Case: A.B. Abdul Kadir &amp; Ors Etc Vs. State Of Kerala

is unquestionably within the legislative competence of the State Legislature in view of entry 62 in List II of the Seventh Schedule to the Constitution. As such, it cannot be said that the impugned Act is a colourable piece of legislation. In the case of Jaora Sugar Mills (P) Ltd. access was levied under the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1958 on sugarcane. This Court in the earlier case of Diamond Sugar Mills([1961] 3 S.C .R 242.) had held that such a levy was not valid. Following the above decision the Madhya Pradesh High Court struck down section 23 which was t he charging section of the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1958. There were similar Acts in- several other States which suffered from the same infirmity and to meet that situation, Parliament passed the Sugarcane Cess (Validation) Act, 1961. The Act made valid by section 3 all the assessments and collections made before its commencement under the various State Acts and laid down that all the provisions of the State Acts as well as the relevant notifications, rules, etc., made under the State Acts would be treated as part of section 3. It was further provided that the said section shall be deemed to have existed at all material times when the cess was imposed, assessed and collected under the State Acts. The appellant, a sugar factory, was asked to pay the cess for the years 1959-60 and 1960-61. The appellant challenged the levy. The High Court having dismissed the petition, the appellant came to this Court. Among the various contentions which were advanced on behalf of the appellant in the case were: (1) What the validation of the Act had done was to attempt to cure the legislative incompetence of the State Legislatures by validating State Acts which were invalid on the ground of absence of legislative competence in the respective State Legislatures; (2) Parliament lrad passed the Act in question not for the purpose of levying a cess of its own , but for the purpose of enabling the respective States to retain the amounts which they had illegally collected. The Act was, therefore, a colourable piece of legislation; and (3) The Act had not been passed for the purposes of the Union of India and the recoveries of cesses which were retrospectively authorised by it were not likely to go into the Consolidated Fund of India. The Constitution Bench of this Court speaking through Gajendragadkar CJ. repelled all the above contentions. It was held by this Court that if collections are made under statutory provision which are invalid because they deal with a topic outside the legislative competence of the State Legislature, the Parliament can in exercise of its undoubted legislative competence, pass a law retrospectively validating the said collections by converting their character into collections made under its own statute operating retrospectively. So far as the present case is concerned, we have already pointed out above that it was within the competence of the State Legislature to make a law in respect of luxury tax and to recover that tax in the shape of licence fee for vend and stocking of tobacco. The State Legislature has sought to validate the recovery of the amounts already made by treating those amounts as luxury tax. The fact that the validation of the levy entailed converting the character of the collection from an impermissible excise duty into permissible luxury tax would not render it unconstitutional. The only conditions are that the levy should be of a nature which can answer to the description of luxury tax and that the State Legislature should be competent to enact a law for recovery of luxury tax. Both these conditions as stated above are satisfied.As regards the power of the legislature to give retrospective operation to a tax legislation, we may also refer to the case of Rai Ramkrishna &Ors. v. State of Bihar ([1964] 1 S.C.R 897.) wherein it was held that where the legislature can make a valid law, it can provide not only for the prospective operation of the material provisions of the said law but can also provide for the retrospective operation of the said provisions. The legislative power was held to include the subsidiary or the auxiliary power to validate law which had been found to be `H invalid. It was also observed that in judging the reasonableness of the retrospective operation of law for the purpose of article 304(b), The test of length of time covered by the retrospective operation could nob by itself be treated as decisive. Again, in the case of Epari Chinna Krishna Moorthy, Proprie tor, Epari Chinna Moorthy &Sons, Berhampur, Orissa v. State of Orissa([1964] 7 S.C.R. 185.) the Constitution Bench of this Court repelled the argument that a legislation should be held to be invalid because its retrospective operation might operate harshly in some cases.19. As a result of the above, we would hold that the impugned provisions are protected by article 304(b) of the Constitution.20. Lastly, it has been argued that section 6 of the impugned Act is invalid because it provides for payment of an amount which had been refunded in pursuance of the order of this Court. Section 6 is thus stated to be an encroachment by the legislature upon a judicial field. This contention, in our opinion, is bereft of force. If a provision regarding the levy of luxury tax is within the competence of the State Legislature, the said Legislature would be well within its competence to enact a law for recovery of an amount which, though already refunded to a party, partakes o f the nature of luxury tax in the light of that law. If an amount can answer to the description of luxury tax, there would be no legal impediment to recovering the same as luxury tax, even though initially it was recovered or sought to be re covered as something different from luxury tax.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The above submission of Mr. Patel, in our opinion, is wellwe are concerned with is the constitutional validity of the Kerala Act 9 of 1964. This Act was enacted subsequent to the above decision of this Court rendered on January 24, 1962. No question relating to the validity of the above mentioned Act in the very nature of things could arise at the time of the earlier decision in 1962. We, therefore, are of the view that the judgment dated January 24, 1962 of this Court does not operate as res judicate regarding the points of controversy with which we are concerned in these appeals.It has next been argued on behalf of the appellants that the levy for the licence fee for stocking and vending of tobacco, even though described as luxury tax in charging section 3 of the Act, is in reality and substance an excise duty on tobacco. Excise duty on tobacco under entry 84 of List I of the Seventh Schedule to the Constitution can only be levied by Parliament and, as such, according to the learned counsel for the appellants, the State Legislature was not competent to enact the impugned Act 9 of 1964. This; contention. in our opinion, is equally devoid of force. Excise duty, it is now well-settled, is a tax on articles produced or manufactured in the taxing country. Generally speaking, the tax is on the manufacturer or the producer, yet laws are to be found which impose a duty of excise at stages subsequent to the manufacture orfact that the levy of excise duty is in the form of licence fee would not detract from the fact that the levy relates to excise duty. It is, however, essential that such levy should be linked with production or manufacture of the excisable article. The recovery of licence fee in such an event would be one of the modes of levy of the excise duty. Where, however, the levy imposed or tax has no nexus with the manufacture or production of an article, the impost or tax cannot be regarded to be one in the nature of excisethat the provisions of the Act fall under entry 84 of List I of the Seventh Schedule to the Constitution must, therefore, be held to be bereft of force.Perusal of the rules shows that it was imperative for the A class licensees to pay the licence fee in advance before they could bring tobacco within the taxable territory. We agree with the learned Judges of the High Court that such levy directly impedes the free flow of trade and as such is violative of article 301 of theis no doubt true that the assent of the President was given subsequent to the passing of the Bill by the legislature but that fact would not affect the validity of the impugned Act in view of the provisions of article 255 of theis well-settled that when power is conferred upon the legislature to levy tax, that power must be widely construed; it must include the power to impose a tax and select the articles or commodities for the exercise of such power; it must likewise include the power to fix the rate and prescribe the machinery for the recovery of tax. This power also gives jurisdiction to the legislature to make such provisions as, in its Opinion, would be necessary to prevent the evasion of theagree with Mr. Krishnamurthy Iyer that the onus of showing that the restrictions on the freedom of trade, commerce or intercourse in the public interest are reasonable, is upon the State. It is also true that no effort was made in the affidavit filed on behalf of the State in this case to show as to how the restrictions were reasonable, but that fact would not necessarily lead the court to hold that the restrictions are unreasonable. If the court on consideration of the totality of facts finds that the restrictions are reasonable, the court would uphold the same in spite of lack of details in the affidavit filed on behalf of the State. In judging the question of reasonableness of restriction in the present case, we must bear in mind that the levy of luxury tax relates to tobacco, the consumption of which involves health hazard. Regulation of the sale and stocking of an article like tobacco which has a health hazard and is considered to be an article of luxury by imposing a licence fee for the same, in our opinion, is a permissible restriction in public interest within article 304(b) of the Constitution. The material on record shows that except for cultivation of tobacco on experimental basis, no tobacco is grown in the area with which we are concerned . The levy of luxury tax is bound to result in raising the price of tobacco in the area of erstwhile States of Travancore and Cochin. Once of the likely effects of the enhancement of the price of a commodity entailing health hazards is to lower its consumption.The fact that there is no commercial production of tobacco in the area with which we are concerned would show that there is no discrimination between tobacco brought from outside that area and the locally grown tobacco because in fact there is no tobacco of the latter category, except that grown on experimentalcontention, in our opinion, is not well founded. The fact that the operation of the Act is confined to a particular area and does not extend to the entire State is due to historical reasons. The object of the Act was to validate the recoveries alreadyare unable to accede to the submission that this Court lost sight of the fact that the Act was not applicable to the Telengana area in holding that its provisions were protected by article 304(b) of the Constitution.It is also true that the levy of tax relates only to the period from August 17, 1950 to December 31, 1957, but that too was due to the historical reason that the licence fee had been realised only during that period and the object of the impugned Act was to validate the recovery alreadyabove argument has a seeming plausibility, but, on deeper examination, we find it to be notabove principle would, however, have no application where, as in the present case, what is sought to be done is to validate the recovery of licence fee for stocking and vending of tobacco. The impugned provisions under which that levy is sought to be made with a retrospective effect have nothing to do, as already pointed out above, with production and manufacture of tobacco. The levy is sought to be made as luxury tax which is within the competence of the State Legislature and not as excise duty which is beyond the legislative competence of the State Legislature. If the levy in question can be justified under a provision which is within the legislative competence of the State Legislature, the levy shall be held to be validly imposed and cannot be considered to bea challenge to the validity of a legal enactment is made on the ground that it is a colourable piece of legislation, what has to be proved to the satisfaction of the court is that though the Act ostensibly is within the legislative competence of the legislature in question, in substance and reality it covers field which is outside its legislative competence. In the present case we find that in enacting the impugned provisions, the State Legislature, as already pointed out above, has exercised a power of levying luxury tax in the shape of licence fee on the vend and stocking of tobacco. The enactment of a law for levying luxury tax is unquestionably within the legislative competence of the State Legislature in view of entry 62 in List II of the Seventh Schedule to the Constitution. As such, it cannot be said that the impugned Act is a colourable piece offar as the present case is concerned, we have already pointed out above that it was within the competence of the State Legislature to make a law in respect of luxury tax and to recover that tax in the shape of licence fee for vend and stocking of tobacco. The State Legislature has sought to validate the recovery of the amounts already made by treating those amounts as luxury tax. The fact that the validation of the levy entailed converting the character of the collection from an impermissible excise duty into permissible luxury tax would not render it unconstitutional. The only conditions are that the levy should be of a nature which can answer to the description of luxury tax and that the State Legislature should be competent to enact a law for recovery of luxury tax. Both these conditions as stated above are satisfied.As regards the power of the legislature to give retrospective operation to a tax legislation, we may also refer to the case of Rai Ramkrishna &Ors. v. State of Bihar ([1964] 1 S.C.R 897.) wherein it was held that where the legislature can make a valid law, it can provide not only for the prospective operation of the material provisions of the said law but can also provide for the retrospective operation of the said provisions. The legislative power was held to include the subsidiary or the auxiliary power to validate law which had been found to be `H invalid. It was also observed that in judging the reasonableness of the retrospective operation of law for the purpose of article 304(b), The test of length of time covered by the retrospective operation could nob by itself be treated as decisive. Again, in the case of Epari Chinna Krishna Moorthy, Proprie tor, Epari Chinna Moorthy &Sons, Berhampur, Orissa v. State of Orissa([1964] 7 S.C.R. 185.) the Constitution Bench of this Court repelled the argument that a legislation should be held to be invalid because its retrospective operation might operate harshly in somea result of the above, we would hold that the impugned provisions are protected by article 304(b) of thecontention, in our opinion, is bereft of force. If a provision regarding the levy of luxury tax is within the competence of the State Legislature, the said Legislature would be well within its competence to enact a law for recovery of an amount which, though already refunded to a party, partakes o f the nature of luxury tax in the light of that law. If an amount can answer to the description of luxury tax, there would be no legal impediment to recovering the same as luxury tax, even though initially it was recovered or sought to be re covered as something different from luxury tax.