# GOODRICKE GROUP LTD. ETC v. STATE OF WEST BENGAL AND ORS

- **Citation:** [1994] Supp. 6 S.C.R. 120
- **Court:** Supreme Court of India
- **Decided:** 1994-11-25
- **Bench:** B.P. Jeevan Reddy, Suhas C. Sen, K.S. Paripoornan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/goodricke-group-ltd-etc-v-state-of-west-bengal-and-ors-12536
- **Pages:** 44

## Headnote

Constitution of India-Entry 249, List II, Seventh Schedule-West
Bengal Taxation Laws (Section Amendment) Act 1989-Sections 2, 3,
amending West Bengal Primary Education Act 1953 and West Bengal
Rural Employment Production Act 1976, Section 4-Cess on tea estates
levied annually assessed on the basis of plucked and unprocessed green tea
/eaves-Whether cess is levy on land or tax on production of tea-Held,
calculation of cess on the basis of yield is accepted mode of levy of tax on
/and-Cess is upon 'tea estate' quantified on basis of quantum of produce
of tea estate-It is not cess on production-State legislature, therefore, has
power to levy impugned cess-India Cement case, which held cess on
royalty to be beyond r:ompetence of State legislature, distinguished-Entry
45, List JI, Seventh Schedule_:_Legislature competence-Precedent.
Constitution of India-Entry 249, List JI, Seventh Schedule-Pith and
substance-Legislative lists-Held, where there are three lists containing
large number of entries, overlapping inevitable-Rule of pith and substance
to be applied to determine the entry to which given legislation relatesOnce determined, any incidental trenching on field reserved to other
legislature of no consequence-Power of legislature to make law with
reference to entry 249, List JI is plenary-Interpretation of statutesLegislative competence.
Constitution of India-Entry 249, List JI, Seventh Schedule-Levy on
land-Incidents of-Held, tax need not be uniform or constant over number
of years-Held further, tax may be based on current years incomeRemoving produce of the land from plant or tree before assessing tax
doesn't alone sever connection between land and tax-Making person in
possession of land or building liable for payment of tax, held, is well-known
feature of enactments relatable to ~ntry 249, List II-Labour and capital
investment on land in producing yield or income does not alter character of
tax on /and-Prescribing uniform method of levy of cess not
discriminatory-Taxing statutes-Statute law.
120
GOOD RICKE GROUP v. STA TE
121
West Bengal Taxation Laws (Second Amendment) Act 1989A
Retrospectivity-Rectified and remedied enactment given retrospective
effect for period covered by anterior provisions which were struck down,
held, valid
Constitution of India-Entry 52, List I, Seventh Schedule-Tea Act
1953-Sections 2 and 25-West Bengal Taxation Laws (Second B
Amendment) Act 1989-.:.Section 4-Whether declaration under Tea Act
affects competence of legislature to levy cess on land comprised in tea
estate-Held. Tea Act concerned with tea industry, whereas impugned cess
is on land comprised in tea estate-State legislature's competence upheld--
Pith and substance.
Statute Law-Validity-Held, validity of laws to be judged with
reference to ordinary, prudent person.
c
The West Bengal legislature enacted the West Bengal Primary
Education Act, 1953 and the West Bengal Rural Employment and
Production Act, 1976 to provide for primary education throughout the D
State and to provide employment in rural areas, respectively. For
raising funds for the said purposes, the State legislature imposed two
cesses upon certain lands and buildings in the state. By the West Bengal
(Taxation Laws) Amendment Act, 1981, tea estates were carved out as
a separate category of immovable properties on which cess was levied.
The separate rate prescribed therefore was based upon the despatches E
from the tea estates on the tea grown therein, and the state government
was empowered to make certain exemptions in this regard. This
amendment was questioned by a number of tea estates in writ petitions
and decided by a two-member Bench of this Court in Buxa Dooars Tea
Co. Ltd v. State of West Bengal, [1989) 3 SCC 211.
This Court found that the levy was essentially upon despatches F
though purporting to be a levy upon the tea estates. They pointed out
further that the quality of tea produced in all tea estates in the state
was not uniform, that there was no nexus between the t

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GOODRICKE GROUP LTD. ETC.
v.
STATE OF WEST BENGAL AND ORS.
NOVEMBER 25, 1994
[B.P. JEEVAN REDDY, SUHAS C. SEN AND K.S. PARIPOORNAN, JJ.]
Constitution of India-Entry 249, List II, Seventh Schedule-West
Bengal Taxation Laws (Section Amendment) Act 1989-Sections 2, 3,
amending West Bengal Primary Education Act 1953 and West Bengal
Rural Employment Production Act 1976, Section 4-Cess on tea estates
levied annually assessed on the basis of plucked and unprocessed green tea
/eaves-Whether cess is levy on land or tax on production of tea-Held,
calculation of cess on the basis of yield is accepted mode of levy of tax on
/and-Cess is upon 'tea estate' quantified on basis of quantum of produce
of tea estate-It is not cess on production-State legislature, therefore, has
power to levy impugned cess-India Cement case, which held cess on
royalty to be beyond r:ompetence of State legislature, distinguished-Entry
45, List JI, Seventh Schedule_:_Legislature competence-Precedent.
Constitution of India-Entry 249, List JI, Seventh Schedule-Pith and
substance-Legislative lists-Held, where there are three lists containing
large number of entries, overlapping inevitable-Rule of pith and substance
to be applied to determine the entry to which given legislation relatesOnce determined, any incidental trenching on field reserved to other
legislature of no consequence-Power of legislature to make law with
reference to entry 249, List JI is plenary-Interpretation of statutesLegislative competence.
Constitution of India-Entry 249, List JI, Seventh Schedule-Levy on
land-Incidents of-Held, tax need not be uniform or constant over number
of years-Held further, tax may be based on current years incomeRemoving produce of the land from plant or tree before assessing tax
doesn't alone sever connection between land and tax-Making person in
possession of land or building liable for payment of tax, held, is well-known
feature of enactments relatable to ~ntry 249, List II-Labour and capital
investment on land in producing yield or income does not alter character of
tax on /and-Prescribing uniform method of levy of cess not
discriminatory-Taxing statutes-Statute law.
120
GOOD RICKE GROUP v. STA TE
121
West Bengal Taxation Laws (Second Amendment) Act 1989A
Retrospectivity-Rectified and remedied enactment given retrospective
effect for period covered by anterior provisions which were struck down,
held, valid
Constitution of India-Entry 52, List I, Seventh Schedule-Tea Act
1953-Sections 2 and 25-West Bengal Taxation Laws (Second B
Amendment) Act 1989-.:.Section 4-Whether declaration under Tea Act
affects competence of legislature to levy cess on land comprised in tea
estate-Held. Tea Act concerned with tea industry, whereas impugned cess
is on land comprised in tea estate-State legislature's competence upheld--
Pith and substance.
Statute Law-Validity-Held, validity of laws to be judged with
reference to ordinary, prudent person.
c
The West Bengal legislature enacted the West Bengal Primary
Education Act, 1953 and the West Bengal Rural Employment and
Production Act, 1976 to provide for primary education throughout the D
State and to provide employment in rural areas, respectively. For
raising funds for the said purposes, the State legislature imposed two
cesses upon certain lands and buildings in the state. By the West Bengal
(Taxation Laws) Amendment Act, 1981, tea estates were carved out as
a separate category of immovable properties on which cess was levied.
The separate rate prescribed therefore was based upon the despatches E
from the tea estates on the tea grown therein, and the state government
was empowered to make certain exemptions in this regard. This
amendment was questioned by a number of tea estates in writ petitions
and decided by a two-member Bench of this Court in Buxa Dooars Tea
Co. Ltd v. State of West Bengal, [1989) 3 SCC 211.
This Court found that the levy was essentially upon despatches F
though purporting to be a levy upon the tea estates. They pointed out
further that the quality of tea produced in all tea estates in the state
was not uniform, that there was no nexus between the tea estate and the·
varied treatment accorded in respect of despatches of the different
kinds of tea. The amendment was accordingly held to be violative of G
Article 301 of the Constitution. Further, referring to the Tea Act, 1953
by which Parliament assumed control over the tea industry including
the tea trade, and that, if the levy is in substance on despatches of tea it
cannot be held to be tax on lands under Entry 49 List II, this Court
found the impugned amendment void for want of legislative
competence as it pertained to a covered field.
'
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122
SUPREME COURT REPORTS
[1994] SUPP. 6 S.C.R
A
Following this decision, the State of West Bengal enacted the West
Bengal Taxation Laws (Second Amendment) Act, 1989 ('Amendment
Act, 1989') with retrospective effect. By this amendment, the cesses
were to be levied annually on a tea estate at the rate of 12 paise for each
kilogram of plucked and unprocessed green tea leaves produced in each
· tea estate. The State Government was empowered to exempt certain
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categories of tea estates from the cess. The cess collected, and
assessments made on proceedings taken under the Amendment Act,
1981 were validated.
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The levy of the cess by the Amendment Act, 1989 was challenged in
writ petitions before this Court It was contended that the impugned
levy was not upon land within the meaning of Entry 49 List II of the
Seventh Schedule and therefore the State legislature lacked legislative
competence. In this context, it was argued that the levy in question was
really a tax on production of tea and not on land; that a tax on land
must be a constant figure whereas the impugned levy would vary from
year to year based as it is on the quantity of tea produced in a tea estate
in a given year; that in fact there may be no production of tea leaves at
all in a given year if, for instance, an owner were to decide to leave the
leaves unplucked; that the definition of tea estate which included fallow
land and land covered by the factory and other buildings further
establishes the absence of nexus between the cess and the land. Strong
reliance was placed upon the decisions of a seven judge bench in India
Cement Ltd v. State of Tamil Nadu, [1990] l SCC 12 and a three judge
bench in Orissa Cement Ltd v. State of Orissa, [1991) l SCC 430. It was
also pointed out that the provision for exemption, which Buxa Dooars
pointed out was a vitiating factor, continues in the present Act.
For the State it was argued that the impugned cesses were within
the purview of "taxes of lands and buildings" in Entry 49 of List II of
the Seventh Schedule. Alternatively, it was sought to be justified as
"land revenue" within the meaning of Entry 45 of List II of the Seventh
Schedule.
Dismissing the petitions, this Court
HELD : l. The State legislature has the power to levy the
impugned cess. Since the impugned levy is in pith and subs~ance a levy
of tax on land and the produce of the land is merely brought in for the
purpose of quantifying the tax, it is not outside the competence of the
.
...
GOODRICKE GROUP v. STATE
123
State legislature either as being an imposition of excise duty within the A
meaning of entry 84 List II, or by virtue of section 2 of the Tea Act,
1953 as contemplated by entry 52 List I. [162 A, 161 G)
'
Ba!jnath Kadio v. State of Bihar, [1969) 3 SCC 838, referred to.
2. The declaration under section 2 of the Tea Act has no relevance B
to the State legislature's competence inasmuch as the impugned cess is
not a cess on the tea industry but a cess on the land comprised in a tea
estate. The levy contemplated under section 25 of the Tea Act, 1953 and
the levy provided by the impugned enactment are altogether different
and distinct in character, inasmuch as the Tea Act, 1953 is concerned
with the tea industry whereas the impugned cess is not a cess on the tea C
industry but a cess on the land comprised in the tea estate. The fact
that ultimately the tax may have to be borne by the tea industry is no
ground for holding that the said levy is upon the tea industry.
[161 E, D, F]
Ganga Sugar Co. v .. State of U.P., [1980] 1 SCR 769 and Federation D
of Hotel and Restaurant Association (supra), referred to.
3. Merely because a tax on land or buildings is imposed with
reference to its income or yield, it does not cease to be a tax on Ian~ or
building. The income 0111 yield of the land or building is taken merely as
a measure of the tax; it does not alter the nature or character of the E
levy. It still remains a tax on land or building. There is no set pattern of
levy _of tax on lands or buildings- indeed there can be no such
standardisation. The legislature is free to adopt such method of levy as
it chooses and so long as the character of the levy remains the same,
~e., within the four corners of the particular entry, no objection can be
taken to the method adopted. [141 D, E]
f
Sir Byramjee Jeejeebhoy v. State of Bombay, AIR (1940) Born 48,
Rafla Ram v. Province of East Punjab, AIR (1949) FC 81, v.
Pattabhiraman v. Asst. Commr., Urban Land Tax, AIR (1971) Mad 61,
Ajoy Kumar Mukherjee v. Local Board of Barpeta, AIR (1965) SC 1561,
Kunnathat Thathunni Moopil Nair v. State of Kera/a, [1961] 3 SCR 77, G
Assistant Commissioner v. Buckingham and Carnatic Co. Ltd., [1970) 1
SCR 268, Subramanyam Chettiar v. Muthusami Goundar, (1940) FCR
188, Federation of Hotel and Restaurant Association v. Union of India,
[1989] 3 sec 634, Express Hotels (P) Ltd., v. State of Gujarat, [1989] 3
SCC 677 and Governor General in Council v. Province of Madras, (1945)
FCR 179, relied on.
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124
SUPREME COURT REPORTS
[1994] SUPP. 6 S.C.R
A
Tlie cess in the cases before this Court is calculated on the basis of
yield- for every kilogram of, tea leaves produced in a tea estate, a
particular cess is levied. That is a well-accepted mode of levy of tax on
land. The tax is upon the land- upon the tea estate which is classified
as a separate category, as a separate unit, for the purpose of levy and
assessment of the said cess quantified on the basis of the quantum of
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produce of the tea estate. It cannot be characterised as on production
for this reason. [141 F, G)
Kunnathat Thathunni Moopil Nair v. State of Kera/a supra, relied on.
4. There is no basis for saying that the impugned cess is not a tax
C
upon the land directly. The mere fact that it is measured with reference
to the yield of the land does not make it any the less a tax upon the land
directly. [151 A)
Sudhir· Chandra Nawn v. Wealth Tax Officer, Calcutta, [1969) 1 SCR
108 and Second Gift Tax Officer, Manga/ore v. D.H. Nazareth, (1971) 1
D
SCR 195, explained and distinguished.
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Ajoy Kumar Mukherjee supra relied on.
,Assistant Commissioner of Urban Land Tax v. Buckingham and
Carnatic Co. Ltd., [1970) 1 SCR 268, referred to.
5. Tea estate is a well-understood entity and can legitimately and
reasonably be classified as a separate category for the purpose of
taxation and the rate of tax. Such classification has, in any event, not
been questioned in this case. [134 G)
6. That a wide discretion has to be conceded to the legislature in
matters of taxation is well-established. So also is the proposition that
the several entries in the Seventh Schedule are legislative heads and
must be construed liberally. It is equally well-recognised that where
there are three lists containing a large number of ent~h~s, there is
bound to be some overlapping among them. In such a situatio·n, the rule
of pith and substance has to be applied to determine to '-hich entry
does a given piece of legislation relate. Once it is so determined, any
incidental trenching on the field reserved to the other legislature is of
no consequence. The extent of encroachment may however be an
element in determining whether the Act is a colourable piece of
legislation. Where the legislative competence of Parliament to enact a
law is questioned, all that one has to ask is whether it relates to any of
..
GOODRICKE GROUP v. STATE
125
the entries in 'List II and if it is not, no further question need be asked A
and Parliament's legislative competence must be upheld.
[134 F, 135 B to DJ
H.S. Dhillon v. Union of India, AIR (1972) SC 1061 relied on.
However, before exclusive legislative competence can be claimed B
for Parliament, the legislative competence of the State legislature must
be clearly established. [135 EJ
International Tourist Corporation v. State of Haryana, AIR (1981) SC
774, relied on.
In our constitutional system, where all important legislative heads C
are assigned to the Centre, the court should be slow to adopt any
interpretation which tends to deprive the States of the few powers
assigned to them under the Constitution. [135 FJ
B.P. Jeevan Reddy J., in S.R. Bommai v. Union of India, [1994J 3
SCC 1 and Sundararamier v. State of A.P., [1958J SCR 1422, referred to.
D
7. The presumption in favour of constitutionality obliges the court
to sustain an enactment, if necessary, by relating it to an entry other
than the one relied upon by the government, if that can be reasonably
done. Moreover it is the function and power of the court to interpret an
enactment. It is equally the function and power of the judiciary to say E
to which entry does an enactment relate. The opinion of the
government in this behalf is but an opinion and no more. [156 A, BJ
Sanjeev Coke Mfg. Co. v. Bharat Coking Coal Ltd. and Anr., [1983J 1
SCR 1000, referred to.
8. The decision in India Cement is distinguishable and not relevant F
herein as the levy in that case is altogether on a different basis for
which reason it was held to be outside entry 49 List II. The Court in
India Cement found that it was a case where the tax was measured not
with reference to or on the basis of income or yield of the land, but with
reference to the amount of royalty payable by the lessee to his lessor. It G
was for this reason that the tax was held to be not upon the land.
Royalty is a matter of agreement between the lessor and the lessee, it
may also be determined by a statutory provision. But royalty is not the
produce of the land; royalty is not the income of the land nor is it the
yield of the land- and that is the distinction. It is significant that the
concept of royalty was understood by the court in India Cement to be a H
126
SUPREME COURT REPORTS
[1994] SUPP. 6 S.C.R
A
tax, and as such a cess on royalty being a tax on royalty was found to
be beyond the competence of the State legislature. It would be wrong to
read the India Cement decision as overruling the innumerable decisions
rendered with reference to entry 49 List II (or the corresponding entry
in the Government of India Act, 1935) which have upheld levy upon
land and building measured on the basis of their yield or income. The
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decision in India Cement must be understood consistent with and in
continuation of the earlier decisions on the subject.
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[142 H, D, E, F, 143 A, BJ
India Cement Ltd v. State of Tamil Nadu, [1990) 1SCC12, explained
and distinguished.
Orissa Cement Ltd. v. State of Orissa, (1991] 1 SCC 430, following
India Cement (supra) distinguished.
H.R.S. Moorthy v. Collector of Chittoor, (1964] 6 SCR 666, referred
to.
9. Tax on royalty is not tax on land with reference to income since
royalty is not the income of ttie land but an exaction payable by the
lessees of the land to the lessor/owner. A tax imposed on land measured
with reference to or on the basis of its yield, however, is certainly a tax
directly on the land. Apart from income, yield or produce there can
perhaps no other basis for levy. (145 C, DJ
India Cement Supra distinguished.
State of A.P. v. Na/la Raja Reddy, (1967] 3 SCR 28, referred to.
10. In deciding whether there is a reasonable connection between
F
the tax and the land, one has to go by the generality of the situation.
The validity of laws are not to be judged with reference to .freaks, but
an ordinary prudent owner/occupier. No ordinary person would leave
. the tea estates to nature or leave the leaves to wither on bushes.
Moreover section 16 B (1) (b) of the Tea Act, 1953 read with sections
16C and 16D provides for investigation into the affairs of the tea estate
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and even assuming management of the estate by the Central
Government to ensure the production of tea at the expected levels.
(153 G, D, F]
India Cement supra distinguished.
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R. K. Gargv. Union of India, [1982] l SCR 947, relied on.
.
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GOODRICKE GROUP v. STATE
127
11. G.L. Oza, J.'s opinion in India Cement that the three elements A
of land, labour and capital are required for extracting minerals, that
royalty is therefore a tax/imposition/levy not on land alone but on
labour and capital as well, and that cess levied on royalty could not be
said to be tax on land, was not s_hared by the other learned judges.
Moreover, the said theory flies in the grain of all the previous
judgments of this Court and the Federal Court on the subject. It has B
been held uniformly that a tax on land within the meaning of entry 49
List II can be levied with reference to their yield or income. It will be
difficult to imagine a situation where a land yields income worth the
name without any labour and/or capital investment. On that account,
the tax levied on land but quantified with reference to the income/yield
of the land cannot be characterised as a tax other than tax on land.
C
[148 A, C, D, E)
G.L. Oza, J. in India Cement dissented from
12. It is not the essence of a tax- nor a condition of its validity -
that the tax must be constant or uniform for all the years or for a
particular number of years. The variation between the amount of tax D
from year to year does not reflect upon the character of the tax.
[151 C, DJ
13. If a tax on land can be assessed on the basis of the previous
year's income, there is no reason why it cannot be levied on the current
year's income. The power of the legislature to make law with reference E
to entry 49 List II is plenary like any other entry in List II. It is open to
the legislature to adopt such formula as it thinks appropriate for
levying the tax and so long as the character of the tax remains the one
contemplated by the entry, it does not matter how the tax is calculated,
measured or assessed. [151 H, G)
Venkateshwara Theatre v. State of A.P., (1993) 3 SCC 677, referred to
14. The income on yield of land and building, reasonably speaking,
cannot include income from the manufacturing activity carried on such
land or the income of an industry if run upon such land. The products
F
of such manufacturing activity and industry would be the products of G
such manufacturing activity and industry, as the case may be, and not
of land, whereas the tea leaves are the produce/yield of the land. The
distinction is too obvious to be glossed over. [153 BJ
15. It cannot be said that the moment tea leaves are plucked, they
are 90 longer attached to or form part of the land, and that levy of tax H
128
SUPREME COURT REPORTS
[1994] SUPP. 6 S.C.R
A
with reference to such plucked tea leaves cannot be called a tax on lilnd.
Generally speaking, unless the produce of the land is removed from the
plant or tree, as the case may be, the yield of the land or its income
cannot properly be assessed. If the tax is calculated or assessed on the
basis of such yield or income, it cannot be said that for that reason
alone there is no reasonable connection between the land and the tax.
B
[154 A, BJ
16. The main holding in Buxa Dooars is that levy impugned therein
violates Article 301. The argument about entry 49 of List II was
referred to only for the purpose of saying that the levy on the
despatches of the tea cannot be related to the said entry. The provision
C
for exemption contained in the impugned enactment, cannot be treated
as a ground or reason for holding the said levy to be a levy not on land
but on something else. There is no principle nor any authority in
support of the said proposition. [155 A, BJ
D
Buxa Dooars supra explained
17. Making the person in actual possession of land or building,
whether it be the owner or the transferee, liable for the payment of the
tax is a well-known feature in enactments relatable to entry 49 List II
and cannot be faulted. [155 E)
E
18. There is force in the alternative submission for the State of
West Bengal that the impugned levy can also be sustained with
reference to entry 45 of List II as land revenue. [155 FJ
19. Prescribiitg a uniform method of levy on all tea estates, where
the quality of tea produced in one estate may differ from that produced
F
in another estate is not discriminatory. {156 C]
G
H
Twyford Tea Co. Ltd v. State of Kera/a, AIR (1970) SC 1133,
followed
20. Retrospective effect has been given to the enactment for the
period covered by the anterior provisions which were struck down in
Buxa Dooars. Once it is held that the defect pointed out in Buxa Dooars
is rectified and remedied in the impugned enactment, it can be given
retrospective effect to cover the period covered by the earlier
enactment which is not only a well-known but a frequently adopted
measure by all the legislatures. If the Act is good, it is good both
prospectively and retrospectively. [162 H, 163 A, 162 GJ
I"-
\
I •
GOODRICKE GROUP LTD. v. STA TE [B.P. JEEVAN. REDDY, J.]
129
CIVIL ORIGINAL JURISIDCTION : Writ Petition (C) No. 1215 of A
1989 Etc. Etc.
(Under Article 32 of the Constitution of India)
Dr. D.P. Pal, K.K. Venugopal, Ashok H. Desai, R.F. Nariman, Ms.
Priya Hingorani, D.P. Mukherjee, Rahul Dave, S. Ganesh, Sumoy J. B
Khaitan, P.P. Tripathi, Darshan Singh, Ms. Vijaylakshmi Menon and H.K.
Dutt for the Petitioners.
Shanti Bhushan, Santosh Hegde, T. Ramachandran, S.K. Dholakia,
D.K. Sinha, J.R. Dass, A. Bal, A. Bhattacherjee and Ms. A. Subhashini for
the Respondents.
C
The Judgment of the Court was delivered by
B.P. JEEV AN REDDY, J. The validity of the levy of education cess
and rural employment cess created by the West Bengal Taxation Laws
(Second Amendment) Act, 1989 is called in question in these writ petitions D
preferred by several tea estates in West Bengal.
LEGISLATIVE BACKGROUND:
For a proper appreciation of the questions arising herein, it is necessary
to have a glimpse of the legislative history behind the impugned
Amendment Act.
E
The West Bengal Legislature enacted The West Bengal Primary
Education Act, 1953 and The West Bengal Rural Employment and
Production Act, 1976 to provide for primary education throughout the State
and to provide employment in rural areas respectively. For raising funds for
the said purposes, the State Legislature imposed two cesses upon certain F
lands and buildings in the State. Since the relevant provisions of both the
enactments are similar, it would be sufficient to notice the relevant
provisions of the West Bengal Rural Employment and Production Act,
1976. Section 4 (I) of the 1976 Act levies rural employment cess on all
immovable properties on which road or public work cess is assessed or G
liable to be assessed according to the provisions of the Cess Act, 1880.
Section 4 (2), as originally enacted, prescribed different rates in respect of
lands, coal mines and other mines on an annual basis. By virtue of the West
Bengal Taxation Laws (Amendment) Act, 1981, tea estates were carved out
as a separate category and a separate rate prescribed therefore. Sub-section
(2) of Section 4, as amended in 1981, read as follows:
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130
SUPREME CQURT REPORTS
[1994] SUPP. 6 S.C.R
"4 (2) The rural employment cess shall be levied annually -
(a) in respect of lands, other than a tea estate, at the rate of
six paise on each rupee of development value thereof;
(aa) in respect of a tea estate at such rate, not exceeding
rupees six on each kilogram of tea on the despatches from ·
such tea estate of tea grown therein, as the State Government
may, by notification in the official Gazette, fix in this behalf:
Provided that in calculating the despatches of tea for the
purpose of levy of rural employment cess, such despatches
for sale made at such tea auction centres as may be
recognised by the State Government by notification in the
Official Gazette shall be excluded:
Provided further that the State Government, may fix different
rates on despatches of different classes of tea
Explanation : - For the purpose of this section, "tea" means
the plant Camellia Sinensis (L) 0. Kuntze as well as all
varieties of the product known commercially as tea made
from the leaves of the plant Camellia Sinensis (L) 0. Kuntze,
including green tea and green tea leaves, processed or
unprocessed."
Sub-section ( 4) was introduced in Section 4 which empowered the
State Government to exempt "such categories of despatches of such
percentage of despatches from the liability to pay the whole or any part of
the rural employment cess or reduce the rate ....... " By another amendment
effected in 1982, the first proviso to clause (aa) in Section 4 (2) was
omitted. Several notifications were issued by the Government from time to
time as contemplated by Section 4 (2).
The levy of the said cess was questioned by a number of tea estates by
way of writ petitions filed in this Court. Certain writ petitions filed in the
High Court were transferred to this Court to be heard alongwith the said
writ petitions, all of which were disposed of on May 12, 1989 by a Bench
comprising R.S. Pathak, C.J. and M.H. Kania, J. [reported as Buxa Dooars
Tea Company Ltd. and Ors. v. State of West Bengal and Ors., [1989] 3
SCC 211. The challenge to the levy was basecfopon violation of Article 14
and Article 301 of the Constitution as also on the ground of lack of
legislative competence on the part of the State Legislature. This court
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131
examined the attack based upon Article 301 in the first instance. It held that A
the levy was really on the despatches of tea from the tea esca~es. It noted
that the first proviso to Section 4 (2) (aa), since deleted, exciuded the
despatches of tea for sale made at such tea auction centres as may be
recognised by the State Government by notification in the official Gazette
from the levy. It further pointed out that the second proviso empowered the
State Government to fix different rates on despatches of different classes of B
tea. Section 4(4), it noted further, empowered the Government to exempt
such categories of despatches or such percentage of despatches from levy as
the Government may think appropriate. Having regard to the said features,
the Bench held, the levy was essentially upon despatches though purporting
to be a levy upon the tea estates. The entire structure of the levy, the Bench
pointed out led to the conclusion that it was a levy on despatches and not on C
tea estates and that there was no nexus between the levy and the tea estates.
The learned Judges rejected the argument that the mode of levy was merely
a measure of the tax. They pointed out further that the quality of tea
produced in all tea estates in the State was not unifonn and that the benefit
of exemption or reductioμ in levy has no relation to the need of a particular
tea estate for exemption from the levy. The learned Judges concluded, D
"when the provisions before us are examined in their totality, we find no
such relationship or nexus between the tea estate and the varied treatment
accorded in respect of despatches of different kinds of tea. It seems ts> us
that having regard to all the relevant provisions of the statute, including
Section 4 (2) (aa) and Section 4(4) in substance the impugned levy is a levy E
in respect of despatches of tea and not in respect of tea estates."
Accordingly, the levy was held to be violative of Article 301 of the
Constitution. The learned Judges then proceeded to consider the question of
legislative competence and held that if the levy is, in substance, on
despatches of tea, it cannot be held to be tax on lands. They referred to the
declaration by the Parliament in Section 2 of the Tea Act, 1953 to the effect F
that it was expedient in public interest that Union should take under its
control the tea industry and observed that Parliament has thereby assumed
control of the tea industry including the tea trade and has also imposed a
cess on tea produced in India under Section 25. The learned Judges
observed: "it appears to us that the impugned legislation is also void for
want of legislative competence as it pertains to a covered field."
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As a result of the Judgment in Buxa Dooars, the State became liable to
refund the cess already collected and the relevant schemes came under
jeopardy. The West Bengal Legislature intervened to remedy the situation
and enacted the West Bengal Taxation Laws (Second Amendment) Act,
1989, impugned herein.
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A
Section 2 of the impugned Act contains amendments tc West Bengal
Primary Education Act while Section 3 sets out the amendments to West
Bengal Rural Employment and Production Act, 1976. As mentioned
hereinbefore, it would be enough to notice the amendments to the 1976 Act
since the amendments to both enactments are identical.
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Clause (aa) in sub-section (2) of Section 4 was omitted with effect
from April l, 1981. After sub-section (2), sub-section (2A) was introduced
with retrospective effect from Aprill, 1981. Sub-section (2A) reads:
"(2A) The rural employment cess shall be levied annually on
a tea estate at the rate of twelve paise for each kilogram of
C
green tea leaves produced in such estate.
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Explanation -
For the purposes of this sub-section, subsection (3) and section 4B.
(i) . "green tea leaves" shall mean the plucked and unprocessed
green leaves of the plant Camelia Sinensis (L) 0. Kuntze;
(ii) "tea estate" shall mean any land used or intended to be used
for. growing plant Camelia Sinensis (L) 0. Kuntze and
producing green tea leaves from such plant, and shall include
land comprised in a factory or workshop for producing any
variety of the product known commercially as "tea" made
from the leaves of such plant and for housing the persons
employed in the tea estate· and other lands for purposes
ancillary to the growing of such plant and producing green
tea leaves from such plant."
Clause (a) in sub-section (3) was also substituted which had the effect
of making the owner of the tea estate liable for the said cess. The other
provisions required the owner of the tea estate to maintain true and correct
account of green tea leaves produced in a tea estate. Sub-section (4) was
also substituted. The substituted sub-section (4) empowered the State
Government to exempt from the cess such categories of tea estate
producing green tea . leaves not exceeding two lakhs fifty thousand
kilograms and located in such area as may be specified in such notification.
Section 4-B contains the validation clause. It says that any cess collected for
the period prior to the said Amendment Act shall be deemed to have been
validly levied by it and collected under the Amended Act. Any assessment
made or other proceedings taken in that behalf for assessing and collecting
the said tax were also to be deemed to have been taken under the Amended
GOOD RICKE GROUP LTD. v. ST A TE [B.P. JEEV AN REDDY, J.]
133
Act. It is the levy of said cess (alongwith the Primary Education Cess) that A
is challenged in this batch of writ petitions filed under Article 32 of the
Constitution. While issuing Rule Nisi, this Court directed that these writ
petitions be heard by a Bench of three Judges and that is how they are now
posted before us.
WHETHER THE IMPUGNED LEVY IS A LEVY UPON THE LANDS B
WITHIN THE MEANING OF ENTRY 49, LIST IL SCHEDULE VII OF THE
CONSTITUTION?
The first and the main submission of the learned counsel for the
petitioners in all its facets runs thus: the levy created by Section 2 and 3 of
the impugned Amendment Act is not a tax on lands and buildings within C
the meaning of Entry 49 of List-II of the Seventh Schedule to the
Constitution and is, therefore, beyond the competence of the State
legislature; for being a tax on land, the levy must be directly upon the land
whereas the levy in question is really a tax on production of tea, a subject
covered by Entry 84 of List-I. A levy on tea leaves is not a levy upon the
land. The defect pointed out in Buxa Dooars still continues under the D
impugned Amendment Act inasmuch as all that the impugned Act does is to
levy the cess on production of green leaves instead of on despatches (as was
done by the provisions struck down). A tax on land must be a constant
figure whereas the impugned levy varies from year to year, based as it is on·
the quantity of tea produced in a tea estate m a given year; indeed, there
may be a case where there is no production of tea leaves at all in a E
particular tea estate in a particular year in which event no cess would be
payable in that year. The definition of 'tea estate' further establishes the
absence of nexus between the cess and the land; 'tea estate' is defined to
include not only the land covered by tea bushes but also the land covered
by the factory and buildings; even fallow land within the tea estate is within F
the definition- all the same, the tea leaves produced in the land covered by
tea bushes is made the basis of levy of cess upon the entire land comprised
in a tea estate; if in a given year, the owner of the estate decides not to
pluck the leaves at all, there would be no cess leviable altogether. All this
shows that the tax is not really upon the land; there is no direct connection
between the land and the levy; the levy is related to some other thing than G
the land. Strong reliance is placed upon the ratio of the seven-Judge Bench
decision of this Court in India Cement Ltd and Ors. v. State o/Tamil Nadu
and Ors., [1990] l SCC 12 and the three Judge Bench decision in Orissa
Cement Ltd v. State of Orissa and Ors., [1991] 1 SCC 430. It is pointed out
that the provision for exemption, pointed out in Buxa Dooars as a vitiating
factor, still .continues under the impugned Act. For all these reasons, it is H
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submitted, the levy is outside the purview of Entry 49, List-II of the
Seventh Schedule to the Constitution.
The relevant provisions of the impugned Amendment Act have been
set out by us hereinbefore. The levy of cess, according to sub-section (2A)
(introduced by the said Amendment Act) is an annual levy. The levy is
upon "a tea estate" at the rate of twelve paise for each kilogram of green tea
leaves produced in such estate. Green tea leaves are defined to mean "the
plucked and unprocessed green leaves" of the plant. Tea estate is defined to
mean "any land used of intended to be used for growing (tea) plant. ... ;and
producing green tea leaves from such plant." The definition further includes
the land coqiprised in a factory, workshop and buildings housing the
persons employed in the tea estate as well as the lands ancillary to growing
of tea plants within the definition of tea estate. Any land not falling within
the aforementioned categories does not fall within the definition of tea
estate. Sub-section (2A) classifies the tea estate as a unit by itself for the
purpose of levy of the cess and its rate.
It is evident that the definition reflects the generally obtaining situation.
A tea estate normally has a factory, buildings for housing its officers and
employees and land ancillary to the growing of tea plants. We are told that
the tea plant has a life of fifty to ninety years. After forty to fifty years,
however, it is stated, the yield starts diminishing and it gradually becomes
uneconomic. Such bushes are generally removed and new bushes planted. It
is thus a continuous process. For this reason, land intended for being
planted with bushes is also included within the definition. The fact that in
some cases there may be no factory or no building hardly makes a
difference to the validity of the definition of the tea estate. The entire land
covered in a tea estate as defined is treated as a separate category of land, as
a unit, for the purposes of levy of the cess. That a wide discretion has to be
conceded to the Legislature in matters of taxation is so well established as
not to call for a reference to the decisions saying so. Indeed, classification
· of tea estates as a separate category for the purposes of the said levy is not
even questioned before us. It may also be noticed that generally speaking
no tea estate markets green tea leaves. By applying a particular process, the
green tea leaves are converted into tea as commercially known and then
marketed. It is thus clear that tea estate is a well-understood entity and
hence can legitimately and reasonably be classified as a separate category
for the purpose of taxation and the rate of tax.
According to the State, the impugned cesses are within the purview of
"taxes on lands and buildings" in Entry 49 of List-II of .the Seventh
GOODRICKE GROUP LTD. v. STATE [B.P. JEEVAN REDDY, J.]
135
Schedule. Alternately, they seek to justify it as "land revenue" within the A
meaning of Entry 45 of List-II.
The scheme of the entries in the three Lists in the Seventh Schedule is
set out in the decision of this court in Sunderaramier v. State of Andhra
Pradesh, [1958] SCR. 1422 and needs no reiteration. Similarly, the
proposition that the several entries are legislative heads and must be B
construed liberally is too well-settled to require any elaboration. It is
equally well-recognised that where there are three Lists containing a large
number of entries, there is bound to be some over-lapping among them. In
such a situation, the rule of pith and substance has to be applied to
determine to which entry does a given piece of legislation relate. Once it is
so determined, any incidental trenching on the field reserved to the other C
legislature is of no consequence. Of course, the extent of encroachment
may be an element in determining whether the Act is a colourable piece of
legislation. Yet another relevant principle is the one enunciated in H S.
·Dhillon v. Union of India A.LR. (1972) S.C. 1061; where the legislative
competence of the Parliament to enact a law is questioned, all that one has D
to ask is whether it relates to any of the entries in List-II and if it is not, no
further question need be asked and the Parliament's legislative competence
must be upheld. This decision also explains why did the founding fathers
find it necessary to have three Lists. In International Tourist Corporation v.
State of Haryana, A.LR. (1981) S.C. 774, however, a caution has been
administer.ed that before exclusive legislative competence can be claimed E
for Parliamen~ the legislative incompetence of the State Legislature must
be clearly established. In S.R. Bommai v. Union of India, [1994] 3 SCC I,
one of us (B.P. Jeevan Reddy, J.) cautioned that in our constitutional
system, where all important legislative heads are assigned to Centre, the
courts should be slow to adopt any interpretation which tends to deprive the F
States of the few powers assigned to them under the Constitution.
We may now deal with the question whether the levy in question is a
levy on lands and buildings within the meaning of Entry 49 of List-II or
whether it is outside the purview of the said entry?
In Sir Byramjee Jeejeebhoy v. Bombay, [1940] Bombay 48, property G
tax was levied 10% on the annual letting value of lands and buildings by
the Bombay Finance (Amendment) Act, 1939. The levy was impugned as
ultra vires the provincial legislature on the ground that it was in truth a tax
on income or ~n the capital value of assets. Negativing the said contention,
Broomfield, J. observed:
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SUPREME COURT REPORTS
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