tax 72 cannot be deducted from another Entry as ancillary exercise of power
Since the Concurrent List does not contain any Entry relating to taxing power the concept of occupied field or repugnancy cannot arise
If there is clash between exer cise of power under List II and List I then the State legis lation may be invalid due to Article 2461 But since there can be no clash or invalidity in relation to taxing power the question of invalidity cannot arise
94G 95C 314
Price fixation of ethyl alcohol is an exercise of power for regulating distribution and supply of the general entry for regulating distribution and supply is different from exercise of taxing power
The two do not even remotely touch each other
Therefore if the price goes up in exercise of taxing power the subject to its being arbitrary or con fiscatory it could not be struck down as intruding in for bidden field
95C D  CIVIL APPELLATE JURISDICTION Civil Appeal No 2722 NT of 1991
From the Judgment and Order dated 1271990 of the Allahabad High Court in Civil Misc
WP No 361 of 1976
Umesh Chandra Rakesh Srivastava AK Srivastava and KD Misra for the Appellants
MH Baig PS Shroff R Sasiprabhu SS Shroff Suresh A Shroff and Rajan Mahapatra for the Respondents
The Judgment of the Court was delivered by THOMMEN J
Leave granted
This appeal is brought by the State of Uttar Pradesh against the judgment of the Allahabad High Court in Civil Miscellaneous Writ Petition No 361 of 1976
The High Court allowing the writ petition declared the Uttar Pradesh Sales of Motor Spirit Diesel Oil and Alcohol Taxation Amendment Act 1976 Act No 8 of 1976 to be null and  void in so far as it purported to levy purchase tax on industrial alcohol
By this Act sub section 1 of section 3 of the United Provinces Sales of Motor Spirit Diesel Oil and Alcohol Taxation Act 1939 was amended so as to substitute the following clause 31 There shall be levied with effect from May 2 1974
73 b at the point of first purchase of alcohol in the State a tax at the rate of 40 paise per litre for the first million liters and at the rate of 20 paise per litre for the remain der payable by the purchaser and which shall be collected and paid in the prescribed manner to the State Government
This levy was sought to be justified by the state when challenged in the writ proceeding as a valid exercise of its legislative power on a matter falling under Entry 54 of List II of the Seventh Schedule of the ConstitutionThe writ petitioners challenging the levy contended that the State Legislature was incompetent to levy tax with reference to Entry 54 of List II in respect of industrial alcohol in so far as that article was the subject of regulation by the Central Government in exercise of its power under section 18G of the Industries Development and Regulation Act 1951 Act No 65 of 1951 hereinafter referred to as the IDR Act and that the price of that article was regulated by the relevant Price Control Orders made by the Central Government under the said Act
Any levy of sales tax or purchase tax by the State by recourse to Entry 54 of List II it was con tended would come into direct conflict with the law made by Parliament and the control exercised by the Central Govern ment under that law in regard to an industry falling under Entry 52 of List 1 read with Entry 33 of List III
The writ petitioners relying upon the decision of a Constitution Bench of this Court in Synthetics and Chemicals Ltd  Others vs State of UP  Others   contend ed before the High Court that in so far as industrial alcohol was concerned the State was incompetent of levy sales tax by reason of the operation of the Ethyl Alcohol Price Control Orders made by the Central Government in exercise of its power under section 18G of the IDR Act
The State contended before the High Court that the aforesaid decision of this Court did not deal with any levy of tax falling under Entry 54 of List II
The power of the State to levy taxes on the sale or purchase of goods was not the subject of consideration in that decision
What was considered was the power of the State to collect vend fee or transport fee or the like by recourse to Entry 8 or 51 of List II with reference to the production manufacture possession transport purchase and sale of industrial alcohol during the operation of the IDR Act and the rules made thereunder
The High Court accepted the contention of the writ petitioners and held that the impugned purchase tax if allowed to be levied on 74 industrial alcohol would have the effect of raising its price beyond the limit prescribed under the Price Control Orders made by the Central Government in relation to indus trial alcohol in exercise of its power under the IDR Act
The High Court accordingly declared that the impugned levy of purchase tax on industrial alcohol was during the opera tion of the Price Control Orders of the Central Government beyond the legislative competence of the State
In Synthetics  this Court held that vend fee transport fee and the like levied by Uttar Pra desh Maharashtra and certain other States by recourse to Entry 8 or Entry 51 of List II were null and void in so far as such impost came into direct conflict with the exercise of power by the Centre for the control of supply distribu tion price etc
of industrial alcohol under section 18G of the IDR Act and the rules or orders made thereunder
That case was apparently not concerned with the exercise of legislative power with reference to Entry 54 of List II which reads Taxes on the sale or purchase of goods other than newspapers subject to the provisions of Entry 92 A of List I
Significantly this Entry shows that subject to Entry 92A of List I taxeson the sale or purchase of goods other than newspapers taking place within the State are the exclusive preserve of the State
The only restriction on this legisla tive power is what is stated in Article 286
Nevertheless in the concluding portion of the judgment Sabyasachi Muk harji J as he then was stated The position with regard to the control of alco hol industry has undergone material and significant change after the amendment of 1956 to the IDR Act
After the amend ment the State is left with only the following powers to legislate in respect of alcohol a It may pass any legis lation in the nature of prohibition of potable liquor refer able to Entry 6 of List II and regulating powers
b It may lay down regulations to ensure that non potable alcohol is not diverted and misused as a substitute for potable alcohol
c The State may charge excise duty on potable alcohol and sales tax under Entry 52 of List H
However sales tax cannot be charged on industrial alcohol in the present case because under the Ethyl Alcohol Price Control Orders sales tax cannot be charged by the State on industrial alcohol
I d However in case State is rendering any service as 75 distinct from its claim of so called grant of privilege it may charge fees based on quid proquo 1990 ISCC 109 158 emphasis supplied So stating the earlier decision Of this Court in State of Uttar Pradesh  Others vs Ms SynthetiCs  Chemicals Ltd  Others  so far as it related to industrial alcohol was overruled but only prospectively so as not to affect collection of taxes already made While invalidating the fees levied under various enactments chal lenged in Synthetics  including the transport fee levied under the Bombay Prohibition Act 1949 and the vend fee
levied by the State of Uttar Pradesh in respect of industrial alcohol tO the extent that such levies were unsupported by quid pro quo this Court also held as seen above that sales tax could not be charged on industrial alcohol because of the Ethyl Alcohol Price Control Orders
Vend fee or transport fee was collected by various States purportedly in exercise of the power referrable to Entry 8 of List II
The fee was at times sought to be levied under the Excise Rules made under the Excise Act and ex tended to potable alcohol and industrial alcohol alike
Though the fee was collected supposedly in return for serv ice rendered it was more often than not the price of li cence to deal in what is otherwise the exclusive privilege of the State
No citizen has a fundamental right to deal in intoxicat ing liquors and it is the right of the State to control production manufacture sale etc
of such liquors with a view to even prohibiting the trade
The term intoxicating liquors  was so widely interpreted in decisions like Syn thetics 1 that State interference by way of control albeit as vend fee or transport fee of trade in non potable alcohol was challenged as a transgression on the area reserved for Parliament in respect of a controlled industry see Entry 52 List I and as repugnant to the control exercised by the Centre as regards the products of such a controlled industry see Entry 33 List III
The challenge was specially on the ground that the levy of fees could not be justified except within the bounds of Entry 8 of List II which is a subject of legislation limited to potable alcohol but not a taxing Entry and of Entry 51 of List II which relates to duties of excise on alcoholic liquors for human consumption but excluding medicinal and toilet preparations containing alcohol
The contention was that no fee or duty could be levied by the States in respect of industrial alcohol
This contention was accepted by this Court in Synthetics  as correct provided the levy 76 of fees in respect of industrial alcohol was unsupported by quid pro quo
In other words although Entry 66 of List II justified collection of fees in respect of matters falling in that List levy of any such fee by reason of the limita tion of the entries in that List concerning alcohol had to be confined to potable liquor and could not be extended to industrial alcohol unless there was quid pro quo
This was the rationale of the challenge in Synthetics  and the crux of the ratio decidendi of that decision
It was never contended by the States that the vend fee was a tax referfable to Entry 54 of List II or the transport fee imposed by the Prohibition Act and the Rules was a levy under Entry 56 of List II
The Bombay Rectified Spirit Transport in Bond Second Amendment Rules 1981 made under the Bombay Prohibition Act 1949 was challenged precisely for the reason that it was an invalid collection of fee amounting to an impermissible interference with the Central control of industrial alcohol
This Court as seenabove upheld the challenge in so far as industrial alcohol was concerned unless there was quid pro quo
The Advocate General appearing for the appellant State of UP respondent in the High Court submits that the reference to sales tax in the judgment of this Court in Synthetics  which the High Court in the present case thought was binding upon it was accidental and did not arise from the judgment
The levy of sales tax was not in question at any stage of the arguments
Nor was the question considered as it was not in issue
The Court gave no reason whatever for abruptly stating that sales tax was not leviable by the State by reason of the Ethyl Alcohol Price Control Orders
The question which arose for consid eration was in regard to the validity of vend fee and other fees charged by the States
The argument was that such impost to the extent that it fell on industrial alcohol encroached upon the legislative field reserved for Parlia ment in respect of a controlled industry coming under Entry 52 of List I read with Entry 33 of List III
Vend fee or transport fee and similar fees unless supported by quid pro quo this Court held interfered with the control exercised by the Central Government under the IDR Act 1951 and the various orders made thereunder with respect to prices 1licences permits distribution transport disposal acquisition possession use consumption etc of articles related to a controlled industry industrial alcohol being one of them
But none of the observations in the judgment warranted the abrupt conclusion to which the Court came that the power to levy taxes on sale or purchase of goods referrable to Entry
54 of List II was curtailed by the control exercised by the Central Government under the IDR Act
The casual reference to sales tax in the 77 concluding portion of the judgment the Advocate General points out was accidental and per incurium
Counsel for the respondents writ petitioners however submits that the prices are strictly controlled by the Central Government in exercise of its power under the IDR Act
The State law cannot be allowed to disturb such prices
Any attempt to raise the prices despite the strict control exercised by the Central Government by means of statutory orders is an invalid exercise of power
Levy of sales or purchase tax affects the price for the incidents of tax fall on the customer
The customer will have to pay the amount of tax levied at the point of first purchase which would be in addition to the price determined by the Central Government under the Price Control Orders
This is a trans gression on the legislative control exercised by Parliament and by the Central Government acting as its delegate
The Government of UP charged fee under the UP Excise Act 1910 as amended in 1972 and 1976 the Govern ment of Maharashtra charged transport fee under the Bombay Rectified Spirit Transport in Bond Rules 1951 made under the Bombay Prohibition Act 1949 and the Andhra Pradesh Government extended the Excise Act 1968 and the Distillery Rules 1970 and the Rectified Spirit Rules 1971 to all alcohol plants
The applicability of these Acts and the Rules so far as industrial alcohol was concerned was challenged in Synthetics  principally on the ground that the legislative power of the State to levy excise duty under Entry 51 of List II did not extend to industrial alcohol and in respect of that article no fee in the nature of a regulation or control or licence could be charged by reference to Entry 51 or 8 of List II which had no application to industrial alcohol and also by reason of the control exercised by Parliament and the Central Govern ment under the IDR Act 1951 which is a law referrable to Entry 52 of List I and Entry 33 of List III
Dealing with that contention this Court states The main question that falls for considera tion in these matters is whether the vend fee in respect of the industrial alcohol under different legislations and rules in different States is valid
The question is is the vend fee an impost leviable or extractable by the States under different Acts 
The questions with which we are mainly concerned are the following i whether the power to levy excise duty in case of indust 78 trial alcohol was with the State legislature or the Central legislature what is the scope and ambit of Entry 8List 11 of the Seventh Schedule of the Constitution iii whether the State Government has exclu sive right or privilege of manufacturing selling distributing etc
of alcohols in cluding industrial alcohol 
Para 2
This Court further says   
In these matters this Court is concerned with the taxing power of the States to impose and levy excise duty on industrial alcohol andor imposts as vend fees  Para 4
After elaborately discussing the increasing use of industrial alcohol as distinct from potable alcohol this Court says The only question which has to be determined is whether intoxicating liquor in Entry 8 in List H is confined to potable liquor or includes all liquors 
Para 41
emphasis supplied Answering that question which is characterised as the only question
this Court categorically states that intoxicating liquor within the meaning of Entry 8 of List II is confined to potable liquor and does not include industrial liquor
Referring to the Constitutional obligations of the State this Court says Article 47 of the Constitution imposes upon the State the duty to endeavour to bring about prohibition of the consumption except for medicinal purpose of intoxicating drinks and products which are injurious to health
Does Article 47 oblige the State to prohibit even such industries as are licensed under the IDR Act but which manufacture industrial alcohol   Para 77
In that view of the matter it appears to us that the relevant provisions of the UP Act AP Act Tamil Nadu Act 79 Bombay Prohibition Act as mentioned hereinbe fore are unconstitutional insofar as these purport to levy a tax or charge imposts upon industrial alcohol namely alcohol used and usable for industrial purposes Para 82
Furthermore in view of the occupation of the field by the IDR Act it was not possible to levy this impost
Para 84
After the 1956 amendment to the IDR Act bringing alcohol industries under fermentation industries as Item 26 of the First Schedule to IDR Act the control of this industry has vested exclu sively in the Union
Thereafter licences to manufacture both potable and non potable alcohol is vested in the Central Government Distilleries are manu facturing alcohol under the central licences under IDR Act
No privilege for manufacture even if one existed has been trans ferred to the distilleries by the State
The Statecannot itself manufacture industrial alcohol without the permission of the Central Government
The States cannot claim to pass a right which they do not pos sess
Nor can the States claim exclusive right to produce and manufacture industri al alcohol which are manufactured under the grant of licence from the Central  Government
Industrial alcoholcannot upon coming into existence under such grant be amenable to States  claim of exclusive posses sion of pri vilege
The State can neither rely on Entry 8 of List II no Entry 33 of List III as a basis for such a claim
The State cannot claim that under Entry 33 of List III it can regulate industrial alcohol as a product of the scheduled indus try because the Union under Section 18 G of the IDR Act has evinced clear intention to occupy the whole field
Even otherwise sections like Sections 24A and 24B of the UP Act do not constitute any regulation in re spect of the industrial alcohol as product of the scheduled industry
On the contrary these purport to deal with the so called transfer of privilege regarding manufacturing and sale
This power admittedly has been exercised by the State purporting to act under Entry 8 of List II and not under Entry 33 of List III
Para 85
Summing up in paragraph 86 of the judgment this Court stated what we have already set out above
However for continuity we will repeat clause c of that paragraph 80 c The State may charge excise duty on potable alcohol and sales tax under Entry 52 of List II
However sales tax cannot be charged on industrial alcohol in the present case because under the Ethyl Alcohol Price ControlOrders sales tax cannot be charged by the State on industrial alcohol We have extensively quoted from the judgment of the Constitution Bench in Synthetics  Chemicals Ltd  Others vs State of UP  Others   with a view to showing that the Court was concerned with only one question and that was whether the States could levy excise duty or vend fee or transport fee and the like by recourse to En tries 51 or 8 in List II in respect of industrial alcohol
This Court held as seen above that the States had no such power under either Entry in respect of non potable or indus trial alcohol
The Court did not deal with the taxing power of the State under Entry 54 of List I1 which deals with taxes on the sale or purchase of goods other than news papers subject to the provisions of Entry 92A of List I 
The power of the State to levy taxes on sale or purchase of goods under that Entry was not the subject matter of discus sion by this Court although in paragraph 86 of the leading judgment of Sabyasachi Mukharji J as he then was there is a reference to sales tax
He says The State may charge excise duty on potable alcohol and sales tax under Entry 52 of List II
Entry 52 of List II is mentioned in connection with excise duty and sales tax but neither of them fails under Entry 52
Reference to Entry 51 of List 1I ought to have been made if it was excise duty that the Court had in mind
Entry 54 of List II would have been referred to and not Entry 52 if the Court had in mind sales tax
On the other hand Entry 52 refers to Taxes on the entry of goods into a local area for consumption use or sale therein
None had a case that this Entry had any application to the fees or charges in question
The Court further says However sales tax cannot be charged on industrial alcohol in the present case be cause under thee Ethyl Alcohol Price Control Orders sales tax cannot be charged by the State on industrial alcohol
That was an abrupt observation without a preceding discus sion and inconsistent with the reasoning adopted by this Court in earlier decisions from which no dissent was ex pressed on the point
Coming as it does immediately after a reference to Entry 52 of List II in connection with excise duty and sales tax when neither falls under that Entry the 81 submission of the Advocate General that the observation regarding sales tax in para 86 of the judgment was per incurium assumes great significance
The genesis of the problem dealt with in Synthetics  is traceable to the decision in the State of Bombay  Anr
vs FN Balsara   where this Court stated that the word liquor  as understood in this country at the time of the Government of India Act 1935 comprehended not only alcoholic liquors which were generally used as beverages and which produced intoxication but also all liquors containing alcohol
Section 224 of the Bombay Prohibition Act 1949 was held to be intra vires
However so far as medicinal and toilet preparations containing alcohol were concerned sections 12 and is of the Act were held to be invalid being an unreasonable restriction on the fundamental right to the extent that they prohibited possession sale use and consumption of liquors for medicine and toilet preparations but were held to be valid to the extent that they applied to other categories of alcoholic liquors namely spirits of wine methylated spirit wine beer and toddy as these items Were distinctly separable and easily severable from the other category namely all liq uors containing alcohol
It was this principle which was followed by this Court in Synthetics 1 where it was held that there was no fundamental right for a citizen to carry on trade or business in liquor and that the State had the power to enforce absolute prohibition on manufacture or sale of intoxicating liquor by reason of Article 47 of the Constitu tion and that the State had exclusive right orprivilege to manufacture or sell liquor
This Court also held that the expression intoxicating liquor  was not confined to potable liquor but would also include all liquors which contained alcohol
The State Government had the power to levy a fee for parting with its exclusive right respect of intoxicat ing liquor
This Court stated that alcohol  included both ordinary as well as specially denatured spirit
Denatured spirit contains ethyl alcohol
The specially denatured spirit for industrial purposes is different from denatured spirit only because of the difference in the quantity and quality of the denaturants
Specially denatured spirit and ordinary denatured spirit were classified according to their use and denaturants used
This Court rejected the distinc tion sought to be drawn between denatured spirit for indus trial purposes and ordinary denatured spirit
It was this wider understanding of intoxicating liquor  so as to 82 comprehend not only potable alcohol but also industrial alcohol that was disapproved in Synthetics  In drawing the distinction between potable and non potable alcohol this Court had in mind the tremendous changes which have taken place in science and technology and industry and commerce and the increasing use of industrial alcohol in various industries
Drawing a distinction between potable and non potable alcohol and confining the doctrine of Article 47 to the former this Court came to the conclu sion that the impugned statutory provisions purportedly levying fees or enforcing restrictions in respect of indus trial alcohol were impermissible in view of the control assumed by the Central Government in exercise of its power under section 18G of the IDR Act in respect of a declared industry falling under Entry 52 of List I read with Entry 33 of List III
Alcohol as an industry being one of the industries brought within the purview of the IDR Act and thus under the regulatory control of the Union the power to grant licence for the manufacture of alcohol is vested in the Central Government
Distilleries manufacturing alcohol are necessarily licensed under the IDR Act for such distill eries can manufacture alcohol of all types and therefore are necessarily brought under the control of the Central Government
It is in this background that the cardinal question has to be examined that is whether or not the power of the State to levy tax on the sale or purchase of goods falling under Entry 54 of List II will comprehend industrial alco hol
It is significant that the taxing power of the State on a matter falling within its competence under this Entry namely sale or purchase of goods other than newspapers is subject to the taxing power of Parliament under Entry 92A of List I and other provisions of the Constitution plenary and unlimited and untrammelled by the supervisory or regulatory power of Parliament under Entry 52 of List I read with its concurrent power under Entry 33 of List III
This is the crucial distinction between the wide taxing power of the State under Entry 54 of List II and its condi tional or restricted taxing power for example over mineral rights mentioned in Entry 50 of that List which was consid ered in India Cement Ltd  Ors
vs State
of Tamil Nadu  Ors Similarly the power of the State in respect of potable alcohol as distinguished from industrial alcohol falling under Entry 8 of List II is significantly unfettered unlike for example mines and mineral develop ment over which the regulatory power of the State is specif ically stated to be subject to the regulatory power of Parliament see entry 23 of List II read with Entry 54 of List I
The legislative competence of the State in respect of mines and I minerals was accordingly held to be denuded to the extent that the 83 field was covered by section 9 of the Central Act namely see India Cement supra
Unlike mines and minerals alcohol stands on a different footing and is dealt with different ly dependant on whether it is potable or not
What is significant is that legislation falling in pith and sub stance under Entry 8 or Entry 51 of List II in relation to alcoholic liquor for human consumption as distinguished from industrial alcohol whether for the purpose of levying vend fee or transport fee or excise duty strictly confined to such articles is not subject to challenge on the ground of legislative incompetence or repugnancy by reason of the power vested in Parliament under Entry 52 or Entry 84 of List I or Entry 33 of List III
Incompetence or repugnancy arises only when the impact of the legislation falls not incidentally but substantially on industrial alcohol so as to transgress on a field occupied by Parliament
In MPV Sundararamier  Co vs The State of Andhra Pradesh  Anr  at 1479 Venkatarama Aiyar J speaking for the Constitution Bench referred to the Entries in the three lists of the Seventh Schedule of the Constitution and drew a distinction between the main sub jects of legislation forming one group and taxes forming another group
Entries 1 to 81 of List I are the main sub jects of legislation within the competence of Parliament
Entries 82 to 92 of that List 92A and B have since been added enumerate the taxes which Parliament is competent to impose
Likewise Entries 1 to 44 forming one group in List II relate to the main subjects within the legislative compe tence of the States while Entries 45 to 63 of that List deal specifically with the taxes leviable by the States
The general power of legislation vested in the States regarding trade and commerce production supply etc
is referrable to Entries 26 and 27 of List II
The power of the State to levy taxes on the sale or purchase of goods other than newspapers is mentioned in Entry 54 of List II
This power is however subject to certain restrictions imposed trader Article 286
Clause 1 of Article 286 prohibits a State from imposing or authorising the imposition of a tax on the sale or purchase of goods taking place outside the State or in the course of import into or export out of the terri tory of India
Parliament is empowered under clause 2 of this Article to formulate by law principles for determining when a sale or purchase takes place outside a State or in the course of import into or export out of the territory of India
Clause 3 of this Article empowers Parliament toimpose certain restrictions and conditions on the taxing power of the State in respect of goods declared by Parlia ment to be of special importance in inter State trade or commerce and certain other goods falling under clause 29 A of Article 366
The legislative 84 power of Parliament in respect of inter State trade or commerce and its taxing power in regard to it are respec tively mentioned in Entries 42 92A and 92B of List I Taxes levied and collected by the Union on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter State trade or commerce are assigned to the State in the manner provided in clause 2 of Article 269
Clause 3 of that Article says that Parliament may by law formulate principles for determining when a sale or purchase or Consignment of goods takes place in the course of inter State trade or commerce
It was by virtue of this power that Parliament enacted the  sections 3 and 4 of which formulate principles for determining when a sale or purchase of goods has taken place in the course of inter State trade or commerce or outside a State
In all other respects the State enjoys legislative power to levy taxes on the sale or purchase of goods
Industry as a subject of legislation falls under Entry 24 of List II
But this provison is subject to Entries 7 and 52 of List I dealing respectively with Industries declared by Parliament by law to be necessary for the purpose of defence or for the prosecution of the war and Industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest
It is Entry 52 of List 1 that is relevant for the present purpose for it is in respect of that Entry that Parliament enacted the IDR Act 1951 to provide for the development and regulation of certain industries
This Act contains a declaration by Parliament that it is expedient in the public interest that the Union should take under its control the industries specified in the First Schedule  Fermentation Industries  ie Alcohol and Other products of fermentation industries is Item 26 of the First Schedule
Section 18G of the IDR Act confers upon the Central Government the power of control of supply distribution price etc
of the articles mentioned in the First Schedule of the Act
All powers vested in the Central Government under section 18G of the IDR Act are referfable to Entry 52 of List I dealing with controlled  industries read with Entry 33 of List III which pertains to Trade and commerce in and production supply and distribu tion of  the products of controlled industries
None of the entries in the Concurrent List deals with tax but general subjects of legislation
No conflict can therefore arise bet ween the taxing powers of the Union and the States
Parliament has 85 the power to legislate in respect of a controlled  industry falling under Entry 52 of List I and both Parliament and the States have the power to legislate in respect of the trade and commerce in and the production supply and dis tribution of the products of a controlled  industry Entry 33 of List III
These are not taxing entries and do not therefore relate to taxes but powers of regulation and control
The power to control industry being thus vested in Parliament Entry 52 of List I and the legislative power in respect of trade and commerce in such industry being concur rently vested in the Union and the States Entry 33 of List III any exercise of control by the State must be subject to the legislative power of Parliament and the power conferred on the Central Government by such legislation Article 246
Any exercise of power by the State which transgresses upon the power of Parliament or of the Central Government as its delegate is to the extent of such transgression null and void
Entry 8 of List II reads Intoxicating liquors that is to say the production manufacture possession trans port purchase and sale of intoxicating liq uors
These matters concerning intoxicating liquors are thus included within the legislative competence of the States
In respect of any such matter the States are competent to levy fees Entry 66 of List II
Entry 51 of List II relating to excise duty on alcoholic liquors for human consumption reads Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or pro duced elsewhere in India a alcoholic liquors for human consumption b opium Indian hemp and other narcotic drugs and narcotics but not including medicinal and toilet prepar tions containing alcohol or any substance included in sub paragraph b of this entry
While this Entry clearly refers to liquor for human consump tion the 86 same meaning has been judicially ascribed in Synthetics  to intoxicating liquors  in Entry 8 of the same List
The legislative competence of the State in re spect Of intoxicating liquors  referred to in Entries8 and 66 of List II as a subject of legislation and fee respec tively and the power of the State to levy excise duty on alcoholic liquors for human consumption falling under Entry 51 of the same List must necessarily be confined to potable alcohol and cannot include industrial alcohol or medicinal and toilet preparations containing alcohol see Entry 84 of List I
Any transgression by the State on industrial alcohol will be invalid for want of power by reason of the limitation of Entries 8 and 51 of List II being confined to potable alcohol and consequent trans gression on areas covered by Entries 52 and 84 of List I respectively relating to declared industry and excise duty on industrial alcohol and medicinal and toilet preparations containing alcohol and also for repugnancy arising from a clash with the centrally occupied field falling under Entry 33 of List III
This is why this Court in Synthetics  held that the State should not impose any fee whether called vend fee transport fee excise duty and the like on industrial alcohol as such impost would trespass upon the statutory orders made by the Central Government in exercise of its power of control under section 18G of the IDR Act as regards ethyl alcohol and other non potable products of fermentation industries
Article 298 of the Constitution says that the executive power of the State within the area of its legislative competence or subject to legislation by Parliament in areas falling outside its legisaltive competence shall include the conduct of any trade or business the acquisi tion holding and disposal of property and the making of any contract for such purpose
The regulatory powers of the State extend to every form of activity concerning intoxicat ing liquor for human consumption
The production manufac ture possession transport purchase and sale of such articles fall within the regulatory power of the State
The State is entitled to levy fees in respect of any such matter Entry 66 List II
The power of regulation and control is separate and dis tinct the power of taxation
Legislative exercise of regula tion or control referfable to Entry 52 of List I or Entry 8 of List II is distinct and different from a taxing power attributable to Entry 54 of List II or Entry 92A or 92B of List I The power to levy taxes on sale or purchase or consignment in referrable to these Entries and subject to the other provisions of the Constitution the taxing power of the State is not cut down by the general legislative control vested in Parliament and 87 referrable to the general topics of legislation
In Ms RMDC Mysore Private Limited vs The State of Mysore  a Constitution Bench of this Court held that the subject of betting and gambling in entry 34 of List II of the Seventh Schedule to the Constitution of India and that of  taxes on betting and gambling in entry 62 of List II have to be read separately as separate powers and therefore  when control and regulation of prize competitions was surren dered to Parliament by the resolution dated February 23 1956 the power to tax could not be said to have been surrendered
Therefore if the Mysore Legislature had the power which in our opinion it had and it had not surrendered its power to Parliament which in our opinion it had not then it cannot be said that the imposition of the tax is a piece of colourable legislation and is on that ground unconstitutional In Ganga Sugar Corporation Ltd vs State of Uttar Pra desh  Others   Krishna Iyer J speaking for the Constitution Bench dealt with a challenge against the levy of purchase tax on the raw material consumed by a controlled industry namely the Sugar Industry and stated Is the legislation ultra vires because the State enters the forbidden grounds by enacting on controlled industry It is undisputed that sugar industry is a controlled industry within the meaning of Entry 52 List I of Seventh Schedule and therefore the legisla tive power of Parliament covers enactments with respect to industries having regard to Article 2461 of the Constitution
If the impugned legislation invades Entry 52 it must be repulsed by this Court
But Entry 54 in List II of the Seventh Schedule empower the State to legislate for taxes on purchase of goods and so if the Act under consideration is attracted in pith and substance by this entry legislative incompetence cannot void the Act 
This is precisely the question in the instant case namely 88 whether or not the impugned legislation falls in pith and substance with in Entry 54 of List II and not whether the industry producing goods the sale of which is leviable to tax under the impugned legislation is controlled within the arebit of Entry 52 of List I
This question was not consid ered in Synthetics  A like question arose in a different form in Ch
Tika Ramji  Others etc
vs The State of Uttar Pradesh  Ors  This Court rejected the challenge in that case against the constitutional validity of the UP Sugar cane Regulation of Supply and Purchase Act 1953 and the notifications issued thereunder
It was held that the im pugned Act and the notifications were intra rites the State Legislature as they were concerned with the regulation of the supply and purchase of sugarcane which in no way trenched upon the exclusive jurisdiction of the Centre with regard to sugar
No question of repugnancy under Article 254 of the Constitution could arise because Parliament and the State legislated in different fields and dealt with separate and distinct matters even though of a cognate and allied character
There is no inconsistency between the two enact ments
The provisions of section 18G of the IDR Act 1951 did not cover sugarcane or indicate any intention on the part of Parliament to cover the entire field of such legis lation
Raw material did not come within the ambit of any article or class of articles relatable to any scheduled industry within the meaning of that Act 
The Court further pointed out that even if sugarcane was an article which fell within the purview of section 18G of the Act no order having been issued by the Central Government under that provision no repugnancy could arise for repugnancy had to exist as a fact and not as a mere possibility
The existence of an order covering the entire field was an essential prerequisite to give rise to repugnancy
Similarly in Kannan Devan Hills Produce Company Ltd vs The State of Kerala  Another  a Constitu tion Bench of this Court stated It seems to us clear that the State has legislative competence to legislate on entry 18 List II and entry 42 List III
This power cannot be denied on the ground that it has some effect on an industry controlled under entry 52 List I Effect is not the same thing as subject matter
If a State Act otherwise valid has effect on a matter in List I it does not cease to be a legislation with re spect to an entry in List II or List III   89 In Haechst Pharmaceuticals Ltd  Anr
vs State of Bihar  Others  this Court reiterating the observations of the Constitution Bench in Sundararamier s case  as regards the distinction between general subjects of legislation and taxes in List 1 and List II and the absence of any entry in List III relating to taxes apart from levy of fees stated  
Thus in our Constitution a conflict of the taxing power  of the Union and of the States cannot arise
That being so it is difficult to comprehend the submission that there can be intrusion by a law made by Par liament under Entry 33 of List III into a forbidden field viz the State s exclusive power to make a law with respect to the levy and imposition of a tax on sale or purchase of goods relatable to Entry 54 of List II of the Seventh Schedule
It follows that the two laws viz sub section
3 of section 5 of the Bihar Finance Act 1981 and paragraph 21 of the Control Order issued by the Central Government under sub section
1 of section 3 of the Essential Commodi ties Act operate on two separate and distinct fields and both are capable of being obeyed
There is no question of any clash between the two laws and the question of repugnancy does not come into play
These decisions unmistakably demonstrate the power of the State to levy taxes on the sale or purchase of goods other than newspapers but subject to Entry 92A of List I which deals with the legislative power of Parliament to levy taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter State trade Or commerce
Subject to the overriding power of Parliament in respect of what falls under Entry 92A and the provisions of Article 286 the State has full legis lative competence in levying taxes on the sale or purchase of goods other than newspapers
The power to tax under Entry 54 of List 11 being a specific power it cannot be cut down or in any manner lettered by the general power of control exercised by Parliament by legislation on a matter falling under Entry 52 of List I relating to an industry the con trol of which by the Union is declared by Parliament by law to be expedient in the public interest read with Entry 33 of List III dealing with trade and commerce in and the production supply and distribution of the products of any such controlled industry and imported goods of the same kind as such products and other articles mentioned in Entry 33
The impugned provision of the Uttar Pradesh Sales of Motor Spirit Diesel Oil and Alcohol Taxation Amendment Act 1976 levying tax at the 90 point of first purchase of alcohol in the State is undoubt edly an impost failing in pith and substance under Entry 54 of List II
In the absence of any fetter on the legislative power and in the absence of any valid challenge against the provision as a colourable piece of legislation the impugned legislative enactment remains unimpeachable
The control exercised by the Central Government by virtue of section 18G of the IDR Act is in a field far removed from the taxing power of the State under Entry 54 of List II
So long as the impugned legislation falls in pith and substance within the taxing field of the State the control of the Central Government in exercise of its power under the IDR Act in respect of a controlled industry fall ing under Entry 52 of List 1 cannot in any manner prevent the State from imposing taxes on the sale or purchase of goods which are the products of such industry and which are referrable to Entry 33 of List III
As seen above the taxing power of the State under Entry 54 of List II cannot be cut down by the general legislative power of control of the Centre
The levy of fee whether called vend fee or transport fee or duty or charge whether levied by Rules purportedly made under the Excise Act or Prohibition Act or any other statute otherwise than as a proper levy falling in pith and substance under a taxing Entry was not valid to the extent that it lacked quid pro quo and applied to industrial alco hol
Any such fee or charge can be justified as a mode of control falling in pith and substance under Entry 8 read with Entry 66 of List 1I only to the extent that it remains within the bounds of the concerned subject matter namely intoxicating liquors  which must necessarily exclude industrial alcohol
We see no substance in the contention that the Price Control Orders made by the Central Government in exercise of its power under the IDR Act fettered the legislative power of the State on a matter falling under Entry 54 of List II
Taxes on sale or purchase are not governed by the Price Control Orders for the purpose of the latter is to prevent the seller from pricing his goods beyond the limit pre scribed by the orders
That is a fetter on the free play of demand and supply
When supply is scarce the price are bound to rise and it is that vice which is controlled by fixing the maximum price
But that does not in any manner curtail the power of the State to levy taxes on the sale or purchase of goods
It is no doubt true that the consumer of the article must in addition to the price pay purchase tax due in respect of them
But that is by reason of a valid levy which is within the constitutional power of every State and is dehors the price though often referrable to it
91 The High Court in our view was clearly in error in striking down the impugned provision which undoubtedly falls within the legislative competence of the State being refer rable to Entry 54 of List II
We are firmly of the view that the decision of this Court in Synthetics  is not an authority for the proposition canvassed by the assessee in challenging the provision
This Court has not and could not have intended to say that the Price Control Orders made by the Central Government under the IDR Act imposed a fetter on the legislative power of the State under Entry 54 of List II to levy taxes on the sale or purchase of goods
The reference to sales tax in paragraph 86 of that judgment was merely accidental or per incurium and has therefore no effect on the impugned levy
RM SAHAI J
I have carefully gone through the judgment of brother Thommen J
I agree with every word that has been said by him
But considering the importance of issues involved I would like to add few words of my own
The dispute is about levy of purchase tax on industrial alcohol
The High Court held that the State legislature was competent to enact a law imposing purchase tax on it in exercise of power under Entry 54 of List II
But it struck down the levy as it would disturb price structure regulated by Central Government
It was held that control of alcohol industry having been taken over by the Parliament for purpose of regulation and development the State stood denud ed of its taxing power under Entry 54 of List II to the extent the field of price fixation was covered by the price control order issued by the Government
And the purchase price being component of price fixation which squarely fell within the power of Central Government the imposition of purchase tax amounted to intrusion into the forbidden area of price fixation by Central Government
Support for this was drawn principally from the two Constitution Bench decision in Indian Cement Ltd vs State of Tamil Nadu and Synthetic and Chemicals vs State of UP The first was relied for the prin ciple that even a taxing legislation by the State could be invalid to the extent it trenched on Central legislation on the same subject
And the latter for the conclusion that however sales tax cannot be charged on industrial alcohol in the present case because under the Ethyl Alcohol Price Control Orders sales tax cannot be charged by the State on industrial alcohol 
Reliance on Indian Cement Ltd supra was under complete misapprehension
The State in that case attempted to levy cess on royalty
It was held to be in valid
To save it the State attempted to justify it as a tax in exercise of power under Entry 50 of 92 List II
The submission was negatived as the legislative power of State under Entry 50 of List II was subject to any limitation imposed by the Parliament by law relating to mineral development 
The Bench held that in view of the Parliamentary legislation under Entry 54 of List I and the declaration made under Section 2 and provisions of Section 9 of the Act the State legislation was overridden to that extent
No such restriction or limitation is placed under Entry 54 of List II except that the exercise of power has been made subject to the provisions of Entry 92 of List I
But the problem has arisen due to the conclusion in the case of Synthetic and Chemicals supra
The question was if the State legislature could levy vend fee or excise duty on industrial alcohol
The Bench answered the question in the negative as industrial alcohol being unfit for human con sumption the State legislation was incompetent to levy any duty of excise either under Entry 51 or Entry 8 of List II of the VIIth Schedule
While doing so the Bench recorded the conclusion extracted earlier
It was not preceded by any discussion
No reason or rationale could be found in the order
This gives rise to an important question if the conclusion is law declared under Article 141 of the Consti tution or it is per incuriurn and is liable to be ignored Incuria  literally means carelessness 
In practice per incurium appears to mean per ignoratium  English Courts have developed this principle in relaxation of the rule of stare decisis
The quotable in law  is avoided and ignored if it is rendered in ignoratium of a statute or other binding authority 
1944 IKB 718 Young vs Bristol Aeroplane Ltd Same has been accepted approved and adopted by this Court while interpreting Article 141 of the Constitution which embodies the doctrine of precedents as a matter of law
In Jaisri Sahu vs Rajdewan Dubey this Court while pointing out the procedure to be followed when conflicting decisions are placed before a Bench extracted a passage from Halsbury Laws of England incorprating one of the exceptions when the decision of an Appellate Court is not binding
Does this principle extend and apply to a conclusion of law Which was neither raised nor preceded by any considera tion
In other words can such conclusions be considered as declaration of law Here again the English Courts and ju rists have carved out an exception to the rule of prece dents
It has been explained as rule of sub silentio
A decision passed sub silentio in the technical sense that has come to be attached to that phrase when the particular  point of law involved in 93 the decision is not perceived by the Court or present to its mind  Salmond 12th Edition
In Lancaster Motor Company London Ltd vs Bremith Ltd 1941 IKB 675 the Court did not feel bound by earlier decision as it was rendered wit hout any argument without reference to the crucial words of the rule and without any citation of the authority 
It was approved by this Court in Municipal Corporation of Delhi vs Gumam Kaur  The Bench held that prece dents sub silentio and without argument are of no moment 
The Courts thus have taken recourse to this principle for relieving from injustice perperated by unjust precedents
A decision which is not express and is not founded on reasons nor it proceeds on consideration of issue cannot be deemed to be a law declared to have a binding effect as is contem plated by Article 141
Uniformity and consistency are core of judicial discipline
But that which escapes in the judg ment without any occasion is not ratio decedendi
In Shama Rao vs State of Pondicherry AIR 1967 SC 1680 it was ob served it is trite to say that a decision is binding not because of its conclusions but in regard to its ratio and the principles laid down therein 
Any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be declaration of law or authority of a general nature binding as a precedent
Restraint in dissenting or overruling is for sake of stabil ity and uniformity but rigidity beyond reasonable limits is inimical to the growth of law
Effort was made to support the conclusion indirectly by urging that the State having raised same objections by way of review petition and the same having been rejected it amounted impliedly asproviding reason for conclusion
Law declared is not that can be culled out but that which is stated as law to be accepted and applied
A conclusion without reference to relevant provision of law is weaker than even casual observation
In the order of brother Thom men the extracts from the judgment of the Constitution Bench quoted in extenso demonstrate that the question of validity of levy of sales and purchase tax was neither in issue nor was it raised nor is there any discussion in the judgment except of course the stray argument advanced by the learned Attorney General to the following effect
But alcohol not fit for human consumption are not luxury and as such the State Legislatures according to Attorney General will have no power to levy tax on such alcohol Sales tax or purchase tax under Entry 54 is levied on sale or purchase of goods
It does not contemplate any distinc tion between luxury and 94 necessity
Luxuries are separately taxable under Entry 62
But that has nothing to do with Entry 54
What prompted this submission is not clear
Neither there was any occasion nor there is any constitutional inhibition or statutory restric tion under the legislative Entry nor does the taxing statute make any distinction between luxuries and necessities for levying tax
In any case the Bench did not examine it nor did it base its conclusions on it
In absence Of any discus sion or any argu ment the order was founded on a mistake of fact and therefore it could not be held to be law de clared
The Bench further was not apprised of earlier Con stitution Bench decisions in Hoechest Chemicals vs State of Bihar  and Ganga Sugar Mill vs State of UP  which specifically dealt with the legislative competence of levying sales tax in respect of any industry which had been declared to be of public impor tance
Therefore the conclusion of law by the Constitution Bench that no sales or purchase tax could be levied on industrial alcohol with utmost respect fell in both the exceptions namely rule of sub silentio and being in per incurium to the binding authority of the precedents
Ethyl alcohol is not fit for human consumption
It is principally used as raw material for manufacture of rubber etc
Since it was of all India importance the activities of which affected the country as a whole it was declared as of public importance by adding it as item No 1 under Entry 26 of the first Schedule appended to the Industrial Devel opment and Regulation Act 1951 hereinafter referred as IDRA
The effect of this declaration was that it stood removed from Entry 24 of List II and allocated to the Cen tral legislature
The control thus vested in the Parliament
But Entry 33 in Concurrent List permits both the Parliament and the State Legislature to deal with trade and commerce in it and also regulate production supply and distribution of goods declared to be of public importance
The State could therefore enact law under Entry 33 subject to it that the State legislation could not be repugnant to central legisla tion
That is if the field is already occupied by a Central enactment then the State legislation to that extent shall be invalid
See Tika Ramji vs State of U P  and Hoechest Pharmaceuticals Ltd vs State of Bihar  Can this principle apply to levy of purchase tax by an enactment made in exercise of legislative power under Entry 54 of List II Power to tax is a sovereign power
In federal system of governance it is exercised by distribution of power between the Union and the State
Both are supreme in their sphere
That is brought out clearly by Arti and Article 2463 of the Constitution
The legislative field for levying tax by Union is set out in Entries 82 to 92 in List i and of State in Entries 45 to 63 in List II of the VIIth Schedule
There is no overlapping
Fields are clearly demarcated
Limitations and restrictions are also mentioned
Unlike general entries power to levy tax cannot be deduced from another Entry as ancillary exercise of power
Since the Concurrent List does not contain any Entry relating to taxing power the concept of occupied field or repugnancy cannot arise
If there is clash between exer cise of power under List II and last I then the State legis lation may be invalid due to Article 2461
But since there can be no clash or invalidity in relation to taxing power the question of invalidity can not arise
Price fixation of ethyl alcohol is an exercise of power for regulating distribution and supply of it
The general entry for regulating distribution and supply is different from exercise of taxing power
The two do not even remotely touch each other
Therefore if the price goes up in exer cise of taxing power then subject to its being arbitrary or confiscatory it could not be struck down as intruding in forbidden field
In Hoechest Pharmaceuticals supra this Court while examining the ambit of Entry 54 of List II observed Entry 54 of List II of the Seventh Schedule is only subject to Entry 92A of List I and there can be no further curtailment of the status of power of taxation
Therefore the entire basis for striking down the levy that even though the State had plenary power to impose tax on salespurchase of goods can exercise taxing power under Entry 54 of List II so long as it does not militate against the legislative field occupied by the Central GOvernment under the IDR Act or any other enactment made under Entry 52 of List I proceeded on complete misconception of taxing powers of State
In fact as stated earlier the entire theory of occupied field or State legislation being repugnant to Central legislation is available when the two legislatures exercise their powers under ConcUrrent List
Therefore the order of the High Court striking down the levy cannot be upheld
VPR Appeal allowed


Summary:
The appellant company manufactured railway wagons in accordance with the specifications terms and conditions contained in the agreements entered between the appellant and the Railway Board from time to time
The Railway Board without charging any price supplied wheel sets axle boxes and various other finished components of wagons which were termed as free supply items to the appellant which were used in the manufacture of wagons and supplied the complete wagons to the Railway Board
The invoice value of the wagon charged by the appellant did not include the value of the free supply items
 The central excise authorities issued show cause to the appellant as to why the excise duty be not computed and charged on the value of the complete wagon including that the free supply items
The appellant challenged the show cause notices by filing a Writ Petition before the High Court
Holding that the excise duty could only be charged on the invoice value under the contract the Single Judge allowed the petition
The appeal filed by the Respondents against the judgment of the Single Judge was allowed by the Division Bench of the Court against which the present appeal was made by the appellant company
On the question whether the excise duty under sections 3 and 4 of the Central Excise and Salt Act 1944 was to be charged on the invoice value of the wagon or on the value of completed wagon including that of the free supply items
Dismissing the appeal this Court 961 HELD 1
Section 3 of the Act provides for levy of the duty of excise
It is a levy on goods produced or manufactured in India
Section 4 of the Act lays down the measure by reference to which the duty of excise is to be assessed
The duty of excise is linked and chargeable with reference to the value of the excisable good and the value is further defined in express terms by the said section
In every case the fundamental criterion for computing the value of excisable article is the normal price at which the excisable article or an article of the like kind and quality is sold or is capable of being sold by the manufacturer
940G 965A 2
What comes down from the assembly line of the appellant s factory is a complete wagon and as such the appellant being manufacturer of wagons is liable to pay duty of excise on the value of a complete wagon
The free supply items like wheel sets etc
in the process of manufacturing become part of the complete wagon and loose their identity
It hardly matters how and in what manner the components of the wagon are procured by the manufacturer so long as the appellant is manufacturing and producing the goods called wagons it is liable to pay duty of excise on the normal value of the wagon
965A C Empire Industries Limited and Others vs Union of India and Others  and Ms Ujagar Prints and Others vs Union of India and Others   followed