Civil Appeals
Nos 89 90 and 126 to 12861
Appeals from the judgment and order dated November 8 1957 of the Kerala High Court in o Ps
Nos 70 and 71 of 1956K and 2 6 and 7 of 1955 E MC Setalvad Attorney General of India and R Gopalakrishnan for the appellants in a As Nos 89 and 90 of 61
G section Pathak and V A Seyid Muhammad for the respondent in C As
Nos 89 and 90 of 61
A V Viswanatha Sastri A George Titus R Mahalingier and M R Krishna Pillai for the appellants in C As
126 to 128 of 61
G section Pathak and Sardar Bahadur for the respondents in a As Nos 126 to 128 of 1961
744 1962
January  24
The Judgment of B P Sinha C J P B Gajendragadkar K N Wanchoo and M Hidayatullah JJ Was delivered by Wanchoo J J C Shah J delivered a separate judgement
WANCHOO J These five appeals on certificates granted by the High Court of Kerala raise a common question of law and will be dealt with together
Two of them appeals 89 and 90 are from what was formerly the Cochin area and the other three are from what was the Travancore area
They relate to a tax on tobacco in these areas
As the facts laws and rules in the two areas are similar we propose to deal in detail with the appeals from the Cochin area
In 1909 Act VII of 1084 was passed by the Maharaja of Cochin to consolidate and amend the law relating to tobacco and was called the Cochin Tobacco Act VII of 1084 hereinafter called the Cochin Act
Section 4 of the Cochin Act prohibited the possession for sale transport import or export sale and cultivation of tobacco except as permitted under the Act or the rules framed thereunder
section 5 of the Act gave power to the Diwan to make rules from time to time consistent with the Act to permit
absolutely or subject to any conditions and also to regulate the possession for sale transport import or export sale and cultivation of tobacco as well as the form of duty leviable on the sale of tobacco by retail
The remaining provision of the Act deal with offences prosecutions punishment confiscation and other ancillary matters such as arrest and siezure with which we are not concerned in the present appeals
Reference may however be made to section 18 which provided that no action shall lie against the sirkar or against any officer of the Excise department for damages in any civil court for any act bona fide done or ordered to be done in pursuance of this Act or of any law for 745 the time being in force relating to tobacco revenue
Rules were framed under the Cochin Act called the Tobacco Cultivation Rules which by the first rule provided that the cultivation of tobacco plant is prohibited except under a licence and shall be restricted to such parts or localities of the State as may from time to time be fixed by the Diwan   Rule 3 provided for drying curing manufacturing and storing of the tobacco cultivated in the State to be done under the supervision of an officer of the Excise Department in licensed manufacturing yards and storehouses
Rule 4 provided for licensed for manufacturing yards and store houses
Rule 5 laid down that the licences would be in force for one official year and were to be issued on payment of a fee of Rs 50 for each licence Under r 6 the tobacco crop could only be harvested after permission obtained from the Inspector of Excise and under r7 the harvesting was to be done by the licensed cultivator under the general superintendence of the Sub Inspector
Of the locality in which the area cultivated lay and the harvested corp was to be transported only under permits granted by him from such area to the manufacturing yard where alone manufacture was to be undertaken
Rule 8 provided for the maintenance of a stock book by a licensee of a storehouse or n manufacturing yard
Rule 13 provided that the licensed manufacturer and the storehouse keeper would sell or otherwise dispose of his stock only to licensed dealers and there was prohibition against the disposal or sale of tobacco to any person who had not the required license to possess the same
Rule 15 made it an office for any one to cultivate dry cure manufacture store transport sell or otherwise dispose of tobacco in contravention of the Rules
In addition to these Rules there were further Rules also framed under the Cochin Act with 746 respect to import of tobacco into the State and all import was prohibited except under the provisions of the Diwan s notification describing the sale of tobacco shops and licences
Possession of tobacco for the purpose of sale was also prohibited except under the provisions for the sale of tobacco shops and licences
Export of tobacco was also prohibited except with the special sanction of the Commissioner of Excise
It further appears that the system in force for the collection of tobacco revenue up to August 1950 was to auction what were called A class and B class shops and the last of such auction was held under the notification dated May 30 1919
In addition there were a class shops the licence for which was granted either on the recommendation or in consultation with class licensees at the discretion of the Excise Commissioner or any other officer authorised by him on payment of the prescribed fee
This system along with the Rules already referred to was in force on April 1 1950
On April 1 1950 after the Constitution had come into force and Travancore Cochin has become a Part State thereunder the Finance Act No XXV of 1950 extended the  No1 of 1944 hereinafter called the Central Act to the Part State of Travancore Cochin by section 11 thereof
Section 13 2 of the Finance Act further provided that if immediately before the 1st day of April 1950 there is in force in any State other than Jammu and Kashmir a law corresponding to but other than an Act referred to in sub section
1 or 2 of section 11 such law is hereby repealed with effect from the said date  It seems that in consequence of this provision in the Finance Act 1950 the rules which were in force on April l 1950 were changed in the Cochin area by a notification dated August 3 1950 and the system of auction sales of A clause and shops was done away with and instead 747 graded licence fees were introduced for various classes of licensees including class licensees
Similar change was made for the Travancore area by notification dated January 25 1951
These Rules introduced by these two notifications also did away with the control of cultivation drying curing manufacturing and wrare housing which were in force under the earlier Rules so that these new Rules were only concerned with licensing of A and C class shops
A class licensees under the new Rules were called stockists class licensees were wholesale sellers and a class licensees were retailers
The system for A class licensees was that they were to pay a minimum annual fee for a Maximum quantity of tobacco or tobacco goods possessed by them and additional fee for further additional quantity Thus for example in the case of jaffra tobacco it was provided that maximum annual fee would be Rs1500 for a minimum of 100 candies and further fee of Rs1000 for additional quantity of 100 candies or part there of
The appellants of Cochin area were tobacco dealers and holders at the time they filed their petitions in 1956 of A class licences
The main contention raised on their behalf in their petitions was that the Cochin Act stood repealed by the Finance Act 1950 on the introduction of the Central Act in the part State of Travancore Cochin from April 1 1950 in consequence the notification which was issued on August 3 1950 or on January 25 1951 framing new Rules for the issue of licences and prescribing rules therefor under the powers conferred under the Cochin Act or the similar Travancore Act were ab initio void because the Acts under which the notifications were purported to be issued stood repealed from April 1 1950
In addition various other grounds were raised challenging the validity of the new Rules which however we do not think it necessary for the purposes of these appeals to set out here 748 The petitions were opposed on behalf of the State and it was contended that the Cochin Act or the similar Travancore Act did not stand repealed from April 1 1950 In consequence it was urged that the State was competent to frame new Rules which it did under the Cochin Act or the similar Travancore Act
Further the case of the State was that the graded licence fee introduced after April 1  was a tax which was sustainable under item 60 or 62 of List II of the Seventh Schedule to the constitution
The High Court dismissed the petitions holding that the laws under which the new Rules were framed were in force and were justifiable under item 62 of List II of the Seventh Schedule
Unfortunately though the judgment of the High court mentions the contention of the appellants that on the extension of the Central Act with effect from April 1 1950 by the Finance Act 1950 the Cochin Act as well as the similar Travancore Act ceased to be operative from that date there is no discussion in the judgment with regard to this contention and the High Court did not consider whether in view of s132 of the Finance Act 1950 the Cochin Act as well as the similar Travancore Act stood repealed from April 1 1950
If the effect of section 132 of the Finance Act 1950 was to repeal the Cochin Act as well as the similar Travancore Act from April 1 1950 there will be no law in operation which would justify the framing of the new Rules either in August 1950 orin January 1951 and it would then be unnecessary to consider whether a law contain inas provisions similar to those contained in the notification would be within the competence of the State legislature under item 62 of List ll of the Seventh Schedule
That question would only arise if the Cochin Act or the similar Travancore Act survived the repeal effected by section 132 of the Finance Act
749 We have therefore to see what the provisions of the Finance Act are in this Connection
As already indicated B 111 of the Finance Act extends the Central Act and the Rules and orders made thereunder which were in force immediately after the commencement of the Finance Act to all Part States except the State of Jammu and Kashmir
Consequently the Central Act as well as the Rules and orders made there under become applicable to the Part State of Travancore Cochin from April l 1950
Further section 132 of the Finance Act specifically provides that from April 1 1950 any law corresponding to the Central Act will be repealed from that date
The contention on behalf of the appellants is that the Cochin Act as well as the similar Travancore Act was a law corresponding to the Central Act and therefore stood repealed as from April 1 1950 under B 132 of the Act
and it is this contention that we have to examine
It was pointed out by this Court in The Custodian of Evacuee Property vs Khan Saheb Abdul Shakoor etc
1 that where the Act repealed provides substantially for all matters contained in the Act effecting the repeal there is correspondence between the two Acts and the earlier Act would thus stand repealed it is not necessary that there should be complete identity between the repealing Act and the Act repealed in every respect Therefore when section 13 2 of the Finance Act provides that on the extension of the Central Act from April 1 1950 to the Part State of Travancore Cochin any law corresponding to the Central Act is repealed with effect from that date all that we have to see whether the law repealed substantially provided for the same matters as the Central Act even though it may not be identical in all respects
Let us therefore turn to the Cochin Act and the rules framed thereunder to see if it substantially 750 provides for the same matters with which the Central Act and the Rules and Orders made thereunder deal
The main contention on behalf of the respondent in this connection is that the Central Act is an Act imposing a duty of excise on tobacco under item 45 of List I of the Seventh Schedule to the Government of India Act 1935 now corresponding to item 84 of List I of the Seventh Schedule to 
the constitution and such duty of excise is a duty on goods manufactured or produced in India
Thus according to the respondent the main feature of the Central Act is the imposition of a tax on goods produced or manufactured in India and unless the Cochin Act or the similar Travancore
Act also imposes a tax on goods produced or manufactured in what was formerly Cochin or Travancore State these would be no question of correspondence between the Central Act and the Cochin Act or the similar Travancore Act
Reference was also made to In Re the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act
1938 Central Provinces and Berar Act XIV of 1938 Province of Madras v Messrs Boddu Paidanna and Son2 and Governor General in Council vs Provinces of Madras 3 where the nature of a duty of excise was considered
In the first case it was held that the primary meaning of excise duty was of a tax on articles produced or manufactured in the taxing country see p 40
It was also observed in that case that it could not be denied that laws were to be found which impose a duty of excise at stages subsequent to the manufactures or production
In the second case it was held that duties of excise were duties levied on the manufacture or producer of the commodity taxed
In the third case the Privy council approved of the view of the Federal Court as to the nature of the duty of excise
It may therefore be accepted that a duty of excise is a 751 tax on goods produced or manufactured in the taking country
It may also be accepted that generally speaking the tax is on the manufacturer or the producer
though it cannot be denied that laws are to be found which impose a duty of excise at stages subsequent to the manufacture or production
We cannot however forget that the Cochin Act or the similar Travancore Act was passed by State in which there were no such Constitutional provisions as are to be found in the Government of India Act and it legislative Lists and this aspect will have to be borne in mind when judging the question of correspondence between the Central Act and the Cochin Act or the similar Travancore Act
Now the Central Act provides by section 3 for the levy and collection of duties of excise on all excisable goods other than salt which are produced or manufactured in India and also a duty on salt manufactured in or imported by land into any part of India
Further section 6 of the central Act gives power to the central Government to issue licences and prohibits any person from engaging in the wholesale purchase or also whether on his own account or as a broker or commission agent or the storage of any excisable goods except under the authority and in accordance with the terms and conditions of a licence granted under the Central Act
In Chaturbhai
M Patel vs The Union of India 1 where the various provisions of the Central Act including section 6 and the rules framed thereunder were attacked on the ground that they had nothing to do with the levy and collection of duties of excise this court held that the various provisions of the Central Act and the Rules made thereunder were essentially Connected with levying and collection of excise duty and in its true nature and character the Central Act remained one under item 45 of List I and that the incidental trenching upon the provincial field would not affect its constitutionality
The nature of the Rules the 752 considered will appear from the following observations at p 371 It the Central Act is a fiscal measure to levy and realise duty on tobacco
The method of realising duty must be left to the wisdom of the legislature taking each individual trade and its peculiarities and difficulties which arise in that matter
Various provisions of the Act and the Rules show that the authorities are on the track of the movement of tobacco from the time it is grown to the time it is manufactured and sold in the market and the various provisions of the Act and the Rules made thereunder have been considered necessary for effectuating the purpose of the Act
 It is true that the Central Act provides for the levy of excise duty under section 3 but in order to carry out that purpose it has provided for licences under section 6
The Rules also provide in Chap
III for levy and refund of duty in Chap
V for manufactured goods other than salt in Chap
VII for warehousing in Chap
VIII for licensing
Thus in order to levy excise duty under the Central Act there are provisions in the Rules which start in the case of tobacco from the stage of cultivation and continue right up to the time the finished product reaches the hand of the retailer and thus becomes a part of the commons stock for purposes of sale to the consumers
We have also seen that the Cochin Act similarly provides for control on tobacco from the stage at which it is grows to the stage tillit reaches Glass licensees who sell it in retail to the consumers
The Cochin Rules may not be so detailed as the Rules under the Central Act but their main object and purpose is the same namely to keep a check on tobacco from the time it is grown to the time it reaches the a Glass licensee who eventually sells it to the consumer
Further if one looks at the Rules 753 under the similar Travancore Act in vol
II of the Travancore Excise Manual which were in force on A April 1 1950 in relation to tobacco it will be found that there are elaborate rules in Part III from pp
257 to 325 dealing with all aspects of control relating to tobacco
IV deals with bonding and issue Chap
V with licences for sales Chap
VI with transport and possession
Further there are rules at p 296 for cultivation curing and warehousing
Then at p 14 are rules for the manufacture of cigars cheroots and snuff in bond
It will thus be clear r that the Cochin as well as the Travancore Rules provided for similar central of tobacco as under the Central Act and show that the authorities in Travancore and Cochin were also on the track of the movement of tobacco from the time it was grown and manufactured to the time it was sold in the market
It would therefore follow that the Cochin Act as well as the similar Travancore Act along with the Rules corresponded to the Central Act substantially and would thus be repealed by section 132 of the Finance Act 1950
But it is urged on behalf of the State that there is no provision for charging duty in the Cochin Act or the similar Travancore Act and therefore all these provisions in the Rules for control from the time of cultivation to the time of the final stage of sale to the consumer even though they are similar to the Rules under the Central Act would not make the Cochin Act or the similar Travancore Act a corresponding Act to the Central Act
There is no doubt that there is no provision corresponding to section 3 of the Central Act in the Cochin Act or in the similar Travancore Act
Under the Cochin Act the tax was levied by virtue of the power conferred on the Diwan under section 5 to make rules for the purpose
Under the similar Travancore Act the provision is contained in section 31 which provides that the Diwan may with the sanction of the ruler make rules permitting 754 absolutely or subject to the payment of any duty or fee or to any other conditions and regulating within the whole or any specified part of Travancore the cultivation manufacture possession transport import and sale of tobacco
So in both the former States the Act did not contain a charging section and the duty was levied by the Rules framed by the Diwan under the powers conferred on him by the Act
In essence therefore the provision for charging the tax was made in the Rules
Further it is true that the method by which the tobacco revenue was realised was through auction sales of the right to possess and sell tobacco
But we must not forget that the Cochin Act as well as the similar Travancore Act was passed by a Ruler who was not trammelled by a constitution like the Government of India Act 1935 and its Legislative Lists
The method evolved for realising tobacco revenue was to auction the right to poses and sell tobacco and the amounts received at such auctions would cover what would be duty under section 3 of the Central Act and licence fee under section 6 thereof
It is urged however that this does not amount to duty on goods produced nor is the duty in such a case paid by the manufacturer or producer of the goods
We have already indicated that the essence of the duty of excise as held by the Federal Court and the Privy Council is that it is a duty on the goods manufactured or produced in the taxing country
Further as generally the duty is on the goods produced or manufactured it is paid by the producer or manufacturer though as in the case of all indirect taxes it is passed on eventually to the consumer in the shape of being included in the price and is thus really borne by the consumer
Further the cases on which reliance bas been placed on behalf of the State also show that laws are to be found which impose duty of excise at stages subsequent to manufacture or 755 production
As a matter of fact even in British India before 1935 there used to be public auctions of the right to possess and sell excisable goods like country liquor ganja and bhang aid the amount realised was excise revenue
It is also obvious that this system of auction is not a system of levying sales tax because it has nothing to do with the levy on each sale which is the essence of a sales tax
It seems that in the former States of Travancore and Cochin auction system continued right up to the time the constitution came into force and even for sometime thereafter
It seems under the circumstances that the auction system which was in force was only a method of realising duty through the grant of licences to those who made the highest bid at the auctions
The fact therefore that this system was used instead of the system of charging of duty as provided in section 3 of the Central Act would not in our opinion make any difference to the nature of the impost which was in force on the relevant date namely April 1 1950
It was however urged that under this system even tobacco which was not produced or manufactured in the State but was imported from outside was included for the purpose of licences granted under it
That is undoubtedly so
But from the Rules which were in force regarding cultivation curing manufacturing and so on of tobacco within the State it would not be unreasonable to infer that the substantial part of the income from auctions was still in the nature of excise duty
Even in the case of imported tobacco only with respect to that part of it which was eventually sold to the consumer as it was imported without any processing or treatment in the State it can be said that the impost which fell on it was not in the nature of excise duty
However there is no way of differentiating this part of the revenue from the rest and considering the elaborate provisions as to the control of tobacco trade from the grower right up to the time that the 756 goods were sold to the public in retail sale it would r in our opinion be not unreasonable to hold that the Cochin Act as well as the Travancore Act was in substance an Act corresponding to the Central Act
Therefore when the Central Act was extended to the Part State of Travancore Cochin by section 11 1 of the Finance Act and the Finance Act specifically provided by section 13 2 for the repeal of corresponding law the result was that the Cochin Act as well as the similar Travancore Act stood repealed
There would be no power in the State Government thereafter to frame new Rules either in August 1950 or in January 1951 for there would be no law to support the new Rules and without such law the new Rules could not impose a tax as that would clearly offend article 265 of the Constitution
Further as soon as the Cochin Act as well as the similar Travancore Act stood repealed on April 1 1950 by virtue of a 132 of the Finance Act there could be no question of their being sustained under item 62 of List II of the Seventh Schedule for that would only arise if these were not repealed as corresponding law by s132
Turning now to the three Travancore appeals it is enough to pay that they stand on the same footing as the two Cochin appeals
If anything the Travancore Act as well as the Travancore Rules which were in force on April 1 1950 are more elaborate than the Cochin Act and the Cochin Rules
Further the Travancore Act by section 31 actually refers to manufacture also
The Cochin Act did not refer to manufacture in the Act itself though there was provision for manufacture in the Rules framed under the Act
What applies therefore to the Cochin Act and the Rules framed thereunder applies in force to the Travancore Act and the Rules framed thereunder and there is no doubt that the Travancore Act and the Rules framed thereunder were also a law corresponding to the Central Act and the Rules framed thereunder
The Travancore Act therefore also stood repealed from April 1 1950
There 757 would thus be no law to support the Rules framed by the State Government in January 1951 and therefore the Rules must fall
It appears that these new Rules have been abrogated as from January 1958
So it Was urged on behalf of the State that this Court should not grant a mere declaration as to the invalidity of the Rules when they are no longer in existence
This argument in our opinion has no force because we must look to the situation as it was when the petitions were presented
The Cochin petitions were presented in 1956 and the Travancore petitions were presented in 1955 and at that time the Rules were in force and they continued in force till December 1957
Therefore the petitioners would be entitled to a declaration that the Rules were invalid because at any rate that would give them relief so far as the period after their petitions is concerned while the Rules remained in force
We therefore allow the appeals and set aside the order of the High Court
The petitions are allowed and it is hereby declared that the new Rules purporting to be framed either under the cochin Act or under the Travancore Act in August 1960 and thereafter in January 1951 were invalid ab initio and have no force and effect
The appellants will get their costs from the State one set of hearing costs
SHAH J
In this group of five appeals the principal question which falls to be determined is whether within the meaning of a 132 of the Finance Act 1950 which by section 11 thereof extended the Central Excise  Salt Act I of 1944 to the Part b States there was immediately before the 1st of April 1950 in force in Part State of Travancore Cochin a law Corresponding to the Central Excise  Salt Act 1944 It is common ground that if there was such a law in force by virtue of s132 of the Finance Act of 1950 that law stood repealed 758 The appellants in Civil Appeals Nos89 and 90 of 1961 were carrying of the former state of Cochin
Appellants in Civil Appeals 126 to 128 of 1961 were residents of and carried on business in tobacco with in territory of the former State of Travancore
On July 1 1949 the States of Travancore and Cochin from themselves into a Union under a common administration but by the virtue of Travancore Cochin Administration Law 6 of 1125 ME the Acts which were previously in force
In the Territory of the former State of Travancore  there was in force the Travancore Tobacco Regulation I of Travancore in 1911
By section 3 of the ActTobacco was define as including snuff cigars cigarettes beedies tobacco powder and other preparations or admixtures of tobacco Section 4 of the Act imposed excepts as permitted by the Act or by any other enactment relating to tobacco for the time being in force by the Rules published under the Act or any other such enactment prohibitions against cultivation manufacture possessions transport importation exportation or sale of tobacco
By Chapter III of the Act power was conferred upon the officers of the Excise Department to search house suspected to contain tobacco and provision was made for incidental matters
Chapter IV dealt with offences and punishments and by section 31 the Diwan of the State was authorised with the sanction of the Ruler from time to time by Notification in Gazette to make rules consistent with the Act amongst other subject permitting absolutely or subject to the payment of any duty or fee or to any other conditions and regulating within the whole or to any other conditions and regulating within the whole or any specified part of the State of Travancore cultivation manufacture possession transportation 759 import and sale of tobacco authorising the establishment of warehouses or bankshalls for storing tobacco legally cultivated or imported into the territory fixing the mode time and place of levy T of duty regulating the special custody of tobacco warehoused and the levy of fees for warehousing and transport and generally to carry out the provisions of the Act
Rules were framed in 1913 in exercise of the powers under section 31 of the Tobacco Act whereby restrictions were imposed upon the import and export of tobacco and provision was made for bonding tobacco in warehouses and for the issue of licences for bonding tobacco
Provision was also made for licensing retail sale for tobacco and for transport and possession thereof
Certain other rules regulating cultivation curing and warehousing tobacco and for the issue of licences for those purposes were promulgated in 1937
Rules were also framed regulating the manufacture of cigars cigarettes and cheroots in bonds under licences
It is unnecessary to set out these rules in detail it may suffice to observe that cultivation curing manufacture possession transport importation and exportation and sale of tobacco was controlled by a system of licensing
Certain licences were issued free of charge and in respect of certain other licences especially storage and sale fee had to be paid to the State
Similarly in the State of Cochin there was enacted by the Ruler of Cochin the Cochin Tobacco Act of 1084 ME on May 3 1909
By section 3d of that Act tobacco was defined as inclusive of snuff cigars and preparations of which tobacco forms a part  By section 4 except as permitted by the Act or by the Rules made thereunder possession for the purposes of sale transport import export sale and cultivation of tobacco were prohibited
By a 5 the Diwan of the State was authorised from time to time after previous publication to make rules consistent with the Act to permit abso
760 lutely or subject to any Conditions regulating the possession transportation importation or exportation and sale and cultivation of tobacco
Contravention of the Act and the Rules or orders made under the Ace were penalised by section 6
Rules were framed in 1923 under the Cochin Tobacco Act providing for a system of licensing for cultivation manufacture and storage of tobacco and for incidental matters
Control was maintained over harvesting weighment storage stock taking and transport of tobacco and also on the export and import of tobacco
The authorities administering the provisions of the Tobacco Act and the Rules framed thereunder were the Commissioner of Excise and officers subordinate to him in the Excise Department
Licences for storage were to be annual licences and to be issued on payment of licence fee
Under the Cochin Act and the Rules framed thereunder control was maintained on tobacco at all the stages of its production manufacture and disposal
From a resume  of the provisions of these two Acts and rules and notifications issued thereunder it is manifest that on the production manufacture storage and sale of tobacco control was imposed and the administration of this control was left in the hands of the Excise Departments of the two States
As stated hereinbefore by virtue of Act VI of 1125 ME the two Acts in operation within the territories of the two States were continued even after the Union of Travancore and Cochin as formed and by article 372 of the constitution the provisions of the two Acts remained in operation in the respective area of the former States even after the PartB State of Travancore Cochin came into being on January 26 1950
By s11 of Finance Act 25 of 1950 certain Acts including the Central Excises  Salt Act 1 of 1944 and all Rules and orders made thereunder in force from time to time before the commencement of the 761 Finance Act were extended with effect from April 1 1950 to the part B States except the State of Jammu  Kashmir It was provided by section 132 that if immediately before the 1st of April 1950 there was in force in any State other than Jammu  Kashmir a law corresponding to but other than the Act referred to in sub section
1 section 11 such law shall stand repealed with effect from the said date
Presumably on account of the application of the Central Excises  Salt Act I of 1944 by section 11 of the Finance Act 1950 the Part B State of Travancore Cochin published fresh sets of Tobacco Rules
These Rules were issued on January 25 1951 in purported exercise of the powers conferred by the Travancore Regulation I of 1087 ME and the Cochin Tobacco Act of 1084 ME
Rule 14 which is common to both the sets of Rules provides that the vend of tobacco of all kinds is prohibited throughout the state except under a licence
Rule 15 provides that the licence for the vend of tobacco shall be of the following description i Stockist or A  Class licence ii Wholesale or B  Class licence  and iiiRetail or C  Class licence Rule 16i and ii provides i Holders of Stockist or A  Class licences shall be entitled to purchase tobacco from any dealer within or without the State without any quantitative restriction
This class of licensees shall sell only to other A  Class licensees or to B  Class licence ii The annual fees for these licences shall be as follows Then follows a table which sets out minimum fee prescribed for varieties of tobacco stocked upto the maximum 762 prescribed quantity and the additional fee payable for stocking additional quantities The appellants in all these appeals were A  Class stockists and were called upon to pay licence fee prescribed by these Rules
They claimed that they were not liable to pay licence fee under the Rules framed in 1951 because there was absolute delegation of legislative power by the Rules that the levy infringed their fundamental rights under articles 14 and 191g of the Constitution that the duty levied was in any event an excise duty and because the fee represented a tax on trade calling or employment and on that account was subject to the constitutional restriction imposed by article 276 2 of the Constitution
They also contended that the Tobacco Acts of the Travancore State and the Cochin State which had been kept alive by Act 6 of 1125 ME and by article 372 of the Constitution were superseded by the application of the  by section 11 of the Finance Act 1950
The High Court of Travancore Cochin in the petitions for writs of mandamus and other writs negatived the contentions raised by the appellants that the Acts and the Rules amounted absolute delegation of legislative power or that the fundamental rights under articles 14 and 191g and the restrictions imposed by article 2762 of the Constitution were infringed thereby
The High Court also held that the duty levied was not an excise duty and presumably on that account declined to consider the question whether the Tobacco Acts of the States of Travancore and Cochin had been superseded either wholly of partially by the application of the of 1944
The Travancore and the Cochin Acts do not directly levy any duty on production or manufacture of tobacco
Restrictions it is true are imposed 763 the growing curing manufacture storage import and export by requiring that licences shall be obtained for those purposes and prescribing penalties for violating the provisions of the Acts and the Rules
It also appears that the trade in tobacco was regulated before the formation of the B State of Travancore Cochin by holding auctions for the rights to sell tobacco
These auctions were held by Excise Commissioners and the highest bidder in the auction got the right to deal in tobacco and the two Acts were enacted for regulating and controlling the sale of tobacco but the State did not levy any duty on the manufacture or production of tobacco
The licence fee for the issue of a licence for growing curing manufacturing exporting importing or storing is not in itself an excise duty on the manufacture or production
The Federal Court In the matter of the Central Provinces and Berar Sales of Motor Spirit and lubricants Taxation Act 1938 observed   at the date of the Constitution Act Government of India Act 1935 though it seems that the word excise  was not infrequently for the administration of a particular indirect tax as salt excise or opium excise the only kind of excise duties which were known in India by that name were duties collected from manufacturers or producers and usually payable on the issue of the excisable articles from the place of manufacture or production
This also may not be conclusive in itself but it seems a not unreasonable inference that Parliament intended the expression duties of excise  in the Constitution Act to be understood in the sense in which upto that time it had always in fact been used in India where 764 indeed excise duties of any other kind were unknown
Nor indeed are excise duties properly so called often to be found at the present day which are not collected at the stage of production or manufacture whatever may have been the case in Blackstone s time and whatever may have been the reasons for Johnson s definition of Excise  in the first edition of his Dictionary 1755 Per Gwyer CJ This view was approved by the Judicial Committee in The Governor General in Council vs The Province of Madras An excise duty is according to the Indian Statute a duty on the manufacture or production of goods and the duty which was levied in the States of Travancore and Cochin on the storage of tobacco cannot be regarded as a duty of excise
But that conclusion is not decisive of the problem under consideration
The question has still to be considered whether the Travancore and Cochin Acts and the Rules framed thereunder were law corresponding to the  extended under the Finance Act 1950
The expression corresponding does not postulate identity of the State Law and the statute extended by section 11 of the Finance Act if there was in force at the material time law in the Part B State dealing with a particular subject matter and the law extended by section 11 of the Finance Act 1950 dealt with the same subject matter and the two laws though not identical still were such that if they stood together there would have been legislative duplication or overlapping the law in force in Part B State would be regarded as corresponding to the law extended by the Indian Finance Act and hence repealed by the operation of section 132
Let us examine the scheme of the of 1944 for the purpose of 765 ascertaining whether the Travancore and the Cochin Tobacco Acts and Rules frame thereunder are law corresponding to the  wholly or partially
The  was enacted to consolidate and amend the law relating to Central duties of excise on goods manufactured or produced in certain parts of India and to salt
The expression excisable goods is defined in section 2d as meaning goods specified in the First Schedule as being subject to a duty of excise and includes salt
By section 2f the expression manufacture is defined as inclusive of any process incidental or ancillary to the completion of a manufactured product and i in relation to tobacco includes the preparation of cigarettes cigars cheroots biris cigarette or pipe or hookah tobacco chewing tobacco or snuff x x x
By section 3 it is provided that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India x x x and at the rates set forth in the First Schedule
By section 6 certain incidental operations are made subject to licence and it is provided The Central Government may by notification in Official Gazette provide that from such date as may be specified in the notification no person shall except under the authority and in accordance with the terms and conditions of a licence granted under this Act engage in a the production or manufacture of any specified goods included in the First schedule or of saltpetre or of any specified component parts or ingredients of such goods or of specified containers of any specified excisable goods or b the wholesale purchase or sale whether on his own account or as a broker or commission agent or the storage of any excisable goods specified in this behalf in Part A of the Second Schedule
By virtue of these provisions power is conferred upon the Central Government to impose restrictions 766 upon the rights to produce manufacture and to engage in any process of production or manufacture of the excisable goods or in the wholesale purchase or sale of excisable goods this power is conferred indisputably as ancillary to enforcing the law enacted for the levy and collection of excise duty
By section 9 contraventions of the provisions of the Act and notifications thereunder are penalised
Power to forfeit goods is conferred by section 10
By Chapter III power to arrest and to summon persons to give evidence or produce documents in inquiries under the Act to search and the procedure to be followed by officers in charge of police stations inquiries to be made by Central Excise Officers against arrested persons forwarded to them are made
Chapter VI deals with adjudication of confiscations and penalties and Chapter VII enacts certain supplementary provisions
The Schedule to this Act sets out the descriptions of various goods and the rates of duty chargeable in respect thereof
The primary purpose of the Act is to levy and collect excise duty in respect of goods specified in the First Schedule and with that object in view diverse provisions are enacted
Tobacco is under the Act an excisable commodity and duty at rates specified in the Schedule is leviable in respect of different forms of tobacco
By section 6b wholesale purchase or sale or storage of excisable articles is prohibited
By Rule 7 of the Central Excise Rules 1944 duty is made payable by every person who produces cures manufactures or who stores in any warehouse any excisable goods
Rule 174 which occurs in Chapter VII deals with licensing
It provides in so far as it is material that Every manufacture trader or person hereinafter mentioned shall be required to take out a licence and shall not conduct his business in regard to such goods otherwise 767 than by the authority and subject to the terms and conditions of a licence granted by a duly authorised officer in the proper From 1 Matches x x x 2 Unmanufactured products
Curers brokers Commission agents and wholesale dealers who purchase such products from cures all brokers commission agents and wholesale dealers doing business in unmanufactured tobacco all holders of private bonded store rooms or warehouses 3 Other excisable goods except salt a Manufacturers and b x x x Rule 175 deals with the procedure for obtaining a licence
By the 1st clause it provides that every person desiring to engage in operations requiring the possession of a licence aforesaid shall apply in writing every year for a licence or renewal thereof to the licensing authority who shall be such officer as the Central Board of Revenue may authorise in this behalf
Rule 176 prescribes Forms application for licences and cl
2 provides that every such application for licence shall where a fee is prescribed in the subjoined Table be accompanied by a Central Excise Revenue Stamp showing payment of such fee under item No 2 in the Table a wholesale dealer in unmanufactured tobacco who purchases for the purpose of trade or manufacture the to pay graded fee set out in the second and the third columns
Item 6 deals with the duty payable by the holder of a private bonded store room or warehouse
Rule 178 provides for the Forms of licence
The appropriate forms of licence in respect of storage of tobacco for sale are Form L 2 application for licence to carry on wholesale trade 768 in unmanufactured products liable to a central duty of excise Form L 3 application for licence as broker or commission agent in respect of unmanufactured products liable to a central duty of excise and Form L 5 application for licence for a private bonded warehouse storeroom for the storage of excisable goods
It is manifest that under the Rules so framed duty is imposed to obtain a licence on payment of fee for storage of tobacco for sale
It is not disputed that the appellants in all the appeals took out licences under rules 174 and 178 of the and paid the licence fee in that behalf to the Central Government
The appellants were also required to pay licence fee for the storage of tobacco for sale under the provisions of the Travancore and the Cochin Tobacco Acts and the Rules framed thereunder on January 25 1951
It is true that under the  the provision for obtaining licences for storage is a provision ancillary to the recovery of excise duty whereas under the Travancore and the Cochin Acts the levy of licence fee was imposed in pursuance of a scheme for maintaining control on the sale of tobacco without expressly levying any excise duty
But on that account it cannot be said that the provisions relating to the requirement of licences and the payment of licence fees for storage of tobacco for sale under the Travancore and the Cochin Acts were not provision corresponding to the provisions of section 6b under the and the rules framed under the Act requiring that licences shall be taken out for storage of tobacco for sale and fee shall be paid in respect thereof
In my judgment the relevant rules made under the Travancore and the Cochin Tobacco Acts requiring licences to be taken for storage of tobacco and in force on April 1 1950 were law corresponding to the provisions of the Central Excise and Salt Act 1944 and the rules 769 framed thereunder which required licences to be taken out for storage of tobacco and for payment of licence fee in respect thereof and to that extent the provisions imposing an obligation to take out licences and to pay licence fees under the Tobacco Acts of Travancor and the Cochin States were superseded and the State of Travancore Cochin had no authority to promulgate rules 14 15 and 16 under the Notification issued in the Travancore Cochin Government Gazette dated January 251951 and to levy licence fee for storage of tobacco
It is unnecessary to consider whether the remaining provisions of the Travancore and the Cochin Tobacco Acts and the Rules framed there under were law corresponding with the 
For these reasons I agree that the appeals be allowed and the order passed by the High Court be set aside
In each petition a writ will issue declaring that the levy of licence fee under the Notification dated January 25 1951 is without authority of law and that the State of Travancore Cochin do forbear from levying and collecting the licence fee
Appeals allowed


Summary:
ln 1909 the Ruler of the erstwhile State of Cochin enacted the Cochin Tobacco Act of 1084 ME with the object of controlling the cultivation production manufacture storage and sale of tobacco
Rules were framed under the Act for regulating the cultivation possession transportation and sale of tobacco and a system of licensing was introduced for that purpose
Licences for storage were to be annual and to be issued on payment of licence fee
The authorities administering the provisionals of the Act and the Rules framed thereunder were the commissioner of Excise and his subordinates
The system in force for the collection of tobacco revenue was to auction what were called A class and class shops
A law similar to that prevailing in Cochin was promulgated in 1911 by the Ruler of Travancore as the Travancore Tobacco Regulation of 1087 ME
The two States merged themselves in 1919 as the State of Travancore Cochin but the two Acts continued to remain in force in the respective territories
On April 1 1950 after the Constitution of India had come into force and Travancore cochin had become a 742 Part B State thereunder by s11 of the Finance Act 1950 the central Excises and Salt Act194was ex tended to that State
Section 132 of the Finance Act 1950provided that if immediately before the 1st day of April1950 there is in force in any State other than Jammu and Kashmir a law correspo nding tobut other than an Act referred to in sub s1 or 2 of s11 such law is repealed with effect from the said date
 After this provision in the Finance Act 1950 the Rules which were in force on April 1 1950 were changed in the Cochin area by a notification dated August 3 1950 and the system of auction sales of A Class and Class shops was done away with and instead graded licence fees were introduced for various classes of licensees
Similar change was made for the Travancore area by notification dated January 25 1951
The appellants who were carrying on business in tobacco within the territories of Travancore and Cochin challenged the legal its of the notifications of August 3 1950and January 25 1951 on the ground that the Cochin Tobacco Act and the Travancore Tobacco Regulation under which the notifications were purported to be issued were law corresponding to the  and so they stood repealed from April 1 1950 by virtue of the operation of sections 11 and 132 of the Finance Act
It was contended for the State of Kerala that the main feature of the Central Excise and Salt Act 1944 was the imposition of a duty of excise on goods produced or manufactured in India and that there was no provision for charging duty in the Cochin Act or the similar Travancore Act and therefore all these provisions in the Rules for the control of tobacco from the time of cultivation to the time of the final stage of sale to the consumer even though they were similar to the Rules under the Central Act would not make the Cochin Act or the similar Travancore Act a law corresponding to the Central Act
 Held that the rules framed under the Cochin Tobacco Act of 1084ME and the Travancore Tobacco Regulation of 1087 M E requiring licences to be taken out for storage and sale of tobacco and for payment of licence fee in respect thereof were law corresponding to the provisions of the  and hence were superseded on April 1 1950 by virtue of section 1312 of the Finance Act 1950
consequently the new Rules framed in August 1950 and January 1951 for the respective areas of Cochin and the respective areas of Cochin and Travancore for the issue of license and payment of fee therefore for storage of tobacco were invalid ab initio
Per Sinha C J GajendragadkarWanchoo and Hidayatullah JJ I The Cochin Tobacco Act 1084 743 ME as well as the Travancore Tobacco Regulation 1087ME were in substance law corresponding to the  and therefore stood repealed on April 1 1950
2 The auction system which was in force under the Cochin and Travancore Acts was only a method of realising duty through the grant of licences to those who made the highest bid at the auctions
The fact that this system was used instead of the system of charging of duty as provided in s3 of the Central Excise and Salt Act 1944 would not make any difference to the nature of the impost the income from auctions was in the nature of excise duty
Per Shab J
An Excise duty is according to the Indian statute a duty on the manufacture or production of goods and the duty which was levied in the States of Travancore and Cochin on the storage of tobacco cannot be regarded as a duty of excise
In re The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act 1938  The Province of Madras vs Messrs Boddu Paidanna and Sons  Governor General in Council vs Province of Madras 1945  LR 72 IA 91 and Chaturbhai M Petal vs The Union of India   considered