Jagannath & Ors Vs. Union of India
[1961] INSC 171 (20 April 1961)
GAJENDRAGADKAR, P.B.
SARKAR, A.K.
WANCHOO, K.N.
GUPTA, K.C. DAS AYYANGAR, N. RAJAGOPALA
CITATION: 1962 AIR 148 1962 SCR (2) 118
CITATOR INFO :
R 1973 SC1034 (15,18) APL 1974 SC1111 (10)
ACT:
Excise Duty-Tobacco-Different rates for whole
leaf and broken leaf-If discriminatory-Central Excises and Salt Act, 1944 (1 of
1944), First Schedule Entry 4(1) Items 5 and 6- Constitution of India, Art. 14.
HEADNOTE:
Item 5 of entry 4(1) of the First Schedule to
the Central Excise and Salt Act, 1944, imposes an excise duty of Rs. 1- 10 nP.
per kilogram on tobacco other than flue cured and not actually used for the
manufacture of cigarettes, smoking mixtures for pipes and cigarettes or birds
in the whole leaf form. Item 6 imposes a duty of Rs. 2-20 nP. per kilogram on
tobacco in the broken leaf form. The petitioners who dealt in tobacco in the
broken leaf form contended that their tobacco could not be distinguished on any
rational basis from the whole leaf form in Item 5 and the imposition of a
double tariff on their tobacco was invalid as it was based on unconstitutional
discrimination, the tariff being on the basis of use to which the tobacco was
put.
119 Held, that there was no unconstitutional
discrimination in the imposition of the excise duty on tobacco in the broken
leaf form. Tobacco in the broken leaf form was capable of being used in the
manufacture of biris while tobacco in the whole leaf form could not be so used
economically. The two forms of tobacco were different by the test of capability
of user. The tariff was not based either wholly or even primarily by reference
to the use of tobacco. There was a clear and unambiguous distinction between
tobacco in the whole leaf form covered by item 5 and tobacco in the broken leaf
form covered by item 6 which had a reasonable relation to the object intended
by the imposition of the tariff.
Kunmathat Thathunni Moopil Nair v. The State
of Kerala, [1961] 3 S.C.R. 77, referred to.
ORIGINAL JURISDICTION: Writ Petition No. 84
of 1958.
Petition under Art. 32 of the Constitution of
India for enforcement of Fundamental Rights, G. C. Mathur, for the petitioners.
C. K. Daphtary, Solicitor-General of India,
B. Sen, R. H. Dhebar and T. M. Sen, for the respondent. 1961.
1961. April 20. The Judgment of the Court was
delivered by GAJENDRAGADKAR, J.-This is a petition filed under Ga. Art.
32 of the Constitution challenging the
validity of the excise tariff imposed by el. (6) in entry 4(1) in the First
Schedule to the Central Excises and Salt Act, 1944 (1 of 1944). Petitioners
Nos. 1 to 17 are tobacco cultivators and they carry on the trade and business
of growing tobacco and of selling it in Kaimganj Tahsil in the District of Farrukhabad
in Uttar Pradesh. Petitioners 18 to 30 are partners or proprietors or agents of
firms which are private bonded warehouse licensees and they carry on trade and
business of purchasing tobacco from the cultivators and of selling the same to
dealers or to other private warehouse licensees. By their petition the
petitioners have asked for a writ, direction or order in the nature of mandamus
to be issued to the respondent, the Union of India, restraining it from levying
excise duty on hooka and chewing tobacco under the impugned item and any other
writ, direction or order which may be found suitable to 120 protect the
fundamental rights of the petitioners to carry on their trade and business of
dealing in hooka and chewing tobacco. The attack against the validity of the
impugned tariff item is based substantially on two grounds. It is urged that
the rates imposed by the impugned item are excessive and they virtually destroy
the petitioners' trade and it is argued that the impugned item is based on unconstitutional
discrimination. Mr. Mathur, for the petitioners, fairly conceded that he would
not be able to substantiate the first ground of challenge, and indeed it is
obvious that a challenge to tax law on the mere ground that the tariff imposed
by the tax law is heavy cannot be enter- tained. That leaves the question of
discrimination alone to be considered in the present petition. For the purpose
of this petition we will assume that if discrimination in respect of
commodities taxed is proved it ultimately amounts to a discrimination against
the persons taxed and therefore Art. 14 can be invoked in such a case. Mr.
Mathur contends that is the effect of the decision of this Court in Kunmathat
Thathunni Moopil Nair, etc., v. The State of Kerala (1) and as we have just
observed we will assume that such a challenge can be made against the validity
of a taxing statute with provisions such as we have before us and deal with the
petition on that basis.
The tariff entry in dispute as it now obtains
under the taxing statute is entry 4 in the First Schedule. It deals with
tobacco. Under this entry "tobacco" means any form of tobacco,
whether cured or uncured and whether manufactured or not, and includes the
leaf, stalks and stems of the tobacco plant, but does not include any part of a
tobacco plant while still attached to the earth. Clause I in entry 4 deals with
unmanufactured tobacco and prescribes tariff per kilogram in respect of the
several items specified in it. Item (1) under this clause deals with five
categories of tobacco which are flue cured and are used in the manufacture of
cigarettes as indicated in the said five sub- clauses. Item (2) deals with
tobacco which is flue cured and used for the manufacture of smoking (1) [1961]
3 S.C.R. 77.
121 mixtures for pipes and cigarettes. Item
(3) provides, for flue cured tobacco which is not otherwise specified; and item
(4) is concerned with tobacco other than flue cured and used for the
manufacture of (a) cigarettes or (b) smoking mixtures for pipes and cigarettes.
The, tariff varies from Rs. 16.15 nP. per kilogram to' Rs. 1.65 nP. per
kilogram.
That takes us to item (5). This item deals
with tobacco other than flue cured and not actually used for the manufacture of
(a) cigarettes or (b) smoking mixtures for pipes and cigarettes or (e) biris.
The fourth clause under this item is tobacco cured in whole leaf form and
packed or tied in bundles, banks or bunches or in the form of twists or coils.
For tobacco falling under the four clauses under item (5) the tariff is Rs. 1.10nP.
per kilogram. Clause (6) in this item with which we are concerned in the
present petition deals with tobacco other than flue cured and not otherwise
specified. For this residuary clause the tariff prescribed is Rs. 2.20 nP. per
kilogram. This tariff is double the tariff prescribed for the classes in the
preceding item. Mr. Mathur's grievance is that the tobacco with which the
petitioners deal cannot-be distinguished on any rational basis from the tobacco
covered by item (5), cl. (4), and so the imposition of a double tariff on the
tobacco in which the petitioners deal is invalid inasmuch as it is based on
unconstitutional discrimination. The argument proceeds on the assumption that
the tariff is prescribe by reference to the use to which tobacco is put and it
is urged that the tobacco with which the petitioners are concerned is not
actually used either for cigarettes or smoking mixtures or biris and the fact
that it is broken and not whole leaf does not afford any rational basis for
classification.
In dealing with. this argument it would be
relevant very briefly to refer to the report of the Tobacco Expert Committee
whose recommendations have furnished the main basis for the present revised
tariff in respect of tobacco.
In substance this report shows that the
present tariff cannot be said to have been prescribed either wholly or even
primarily by reference actually to the use of tobacco.
Tobacco, as the 16 122 Committee's report
points out, is a rich man's solace and a poor man's comfort. Since it is used
by all classes of people in various forms it is necessary to frame the tariff
in such a way that the incidence of tax shall fall equitably on all classes of
people using it. The report then points out that the Intention Tariff based on
the principle of intention was found to be, ineffective because the assessee's
declaration of intended use left large room for evasion of tax. That is why the
Intention Tariff was substituted by a flat rate of duty. By experience it was
found that even this method was not very effective or equitable and then was
adopted the capability tariff. Under this test the criterion of assessment was
to be whether or not a particular specimen of tobacco was capable of use in
bird manufacturing. If so capable it was assessable on a higher rate, if not so
capable then at a lower rate. The report has examined the advantages of the
capability tariff and has quoted the opinion of the Taxation Enquiry Committee
which made its report in 1953. The report considered the volume of evidence adduced
before it and took into account all the suggestions made. "In view of the
practical difficulties brought before us", says the report, "we
consider that, within the present tariff, the only workable and satisfactory
method of classifying tobacco will be to prescribe standards readily
identifiable either visually or by other simple tests and manipulations with a
view to determine empirically what is capable and what is incapable of use in
biris. The position is complicated because the same tobacco is used for
different purposes in different parts of the country according to the prevalent
consumption habits of different types of tobacco"; and the Committee
realised that any system of classification on a uniform basis for the whole of
the Indian Union is bound to involve greater imposts on consumers of those
areas where the prevalent custom is to consume a variety for chewing, snuff,
hooka, cigar purposes while the same varieties are used in other areas for
biris. The conclusion of the Committee, therefore, 'was that the only criterion
which is safe to adopt is the one relating to the physical form 123 of tobacco
as affecting its suitability for biri making.
The Committee realised that it was very
difficult to classify specified varieties as solely chewing tobacco because
many of these varieties are also used for making snuff and for hooka purposes.
Normally, however, most chewing varieties are in whole leaf form and are' cured
by addition of moisture. Tobacco cured in whole leaf form cannot be converted into
flakes as readily as tobacco cured by dry curing methods, and in the opinion of
the Committee, although it is possible to prepare flakes out of tobacco cured
in whole leaf form the process of conversion into flakes causes much higher
proportions to crumble into dust, raw and other unsalable forms. The Committee
was conscious that the whole leaf varieties after suitable manipulation can be
utilised for biri manufacturing purposes but it thought that this could be done
only after converting them into graded flakes, and even thereafter only by
admixture with other tobacco on a small localised scale. In regard to the
broken leaf grades which the Committee recommended should be liable to
assessment at the higher rate relief was recommended by permitting any owner to
convert his broken leaf tobacco into fine rawa or dust in which form it will
become physically unusable for biris. According to the Committee, after such
manipulation of physical form, the resultant, if it fulfils the specifications
for rawa and dust, may be allowed assessment at the lower rate.
We have referred to these observations made
by the Committee in its report because they clearly and emphatically bring out
the distinction between "tobacco other than flue cured and not otherwise
specified" which is the subject-matter of the, residuary clause and
"tobacco other than flue cured and not actually. used for the manufacture
of cigarettes or smoking mixtures for pipes or cigarettes or biris"
covered by el. (5). By the test of physical form the two articles are
different. By the test of capability of user they are different and in a sense
according to the Committee's recommendations they partake of the character of
different commodities. In this connection it may be 124 pointed out that though
the tariff impost on the tobacco falling under the impugned cl. (6) is much
higher, biris in the manufacture of which no process has been conducted with
the aid of machines operated with or without the aid of power are not subject
to any tariff, whereas cigars, chewing, cigarettes and biris in the manufacture
of which any process has been conducted with the aid of machines operated with
or without the aid of power are subject to tariff. The problem which the
Committee had to face was to classify tobacco other than flue cured which would
be used for the manufacture of biris, and with that object cl. (5) and el. (6)
have been devised. Therefore, in our opinion, the distinction between tobacco
falling under cl. (5) and cl. (6), according to the report of the Committee, is
so clear and unambiguous and its relation to the object intended by the
imposition of tariff is so clearly reasonable that the attack against its
validity on the ground of unconstitutional discrimination cannot be upheld.
There is one more point to which Mr. Mathur
referred and which may be incidentally considered. Mr. Mathur contended that
Nicotiana Rustica with which the petitioners deal is used exclusively for hooka
and chewing in Uttar Pradesh.
The petition avers that the variety of
Nicotiana Rustica which is used in biris is not grown in Uttar Pradesh and that
all the tobacco which is grown in Kaimganj is Nicotiana Rustica which is either
pit cured or ground cured. It is used exclusively for hooka and chewing and is
unfit for use in biris and cigarettes and is never so used. The argument,
therefore, is that this tobacco cannot, be legitimately taxed under the
impugned clause. Apart from the fact that the question as to whether the
particular tobacco in which the petitioners deal falls under the impugned
clause or not cannot be legitimately raised in a, petition under Art. 32, the
answer to the plea is furnished by the counter-affidavit and the report of the
Committee. In the counter-affidavit the allegations made in regard to the
exalusive user of Nicotiana Rustica are generally denied, and what is more the
report of the Committee specifically points 125 out that though Rustica
varieties of tobacco are generally not known to be used for biris, when they
are cured in broken leaf grades they can be used with admixture with biri
tobacco like Pandharpuri tobacco for imparting strength to biri mixtures, and
so according to the Committee no generalisation in this matter is possible and
it cannot be asserted that, all forms of this variety are incapable of use in
biris. Besides, it would be quite possible for dealers in the said varieties of
tobacco to send them to other parts of the country where they are used for the
purpose of manufacturing biris. Therefore, the grievance made by the
petitioners that the tobacco in which they deal can never be used for biris is
obviously not well founded.
In the result the petition fails and is
dismissed with costs.
Petition dismissed.
Back
