# ORGANON (INDIA) LTD. (NOW KNOWN AS INFER (INDIA) LTD.) AND ANR v. THE COLLECTOR OF EXCISE AND OTHERS

- **Citation:** [1994] Supp. 2 S.C.R. 50
- **Court:** Supreme Court of India
- **Decided:** 1994-07-22
- **Case number:** Civil Appeal Nos. 230-233 of 1977
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/organon-india-ltd-now-known-as-infer-india-ltd-and-anr-v-the-collector-of-12302
- **Pages:** 29

## Headnote

A
ORGANON (INDIA) LTD. (NOW KNOWN AS INFER
(INDIA) LTD.) AND ANR.
v.
THE COLLECTOR OF EXCISE AND OTHERS
B
JULY 22, 1994
(M.M. PUNCHH!, S.C. AGRAWAL AND B.P. JEEVAN REDDY, H.]
Excise Law-Opium Act 1878-Section !r-Va/idity of-{lpheld.
C
Movement of Opium-From one State to another in the course of
export across the frontier of India-Held, is an export within the meaning of
the Opium Act and not under the Dangerous Drngs Act 193()-ffence, levy of
excise duty by State valid.
M.P. Poppy Husks Rules, 195'>-Rules 3A, 5, 6 & 8 provisions imposing
D duty on opiunt-Held, primary pwpose regulatory and not collection of
revenue hence peifectly valid.
Constitution of Indi"a, Article 372-Schedule VII-Entry 24 of List-II
Entry 19 of List-Ill-Opium Act, 1878 M.P. Poppy Husks Rules, 195f)-/feld,
E preconstitutional Aci-Saved by the Constitution-Hence, rnles made thereunder valid.
Administrative Law-Opium Act, 1878-Sections 4, 5-Delegation of
powers-Essential functions-Provision not to be faulted as conferring Rule
making power without layfr1g down any policy-Held, scheme of the Act
F furnishes adequate guidance to the State.
The appellant obtained a wholesale licence under Rules S and 6 or
the M.P. Poppy Husks Rules, 1959 in the year 1974. In pursuance of a
'certificate of official approval of import' granted by Dutch authorities,
. the appellant entered into a contract for sale of Poppy Husks to a Dutch
G buyer. The appellant obtained the 'official authorisation or export' from
the office or the Narcotics Commissioner, with reference to the Import
Certificate granted by Dutch authorities. The export authorisation
specified that the said goods shall be exported through the Customs
House, Bombay, by sea, to Holland within three months from the date or
H issue or the said authorisation.
50
INFER (I) LTD. v. COLLECTOR OF EXCISE
51
The appellant then applied to the Collector of Excise, Mandsaur, A
Madhya Pradesh for grant of permission to transport the said goods from
Madhya Pradesh to Bombay for the purpose of exporting it to Holland.
The appellant claimed that no excise duty is Ieviable or payable under the
Rules of 1959 inasmuch as the Poppy Husks will be despatched from
Madhya Pradesh for export across customs frontier of India. The Collector of Excise declined to grant any permit without payment of duty under
the Rules of 1959.
B
The appellant filed writ petitions in the High Court for directing the
Collector of Excise to grant permit without payment of duty. In one of the
petitions the High Court granted interim relief subject to the condition of C
the appellant furnishing a bank guarantee in favour of the Registrar of the
High Court. Finally, the writ petitions were dismissed by a Division Bench.
On appeal before this Court, it was contended (1) that inasmuch as
the movement of poppy husks from Mandsaur district in Madhya Pradesh
to Bombay port for export to Holland is part of one single integrated D
transaction it is a case of nexport from India" within the punriew of
Dangerous Drugs Act, 1930 and therefore outside the purview of Opium
Act (2) that the levy of export duty by the Collector of Excise is incompetent; (3) that Section 5 of the Opium Act is in effect ataxiug provision
and relying on the principles in Sundera Ramiers, [1958] SCR 1422 case the E
parliament is not competent to levy duty on opium; ( 4) that it cannot be
said that the duty of excise is levied by the State in this case in as much
as the said Rules are made by the State as a delegate of the parliament;
(5) that the levy cauuot be justified even on the ground of being a "price
for parting with the privilege" and in any event the theory has been
negatived in Synthetics and Chemicals [1990] 1 SCC 109 case; (6) that the
duty cannot be justified as a regulatory fees (7) that the duty is excessive
F
(8) and that Section 5 is void on the ground of excessive delegation of
legislative power, (9) Since no guidance is provided by the Act and it was
open to the State Govt. to pres

## Text

_Characters 0–39,962 of 71,787. This is a partial read: ask again with offset=39962 for what follows._

A
ORGANON (INDIA) LTD. (NOW KNOWN AS INFER
(INDIA) LTD.) AND ANR.
v.
THE COLLECTOR OF EXCISE AND OTHERS
B
JULY 22, 1994
(M.M. PUNCHH!, S.C. AGRAWAL AND B.P. JEEVAN REDDY, H.]
Excise Law-Opium Act 1878-Section !r-Va/idity of-{lpheld.
C
Movement of Opium-From one State to another in the course of
export across the frontier of India-Held, is an export within the meaning of
the Opium Act and not under the Dangerous Drngs Act 193()-ffence, levy of
excise duty by State valid.
M.P. Poppy Husks Rules, 195'>-Rules 3A, 5, 6 & 8 provisions imposing
D duty on opiunt-Held, primary pwpose regulatory and not collection of
revenue hence peifectly valid.
Constitution of Indi"a, Article 372-Schedule VII-Entry 24 of List-II
Entry 19 of List-Ill-Opium Act, 1878 M.P. Poppy Husks Rules, 195f)-/feld,
E preconstitutional Aci-Saved by the Constitution-Hence, rnles made thereunder valid.
Administrative Law-Opium Act, 1878-Sections 4, 5-Delegation of
powers-Essential functions-Provision not to be faulted as conferring Rule
making power without layfr1g down any policy-Held, scheme of the Act
F furnishes adequate guidance to the State.
The appellant obtained a wholesale licence under Rules S and 6 or
the M.P. Poppy Husks Rules, 1959 in the year 1974. In pursuance of a
'certificate of official approval of import' granted by Dutch authorities,
. the appellant entered into a contract for sale of Poppy Husks to a Dutch
G buyer. The appellant obtained the 'official authorisation or export' from
the office or the Narcotics Commissioner, with reference to the Import
Certificate granted by Dutch authorities. The export authorisation
specified that the said goods shall be exported through the Customs
House, Bombay, by sea, to Holland within three months from the date or
H issue or the said authorisation.
50
INFER (I) LTD. v. COLLECTOR OF EXCISE
51
The appellant then applied to the Collector of Excise, Mandsaur, A
Madhya Pradesh for grant of permission to transport the said goods from
Madhya Pradesh to Bombay for the purpose of exporting it to Holland.
The appellant claimed that no excise duty is Ieviable or payable under the
Rules of 1959 inasmuch as the Poppy Husks will be despatched from
Madhya Pradesh for export across customs frontier of India. The Collector of Excise declined to grant any permit without payment of duty under
the Rules of 1959.
B
The appellant filed writ petitions in the High Court for directing the
Collector of Excise to grant permit without payment of duty. In one of the
petitions the High Court granted interim relief subject to the condition of C
the appellant furnishing a bank guarantee in favour of the Registrar of the
High Court. Finally, the writ petitions were dismissed by a Division Bench.
On appeal before this Court, it was contended (1) that inasmuch as
the movement of poppy husks from Mandsaur district in Madhya Pradesh
to Bombay port for export to Holland is part of one single integrated D
transaction it is a case of nexport from India" within the punriew of
Dangerous Drugs Act, 1930 and therefore outside the purview of Opium
Act (2) that the levy of export duty by the Collector of Excise is incompetent; (3) that Section 5 of the Opium Act is in effect ataxiug provision
and relying on the principles in Sundera Ramiers, [1958] SCR 1422 case the E
parliament is not competent to levy duty on opium; ( 4) that it cannot be
said that the duty of excise is levied by the State in this case in as much
as the said Rules are made by the State as a delegate of the parliament;
(5) that the levy cauuot be justified even on the ground of being a "price
for parting with the privilege" and in any event the theory has been
negatived in Synthetics and Chemicals [1990] 1 SCC 109 case; (6) that the
duty cannot be justified as a regulatory fees (7) that the duty is excessive
F
(8) and that Section 5 is void on the ground of excessive delegation of
legislative power, (9) Since no guidance is provided by the Act and it was
open to the State Govt. to prescribe such rate of duty as it thinks appropriate as has been held in M/s Rameshwar Prasad Krishan Gopal's, G
(1973) Tax Law Reporter 2503 : 73 All L.J. 739 case by the Allahabad High
Court.
Dismissing the appeals, the court
HELD : 1. The movement of Poppy Husks from Mandsaur district in H
52
SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.
A Madhya Pradesh to the Bombay port in Maharashtra Is an export within
the meaning of the Opium Act, 1878. The 'export from India' begins only
from the port of Bombay and is covered by the Dangerous Drugs Act, 1930.
These two movements are governed by two different enactments and a case
of 'string of movements'. The appellant cannot disown the liability to pay
B the said export duty levied under Rule 3-A read with Rule 8 of the M.P.
Poppy Husks Rules, 1959 on the ground that it Is one single movement
commencing in Mandsaur and terminating in Holland. (64-A, B, 66-C]
Mohd. Serajjuddin v. State of Orissa, (1975] 2 SCC 4, relied on.
C
2. The primary purpose of Sectio'! 5 is controlling and regnlating the
possession, transport, import/export and sale of opium and not collection
of revenue - though the relevance and validity of the said purpose is
undeniable in the case of noxious goods. (69-B]
Sunderaramier M.P. v. State of A.P., (1958] SCR 1422; Synthetics and
D Chemicals Ltd. v. State of U.P., (1990] 1 SCC 109 and Cooveljee B.
Bharucha v. Excise Commissioner, Ajmer & Ors., AIR (1954) SC 220, relied
on.
3. Section 5 of the Act does not purport to levy duty of excise but it
only purports to empower the State Government to make rules to permit
E possession, export etc. of opium subject to such conditions as it may think
appropriate to impose including the payment of an amount (duty). (71-E]
4. The duty provided by Rule 3 (A) read with Rule 8 of the Madhya
Pradesh Poppy Husks Rules is perfectly within the four corners of Section
F
5. (71-HJ
G
5. The so-called duty is not excessive. Even if it is so, the idea
underlying the provisions is to make possession and dealings in opium
prohibitive and commercially a non-paying proposition. [72-A,C]
6. The Opium Act is a law preceding the Government of India Act,
1935 and is saved by Article 372 of the Constitution. Hence, the Rules made
by the 1959 Rules under Section 5 of the Act of 1878 are equally within the
protection. (72-D, 74-E]
South India Corporation Pvt. Ltd. v. Secretary, Board of Revenue, AIR
H (1964) SC 207 and Sardar lndu Singh v. The State of Rajasthan, (1957] SCR
INFER (I) LTD. v. COLLECTOR OF EXCISE
53
· 605 at 619-620, relied on.
A
Kanyani Stores v. State, [1966) l SCR 865, distinguished.
7. Section 5 is a continuation or Section 4 and it merely empowers
the State Government to lift the prohibition on the possession, transport,
import/export and sale or Opium in such cases as it deems appropriate B
and subject to such conditions, as it may deem fit to impose including
payment or an amount. The Scheme or the Opium Act furnishes adequate
guidance to ihe State Government. [76-G, 77-B)
Hari Shankar Bag/a & Anr. v. State of M.P., [1955) l SCR 380 and C
State of Tamil Nadu v. Hind Store, [1981) 2 SCR 742, relied on.
Devi Dass Gopal Kris/tan v. State of Punjab, [1967) 3 SCR 557,
distinguished.
8. Section 5 cannot be faulted either on the ground that it delegates D
essential legislative £unctions to the State Government or on the ground
that it confers rule making power upon the State Government without
furnishing any guidance and without laying down any policy in that behair.
[78-F]
Mis Rameshwar Prasad Kishan Gopal & Ors. v. The State of U.P. etc.,
E
1973 Tax Reporter 2503 : 73 AW 739, distinguished.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 230-233
of 1977.
From the Judgment and Order dated 21.10.76 of the Madhya F
Pradesh High Court in W.P. Nos. 6253/74, 490/75, 367 & 90 of 1974.
Dr. Shankar Ghosh, Pallav Shishodia, A.K. Sil, G. Joshi and G.
Kandpal for the Appellants in C.A. Nos. 230-31/77.
H.N. Salve, Pallav Shishodia, A.K. Sil, G. Joshi and Mrs. Sunanda G
Ray for the Appellants in C.A. Nos. 232-33/77.
Joseph Vella Patti, Ashok K. Srivastava, S.V. Deshpande, Salish K.
Agnihotri and C.V.S. Rao for the Respondents.
The Judgment of the Court was delivered by
H
A
B
c
54
SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.
B.P. JEEVAN REDDY, J. In these appeals, validity of Section 5 of
the Opium Act, 1878 and of certain Rules made thereuuder by the Madhya
Pradesh Government is called in question. Though the Opium Act, 1878
has since been repealed by Section 82 of the Narcotics Drugs and
Psychotropic Substances Act, 1985, things done under the repealed Act are
saved and continued under the 1985 Act. We shall first state the relevant
facts.
The appellant-company obtained a whole-sale licence in Form No.I
under Rule 5 read with Rule 6 of the Madhya Pradesh Poppy Husks
Rules, 1959 in February and March, 1974. In the month of March, 1974, it
entered into a contract with M/s. Veregngde Pharmacutiscbe Fabricken
B.V. Kloosterstreat 6 oss Holland (hereinafter referred to as the 'Dutch
buyer') for supplying to the Dutch buyer 1000 metric tonnes of poppy
husks. This contract was entered into in pursuance of "certificate of official
approval of import" dated April 5, 1973 granted by the Dutch authorities
D in favour of the said Outch buyer to purchase/import 1,000,000 kilograms
of poppy husks from the appellant on or before 31st August, 1974. The
appellant in turn obtained the "Official authorisation of export" from the
Office of th~ Narcotics Commissioner, Government of India permitting him
to export 1,000 metric tonnes of poppy shells {broken and crushed) to the
E
aforesaid Dutch buyer. This certificate dated 14th March, 1974 refers
specifically to the aforementioned Import Certificate dated 5th April, 1973
issued by the Dutch Authorities. It further specifies that the said goods
shall be exported through the Customs House Bombay, by sea, to Holland
within three months from the date of issue of the said Authorisation. On
March 30, 1974, the appellant applied to the Collector of Excise, District
F
Mandsaur, Madhya Pradesh for grant of permission to transport the said
quantity of poppy husks from Madhya Pradesh. In this application the
appellant stated the following facts : the appellant bolds a wholesale licence
granted under Rules 5 and 6 of Madhya Pradesh Poppy Husks Rules, 1959.
It has received an order from the aforesaid Dutch buyer for supply of 1,000
tonnes of poppy husks in Holland. In pursuance of the said order, the
G appellant has to despatch from Mandsaur poppy husks of the said quantity
1 '
for transportation across Indian customs frontier to Holland. The appellant
has obtained the export authorisation dated 14th March, 1974 from the
Narcotics Commissioner of India for despatch of the said poppy husks to
Holland - a copy of which is enclosed. The Dutch buyer has also obtained
H the permit from the Dutch Government on 5th April, 1973 for the import
J
INFER (I) LID. '"·COLLECTOR OF EXCISE [JEEV Ai'I REDDY, J.]
55
of the said goods. The Dutch buyer h~s also arranged for a ship to call at A
the Bombay Port on 5th June, 1974 for taking delivery of the said consignment of poppy husks. Accordingly, the appellant is applying "for permission
to transport and for the despatch of the said consignment of poppy husks
of 1,000 tonnes from Madhya Pradesh for th<; purpose of executing the said
order ...... " Inasmuch as the said consignment of poppy husks will be B
despatched fron1 Madhya Pradesh for export across customs frontier of
India, no excise duty is leviable or payable under the Madhya Pradesh
Poppy Husks Rules and hence, no amount is remitted alongwith the
application. The appellant requested for grant of permit urgently so as to
fulfil the contract within the specified date.
On April 15, 1974, the Collector of Excise, Mandsaur intimated the
appellant that permission to transport poppy husks from Mandsaur District
to the Port of Bombay would be granted only on payment of the export
duty under and in accordance with the Madhya Pradesh Poppy Husks
Rules. He declined to grant any such permit without payment of duty.
c
D
On April 16, 1974, the appellant approached the Madhya Pradesh
High Court for issuance of a writ of mandamus and other appropriate writs
directing the Collector of Excise, Mandsaur to grant the permit applied for
without insisting on the payment of the export duty as demanded by him.
In fact more than one writ petition was filed by the appellant before
E
different Benches of the said High Court. In one of the writ petitions, an
interim order was granted directing the Collector of Excise, Mandsaur to
permit the export without collecting the export duty but subject to the
condition of the appellant furnishing a bank guarantee for the said amount
in favour of the Registrar of the High Court. No such interim order was F
granted in other writ petitions. The writ petitions were heard and dismissed
by a Division Bench on 21st October, 1976, against which the appellant
approached this Court. Leave was granted on January 28, 1977. Interim
orders were passed from time to time permitting the appellant m export
poppy husks to Holland either on furnishing bank guarantee or on deposit
of a part of the export duty, as the case may be.
G
The main issue in these appeals is whether the State of Madhya
Pradesh and its authorities are entitled in law to levy and collect 'duty' as
a condition for permitting the export of poppy husks from Madhya Pradesh
when the said export is not an export from one State to another State within H
56
SUPREME COURT REPORTS (1994] SUPP. 2 S.C.R.
A
India but an export across the customs frontier of India, i.e., export to
Holland?
B
Opium is a noxious drug. It is dangerous to the health of human
beings. The cultivation and trade in opium. leads to problems of law and
order. Over the last few decades, the trade in such drugs has become
intertwined with crime t!"anscending national borders. With a view to
control cultivation, possession, transport and sale of opium and its derivatives, the Opium Act, 1857 was enacted. A few years later Opium Act, 1878
was enacte~. (In these appeals we are not concerned with the 1857 Act but
only with the later Act. All references hereafter to Opium Act mean
C references only to the 1878 Act). The provisions of the Opium Act have
undergone several amendments, alterations and adaptations over the years.
We need not, however, notice all of them except those effected in 1930 and
thereafter.
D
India was a State signatory to the Convention relating t,o dangerous
drugs held at Geneva in the year 1925, whercunder the contracting parties
resolved to take further steps to suppress the contraband traffic in and
abuse of dangerous drugs, especially those derived from opium, Indian
hemp and coca leaf, as set out in the said Convention. Accordingly, the
Dangerous Drugs Act, 1930 was enacted. Since by that time the Opium
E Act was already in operation, it was simultaneously amended so as to make
both the enactments, viz., Opium Act and t!ie Dangerous Drugs Act, 1930
complimentary to each other, occupying different fields. Of course the
Dangerous Drugs Act deals not only with opium but also certain other
dangerous drugs. [The expression "dangerous drug" is defined to include
F
coca leaf, hemp and opium and all manufactured drugs - Section 2(h)]. It
would be appropriate at this stage to notice the provisions of both the
enactments insofar as they pertain to opium.
The expression 'opium' has been defined in identical terms in both
the enactments, viz., Section 3 of the Opium Act and clause (e) of Section
G 2 of the Dangerous Drugs Act with a slight difference. We shall set out the
said definition from the Opium Act, underlining the portion which is not
found in the definition in the Dangerous Drugs Act, 1930 :
"3. In this Act, unless there be somet.hing repugnant in the subject
H
or context, -
INFER(!) LTD. v. COLLECTOR OF EXCISE [JEEV AN REDDY, J.)
57
"Opium" meansA
(i) the capsules of the poppy (Papaver somniferum L.), whether
in their original forrn or cut, crushed or powdered, and whether
or not juice has been extacted therefrom;
(ii) the spontaneously coagulated juice of such capsules which has
not been submitted to any manipulations other than those necessary for packing and transport; and
(iii) any mixture, with or without neutral materials, of any of the
above forms of opium,
but does not include any preparation containing not more than 0.2
per cent of morphine, or a manufactured drug as defind in section
2 of the Dangerous Drugs Act, 1930."
B
c
The expressions
11import
11 and
11export" have been defined in the
D
Opium Act to "mean respectively to bring into, or take out of, a State
otherwise than across any customs frontiers". "Customs frontiers" is defined
to mean "any of the customs frontiers of India as defined by the Central
Government under section 3A of the Sea Customs Act, 1878."
Two other expressions defined in the Opium Act are "transport" and E
"sale". They read as follows :
1111Transport
11 meaus to remove from or..e _ pla~e to another within
the same State.
"Sale" does not include sale for export across customs frontiers.
F
and "sell" shall be construed accordingly."
The expression 'opium derivative' is defined in clause (f) and the
expression 'manufactured drug' in clause (g) of Section 2 of the Dangerous
Drugs Act. (These expressions are not defined in the Opium Act.) It is not
necessary to notice the said definitions inasmuch as it is stated before us G
by counsel for both the parties that poppy husks fall within the expression
'opium' and do not fepresent opium derivative or manufactured drug as
defined in the Dangerous Drugs Act. Clause (i) of Section 2 of the
Dangerous Drugs Act defines
11to import into India
11 to mean
11to bring into
. lndia by land, sea or air across any of the customs frontiers defined by the H
58
SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.
A
Central Government" and as including "the bringing· into any port or place
in Ir.dia of a dangerous drug intended to be taken out of India without
being removod from the ship or conveyance in which it is being carried".
Clause (k) defines the expression "to export from India" to mean "to take
out of India by land, sea or air across any of the said customs frontiers".
B Clauses G) and (1) define the expressions "to import inter-provincially" and
"to export inter-provincially" to mean to bring into or to take out of a State,
as the case may be, otherwise than across any of the said customs frontiers.
Clause (m) defines the expression "to transport" as meaning taking out
from one place to another in the same State.
C
Now, coming to the substantive provisions central to both enactments, in so far as opium is concerned, the following is the position :
Section 4 of the Opium Act (notwithstanding the heading of the
section which does not appear to have been amended correspondingly
while amending the body of the section) deals only with possession,
D transport, import, export and sale of opium. It would be appropriate to set
out Section 4 of Opium Act. It reads :
E
F
G
"4. Except as permitted by this Act, or by any oti)er enactment
relating to opium for the time being in force, or by rules framed
under this Act or under any such enactment, no one shall -
(a) possess opium;
(b) transport opium;
( c )ir,.port or export opium; or
( d) sell opiuni."
Correspondingly, Dangarous Drugs Act deals with cultivation of
poppy and manufacture of opium (Section 5) import into India and export
from India and transhipment of any dangerous drug (Section 7) - matters
which are not dealt with by the Opium Act. It would be appropriate to set
out Sections 5 and 7 of the Dangerous Drugs Act :
"S. Control of Central Government over production and supply of
opium- (1) No one shall -
(a) cultivate the poppy (Papavar somniferum L.) or
H
(b) manufactured opium, save in accordance with rules made
INFER (I) LTD. v. COLLECTOR OF EXCISE [JEEV AN REDDY, J.)
59
under sub-section (2) and with the conditions of any licence for
A
that purpose which he may be required to obtain under those rules.
(2) The (Central Government)* may make rules permitting and
regulating the cultivation of the poppy (Paperver somniferum L.)
and the manufacture of opium, and such rules may prescribe the
form and conditions of licences for such cultivation and manufacture, the authorities by which such licences may be granted, the
fees that may be charged therefore, any other matter requisite to
render effective the control of the [Central Government] over such
cultivation and manufacture.
(3) The [Central Government] may also make rules permitting and
regulating the sale of opium from Government factories for export
or to [State Governments) or to manufacturing chemists.
"7. Control of Central Government over operations at land and
B
c
sea frontiers.- (1) No one shrulD
(a) import into India,
(b) export from India or
(c) tranship
any dangerous drug, other t.han prepared opium, save in accordance with rules made under sub-section (2) and with the conditions
of any licence for that purpose which he may be required to obtain
under those rules.
E
F
(2) The Central Government may make rules pernuttmg and
regulating the import into and export from India and the transhipment of dangerous drugs, other than prepared opium, and such
rules may prescribe the ports or places at which any kind of
dangerous drug may be imported, exported, or transhipped, the G
form and conditions of licences of licences for such import, export
or transhipment, the authorities by which such licences may be
granted, the fees that may be charged therefor, and any other
matter requisite to render effective the control of the Central
(a) Substituted for ttGovemor·Gcncral in Council" by A.O .. 1937.
H
A
60
SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.
Government over such import, export and transhipment."
Each Act contains machinery provisions providing for regulation,
control and other allied and incidental matters relevant to the field covered
by oach of them:
B
It is thus clear that while the Opium Act defines 'import' and 'export'
as meaning bringing into or taking out of State otherwise than across any
customs frontiers, the Dangerous Drugs Act deals with import into India
and export from India across customs frontiers. Evidently, with a view to
avoid any confusion, while the Opium Act uses the expression 'import' and
C 'export' the Dangerous Drugs Act spe~ks of 'to import into India' and 'to
export from India'. The expression "transport" has been defmed in identical
terms under both the enactments' it means removal of opium from one
place to another within the same State. "Transhipment' referred to in
Section 7 evidently means transhipment in the course of or as part of
import into India or export from India, as the case may be. The two
D enactments thus operate in two distinct, though complimentary, fields so
far as opium is concerned. In the interest of clarity, it may be stated that
so far as the manufactured opium and opium derivatives are concerned, all
its aspects including possession, sale, export, import whether from one
State to another in India or across the customs frontiers are governed by
E the Dangerous Drugs Act alone.
F
G
Section 5 of the Opium Act empowers the State Government to make
rules regulating the possession, transport, import, export and sale of opium
subject to payment of duty or subject to such other conditions, as it may
impose. In view of the contentions urged .before us, it is necessary to set
out Section 5 in its full entity :
'The State Government may, from time to time, by notification in
the Official Gazette, make rules consistent with this Act, to permit
absolutely, or subject to the payment of duty or to any other
conditions, and to regulate, within the whole or any specified part
of the territories administered by such Government, all or any of
the following matters : -
(a) the possession of opium;
H
(b) the transport of opium;
•
-;
)
INFER (I) LTD. v. COLLECTOR OF EXCISE [JEEVAN REDDY, J.]
61
( c) The importation or exportation of opium; and
A
( d) the sale of opium and the farm of duties leviable on the sale
of opium by retail:
Provided that no duty shall be levied under any such rule on
any opium imported and on which a duty is imposed by or under B
the law relating to sea-customs for the time being in force or under
the Dangerous Drugs Act, 1930."
Section 13 empowers the State Government to frame Rules regarding
disposal of things confiscated and rewards.
C
In exercise of the powers conferred by Section 5 (read with Section
13) of the Opium Act, 1878, the Government of Madhya Pradesh framed
the Rules called "Poppy Husks Rules, 1959". Rule 2(e) defines "poppy
husks" to mean "such capsules of cleft, cut- open, crushed and powdered
poppy seeds as have been drained of juice". Rule 3 prohibits possession of D
poppy husks of more than specified quantity. Rule 3(A) prescribes the duty
chargeable on export of poppy husks. It is 25 paise per kilogram upon
export (despatch out) of poppy husks and 50 paise per kilogram upon sale
by a wholesale licence holder. Rule 4 prohibits sale of poppy husks otherwise than in accordance with a permit or licence granted under the Rules. E
Rule 5 prescribes the Collector as the licencing authority. Rule 8(1) says
that "none other than the wholesale licence holder shall export (i.e.
despatch out) poppy husks". For snch export, application for licence has
to be made to the Collector and the duty paid in advance at the rates
prescribed by Rule 3(A), i.e., alongwith the application for licence. It is
not necessary to refer to other Rnles except to say that they seek to regulate F
and monitor the movement, export and import of opium.
Rules have also been framed by the Central Government under
Section 7 of the Dangerous Drugs Act called "Dangerous Drugs (Import,
Export and Transhipment) Rules, 1957". Rule 2(2) defines "Narcotics G
Commissioner" as the narcotics Commissioner appointed by the Government of Indfia. Part-IV of the Rules deals with export by sea, land or air.
Rule 6, which is the first Rule occurring in this part, says that no dangerous
drugshall be exported from India by sea, land or air without cbtaining an
export authorisation from the competent authority. Rule 7 says that "save
as provided in Rule 10, dangerous drugs, other than those mentioned in H
62
SUPREME COURT REPORTS (1994] SUPP. 2 S.C.R.
A sub-rule (2) of Rule 6, shall not be exported by sea from India except under
an authorisation granted in accordance with Rule 8 and from a port
appointed for the purpose in Rule 9". Rule 8 says that the export authorisation contemplated by Rule 7 shall be granted by the Narcotics Commissoner and that except in the case of special permission of tho Central
B
c
Government, the export of opium shall be on behalf of the Central Government. Rule 9 prescribes that opium shall be exported by sea only from two
Ports, viz., Bombay and Calcutta. Rules 11 and 12 deal with export by land
while Rules 13, 14 and 15 deal with export by air. Rule 17 in Part-V deals
with transhipment. (This Rule incidentally makes it clear that transhipment
contemplated by the Rules is transhipment in the course of or as part of
import into or export from India.)
We shall first deal with the contention of Sri Salve, learned counsel
for the appellant that inasmuch as the movement of poppy husks from
Mandsaur district in Madhya Pradesh to Bombay Port for export to
D Holland is part of one single integrated transaction, it is a case of 'export
from India' within the meaning of Section 2(k) and Section 7 of the
Dangerous Drugs Act and, therefore, outside the purview of the Opium
Act. Counsel submitted that first the Dutch buyer obtained the import
permit from the Dutch authorities for importing the said quantity of poppy
E
F
husks from the appellant. Correspondingly, the appellant applied for and
obtained an export authorisation from the Narcotics Commissioner for
exporting the said quantity from Mandsaur district in Madhya Pradesh to
the said Dutch buyer. On the basis of the export authorisation issued by
the Narcotics Commissioner and the permit for import granted by the
Dutch authorities, the appellant applied to the Collector of Excise,
Mandsaur for grant of export permit. It was thus not a case of export from
Madhya Pradesh to Maharashtra. As per Rules, the poppy husks' packages
could not be opened in Maharashtra. In fact, the very same packages
transported from Madhya Pradesh were to be loaded on to the ship without
breaking bulk and the same packages reached Holland. Thus, there is a
continuity and unit of movement. Indeed, there is no sale of poppy husks
G in Madhya Pradesh; the only sale being to the Dutch buyer. The permit
issued by the Collector of Excise, Mandsaur and the permit issued by the
Maharashtra Excise Authorities must all be read as part and parcel of one
single transaction covered by the import permit issued by the Dutch
authorities and export authorisation granted by the Narcotics CommisH sioner. All these permits dovetail into one another and represent one
•
t
l
INFER (I) LTD. v. COLLECTOR OF EXCISE [JEEV AN REDDY, J.)
63
unbroken, continuous movement. The levy of export duty, therefore, by the A
Collector of Excise, Mandsaur under the Rules made under Section 5 of
the Opium Act is incompetent. The Opium Act itself has no application to
the said transaction. The only Act applicable is the Dangerous Drugs Act
- says the learned counsel.
For a proper appreciation of the said contention, it is necessary to
reiterate certain features of both the said enactments. Section 5 of the
Opium Act empowers the State Government to do two things, viz., (i) to
make Rules permitting absolutely or subject to the payment of duty or to
B
any other conditions, the possession, transport, import/export and sale of
opium and (ii) to make Rules regulating the aforesaid matters relating to C
opium in the whole or any specified part of the territories administered by
such Government. The matters specified in the Section 5 are the very same
as are specified in Section 4, viz.i possession, transport, import/export and
sale. (We have already pointed out that import and export as defined in
the Opium Act does not mean import into or export from India but import D
into or export out of a particular State otherwise than across any customs
frontiers.) In other words, Section 5 empowers the State Government to
permit inter alia export of opium subject to such conditions, including
payment of duty, as it may deem appropriate to impose, as part of control
and regulation over opium. Another feature to note is that import or
export, as defined in the Opium Act, does not necessarily involve the
element of sale. It is not necessary that the import or export should be
occasioned by or result in a sale. Mere movement from one State to
another is sufficient to constitute export or import, as the case may be,
within the meaning of the Act so long as such movement is not across the
customs frontiers. (Sale of opium is dealt with separately from import/export under Sections 4 and 5.) Now coming to the other Act, taking opium
out of India across the customs frontiers is 'export from India' within the
meaning of the Dangerous Drugs Act and is governed by Section 7 of the
Dangerous Drugs Act and the Rules made thereunder. The Rules under
E
F
the Dangerous Drugs Act, referred to hereinbefore, specifically provide G
only two Ports from which opium can be exported by sea. They are Bombay
and Calcutta. Therefore, any opium to be exported by sea has to first reach
either Bombay or Calcutta. Thus, while movement within India from one
State to another (not involving crossing of any customs frontiers) is
governed by the Opium Act, the movement across the customs frontiers is
governed by the Dangerous Drugs Act. In all these matters, the element H
64
SUPREME COURT REPORTS [1994} SUPP. 2 S.C.R.
A of sale is irrelevant. It is not one of the requirements. Mere movement of
goods is enough. The movement may be the result of 3ale or may not be;
that is immaterial. Therefore, so far «S the movement of poppy husks from
Mandsaur district in Madhya Pradesh to the Bombay Port in Maharashtra
is concerned, it is an export within the meaning of the Opium Act. It is
B export from the State of Madhya Pradesh to the State of Maharashtra. The
'export from India' begins only from the Port of Bombay and is governed
by the Dangerous Drugs Act. These two movements may be parts of the
same transaction but so far as law is concerned, they are two different
movements governed by two different enactments - a case of 'string of
movements', if we may borrow the expression with a slight adaptation from
C the decision of this Court in Mohd. Serajuddin v. State of Orissa, [1975] 2
S.C.C. 47. the two movements are links in the same chain but each subject
to a different law. As a matter of fact, the principle of Serajuddin has a
close bearing upon the question at issue herein.
D
Let us first examine the principle of Serajuddin. The appellant had
entered into four contracts for sale of chrome concentrates. Two of them
were directly with the foreign buyers. The other two were with the State
Trading Corporation since export of mineral ores was camJised through
the said Corporation. The State Trading Corporation in turn entered into
contracts with the foreign buyers. So far as the first two contracts entered
E into directly wiih foreign buyers were concerned, it was held by the High
Court itself that they were sales in the course of export within the meaning
of Section 5 of the Central Sales Tax Act [before the insertion of sub-section (3) therein]. But so far as the two contracts entered into with State
Trading Corporation were concerned, it was held that they were not export
p
sales since the sales were to the State Trading Corporation and because
the State Trading Corporation had in turn entered into separate contracts
with the foreign buyers. The said view was challenged by the appellant in
this Court. It was argued by the appellant that the said two sales too were
really sales to the foreign buyers through the instrumentality and agency of
the State Trading Corporation - which was termed as an 'agent of necessity'
G - and hence, export sales. This cc.urt (by majority) rejected the said
contention holding inter a/ia :
"The appellant sold the goods directly to the Corporation. The
circumstance that the appellant did so to facilitate the performance
H
of the contract between the Corporation and the foreign buyer on
.
;.
INFER (I) LID. v. COLLECTOR OF EXCISE [JEEVAN REDDY, J.]
65
terms which were similar did not make the contract between the A
appellant and the Corporation the immediate cause of the export.
The Corporation in regard to its contract with the foreign buyer
entered into a contract with the appellant to procure the goods.
Such contracts for procurement of goods for export are described
in commercial parlance as back to back contracts. In export trade B
it is 1101 u1111atural to fi11d a stri1tg of contracts for export of goods. It
is 01tly tile co11tract w/Jic/J occasions the export of goods which will
be elltitled to exemptio11. The appellant was made under no contractural obligation to the foreign buyer either directly or indirectly. The rights of the appellants were against the Corporation.
Similarly the obligations of the appellant were to the Corporation. C
The foreign buyer could not claim any right against the appellant
nor did the appellant have any obligation to the foreign buyer. All
acts done by the appellant were in performance of the appellant's
obligation under the contract with the Corporation and not in
performance of the obligations of the Corporation to the foreign D
buyer."
It was further observed by the majority that :
"The expression "sale" in Section S of the Act has the same meaning
as in Sale of Goods Act. String contracts or chain contracts are E
separate transactions even when there is similarity relating to quantity,
quality of goods, shipment, sampling and analysis, weighment and
force majeure etc. or other similar tenns. A Contract of sale is a
contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer for the money collsideration called F
the price. There were two separate contracts. The price was
different in the two contracts. This difference also dissociates the
two contracts from each other. The High Court was right ill holding
that the sales of the appellant to the Corporation were exigib!e to
tax because the appellant's sales to the Corporation were not sales
in the course of export."
G
Since Serajuddin arose under the Sales Tax enactments, the central
concept was the sale of goods, whereas in the enactments concerrted
herein, we are concerned with the movement of opium and not with its
sale, as explained hereinbefore. If we read the expressi'on '~ovement' in H
66
SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.
A the place of expression 'sale' in the aforesaid passages from Serajuddin, the
matter will become self-evident. It would be a case of string of movements
- links in a chain of movement. There would be separate movements even
where there is similarity relating to quantity and quality of goods, shipment,
sampling and analysis. It would thus be a case of string of movements
B ·resulting in export of opium. It is only the movement of goods across the
customs frontiers that constitutes the 'export from India' and not the earlier
movements. The earlier movements, i.e., from one State to another within
India not involving crossing of customs frontiers would be governed by the
Opium Act and if the Opium Act provides for levy of export duty on such
c
export, it has to be paid. The appellant cannot disown the liability to pay
the said export duty levied under Rule 3(A) read with Rule 8 of the
Madhya Pradesh Poppy Husks Rules, 1959 on the ground that it is one
single movement commencing in Mandsaur and terminating in Holland. So
far as the Collector of Excise, Mandsaur is concerned, the permit granted
by him is governed by Rule 8 of the Madhya Pradesh Poppy Husks Rules,
D
in Form P-H .. It is true that he would not have granted such pormit unless
the appellant had produced the export authorisation from lhe Narcotics
Commissioner, Government of India but that only shows that the said
export authorisation is the basis for grant of export permit by the Collector.
E
F
It does not mean that the export permit granted by the Collector is not an
independent permit. The Collector's permit is limited and operative within
the four corners of the Opium Act and the Rules made thereunder. He
cannot grant a permit for export of opium from India. It is equally relevant
to notice that the Authorisation of export issued by the Narcotics Commissioner mentions 'Bombay' against the Column "(e) Name of the customs
house through which export is to be effected" and under clause (g), which
requires the route to be followed by the goods to be specified, it says "Bombay
to Holland". It does not refer to the presence of poppy husks within Madhya
Pradesh or Mandsaur district nor does .it say from where the poppy husks
should be moved or transported to Bombay. This shows that while the
Narcotics Commissioner is concerned only with the movement of goods from
G Bombay across the customs frontiers, by sea, to Holland, it is the Collector
of Excise, Mandsaur, who is concerned with the movement of the said poppy
husks from Mandsaur district in Madhya pradesh to a place beyond Madhya
Pradesh. As a matter of fact, even for movement within the State of
Maharashtra, i.e., from the Madhya Pradesh-Maharashtra border to the Port
H of Bombay, a pemtit had to be and was obtained from the Maharashtra
INFER (I) LTD. v. COLLECTOR OF EXCISE (JEEV AN REDDY, J.]
67
Excise Authorities.