as to the invalidity of the
Rules, when they are no longer in existance. This
argument in our opinion ha~ no force because we
must look to the situation as it was when the petitions wer<i presented. The Cochin petitions were
presented in 1956 and the Travancore petitions were
presented in 1955 and at that time the Rules were
in force and they continued in force till December
1957. Therefore the petitioners would be entitled
to a declaration that the Rules were invalid because
at any rate that would give them relief so far as
the period after their petitions is concerned while
the Rules remained in force.
We therefore allow the appeals and set aside the
order of the High Court. The petitions are allowed
and it is hereby declared that the new RuleH purporting to be framed either under the Cochin Act
or under the Travancore Act in August 1950 and
thereafter in .January 1951 were invalid .ab initio
ancl have no force and effect. The appellants will
get their costs from the State-one set of hearing
costs.
SrrAH, J.-In this group of five appeals the
principal q1iestion which falls to be determined is
whether within the meaning of s. 13(2) of the
Finn.nee Act, HViO (which by s. 11 thereof extended
the Central Excises & Salt Act, I of, I 9-l4; to tho
Part B States), there was, immediately before the
1st of April l!J,:;o, in force in Part B State of Travancore·Cochin, a law corresponding to the Central
Excise & Salt Act, 19H, It is common ground that
if there was such a law in force, by virtue of ".13(2)
of the Finance Act of 1950, that law stood repealed.
1962
A. R Abdulkal ir
v.
Tie State of Kerala
Warichoo J.
SMh J.
llMl
A.B.AW•1dtr
v.
111 Bi.•/ K•lh
SWJ.
758 SUPREME OOURT REPORTS [1962] SUPP.
The appellants in Civil Appoals Nos. 89 and
90 of 1961 were carrying on business in tobaooo
within the territory of the former State of Coohin.
Appellants in Civil Appeals 126 to 128 of 1961 were
residents of and carried on business in tobacoo within territory of the former State of Travancore. On
July 1, 1949, the States of Travanoore and Cochin
formed themselves into a Union under a common
administration, but by the virtue of the TravanooreCochin Administration Law, 6 of l l 26(M.E.), the
Acts which were in operation in the two Stat.ea
continued to remnin in foroe in the territories in
which they were previously in force.
In the territory of the former State of Travancore, there was
in force the Travancore Tobaooo Regulation, I of
1087 (M.E.) which wBB ena<>ted by the Ruler of
Travancore in 1911. Bys. 3 of the Act, "Tobacco"
was defined as including "snuff, cigars, cigarettes,
beedies, toba.coo powder and other prepru-ations or
admi::::tures of tobacco".
Section 4 of the Act
imposed, except as permitted by the Act or by any
other enactment relating to tobaooo, for the time
being in force by the Rules published under the
Act or any other such em~ctment prohibitions against
cultivation, manufacture, possessions, transport,
importation, exportation or sale of tobacoo. By
Chapter III of the Act power was conferred upon
the officers of the Excise Depactment to search
houses suspected to contain tobacco and to seize
tobacco and provision was made for incidrntal
matters.
Chapter IV dealt with offences and
puni~hmeut and by s. 31 the Diwan of the State
was authorised, with the sanctirln of the Ruler,
from time to time, by Notification in the Gazette,
to make rules consist.mt with the Act amongst
other subjects permitting ablolutely or subject to
the payment of any duty or fee or to any other
conditions, and regulating within the whole or any
speoified part of the State of Travancore, oultiva.
tion, manufacture,
posseesion,
tramportation,
2 S.C.R.
SUPREME COURT REPORTS
769
import and sale of tobacco; authorising the establishment of warehouses or bank8haUs for storing
tobacco legally cultivated or imported into the
territory fixing the mode, time and place of levy
of duty, regulating the apecial custody of tobacco
warehoused and the levy of fees for warehousing
and transport, and generally to carry out the
p10visions of the Act. Rules 'were framed in 1913
in exercise of the powers under s. 31 of the Tobacco
Act whereby restrictions were imposed upon the
import and export of tobacco and provision was·
made for bonding tobacco in warehouses and for
the issue of licences for bonding tobacco. Provision
was also made for licensing retail sitle for tobacco
and for transport and possession thereof.
Certain
other rules regulating cultivation, curing and
warehousing tobacco and for the issue of licences
for those purposes were promulgated in 1937.
Rules were also framed regulating the manufacture
of cigars, cigarettes and cheroots in bonds under
licences. It is unnecessary to set out these rules
in detail, it may suffice to observe that cultivation,
curing, manufacture, possession, transport, importation and exportation and sale of tobacco was
controlled by a system of lie{lnsing.
Certain
licences were issued free of charge and in respect of
certain other licences, especially storage and sale,
fee had to bf' paid to the State.
Similarly, in the State of Cochin there was
enacted by the Ruler of Cochin the Cochin Tobacco
Act of 1084 (M.E.) on May 3, 1909. By s. 3(dJ of
that Act, tobacco was defined as inclusive of "snuff,
cigars and preparations of which tobacco forms a
part." By s. 4, except as permitted by the Act
or by the Rules made thereunder, possession for
the purposes of sale, transport, import, export,
sale and cultivation of tobacco were prohibited.
By s. 5, the Diwan of the State was authorised
from time to time after previous publication, to
make rules consistent with the Act to permit abso1162
A. B. Abdulkadff
v,
Till SIGll qf Ke alo
Shah J,
lHt
A. B • ~U,Jbj;,
v.
TAt 8i.11 •f X'tt•l•
ShM J,
760 SUPREME OOURT REPORTS (1962] SUPP.
lutely or su bjcct to any conditions regulating the
pOBSession, transportation, importation or exporta.
tion and sale and cultivation of tobacco. Contravention ,,f the Ar.t and the Rules or orders made
under thP Act wert pl'nalised bys. 6.
Rules were
framed in 1923 under the Cochin Tobacco Act
providing for a system of licensing for cultivation,
manufacture and storage of tobacco and for in·
cidental matters. Control was maintained over
harvesting, weighment, storage, stock taking and
transport of tobacco, and also on the export and
import of tobacco.