Case: M/S. Shinde Brothers &amp; Others  Vs. Deputy Commissioner, Raichur &amp; Others

, as do other provincial Acts, for lump sum payments in certain cases by manufacturers and retailers, which may be described as payments either for the privilege of selling alcohol, or as consideration for the temporary grant of a monopoly; but these are clearly not excise duties or anything like them. Provision was also made in most provincial Acts for the payment of licence fees in connection with the production or sale of alcohol in the Province; but these fees are mentioned in the Devolution Rules entry in addition to excise duties and are, therefore, something different from them." 25. Mr. Gokhale also relies on the legislative practice existing before the Government of India Act, 1935, came into force and his contention is that all the Acts existing before the Government of India Act, 1935, imposed excise duties and collected them by auctioning the privilege of sale or manufacture. The Legislative practice is not of any assistance because all duties collected under these Acts were not excise duties. We are not concerned here with the case of manufacture or the privilege of manufacture, and it is not necessary for us to decide whether Chief Justice Gwyer was right in so far as the auction of the privilege of manufacturing excisable article is concerned. But fit is interesting to note that even in Australia where a very wide meaning has been given to the word "excise", a fee for a mere licence to engage in business even if it be indirectly connected with production or manufacture has not been held to be an excise duty. The High Court of Australia held in Peterswald v. Bartley, 1 CLR 497 , that the State Act imposing a licence fee upon brewers as a condition precedent to the carrying on of their business and punishing non-compliance with its provisions was not opposed to S. 90 of the Australian Constitution. It may be that Chief Justice Gwyer had this case in mind when he made the observations reproduced above. Recently in Dennis Hotels Pvt. Ltd. v. Victoria, 33 ALJR 470, the High Court of Australia, by majority, held that S. 19 (1) (a) of the Licensing Act, 1958 (Vic.) which imposed fees for a Victuallers licence calculated at "equal to the sum of six per centum of the gross amount (including any duties thereon) paid or payable for all liquors which during the 12 months ended on the last day of June preceding the date of application for the grant or renewal of the licence was purchased for the premises was valid as it did not impose any excise duty within S. 90 of the Australian Constitution. 26. It is now necessary to consider the decision of this Court in 1962 Supp (2) SCR 741 (AIR 1962 SC 922 ), Disting. This decision is of course binding on us, but, in our opinion, this case is distinguishable. The question before the Court was whether Cochin Tobacco, Act, 1084 (Cochin Act VII of 1084 M.E.) and Travancore Tobacco Regulation, 1087 (Travancore 1 of 1087 M.E.) were laws corresponding to the Central Excise Act, and within Ss. 11 (1) and 13 (2) of the Finance Act, 1950. The Court was not concerned with the question whether the levies being made under these Acts were strictly excise duties within Item 51, List II and this is quite apparent from the fact that even though these Acts also imposed import duties, these were held in substance to be Acts corresponding to the Central Excise Act. Further the only system in force for the collection of tobacco revenue was to auction what was called A class and B class shops. There was no other duty levied on tobacco at all. As we have already said, it depends on the facts of each case whether in view of the scheme of the Act and the various provisions and the rules the revenue being obtained in an excise duty or not. It is true that Wanchoo, J.. referred to the practice of public auctions of the right to possess and sell excisable goods, but what he said was that the amount realised from these auctions was excise revenue, he did not say that the amount realized was excise duty as such in the strict sense of the term. 27. We may now deal with the propositions submitted by Mr. Gokhale. The first point taken by Mr. Gokhale is not sound. It is contrary to what has been consistently laid down by this Court: that it must be shown in every case that the duty has been levied on goods which have been produced or manufactured, the taxable event being production or manufacture of goods. 28. We also consider that his second proposition is not sound. There is no presumption that if no other taxable event has intervened, the levy must be treated to be connected with production or manufacture. This, as we have said above, must depend upon the facts of each case. But it must be positively shown that the taxable event for the duty which has been levied is manufacture or production of the article. We agree with his contention that the method of its collection is not decisive but, in our opinion in cases of doubt it may throw some light on this question. 29. Mr. Setalvad who appears in the appeals concerned with licenses for arrack points out that Para. 29 (a) of the General Conditions applicable to all excise and opium licenses specifically provides that the manufacturers of arrack and other country spirits as well as the licensees of arrack Bonded Depots are prohibited from holding any interest in the retail vend of arrack or in the vend of other country spirits and from employing any person who has such interest. He says that this strengthens his case because the money realised by the sale of licenses for vending arrack can have no relation to the manufacture or production of arrack. There is force in his contention.

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

Explanation:
1[ds]t appears to us that by Ss. 12 and 15 of the Act manufacture and sale of toddy is prohibited, but S. 16 enables the Government to grant an exclusive or other privilege, inter alia, of manufacturing or selling by retail. It is the latter privilege which was auctioned under the two notifications mentioned above. Section 17 is the charging section and it is quite clear that the word duty in the opening sentence does not mean only excise duty. If an import duty or export duty is levied under S. 17 it would not be an excise duty within Entry 51, List II. Section 18 prescribes the modes of levy of the duties. We are concerned with the mode mentioned in S. 18 (c) (2), i.e., by payment of a sum in consideration of the grant of exclusive or other privileges of selling by retail. It is noteworthy that S. 28 distinguishes amount due to the Government by any grantee of a privilege from duties, taxes and feesWe are unable to accept this contention because some at least of the duties collected under S. 18 (b) would be excise duties. However, this much may be conceded that the Mysore Excise Act not only does not expressly call the duty collected under S. 18 (c) (2) all excise duty, but in S. 28 seems to mention it differentlyThe licences granted to the petitioner were governed by detailed regulatory provisions regarding sale, tent Condition No. 2 makes it clear that the license is in the main for selling. Further if he taps toddy he has to obtain toddy-tapping licences and pay feesWe have already mentioned that the petitioner obtained the privilege of selling toddy at certain shops by bidding at auctions held in pursuance of the two notifications mentioned aboveWe are, however, not impressed by any of these arguments. It seems to us clear that the legislature was levying a health cess on a number of items of State revenue or tax and it adopted the form of calling it a cess and prescribed the rate of nine naye paise in the rupee on the State revenue or tax. Section 4 of the impugned Act makes it quite clear that the cess is leviable and recoverable in the same manner as items of land revenue, State revenue or tax. In the context, the word on in S. 3 does not indicate that the subject-matter of taxation is land revenue or State revenue, but that 9 per cent of the land revenue or State revenue is to be levied and collected, the subject-matter remaining the same as in the law imposing land revenue or any duty or tax. If we read Ss. 3 and 4 together the fact that the words "surcharge" or additional duty" have not been mentioned does not detract from the real substance of the legislation. Accordingly we hold that the Mysore Legislature was competent to enact the law under the various entries of List II which enable it to levy land revenue or the duties of excise, or the other taxes mentioned in S. 3 (iii) of the impugned Actcases establish that in order to be an excise, duty (a) the levy must be upon goods, and (b) the taxable event must be the manufacture of production of goods. Further the levy need not be imposed at the stage of production or manufacture but may be imposed later21. But it is not easy to decide in a particular case whether the particular levy is a levy in respect of manufacture or production of goods. It appears to us that this question has to be decided on the facts of each case, but in deciding the question certain principles must be borne in mind. First, one of the essential characteristics of an excise duty is uniformity of incidenceis difficult to see how the State can fix countervailing duties at the same or lower rates unless the rate of excise as such is known or can be ascertained. Similarly, S. 64-A of the Indian Sale of Goods Act, 1930, contemplates a uniformity of incidencethe duty must be closely related to production or manufacture of goods. It does not matter if the levy is made not at the moment of production or manufacture but at a later stage. If a duty has been levied on an excisable article but this duty is collected from a retailer it would not necessarily cease to be an excise duty. Thirdly, if a levy is made for the privilege of selling an excisable article and the excisable article has already borne the duty and the duty has been paid, there must be clear terms in the charging section to indicate that what is being levied for the purpose of privilege of sale is in fact a duty of exciseFirst, it is a payment for the exclusive privilege of selling toddy from certain shops. The licensee pays what he considers to be equivalent to the value of the right. Secondly, it has no close relation to the production or manufacture of toddy. Thirdly, the only relation it has to the production or manufacture of toddy is that it enables the licensee to sell it. But he may sell little, less or more than he anticipated, depending on various factors. Fourthly, toddy has already paid one excise duty in the form of tree-tax. If the petitioner taps toddy he pays tree tax, but he need not tap himself. Fifthly, the duty is not uniform in incidence because the amount collected has no relation to the quantity or quality of the product but has only relation to what the petitioner thought he could recoup by the sale of the excisable articles. What he recoups would depend upon the amount of sales and the conditions prevailing during the licensing year. Sixthly, there are no express words showing that what is being realised from the petitioner is an excise duty. In fact what S.16 of the Mysore Excise Act says is that a privilege has been granted to him for selling by retail. Section 28 refers specifically to an amount due to the Government by any grantee of the privilege and the legislature apparently did not think that this amount would be covered by the expression all duties, taxes, fines and fees payable to the Government" occurring in S.28. Seventhly, the privilege of selling is auctioned well before the goods come into existence. In this case it would be noticed that the second notification, dated April 27, 1964, was for the sale during the next two yearsIn our opinion the answer is in the negative. The taxable event is not the manufacture or production of goods but the acceptance of the license to sell. In other words, the levy is in respect of the business of carrying on the sale of toddy. There is no connection of any part of the levy with any manufacture or production of any goods. To accept the contention of the State would mean expanding the definition of "excise duty" to include a levy which has close relation to the sale of excisable goods. It is now too late in the day to do soThe Legislative practice is not of any assistance because all duties collected under these Acts were not excise duties. We are not concerned here with the case of manufacture or the privilege of manufacture, and it is not necessary for us to decide whether Chief Justice Gwyer was right in so far as the auction of the privilege of manufacturing excisable article is concerned. But fit is interesting to note that even in Australia where a very wide meaning has been given to the word "excise", a fee for a mere licence to engage in business even if it be indirectly connected with production or manufacture has not been held to be an excise duty27. We may now deal with the propositions submitted by Mr. Gokhale. The first point taken by Mr. Gokhale is not sound. It is contrary to what has been consistently laid down by this Court: that it must be shown in every case that the duty has been levied on goods which have been produced or manufactured, the taxable event being production or manufacture of goods28. We also consider that his second proposition is not sound. There is no presumption that if no other taxable event has intervened, the levy must be treated to be connected with production or manufacture. This, as we have said above, must depend upon the facts of each case. But it must be positively shown that the taxable event for the duty which has been levied is manufacture or production of the article. We agree with his contention that the method of its collection is not decisive but, in our opinion in cases of doubt it may throw some light on this question29. Mr. Setalvad who appears in the appeals concerned with licenses for arrack points out that Para. 29 (a) of the General Conditions applicable to all excise and opium licenses specifically provides that the manufacturers of arrack and other country spirits as well as the licensees of arrack Bonded Depots are prohibited from holding any interest in the retail vend of arrack or in the vend of other country spirits and from employing any person who has such interest. He says that this strengthens his case because the money realised by the sale of licenses for vending arrack can have no relation to the manufacture or production of arrack. There is force in his contention31. In W. P. No. 1076 of 1964 and in some other petitions in the High Court the petitioners have challenged the validity of the Mysore Health Cess Act. 1951. This Act was not referred to in the course of arguments. Section .3 of the Health Cess Act. 19517 reads thus:"3. (1) There shall be levied and collected a health cess at the rate of six pies in the rupee on all items of land revenue and at such rate not exceeding one anna in the rupee as may be specified by Government by notification on all other items of revenue on which education cess is leviable(2) The Government may by notification levy health cess at such rate not exceeding one anna in the rupee as may be specified in the said notification on such other items of revenue as they deem fit."notification or notifications issued under S.3 were placed before us. We are, therefore, unable to say whether the levy of the Health Cess under the Act of 1951 stands on the same basis. Further no particulars are given in the petitions as to the dates of payments and no reason is given why the levy of Health Cess under the Act of 1951 was not challenged earlier. In the circumstances we decline to adjudge on the validity of the Health Cess Act, 1951, and the notifications issued under it. The petitioners will, however, be at liberty to file suits, if so advised, to recover the amounts alleged to have been paid by them under the Health Cess Act, 1951.