Case: Ram Krishna Ramnath Agarwalof Kamptee Vs. Secretary, Municipal Committee,Kamptee.Union Of India And

(1) This is an appeal from the judgment and order of the High Court at Nagpur, made on a reference under S.83(2), Central Provinces Municipalities Act, 1922, by the Extra Assistant Commissioner, Nagpur. The appellant is a trader in Kamptee who manufactures bidis. On 30/11/1945, he brought to Kamptee from outside tobacco to make bidis. A declaration form signed on his behalf stated that the 254 bags of tobacco liable to octroi duty, which had that day arrived at octroi post No. 3, had been brought for use and consumption within the limits of the Municipality. He, however, put on record his protest against the recovery of the duty which was fixed at Rs. 1,128-2-0. Against the order claiming the amount the, appellant filed an appeal to the Extra Assistant Commissioner with revenue appellate powers, Nagpur. He contended that the municipality claimed to levy the duty under S. 66 (1)(e) of the Municipal Act, but they had no right to do so as under S. 3, Central Excises and Salt Act, 1944, that excise duty was levied on tobacco by the Central Government and the levy of the octroi duty on the tobacco in question was covered by the excise duty and therefore not permissible. The Appellate Assistant Commissioner in making the reference to the Nagpur High Court expressed his opinion that the appellants contention that as the bidis were not sold within the municipal limits, duty was not leviable, was unsound. He however thought that because under S. 3, Excise Act, excise duty was levied by the Central Government the levy of the octroi duty was not in consonance with S. 100, Government of India Act, 1935, and was ultra vires the Provincial Government. The High Court rejected the appellants contention and disagreed with the view of the Appellate Commissioner. The High Court however granted a certificate under S. 205 (1), Constitution Act, and the appellant has come in appeal to this Court.

Reasoning: the leavy of such tax by the Provincial Government was a subject which was within the exclusive legislative power of the Centre by reason of such tax being included in List I of Sch.7, the levy of such tax under the Provincial legislation continued to be valid until the Central Legislature passed an Act the provisions whereof were contrary to the provisions of Provincial legislature or to the leavy of a tax under the Provincial Act. Examining next the contentions of the appellant it seems clear that octroi duty as levied by the respondent comes within the exact wording of Entry 49 of List II of Sch. 7, Constitution Act. Prima facie, therefore, there is no reason to consider the levy of the octroi duty under the Provincial legislation invalid.The error underlying the argument of the appellant is the assumption that any impost of tax from the time tobacco came into existence till the same was converted into bidis is necessarily excise duty.The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separate and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the exercisable article leaves the factory or workshop for the first time on the occasion of its sale. But that method of collecting the tax is an accident of administration; it is not of the essence of the duty of excise, which is attracted by the manufacture itself. That this is so is clearly exemplified in those excepted cases in which the Provincial, not the Federal, legislature has power to impose a duty of excise. In such cases, there appears to be no reason why the Provincial legislature should not impose a duty of excise in respect of the commodity manufactured and then a tax on first or other sales of the same commodity. Whether or not such a course is followed appears to be merely a matter of administrative convenience. So, by parity of reasoning, may the Federal Legislature impose a duty of excise on the manufacture of excisable goods and the Provincial legislature impose a tax on the sale of the same goods when manufactured.Excise duty is a tax on manufactured goods. Octrai duty is a tax levied on the entry of goods within a particular area. Under the Excise Act, tobacco becomes excisable goods within the meaning of Item 9 in the Schedule. The subsequent use of such manufactured goods in making different articles only affects the rate of tax. Therefore, tobacco becomes subject to excise duty when it reaches the stage of manufacture mentioned in Item 9 of the Schedule to the Excise Act. Even before it is converted into bidis or any other article mentioned in the entry it has become excisable goods and liable to pay excise duty. The levy of such duty is therefore not in conflict with the levy of an impost on the entry of the goods within a certainIt was argued that under the rules framed by the Government under the Central Excises and Salt Act, 1944, Government retained control over the movement of the goods from the beginning till the end.This arguments is not of assistance in determining the nature of the octroi tax. As Government has to collect excise duty and the rate of duty, varies in respect of different shapes in which the excisable goods are ultimately converted, there is nothing unnatural in the Government keeping a control and note of the articles till the manufactured article becomes a commodity, and is mixed up with the commodities used by the people at large. The argument that Entry 49 in List II being in conflict with Entry 45 in List I of Sch. VII, Constitution Act, Entry 49 should be read as "for consumption or use, except for manufacture of goods", in our opinion is unsound. In the first place, the approach to the question itself is wrong. When a particular legislation falls within the exact words of an entry in the Provincial List, under S. 100 it is valid and no question of reconciliation arises. A similar argument advanced in regard to a supposed conflict between Entry 19 of List I and Entry 31 of List II was rejected by us in case No. 27 of 1949. (Miss Kishore Shetty v. The King). 1949 F.C.R. 650 In the present case, if the question of the validity of the Provincial legislation arises, on the interpretation of Entry 49 in List II it appears that the answer must be in favour of the validity of the legislation. The decision in Administrator, Lahore Municipality v. Daulat Ram, 1942 F. C. R. 31, does not help the appellant because in that case Entry 47 in List I is only, salt". A comparison with Entry 45 in List shows distinctly that Entry 45 is limited to excise duty and is not wide enough to cover tobacoo or other goods generally for all purposes of legislation. The observations in that case therefore are not helpful to the appellant.There is no express provision in the Excise Act contrary to the provisions of the Municipal Act. Unless, therefore, it is necessarily implied under the Excise Act, the levy of the octroi duty under the Municipal Act continues to be valid. On this point again the appellants argument is that the levy of a duty at any stage of the manufacturer of bidis out of tobacco would be the levy of the excise duty and therefore those provisions were contrary to the provisions permitting the levy of the octroi duty.We have already discussed and rejected in the first part of the judgment this contention. It is wrong to think that two independent imposts arising from two different sets of circumstances were not permitted in law. In our opinion, therefore, there is nothing in the Excise Act to make its provisions contrary to the provisions of S. 66 (1) (e), Central Provinces Municipalities Act or to the levy of octroi duty under the