# GODFREY PHILLIPS INDIA LTD. AND ANR v. STATE OF U.P. AND ORS

- **Citation:** [2005] 1 S.C.R. 732
- **Court:** Supreme Court of India
- **Decided:** 2005-01-20
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/godfrey-phillips-india-ltd-and-anr-v-state-of-u-p-and-ors-20468
- **Pages:** 49

## Headnote

{
A
GODFREY PHILLIPS INDIA LTD. AND ANR.
V.
STATE OF U.P. AND ORS.
JANUARY 20, 2005
B [R.C. LAHOTI, CJ., RUMA PAL, ARUN KUMAR, G.P. MATHUR AND
C.K. THAKKER, JJ.]
-4.
Constitution of India :
c
Schedule VII list II Ently 62-Scope of-Levy of luxury tax on goods
or articles under-Held, not contemplated-"'Luxuries "-Meaning ofDiscussed-None of the impugned statutes seek to tax any activity but seek to
tax goods described as luxury goods-Hence the statutes legislatively
incompetent-U.P. Tax on Luxuries Act, 1995-A.P. Tax on Luxuries Act,1987D West Bengal Tax on Luxuries Act,1994.
Schedule VII List I Entries 83 & 84, List II Entries 54 & 62 and Arts.286
& 366(29-A)-Luxury goods/articles-Taxation of-Permissible modes-Held,
\...
method of taxing luxury goods has invariably been subjecting them to the
extent fiscal regimes of excise duties, sales tax, customs duties at heavier rates
E and not under List II Entry 62-No distinction made in Art.366(29-A) or
Art.286 or entries 83 and 84 of List I as to the nature of the goods which may
be subject matter of sale, excise or import, be they articles of necessity or
articles of luxury.
F
Art.265 and Schedule VII-Taxation entries-Subject of tax-Attributes
of an object/article, without mentioning the object/article, held not contemplated
as the subject matter of tax-Taxation.
~
Schedule VII list II Entries 62,54 & List I Entry 92-A and Arts.
286,366(29-A)-Power and Relative scope of List II entries 62 and 54G Imposition of luxury tax on transfer, supply or delivery of article/goods, de
hors constitutional limits on power of States to levy sales tax-Held, all the
constitutional restrictions on power of States to levy sales tax under
Art.286(3)(a) rlwSs.14,15 CST Act,1956 and S.3 and Sch.2 proviso Additional
.. '
Duties of Excise (Goods of Special Importance) Act, 1957 can not be bypassed,
allowing States to levy tax on supply of goods by describing them as luxury
H
732
GODFREY PHILLIPS INDIA LTD. v. STATE OF U.P.
733
goods-Supply of luxury is nothing but supply of goods, since the goods A
themselves constitute luxury-Even if tobacco is an article of luxury, a tax on
its supply is within the exclusive competence of the Stales under List II Entry
54 rlw Art.366(29-A)(a), but subject to the constitutional Courts-Impugned
UP and AP Acts held ultra vires the power of States to levy sales tax-U.P.
Tax on Luxuries Act,1995-A.P. Tax on Luxuries Act,1987.
B
Schedule VII Lisi II Enlly 62 and List I Entries 83 and 84 rlw. S.3 ADE
Act, 1957-Relative scope of-Imposition of luxury tax by Stales on items
~
covered by S.3 ADE Act, 1957-Held, impermissible-West Bengal Tax on
Luxuries Act,1994 held invalid.
.,/.
Arts.265,246 and Schedule VII-Division of powers between Centre and
States-Nature of-Principles for interpretation of taxing entries in Schedule
VII-Held, mutual exclusivity is reflected in Art.246-Thus, taxing entries
must be construed with clarity and precision--A taxing entry which may lead
c
to overlapping must be eschewed-Elements of a tax-Subject of tax and
incidence of tax-Constitutional significance of such distinction-Discussed- D
Arts.265,246,248(2) & Taxation Entries in Schedule VII and Schedule VII List
I Entry 97-Power of taxation under entries in lists in Schedule VII-Discussed
Interpretation of the Constitulion-Noscitur a sociis-Application of the
principle-Caution to be exercised-Discussed
Luxuries Tax :
U.P. Tax on Luxuries Act 1995-A.P. Tax on Luxuries Act,1987-West
Bengal Tax on Luxuries Act, l 994-Constitutional validity of
Words & Phrases :
"Luxuries "-Meaning of
Entry 62 of List II of the Seventh Schedule to the Constitution relates
E
F
to the exclusive power of State Legislatures to make laws with respect to
"Taxes on luxuries, including taxes on entertainments, amusements, G
betting and gambling". Several States have enacted legislation which they
claim are referable to the right to tax luxuries under this Entry. These
I .,,..
appeals and writ petition relate to the Uttar Pradesh Tax

## Text

_Characters 0–39,966 of 123,245. This is a partial read: ask again with offset=39966 for what follows._

{
A
GODFREY PHILLIPS INDIA LTD. AND ANR.
V.
STATE OF U.P. AND ORS.
JANUARY 20, 2005
B [R.C. LAHOTI, CJ., RUMA PAL, ARUN KUMAR, G.P. MATHUR AND
C.K. THAKKER, JJ.]
-4.
Constitution of India :
c
Schedule VII list II Ently 62-Scope of-Levy of luxury tax on goods
or articles under-Held, not contemplated-"'Luxuries "-Meaning ofDiscussed-None of the impugned statutes seek to tax any activity but seek to
tax goods described as luxury goods-Hence the statutes legislatively
incompetent-U.P. Tax on Luxuries Act, 1995-A.P. Tax on Luxuries Act,1987D West Bengal Tax on Luxuries Act,1994.
Schedule VII List I Entries 83 & 84, List II Entries 54 & 62 and Arts.286
& 366(29-A)-Luxury goods/articles-Taxation of-Permissible modes-Held,
\...
method of taxing luxury goods has invariably been subjecting them to the
extent fiscal regimes of excise duties, sales tax, customs duties at heavier rates
E and not under List II Entry 62-No distinction made in Art.366(29-A) or
Art.286 or entries 83 and 84 of List I as to the nature of the goods which may
be subject matter of sale, excise or import, be they articles of necessity or
articles of luxury.
F
Art.265 and Schedule VII-Taxation entries-Subject of tax-Attributes
of an object/article, without mentioning the object/article, held not contemplated
as the subject matter of tax-Taxation.
~
Schedule VII list II Entries 62,54 & List I Entry 92-A and Arts.
286,366(29-A)-Power and Relative scope of List II entries 62 and 54G Imposition of luxury tax on transfer, supply or delivery of article/goods, de
hors constitutional limits on power of States to levy sales tax-Held, all the
constitutional restrictions on power of States to levy sales tax under
Art.286(3)(a) rlwSs.14,15 CST Act,1956 and S.3 and Sch.2 proviso Additional
.. '
Duties of Excise (Goods of Special Importance) Act, 1957 can not be bypassed,
allowing States to levy tax on supply of goods by describing them as luxury
H
732
GODFREY PHILLIPS INDIA LTD. v. STATE OF U.P.
733
goods-Supply of luxury is nothing but supply of goods, since the goods A
themselves constitute luxury-Even if tobacco is an article of luxury, a tax on
its supply is within the exclusive competence of the Stales under List II Entry
54 rlw Art.366(29-A)(a), but subject to the constitutional Courts-Impugned
UP and AP Acts held ultra vires the power of States to levy sales tax-U.P.
Tax on Luxuries Act,1995-A.P. Tax on Luxuries Act,1987.
B
Schedule VII Lisi II Enlly 62 and List I Entries 83 and 84 rlw. S.3 ADE
Act, 1957-Relative scope of-Imposition of luxury tax by Stales on items
~
covered by S.3 ADE Act, 1957-Held, impermissible-West Bengal Tax on
Luxuries Act,1994 held invalid.
.,/.
Arts.265,246 and Schedule VII-Division of powers between Centre and
States-Nature of-Principles for interpretation of taxing entries in Schedule
VII-Held, mutual exclusivity is reflected in Art.246-Thus, taxing entries
must be construed with clarity and precision--A taxing entry which may lead
c
to overlapping must be eschewed-Elements of a tax-Subject of tax and
incidence of tax-Constitutional significance of such distinction-Discussed- D
Arts.265,246,248(2) & Taxation Entries in Schedule VII and Schedule VII List
I Entry 97-Power of taxation under entries in lists in Schedule VII-Discussed
Interpretation of the Constitulion-Noscitur a sociis-Application of the
principle-Caution to be exercised-Discussed
Luxuries Tax :
U.P. Tax on Luxuries Act 1995-A.P. Tax on Luxuries Act,1987-West
Bengal Tax on Luxuries Act, l 994-Constitutional validity of
Words & Phrases :
"Luxuries "-Meaning of
Entry 62 of List II of the Seventh Schedule to the Constitution relates
E
F
to the exclusive power of State Legislatures to make laws with respect to
"Taxes on luxuries, including taxes on entertainments, amusements, G
betting and gambling". Several States have enacted legislation which they
claim are referable to the right to tax luxuries under this Entry. These
I .,,..
appeals and writ petition relate to the Uttar Pradesh Tax on Luxuries Act,
1955, the Andhra Pradesh Tax on Luxuries Act, 1987 and the West Bengal
Tax on Luxuries Act, 1994. The legislative competence of these statutes H
+
734
SUPREME COURT REPORTS [2005] 1 S.C.R.
A was challenged by the assessees before different fora - in some cases
partially successfully, and in others without success. To the extent the
assessees were unsuccessful, they have challenged the decisions ; in those
cases in which the assessees were successful the concerned State has filed
the appeals.
B
The States have differed in their interpretation of the word
"luxuries" of Entry 62 List II since they have argued in the context and
from the point of view of the particular statute sought to ~e defended as
_.
legislatively competent. In these matters although the principal question
to be resolved is the ambit of Entry 62 of List-II, the nature of the tax
c sought to be levied by the three statutes on Luxuries Tax enacted by Uttar
Pradesh, Andhra Pradesh and West Bengal required determination.
Disposing of the matters, the Court
HELD: 1. Given the language of Entry 62 and the legislative history,
D Entry 62 of List II does not permit the levy of tax on goods or articles.
The word "luxuries" in the Entry refers to activities of indulgence,
enjoyment or pleasure. In as much as none of the impugned statutes seek
I
to tax any activity and admittedly seek to tax goods described as luxury
~
goods, they must be and are declared to be legislatively incompetent.
E
However following the principles in Somaiya Organics (India) Ltd. while
striking down the impugned Acts it is appropriate to allow any refund of
taxes already paid under the impugned Acts. Bank guarantees if any
furnished by the assessees will stand discharged. (779-F-G(
Somaiya Organics (India) Ltd v. State of U.P., (2001 J 5 SCC 519,
F
followed.
2. The earlier cases relating to tax on luxuries proceeded on the basis
that Entry 62 of List II covered articles of luxury. In the earlier decisions,
.i,.
this Court was not called upon to address the question whether Entry 62
did not cover articles of luxury and ought to be restricted to things
G incorporeal such as enjoyment or indulgence in what is either choice or
costly. (761-C(
A.B.Abdul Kadir v. Union of India, (1962) 2 SCR 741; Federation of
~·
Hotel and Restaurant v. Union of India, ( l 989J 3 SCC 634 and Express Hotels
v. State of Gujarat, (1989J 3 SCC 677, referred to.
H
GODFREY PHILLIPS INDIA LTD. v. STATE OF U.P.
735
7·
3. Theoretically 'luxuries' is capable of covering each of the several A
meanings ascribed to the word. The question is how the word is to be
construed in the Constitutional entry. Neither the dictionary meaning nor
the meaning ascribed to the word judicially resolve the ambiguity. The
solution must be found in the language of the Entry taking into
consideration the Constitutional scheme with regard to the imposition of B
taxes and the collection of revenues. 1761-F-G]
Corpus Juris Secundum Vol - IV p.887 and Black's Law Dictionary, (6th
..+--
Edition), referred to .
..
4.1. Whatever be the similarities between the Constitutions of other c
countries with similar federal structures as this Country such as the United
States, Canada or Australia, this Court has, as a general rule held that
the opinions expressed by the Courts of those countries may not be helpful
in construing the allocation of legislative heads in our Constitution,
although they may be of some relevance in determining the true character
D
of particular legislation. [761-H; 762-A-B]
ChhotabhaiJethabhai Patel v. The Union of India, ( 1962) Supp. 2 SCR
1; State of Bombay v. Chamarbaugwala, 11957] SCR 874; Atiabari Tea Co.
v. The State of Assam, (19611 1 SCR 809 and The Automobile Transport
(Rajasthan) v. The State of Rajasthan, (1963] 1 SCR 491, relied on.
E
Subrahmanyan Chettiar v. Muthuswami Gounder, (1940) FCR 188 and
Union of India v. H. S. Dhillon, (19711 1 SCC 779, 801-803, referred to.
5. The Indian Constitution is unique in that it contains an exhaustive
enumeration and division of legislative powers of taxation between the F
Centre and the States. Taxing entries must be construed with clarity and
I
precision so as to maintain such exclusivity, and a construction of a
.....
taxation entry which may lead to overlapping must be eschewed. If the
taxing power is within a particular legislative field it would follow that
other fields in the legislative lists must be construed to exclude this field G
so that there is no possibility of legislative trespass. Classically, a tax :is
seen as composed of two elements : the person, thing or activity on which
the tax is imposed and the incidence of tax. Thus every tax may be levied
I~·
on an object or an event of taxation. The distinction between the two may
not, ultimately, be material in the context of the Indian Constitution. Both
these elements are distinct from the incidence of taxation. The law H
736
SUPREME COURT REPORTS [2005] I S.C.R.
A imposing the tax may also prescribe the incidence or the manner in which
the burden of the tax would fall on any person and would take within itself
the amount and measure of tax. The importance of this distinction lies in
the fact that in India, the first two have been given a Constitutional status,
whereas the incidence of tax would be a matter of statutory detail. The
B incidence of tax would be relevant in construing whether a tax is a direct
or an indirect one. But it would be irrelevant in determining the subject
matter of the tax. (762-D; 763-C-Fl
Hoechst Pharmaceuticals Ltd. andAnr. v. State of Bihar and Ors., [1983)
3 SCR 130; The State of West Bengal v. Kesoram Industries Ltd. and Ors.,
C JT 2004 (I) 375; Mis. Chhotabhai Jethabhai Patel & Co. v. Union of India
and Anr., (1962] 2 Suppl. SCR 1 : AIR (1962) SC 1006 and State of
Karnataka v. Drive-in-Enterprises, (2001 I 4 sec 60, relied on.
D
H.M Seervai's Constitutional Law of India, Fourth Edition, Volume
1 page 166 paragraph IA 25 referred to.
6.1. Under the three lists of the Seventh Schedule to the Indian
Constitution a taxation entry in a legislative list may be with respect to
an object or an event or may be with respect to both. Article 246 makes
+
it clear that the exclusive powers conferred on the Parliament or the States
>.
E to legislate on a particular ma!ter includes the power to legislate with
respect to that matter. Hence where the entry describes an object of tax,
all ta,xable events pertaining to the object are within that field of legislation
unless the event is specifically provided for elsewhere under a different
legislative head. Where there is the possibility of legislative overlap, courts
have resolved the issue according to settled principles of construction of
F entries in the legislative lists. The first of such settled principles is that
legislative entries should be liberally interpreted; none of the items in the
list is to be read in a narrow or restricted sense and that each general
word should be held to extend to ancillary or subsidiary matters which
can fairly and reasonably be said to be comprehended in it. (764-B-E]
G
H
United Provinces v. Mt. Atiqa Begam, AIR (1941) FC 16; Western India
Theatres Ltd. v. The Cantonment Board Poona, (1959] Suppl. 2 SCR 63, 69;
ELEL Hotels & Investments Ltd. and Ors. v. Union of India, [1989] 3 SCC
698; Express Hotels v. State of Gujarat, [1989] 3 SCC 677 and State of
Bombay v. RMD Chamarbaugwa/a, (1957) SC 874, relied on.
-
-+
GODFREY PHILLIPS INDIA LTD. v. STATE OF U.P.
737
}-
State of Bombay v. RMD Chamarbaugwala, AIR (1956) Bom.1, A
referred to.
6.2. The second principle is that competing entries must be read
harmoniously. The proper way to avoid a conflict would be to read the
entries together and to interpret the language of one by that of the other.
[765-FJ B
Governor General in Council v. Province of Madras, (1945) FCR 179;
~
State of Bombay v. Narottamdas Jethabhai, [1951] 2 SCR 51; Bar Council
, ~·
of U.P. v. State of U.P. and Anr., [1973] 1 SCC 261; D.G. Ghose & Co.
(Agents) (P) Ltd v. State of Kera/a and Anr., [1980] 2 SCC 410; Federation C
of Hotel and Restaurant v. Union of India, [1989[ 3 SCC 634, 657, 667-668;
State of West Bengal v. Kesoram Industries, (2004) 1 SCALE 425, 462. In
the matter of Central Provinces and Berar Sales of Motor Spirit and Lubricants
Taxation Act, (1938) and AIR (1939) FC 1,8,40, relied on.
7.1. Parliament has been given the overriding power to limit the rates D
of sales taxes which are otherwise within the exclusive competence of the
States in respect of certain items of sale and purchase. The relevant clause
for our purpose is clause (a) of Art. 286(3) which allows Parliament to
enact a law declaring goods to be of special importance in inter-state trade
or commerce. In exercise of this power, Section 14 of the Central Sales
Tax Act. 1956 has declared certain goods to be of special importance in E
inter-state trade or commerce. This includes tobacco both in unmanufactured and manufactured form. The States have been restricted
from imposfog or authorizing the imposition of tax on the sale or purchase
of the declared goods within the State upto a maximum limit of 4 per cent
of the sale or purchase price under Section 15 of the Central Sales Tax
Act, 1956. In December, 1956, the National Development Council, Planning
Commission, Government of India, and the States agreed that the sales
tax in respect of inter alia tobacco should be replaced by a surcharge on
the Central Excise Duties, the income derived therefrom being distributed
amongst States on the basis of consumption, subject to the income from
F
the States being assured. Pursuant to this and the recommendation of the G
Finance Commission in its report dated 30th September, 1957, the
Additional Duties of Excise (Goods of Special Importance) Act 1957 was
passed by Parliament. The object of the Act was to impose additional duties
of excise in replacement of the sales tax levied by the Union and the States
on sugar, tobacco and millmade textiles and to distribute the net proceeds H
738
SUPREME COURT REPORTS [2005] l S.C.R.
A of these taxes, except the proceeds attributable to Union territories, to the
. .;.
States. Provision was made that the State which levy a tax on the sale or
purchase of these commodities after the 1st April, 1958 could not
participate in the distribution of the net proceeds of the additional levy
under the ADE Act. Provision was also being made in the Act for including
specified goods in the category of goods declared to be of special
B importance in inter-State trade or commerce so that, following the
imposition of uniform duties of excise on them, the rates of sales tax if
levied by any State were subject from 1st April, 1958 to the restrictions
in Section 15 of the Central Sales Tax Act, 1956. 1769-C-H; 770-A-B)
~
C
Re: The Bill to Amend Section 20 of the Sea Customs Act, (19641 3
SCR 787; The Central Provinces and Berar Sales of Motor Spirit and
Lubricants Taxation Act, (1938) AIR (1939) FC 1 Federation of Hotel &
Restaurants v. Union of India, (1989( 3 SCC 634 and Madras Province v.
Boddu Paidanna, AIR (1942) FC 33, relied on.
D
7.2. Section 3 of the ADE Act is the charging section under which
additional excise duties are leviable on specified goods manufactured or
lying in stock. No State can levy luxury tax on items covered by Section 3
of the ADE Act in respect of goods for the same taxable event i.e. goods
stored on manufacture, just by describing the goods as luxury goods. The
overlapping of the powers exercised under Entry 84 of List I and Entry
E 62 of List II would then be evident. Similarly storage or stocking of
imported goods is covered by Entry 83 of List I and cannot be made the
subject of levy by the States. 1770-8-E)
7.3. While widening the scope of Entry 54 of List II, the powers of
F the State to levy such tax are subjected to a corresponding restriction as
a consequence of the constitutional curbs imposed on sales tax under
Article 286 read with Sections 14 and 15 of the Central Sales Tax Act,
1956 and the ADE Act, 1957. The tax leviable by virtue of sub-clause (b)
of clause (29-A) of Article 366 of the Constitution thus becomes subject
to the same discipline to which any levy under Entry 54 of the State List
G is made subject to under the Constitution. The position is the same when
one looks at Article 286 of the Constitution. If any declared goods which
are referred to in Section 14 of the Central Sales Tax Act, 1956 are
involved in such transfer, supply or delivery, which is referred to in clause
(29-A) of Article 366, the sales tax law of a State which provides for levy
of sales tax thereon will have to comply with the restrictions mentioned
H
-+
>
'\
..i.
GODFREY PHILLIPS INDIA LTD. v. STATE OF U.P.
739
in Section 15 of the Central Sales Tax Act, 1956. No State can therefore A
by describing an item as a luxury, seek to levy tax on its supply. It cannot
be disputed that as far as UP and AP are concerned, were it not for their
Interpretation of Entry 62 of List II, the tax would be referable only to
Entry 54 List II. If Entry 62 List II does not allow the taxation of goods,
the levy would not be constitutionally sustainable. [771-D-G)
7.4. To read Entry 62 List II as including articles of luxury cannot
allow all these constitutional restrictions to be by-passed allowing States
to levy tax on the supply of goods by describing them as luxury goods.
The supply of luxury is nothing but the supply of goods since the goods
themselves constitute the luxury. So even if tobacco is an article of luxury,
a tax on its supply is within the exclusive competence of the State but
subject to the constitutional curbs prescribed under Article 286 read with
Sections 14 and 15 of the Central Sales Tax Act, 1956 and most
importantly the ADE Act of 1957 under which no sales tax can be levied
011 tobacco at all if the State was to take the benefits under that Act.
Despite the subtraction of the rights to levy excise or customs duties and
the restraint on the States to levy sales tax in cases when the states can
levy tax on goods, it has to be determined whether Entry 62 of List II
covers taxes on goods at all. [771-H; 772-A-C)
7.5. That the entries on taxable events in the legislative lists are not
exhaustive is also recognised and provided for in Art. 248(2) which
provides for the power of Parliament to make any law imposing a tax not
mentioned in either the Concurrent or State lists. This residuary power is
reflected in Entry 97 of List I. Furthermore if an article or goods are
taxable only with respect to a taxable event, and if, all taxable events have
been provided for in the different legislative heads, then by that token no
object or goods could be taxable. This would render the various entries
in the State List including entries 57 and 58 contentless. As this Court
cannot accept that the taxation entries exhaustively enumerate all taxable
events, it does not follow that Entry 62 of List II does not cover goolis. It
B
c
D
E
F
is not possible therefore to hold merely on such a construction of the
legislative lists and the taxation entries therein, that Entry 62 List II does G
not permit the States to levy tax on articles of luxury. [772-D-F)
Re : The Bill to Amend Section 20 of the Sea Customs Act, [1964) 3
SCR 787, referred to.
8.1. The juxtaposition of the different taxes within Entry 62 itself is H
+
740
SUPREME COURT REPORTS [2005) l S.C.R.
A of particular significance. The entry speaks of "taxes on luxuries including
-'<:,
taxes on entertainments, amusements, betting and gambling". The word
"including" must be given some meaning. In ordinary parlance it indicates
that what follows the word "including" comprises or is co .. tained in or is
a part of the whole of the word preceding. The nature of the included items
B
would not only partake of the character of the whole, but may be construed
as clarificatory of the whole. The word 'includes' may in certain contexts
be a word of limitation. In the context of Entry 62 of List II this would
not mean that the word 'luxuries' would be restricted to entertainments,
...
amusements, betting and gambling but would only emphasise the attribute
(
which is common to the group. Tf luxuries is understood as meaning
c something which is purely for enjoyment and beyond the necessities of life,
there can be no doubt that entertainments, amusements, betting and
gambling would come within such understanding. Additionally,
entertainments, amusements, betting and gambling are all activities.
'Luxuries' is also capable of meaning an activity and has primarily and
D
traditionally been defined as such. It is only derivatively and recently used
to connote an article of luxury. One can assume that the coupling of these
taxes under one entry was not fortuitous but because of these common
characteristics. (772-H; 773-A-D)
~
South Gujarat Roofing Tiles Manufacturers v. State of Gujarat, 11976)
E 4 sec 601, referred to.
8.2. Where two or more words susceptible of analogous meaning are
clubbed together, they are understood to be used in their cognate sense.
They take, as it were, their colour from and are qualified by each other,
the meaning of the general word being restricted to a sense analogous to
F that of the less general. 1773-E)
Maxwell on the Interpretation of Statues, 12th Edn.; referred to.
~
8.3. In the present context the general meaning of 'luxury' has been
explained or clarified and must be understood in a sense analogous to that
G of the less general words such as entertainments, amusements, gambling
and betting, which are clubbed with it. (774-D(
U.P. State v. Raja Anand, (19671 l SCR 362; Rainbow Steels Ltd v.
.r '
C.S. T, (19811 2 SCC 141 and State of Bombay v. Hospital Mazdoor Sabha,
AIR (1960) SC 610, referred to.
H
GODFREY PHILLIPS INDIA LTD. v. STATE OF U.P.
741
;t..
-9.1. The maxim of noscitur a sociis may be a treacherous one unless A
th{ 'societas' to which the 'soc ii' belong, are known. The risk may be
present when there 'is no other factor except contiguity to suggest the
'societas '. But where there is, as here, a term of wide denotation which is
not free from ambiguity, the addition of the words such as 'including' is
sufficiently indicative of the societas. The word 'includes' in the present B
context indicates a commonality or shared features or attributes of the
including word with the included. [775-F-G)
9.2. Where articles have been made the object of taxation, either
directly or indirectly, the entries in the legislative lists have specifically
said so or the impost is such that the subject matter of tax follows by c
necessary implication. In List II itself, the State legislature has been given
the right to levy taxes on the entry of goods under Entry 53, on 'carriage
of goods and passengers' under Entry 56, on 'vehicles' under Entry 57
and on 'animals and boats under Entry 58. There is no instance in any of
the legislative lists of a tax being Ieviable only with reference to an
D
attribute. An attribute as an object of taxation without reference to the
object it qualifies would lead to legislative mayhem, blur the careful
demarcation between taxation entries and upset the elaborate scheme
_.(
embodied in the Constitution for the collection and distribution of revenue
between the Union and the States. On an application of general principles
of interpretation, it is held that the word 'luxuries' in Entry 62 of List II E
means the activity of enjoyment of or indulgence in that which is costly
or which is generally recognized as being beyond the neressary
requirements of an average member of society and not articles of luxury.
[775-G-H; 776-A-C)
9.3. Prior to the framing of the present Constitution the debates in F
the Constituent Assembly show that the suggestion that Entry 62 of List
-4.
II should read as "taxes on entertainments, amusements, betting and
gambling, racing and other such luxuries" was negatived on the ground
that it would cut down the scope of the entry. The example of a tax on
servants which "should probably be within the unamended entry" was G
cited as being possibly excluded by the amendment. In fact "a tax on
menials and domestic servants" was, under Schedule II of the Taxes Rules
~
framed under the 1915-1919 Act, within the competence of the Provincial
Legislative Council to impose, or with the authority of the State Legislative
Council within the competence of any local authority. It was an entry
distinct from the authority conferred on the State Legislative Council to H
742
SUPREME COURT REPORTS [2005) 1 S.C.R.
A
-k;
impose a 'tax on any specified luxury' under Schedule I of the Taxation
Rules. In any event 'servants and menials' could hardly be equated with
"goods". It was probably their employment which was considered as a
possible luxury. It is again to be emphasized that the rejection of the
suggestion was not because of the possible exclusion of luxury goods.
B
(777-G-H; 778-A-BI
9.4. After the Constitution came into force except for the decision
of this Court in Abdul Kadir in 1976, Entry 62 of List II was not invoked
""
save for the purpose of levying a tax on gambling and betting or for levying
tax on the provisions of enjoyment or indulgence of facilities in hotels and
c restaurants. 1778-CI
Western India Theatres Ltd. v. The Cantonment Board, Poona, (19591
Supp. 2 SCR 63, 69; A.B. Abdul Kadir v. State of Kera/a, (196212 SCR 741;
State of Bombay v. R.MD. Chamarbaugwala, 119571 SCR 874; Express Hotels
v. State of Gujarat, 1198913SCC677; ELEL Hotels & Investments Ltd. and
D Ors. v. Union of India, 119891 3 SCC 698; East India Hotels Ltd. v. State of
West Bengal, (19901 Supp. l SCC 755; Spences Hotels Pvt. Ltd. and Anr. v.
State of West Bengal and Ors., [1991[ 2 sec 154 and East India Hotels Ltd,
Srinagar v. State of J & K. and Anr., [19941 Supp. 2 sec 580, referred to.
..._
E
IO.I. The constitutional history of Entry 62 of List II would show
that despite the existence of an entry pertaining to 'luxury tax' in all the
Constitutional Acts, from 1915 onwards, the tax was never sought (save
in the case of Abdul Kadir) to be imposed on goods till 1993. The method
of taxing luxury goods invariably was by subjecting them to the extant
fiscal regimes of excise duties, sales tax, customs duties etc. at heavier rates.
F No distinction is made in Article 366 (29A) or Article 286 or Entries 83
and 84 of List I as to the nature of the goods which may be the subject
matter of sale excise or import be they articles of necessity or articles of
,,...
luxury. This is also the sense in which States have all along understood
the word as indicated in their evidence given in response to the question
posed by the Taxation Enquiry Commission with reference to the levy of
G sales tax in 1953-54. (778-E-G I
A.B. Abdul Kadir v. Union of India, (19621 2 SCR 741, referred to.
~·
Report of the Taxation Enquiry Commission, (1953-54), Vol. IV Part
II I, referred to.
H
GODFREY PHILLIPS INDIA LTD. v. STATE OF U.P.
743
~
10.2. Historically, the tax on luxury goods was seen as a part of Entry A
54 of List II or Entries 83 and 84 of List I but not as a tax leviable under
Entry 62 of List II. The only exception was the Kerala Validating Statute
which was the subject matter of Abdul Kadir where the assessee did not
question that Entry 62 related to goods and articles and the sole point of
protest was that tobacco was not an article of luxury. It was only in 1993 B
the State of Maharashtra enacted the Bombay Luxury Tax Act, 1993
directly imposing luxury tax on goods. This was withdrawn in 1994 but
>
the other states soon followed suit culminating in a rash of such legislations.
(779-D-E)
A.B. Abdul Kadir and Ors. v. State of Kera/a, (1976) 2 SCR 690, c
referred to.
CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 567 of
1994.
(Under Article 32 of the Constitution of India.)
D
WITH
W.P. (C) Nos. 568-569/94, C.A.Nos. 123-125/95, 6891, 7870/96, 21232127, 2552-2553/99, 6365 of 2000.
Mohan Parasaran, Additional Solicitor General, Harish N. Salve, S. E
Ganesh, Navroz Seervai, Sunil Gupta (Addi. Adovcate General, U.P.), K.K.
Venugopal (NP), M.N. Rao (NP), B.B. Ahuja, B. Sen, Rakesh Dwivedi,
Gopal Subramanium, R.F. Nariman, Pallav Shishodia, Ms. Kavita Dahiya,
Ms. Sushma Sharma, Sanjeev Dahiya, Ajay Aggarwal, Ms. Meghalee
Barthakur, Rajan Narain, Vivek Vishnoi, Arohi Bhalla, Gaurav Kejariwar,
Punit Dutt Tyagi, Mukesh Verma, Pavan Kumar, Ms. Promila, Tushar Rao, F
A. Ramesh, E.R. Kumar, Ms. Ranjeeta Rohatgi, for P.H. Parekh, Ajay K .
.....
Jain, Nand Kishore, Pramod Dayal, Ms. Radha Rangaswamy, Dipayan
Choudhyry, Ms. Bharati, Pritesh Kapur, Rajiv Tyagi, Vishnu Sharma, Shail
Kumar Dwivedi (NP), B.V. Bairam Das, (NP), B. Krishna Prasad (NP), R.C.
Verma (NP), Dayan Krishnan, Ms. Niranjana Singh, Abhishek Chaudhury, G
Janaranjan Das, Swetaketu Mishra, Ms. Moushumi Galilot, K.K. Saha, Manoj
Saxena, Mohan Prasad Meharia, Siddharth Aggarwal, Rajshekhar Rao,
I
~
Satyakam, Raghenth Basanth, Asheesh Jain, Arunabh Patnaik, Karan
Bharihoke, S.K. Mitra, Khem Chand, Bharat Singh for Kavita Wadia, Shrish
Kumar Misra (NP), E.R. Kumar and Ms. Ranjeeta Rohatgi for P.H. Parekh
for the appearing parties.
H
744
SUPREME COURT REPORTS [2005) I S.C.R.
_..
A
The Judgment of the Court was delivered by
RUMA PAL, J. The assessees/appellants are either manufacturers,
dealers or sellers of tobacco and tobacco products. They have challenged the
imposition and levy of a luxury tax on tobacco and tobacco products by
B
treating them as "luxuries" within the meaning of the word in Entry 62 of
List II.
Entry 62 of List II of the Seventh Schedule to the Constitution relates
to the exclusive power of State Legislatures to make laws with respect to
"
"Taxes on luxuries, including taxes on entertaiiiments, amusements, betting
c and gambling". Several States have enacted legislation which they claim are
referable to the right to tax luxuries under this Entry. We are concerned with
the Uttar Pradesh Tax on Luxuries Act, 1955, the Andhra Pradesh Tax on
Luxuries Act, 1987 and the West Bengal Tax on Luxuries Act, 1994. The
legislative competence of these statutes was challenged by the assessees before
different fora - in some cases partially successfully, in others not. To the
D extent the assessees were unsuccessful, they have challenged the decisions
before us. In those cases in which the assessees were successful the concerned
State has filed the appeals.
The States have differed in their interpretation of the word "luxuries"
E
of Entry 62 List II since they have argued in the context and from the point
of view of the particular statute sought to be defended as legislatively
competent. Thus although the principal question to be resolved would bi: the
ambit of Entry 62 of List-II, the arguments require a determination of the
nature of the tax sought to be levied by the three statutes in dispute before
us, before we resolve the question.
F
Uttar Pradesh Tax on luxuries Act 1995
>
On 14th May, 1994 an Ordinance known as the Uttar Pradesh Tax on
Luxuries Act 1994 (being U.P. Ordinance No.8/94) was promulgated. The
object of the Ordinance as stated in the preamble was to "provide for levy
G and collection of tax on supply of tobacco and matters connected therewith
or incidental there to". It consisted of a few sections of which relevant ones
are quoted.
.., '
Section 3 of the Ordinance which provided for the levy of luxury tax
read as follows :-
H
GODFREY PHILLIPS INDIA LTD. r. STATE OF U.P. [RUMA PAL, J.J
745
,~
"Levy of luxury tax. - Every tobacconist shall be liable to pay luxury A
tax on his turnover of "receipts" at such rate, not exceeding twenty
five per cent, as the State Government may, by notification, specify
and different rates may be specified for different classes of tobacco:
Provided that a "tobacconist" who does not manufacture or receive
tobacco from outside the State shall be liable .o p::iy tax on his turnover B
of receipts from the date his turnover of receipts exceeds two lakh
rupees:
Provided further that in a chain of supply of tobacco, the tax shall
be realized from the earliest of the "tobacconists" in the State and a
successive "tobacconist" shall be exempt from payment of tax if he c
furnishes, in the manner prescribed, proof of payment of tax on such
tobacco."
(Emphasis supplied)
The words "receipt" and "tobacconist" which have been emphasized D
in the section by us had been respectively defined in Section 2(e) and 2(h)
as follows:-
2 ( e) "receipt" means:-
(i)
in respect of supply of tobacco by a tobacconist made by way of E
sale, the amount or valuable consideration received or receivable
by him for such sale including any sum charged for anything
done by him in respect of the tobacco so sold at the time of or
before the delivery thereof and the price if charged separately, 'of
any primary or secondary packing, other than the cost of freight
or delivery or the amount realized as luxury tax when such cost F
'
or amount is separately charged; and
I
-"'
(ii) in respect of supply of tobacco by a tobacconist made otherwise
than by way of sale, the normal price at which the tobacco is sold,
and the term "normal price" shall have the same meaning as
assigned to it in Section 4 of the Central Excise and Salt Act, G
1944;
j
~
2 (h) "tobacconist" means:-
(i)
a manufacturer whose turnover of receipts in a year exceeds one
lakh rupees who supplies tobacco by way of sale or otherwise H
746
A
B
c
D
(ii)
(iii)
(iv)
SUPREME COURT REPORTS
(2005] I S.C.R.
and includes any person who for the purpose of business gets the
manufacturing done from any other person, whether or not on job
work basis, but does not include any person who manufactures
tobacco only on job work basis without obtaining any proprietary
right over it at any stage;
any person who for the purposes of business brings or causes to
be brought tobacco in the State or to whom any tobacco is
dispatched from any place outside the State and who supplies
such tobacco by way of sale or otherwise;
any person who supplies tobacco from a place within the State to
any place outside the State by way of sale or otherwise;
any person who does not buy or otherwise obtain unmanufactured
tobacco under a brand name but supplies by way of sale or
otherwise such unmanufactured tobacco in a sealed container under
a brand name;
Explanation: - For the removal of doubts, it is clarified that a person:-
(!) who exclusively supplies unmanufactured tobacco whether or not
in a sealed container but not under a brand name; or
(2) not being a person referred to in sub-clause (iii) who exclusively
E
obtains tobacco by way of purchase or otherwise from a registered
tobacconist;
shall not be deemed to be a tobacconist for the purposes or this
clause;
Briefly therefore the UP Act provides for the levy of luxury tax on the
F receipts from the supply of tobacco by a tobacconist. It is the act of supply
which is the taxable event. Indeed the preamble of the UP Ordinance as it
originally stood said that the object was to provide for "levy and collection
of tax on the supply of tobacco". Here we may briefly indicate the core of
the controversy between the parties : If the act is in pith and substance
G referable to Entry 54 of List II within the words "taxes on the sale or purchase
of goods" in that entry as the assessees claim, then the tax would be subject
to certain constitutional curbs on the power of the State to levy sales tax on
tobacco. If on the other hand it is referable to Entry 62 of List II as a "tax
on luxury" there would be no such restriction.
H
Writ petitions had been filed by the assessees in the High Court of
+
....
GODFREY PHILLIPS INDIA LTD. v. STATE OF U.P. [RUMA PAL, .I.]
747
I~
Allahabad challenging U.P. Ordinance No.8/94 on the ground that it was A
ultra vires Articles 14, 19, 245, 286, 301 and 304 of the Constitution. At the
same time writ petitions under Article 32 of the Constitution were filed in
this Court for a declaration that U.P. Ordinance 8 of 1994 was ultra vires the
Constitution, basically on the ground that the levy was in substance, a tax on
sales.
B
During the pendency of the proceedings, U.P. Ordinance No.8of1994
was amended by U.P. Ordinance No.22 of 1994 which was published in the
>
Official Gazette on 28th September, 1994. The preamble and the definition
./
of 'tobacconist' were altered. As far as the preamble was concerned, the
phrase tax on supply of tobacco was changed to read" luxury tax on tobacco". c
But despite the change in the preamble there was no corresponding change
in the taxable event in the body of the statute which continued to remain a
tax on supply. The Explanation to the definition of tobacconist was also
substituted after deleting the earlier explanation. The substitution is not
material.
D
On 2nd November, 1994, the High Court allowed the writ petitions
impugning the levy of luxury tax. The High Court held that the levy was
intra vires the Constitution and was legislatively competent.Following the
decision of this Court in A.B. Abdul Kadir and Ors. v. State of Kera/a, [1976]
2 SCR 690 it was held that tobacco was an article of luxury and a tax on
E
tobacco would be a luxury tax within the meaning of Entry 62 of List II.
According to the High Court, tobacco included all fonns of tobacco as provided
under the Ordinance and could be taxed within the State whether it was sent
from outside the State or sent outside the State and every person dealing in
luxury goods such as tobacco would be liable to luxury tax irrespective of
where the tobacco may be consumed. However, the High Court held that the F
imposition of luxury tax impeded the freedom of trade and commerce and
intercourse and was violative of Article 30 I of the Constitution and since no
_....
prior assent of the President had been obtained under Article 304(b ), it was
held that the State could not levy the tax. The argument of the State that
tobacco was hazardous to health and, therefore, there was no fundamental
right to trade in it was negatived. It was held that tobacco could not be put G
on par with liquor which had been held by this Court to be "res extra
commercium". It was also held that the impugned levy was not in any way
I .....
a regulatory measure. The High Court also came to the conclusion that
classification for the purpose of levy of the tax in respect of products of
tobacco had been made on an arbitrary basis. The Writ petitions were H
748
SUPREME COURT REPORTS
[2005] I S.C.R.
A accordingly allowed and the levy of luxury tax was struck down on the
ground that it violated Articles 14 and 30 l of the Constitution. Special Leave
Petitions have been filed from the decision of the Allahabad High Court both
by the writ petitioner (to the extent that the High Court held that the levy was
legislatively competent) as well as the State of Uttar Pradesh which assailed
B the ultimate conclusion of the High Court.
Leave was granted in the several special leave petitions on 2nd January,
1995. The appeals were directed to be tagged with the writ petitions under
Art. 32. Interim relief was granted to the effect that the dealers (tobacconists)
would file their returns with the competent authority in accordance with the
C impugned Ordinance. No action on the returns so filed would be taken by the
authorities during the pendency of the appeal. In the event the challenge of
the dealers failed, the dealers would be liable for payment of the amounts due
in accordance with the assessment made on the basis of the returns so filed.
On 14th May, 1995, U.P. Ordinance No.22/94 was repealed and replaced
D by the Uttar Pradesh Luxury Tax Act 1995 which came into force on the said
date. The Act reproduced Ordinance 22/94 without any material changes.
The pleadings before this Court were suitably amended.
On 17th September, 1995, the U.P. Tax on Luxuries Act 1995 was
repealed by U.P. Ordinance No.39 of 1995.