Ghodawat Pan Masala Products (I) ... vs State Of Maharashtra And Ors.
2002 Latest Caselaw 824 Bom

JUDGMENT

V.C. Daga, J.

1. These petitions seek to challenge the constitutional validity of the Maharashtra Tax on Luxuries Act, 1987 as amended by Maharashtra Tax Laws (Levy and Amendment) Act, 2001, being Maharashtra Act No. 22 of 2001.

The petitioners are carrying on business of manufacture and sale of pan masala containing tobacco (gutkha) and pan masala without tobacco. All the petitioners are registered under the Bombay Sales Tax Act, 1959 ("the BST Act", for short), Central Sales Tax Act, 1956 ("the CST Act", for short), Central Excise Act, 1944 ("the Excise Act", for short) and have also applied for registration under Maharashtra Tax on Luxuries Act, 1987 ("the Luxury Tax Act", for short).

2. The petitioners being aggrieved by levy of luxury tax at the rate of 25 per cent are challenging the validity of the amended provision of the Luxury Tax Act on the ground that the purported levy of tax is in effect and substance a tax on sales and not on luxuries and, therefore, it is a colourable legislation beyond the legislative competence of the State Legislature, liable to be struck down for being violative of Articles 14, 19(1)(g), 245, 246, 301 and 304 of the Constitution of India.

3. Though these petitions are filed by different manufacturers of gutkha, the facts involved, questions of law sought to be raised and the challenges sought to be set up therein are common. So they were heard together and are being disposed of together by this common judgment.

The main challenge relates to validity of Section 3B of the Luxury Tax Act but, before we set out those grounds, it would be convenient to refer briefly the historical background and the structure of the impugned legislations.

The background and structure of legislation :

4. The pan masala containing tobacco (gutka) is exigible for tax under the Excise Act. The said product was also exigible to sales tax under the provisions of the BST Act and the petitioners have been paying the same in the sense that it being covered under package scheme of incentives, they were entitled to collect and defer the same. At this stage, it would be necessary to set out different provisions of different legislations to which the pan masala containing tobacco (gutka) is and was subjected to.

Central Excise Tariff Act, 1985 :

5. Prior to March 1, 2001, "gutkha" was classified under Chapter 21 of the Central Excise Tariff Act, 1985 ("the Tariff Act", for short) : excise duty was charged at 40 per cent on ad valorem basis ; sales tax at 22 per cent totalling to 62 per cent excise duty plus sales tax incidence, paid on tariff value as per Section 2 of the Tariff Act. With effect from March 1, 2001, gutkha was reclassified under chapter 24 of the Tariff Act which consists of goods of special importance as per the Additional Duties of Excise (Goods of Special Importance) Act, 1957 ("the ADE Act, 1957", for short). Therefore, the structure of duty payable has been changed, namely, basic duty 16 per cent, specific excise duty 16 per cent, additional excise duty 18 per cent (in lieu of entry in the First Schedule to the Additional Duties of Excise Act) the total incidence of duty, therefore, has become 60 per cent towards excise payable on product. However, for assessment of duty, the tariff value was withdrawn and maximum retail price based on valuation was reverted to. In addition to the above, luxuries tax at the rate of 25 per cent has been imposed on the said product.

Section 2 of the Tariff Act reads as under :

"Section 2 : Duties specified in (the First Schedule and the Second Schedule) to be levied.--The rate at which duties of excise shall be levied under the Central Excise Act, 1944 are specified in the First Schedule and Second Schedule".

Pan masala was also exigible to special duty of excise under the Second Schedule. The same reads as under :

Heading No.

Sub-heading No.

Description of       goods

Rate of Sp.

duty of excise

21.06

2106.00

Pan masala

per cent

Chapter 21 of the First Schedule of the Tariff Act deals with miscellaneous edible preparations. Chapter Note 3 reads as under :

Note 3 : In this Chapter, "pan masala" means any preparations containing betelnuts and any one or more of the following ingredients, namely, lime, kalthu, (catechu) and tobacco, whether or not containing any of the ingredients, such as cardamom, copra and menthol."

The entry reads as under : (2000-2001)

Heading No. Sub-heading No. Description of goods Rate of Sp. Duty of excise

21.06 2106.00 Pan masala 16 per cent

Notification No. 16/98 CE (NT) dated 2nd June, 1998 as amended by Notification No. 28/99 CE dated 8th June, 1999 reads as under :

Tariff value

Tariff values for pan masala in retail packages :

In exercise of powers conferred by Sub-section (2) of Section 3 of the Excise Act (1 of 1944) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 5/97-Central Excise (NT), dated the 1st March, 1997, the Central Government hereby fixes tariff value in respect of the goods, specified in column (1) of the table hereto annexed, and falling under the sub-heading No. 2106.00 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), equivalent to the amount specified in the corresponding entry in column (2) of the said table.

 

Description of goods

Amount

Panmasala in retail packages

Containing not exceeding two gms. per pack

Re.

1.00 per unit pack

Containing more than 2 gms. but not exceeding 4 gms. per pack

Rs.

2.00 per unit pack

Containing more than 4 gms. but less than 10 gms. per pack

Rs.

6.00 per unit pack

This notification shall not be applicable to goods containing not more than 10 per cent betel nut by weight and not containing tobacco in any proportion.

Explanation.--For the purposes of this notification, "retail package" means package containing pan masala, which is produced, distributed, displayed, delivered, stored for sale through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals.

Notification No. 27/97-CE dated 7th May, 1997 as amended by notification dated 8th June, 1999 reads as under :

"Effective rate of duty for pan masala :

In exercise of powers conferred by Sub-section (1) of Section 5A of the Excise Act, 1944 (1 of 1944) the Central Government being satisfied that it is necessary in the public interest so to do hereby exempts goods of the description specified in the annexure below and falling within sub-heading No. 2106.00 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from so much of the duty of excise leviable thereon under the said Schedule, as in excess of the amount of duty calculated on the value equivalent to the 50 per cent of the maximum retail price declared on the packages in which such goods are sold in retail.

This notification shall not be applicable to goods containing not more than 10 per cent betelnut by weight and not containing tobacco in any proportion.

ANNEXURE

Description of goods

Pan masala, in retail packages-

(i) Containing not exceeding 2 gms. per pack and maximum retail price not exceeds Rs. 1.25 per pack, or

(ii) Containing more than 2 gms. but not exceeding 4 gms. per pack and maximum retail price does not exceed Rs. 2.00 per pack.

Explanation.--For the purposes of this notification, the expression 'maximum retail price' shall have the meaning as assigned to it in clause (r) of Rule 2 of the Standards of Weights and Measures (Package Commodities) Rules, 1977."

The benefit of this exemption notification is not extended to all goods falling under the sub-heading No. 2106.00.

By Clause 127 of the Finance Bill, 2001 (Bill No.17 of 2001) certain amendments were proposed to the First Schedule of the Tariff Act in the manner specified in the Fourth Schedule. The said amendment reads as under :

"The Fourth Schedule [see Section 127(a)] :

In the First Schedule to the Tariff Act (1) in chapter 21, for note 3, the following note shall be substituted, namely :

Note 3 in this chapter 'pan masala' means any preparation containing betelnuts and one or more of the following ingredients, namely, (1) lime and (2) kattha (catechu), but not tobacco, whether or not containing any other ingredients, such as cardamom, copra and menthol."

In chapter 24, after note 5, the following note has been inserted : Note 6 in this chapter, "Pan masala containing tobacco" commonly known as "Gutkha" or by any other name, means any preparation containing betel nuts and tobacco and any one or more of the following ingredients, namely, lime and kattha (catechu), whether or not containing any other ingredients such as cardamom, copra and menthol.

The Finance Bill, 2001:

Clause 129 of the Finance Bill, 2001 (Bill No. 17 of 2001) introduced in the Parliament reads as under :

129. (1) In the case of goods specified in the Seventh Schedule, being goods manufactured or produced, there shall be levied and collected for the purposes of the Union, by surcharge, a duty of excise, to be called the National Calamity Contingent Duty (hereinafter referred to as "the National Calamity Duty", for short), at the rates specified in the said Schedule.

(2) The National Calamity Duty chargeable on the goods specified in the Seventh Schedule shall be in addition to any other duties of excise chargeable on such goods under the Central Excise Act, 1944 or any other law for the time being in force.

(3) The provisions of the Central Excise Act, 1944 and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty, shall, as far as may be, applying relation to the levy and collection of the National Calamity Duty leviable under this section in respect of the goods specified in Seventh Schedule as they apply in relation to the levy and collection of the duties of excise on such goods under that Act or those rules, as the case may be.

The entry reads as under : (2000-2001)

Heading No.

Sub-heading No.

Description of goods

Rate of Sp. Excise duty

21.06

2106.00

Pan masala

23 per cent

In the notes on clause, Clauses 126 and 127 are set out as under :

Clause 126 :

Any action taken or anything done or omitted to be done or purporting to have been taken or done or omitted to be done under any rule, notification, or order made or issued under the Central Excise Act, or any notification or order issued under such rule at any time during the period commencing on and from February 28, 1944 and ending with the day, the Finance Bill, 2001 receives the assent of the President shall be deemed to be and to always have been, for all purposes, as validly and effectively taken or done or omitted to be done as if the amendment made by Section 125 of the Finance Act, 2001 has been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any court, Tribunal or other authority :

(a) Any action taken or anything done or omitted to be done, during the said period in respect of any excisable goods under any such rule, notification or order, shall be deemed to be and shall be deemed to always have been, as validly taken or done or omitted to be done as if the amendment made by Section 125 of the Finance Act, 2001 had been in force at all material times.

(b) No suit or other proceedings shall be maintained or continued in any court, Tribunal or other authority for any action taken or anything done or omitted to be done, in respect of any excisable goods under any of such rule, notification or order, and no enforcement shall be made by any court, or any decree or order relating to such action taken or anything done or omitted to be done as if the amendment made by Section 125 of the Finance Act, 2001 had been in force at all material times.

Clause 128 of the Finance Bill, 2001 (Bill No. 17 of 2001) reads as under :

128. The Additional Duties of Excise (Goods of Special Importance) Act, 1957 hereinafter referred to as the Additional Duties of Excise Act, shall be amended in the manner specified in the Sixth Schedule.

Entry 2404.49 of the Sixth Schedule reads as under:

Heading No.

Sub-heading No.

Description of goods

Rate of Sp. excise duty

 

2404.49

Pan masala containing tobacco

18 per cent

The petitioners claim that they have been paying excise duty under Chapter sub-heading 21.06 of Tariff Act. The Finance Act, 2001 has put "Pan masala containing tobacco" under Chapter 24 of Tariff Act.

Entry 2404.49 sets out that the basic rate of duty is 16 per cent and additional duty of 18 per cent from March 1, 2001. Apart from this the surcharge duty of excise, i.e., National Calamity Duty under the Seventh Schedule to the Finance Act, 2001 at the rate of 10 per cent. The above duties are payable on the maximum retail price.

The Bombay Sales Tax Act (BST Act) :

The petitioners submit that sales tax under the BST Act is chargeable under Section 6 of the BST Act. Sections 6 and 8 are as under :

"Taxes payable by a dealer.--Subject to the provisions of this Act and to any Rules made thereunder, there shall be paid by every dealer who is liable to pay tax under this Act, the tax or taxes leviable in accordance with the provisions of this Chapter.

8. Single point levy of sales tax on goods specified in Schedule C.--(1) There shall be levied a sales tax on the turnover of sales of goods specified in Schedule C at the rates set out against each of them in column (3) thereof, but after deducting from such turnover-

(i) resales of goods on the purchase of which the dealer is liable to pay purchase tax under Section 14 ;

(ii) resales of goods (except those covered by entry 22 of Part II of Schedule C) purchased by the dealer on or after appointed day from a registered dealer, otherwise than on a declaration furnished under Section 11 or 12, if the requirements of Section 12A are satisfied :

Provided that, resales of goods purchased by the dealer from a registered dealer during the period commencing from July 1, 1981 and ending on a day immediately preceding the date of commencement of the Maharashtra Tax Laws (Levy and Amendment) Act, 1988 (Maharashtra 9 of 1988), on a declaration furnished under Section 8A shall not be deducted from such turnover ;

(iii) resales of goods purchased by the dealer on or after the appointed day from a dealer liable to pay tax under Section 4, if a certificate as provided in Sub-section (2) of Section 12A is furnished ;

(iv) sales of goods to a commission agent holding a permit who purchases on behalf of principal, upon such commission agent's furnishing a declaration as provided in Section 12 ; and

(v) sales of goods to a dealer holding the certificate of entitlement, who purchases such goods by furnishing a declaration as provided in clause (g) of Section 12.

Explanation.--For the purposes of this section, the expression 'resale of goods' means the resale of those goods on the sale of which tax was leviable under this section at the time of their purchase."

Section 7 of the BST Act deals with the single point levy on sales tax of the declared goods specified in Schedule and the same reads as under :

"1. There shall be levied a sales tax, on the turnover of sales of declared goods specified in Schedule B, at the rate set out against each of them in column (3) thereof, but after deducting from such turnover-

(i) resales of goods on the purchase of which the dealer is liable to pay purchase tax under Section 14 ;

(ii) resales of goods purchased by the dealer on or after the appointed day from the registered dealer, otherwise than on a declaration furnished under Section 11 or 12, if requirements of Section 12A are satisfied ;

(iii) resales of goods purchased by the dealer on or after the appointed day from a dealer liable to pay tax under Section 4, if a certificate as provided in Sub-section (2) of Section 12A is furnished ;

(iv) sales of goods to a commission agent holding a permit who purchases on behalf of principal, upon such commission agent furnishing a declaration as provided in Section 12 ; and

(v) sales of goods to a dealer holding the certificate of entitlement, who purchases such goods by furnishing a declaration as provided in clause (g) of Section 12."

Section 5 of the BST Act deals with sales and purchases of certain goods free from all taxes and the same reads as under :

"(1) Notwithstanding anything in this Act, but subject to the conditions or exceptions (if any) set out against each of the goods specified in column (3) of Schedule A, no tax shall be payable on the sales or purchases of any goods specified in that Schedule.

(2) The State Government may by notification in the official gazette and to, or enlarge, any entry in Schedule A, or relax or omit any condition or exception specified therein ; and thereupon, the said

Schedule shall be deemed to be amended accordingly ; and the amendment so made shall take effect from the date of the publication of the notification in the official gazette or from such other date as may be mentioned therein."

Schedule A deals with tax-free goods. Entry 15 in Schedule A reads as under :

"(3) Tobacco ;

as described from time to time in column 3 of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and manufactured or produced in India."

Schedule B deals with declared goods. Entry 9 of the Schedule B reads as under :

"(iii) Tobacco,

as defined, from time to time in Section 14 of the Central Sales Tax Act, 1956, but excluding those covered by entry 15 of Schedule A."

Schedule C deals with taxable goods. Entry 13(1) in Part II of Schedule C to the BST Act reads as under :

"(1) Pan masala, i.e., any preparation containing betel nuts and anyone or more ingredients, namely, lime, kattha (catachu) and tobacco, whether or not containing any other ingredients, such as cardamom, copra and menthol."

The rate of sales tax was 20 per cent from May 1, 1998 till April 30, 2001. Turnover tax at the rate of 1 per cent was payable over and above the sales tax and surcharge at the rate of 10 per cent was also payable on the sales tax.

Maharashtra Tax on Luxuries Act, 1987 (Luxury Tax Act) :

By the Maharashtra Tax Laws (Levy and Amendment) Act, 2001, being Maharashtra Act No. 22 of 2001, certain amendment of Luxury Tax Act has been made.

Section 21 of the Amendment Act reads as under :

"In the long title of the Maharashtra Tax on Luxuries Act, 1987 (hereinafter, in this Chapter, referred to as 'the Luxury Tax Act'), after the words 'tax on luxuries' the words 'and tax by way of cess on other facilities, services, enjoyments, utilities, consumption, etc.', shall be inserted."

Section 22 of the Amendment Act reads as under :

"In the preamble of the Luxury Tax Act, after the words 'tax on luxuries' the words 'and tax by way of cess on other facilities, services, enjoyments, utilities, consumption, etc.', shall be inserted."

Section 23 of the Amending Act reads as under : A "In Section 1 of the Luxury Tax Act, in Sub-section (1), after the words 'tax on luxuries' the words 'and tax by way of cess on other facilities, services, enjoyments, utilities, consumption, etc.', shall be inserted."

Section 25 of the Amending Act reads as under :

"In Section 3B of the Luxury Tax Act, for Sub-section (2) the following sub-section shall be substituted, namely :--

(2) There shall be levied a tax on a turnover of the receipts of a tobacconist, in so far as the turnover of receipts relates to the tobacco specified in column (2) of the Table hereunder, at the rates set out in column (3) thereof.

TABLE

Serial No.

Type of tobacco

Rate of tax in a rupee

1.

Cigars, cheroots and cigarettes

8 paise

2.

Snuff

8 paise

3.

Jarda whether manufactured or unmanufactured supplied for a value not exceeding rupees one hundred and fifty per kilogram.

8 paise

4.

Gutka and Pan Masala containing tobacco

25 paise

5.

Tobacco other than the tobacco specified above

20 paise

Provided that, the tax shall be levied under Sub-section (2), after deducting from such turnover, receipts in respect of which the tobacconist proves to the satisfaction of the Commissioner that,--

(a) tax on the very tobacco supplied by him whether by way of sale or otherwise has already been paid by any other person and in support thereof produces a proof of such payment ; or

(b) the tobacco has been supplied by way of inter-State consignment to another State, whether the consignment is to himself or to any other person and further, in support of such claim, produces on demand a certificate as may be prescribed ; or

(c) the tobacco has been supplied by way of sale in the course of inter-State trade or commerce or in the course of export outside

the territory of India and in support thereof produces a proof of such sale or export'."

The amended provisions of the Luxury Tax Act now forming part of the said Act reads as under :

Section 2(k) : "receipt"

(i).....

(ii) In relation to a tobacconist means,--

(A) in respect of supply of tobacco made by him by way of sale, the amount of valuable consideration received or receivable by him for such sale including any such charged for anything done by him in respect of the tobacco so sold at the time or before the delivery thereof and the price, if charged separately of any primary or secondary packing, other than the cost of insurance for transit when such cost is separately charged ; and

(B) in respect of supply of tobacco made by him otherwise than by way of sale, the value determined under Section 4 of the Central Excise Act, 1944.

(iii).....

2(o) "tax" means the tax levied on luxuries and tax by way of cess on other facilities, services, enjoyments, utilities, consumptions, etc., under this Act :

.....

(o-2) "tobacconist" means,--

(i) a manufacturer who supplies tobacco whether by way of sale or otherwise, and includes any person for the purpose of business gets the manufacturing done from any other person, whether or not on job-work basis : but does not include any person who manufactures tobacco only on job-work basis without obtaining any proprietary right over it at any stage ;

(ii) any person who for the purposes of business brings or causes to be brought tobacco in the State or to whom any tobacco is despatched from any place outside the State and who supplies such tobacco whether by way of sale or otherwise ;

(iii) any person who supplies tobacco from a place within the State to any place outside the State, whether by way of sale or otherwise ;

(iv) any person who does not buy or otherwise obtain manufactured tobacco under a brand name but supplies whether by way of sale or otherwise such unmanufactured tobacco in a sealed container under a brand name.

Explanation.--For the removal of doubts, it is hereby declared that :--

(1) an agriculturist, as defined in the Bombay Sales Tax Act, 1959 who exclusively supplies unmanufactured tobacco grown on land cultivated by him personally whether or not in a sealed container but not under a brand name ;

(2) a person who exclusively supplies unmanufactured tobacco whether or not in a sealed container but not under a brand name ; and

(3) a person, not being a person referred to in Sub-clause (iii), who exclusively obtain tobacco whether by way of purchase or otherwise from a registered tobacconist,

shall not be deemed to be a tobacconist for the purpose of this clause :

2(p) "turnover" of receipts :--

(i).....

(ii) in the case of tobacconist means the aggregate of the amount of receipts of a tobacconist during a given period in respect of the supply of tobacco whether such supply is by way of sale or otherwise :

(iii).....

Section 3A. Incidence of tax on tobacconist.--(1) On or after the commencement of the Maharashtra Tax Laws (Levy and Amendment) Act, 1995 (Mah. Act No. 16 of 1995), (hereinafter referred to as "the commencement date") every tobacconist whose turnover of receipts made during :--

(i) the year ending on the 31st March, 1995 ; or

(ii) the year commencing on the 1st April, 1995, has exceeded Rs. 50,000 during such year, shall, until such liability ceases under Sub-section (3), be liable to pay tax on his turnover of receipts :

Provided that, a tobacconist to whom Sub-clause (i) does not apply but Sub-clause (ii) applies and whose turnover of receipts first exceeds Rs. 50,000 after the commencement date shall not be liable to pay tax in respect of receipts up to the time when his turnover of receipts as computed from the 1st day of April, 1995 does not exceed Rs. 50,000.

2. Every tobacconist whose turnover of receipts during any year commencing on the 1st April, being a year subsequent to the years mentioned in Sub-section (1), first exceeds Rs. 50,000, shall until such liability ceases under Sub-section (3), be liable to pay tax under this Act with effect from the said date :

Provided that, a tobacconist shall not be liable to pay tax in respect of the turnover of receipts during the period commencing on the 1st April of the said year upon the time when his turnover of receipts as computed from the 1st April of the said year does not exceed Rs. 50,000.

3. Every tobacconist who has become liable to pay tax under this Act, shall continue to be so liable until his registration is duly cancelled ; and upon such cancellation, his liability to pay tax, other than tax already levied or leviable shall, until his turnover of receipts against first exceeds Rs. 50,000 cease :

Provided that, where the tobacconist becomes liable to pay tax against in the same year in which he ceased to be liable aforesaid, then in respect of the turnover of receipts during the period commencing on the date of cessation of liability to tax and ending on the date on which his turnover of receipts does not exceed Rs. 50,000 no tax shall be payable.

Section 3B. Levy of luxury tax on a tobacconist.--(1) Subject to the provisions of this Act and the Rules made thereunder, there shall be levied a tax on the turnover of receipts of a tobacconist.

(2) There shall be levied a tax on the turnover of the receipts of a tobacconist, in so far as the turnover of receipts relates to the tobacco specified in column (2) of the Table hereunder, at the rates set out in column (3) thereof :

TABLE

Serial No.

Type of tobacco

Rate of tax in a rupee

1.

Cigars, cheroots and cigarettes

8 paise

2.

Snuff

8 paise

3.

Jarda whether manufactured or unmanufactured supplied for a value not exceeding rupees one hundred and fifty per kilogram.

8 paise

4.

Gutka and Pan Masala containing tobacco

25 paise

5.

Tobacco other than the tobacco specified above

20 paise

Provided that, the tax shall be levied under Sub-section (2), after deducting from such turnover, receipts in respect of which the tobacconist proves to the satisfaction of the Commissioner that,

(a) tax on the very tobacco supplied by him whether by way of sale or otherwise has already been paid by any other person and in support thereof produces a proof of such payment ; or

(b) the tobacco has been supplied by way of inter-State consignment to another State, whether the consignment is to himself or to any other person and further, in support of such claim, produces on demand a certificate as may be prescribed ; or

(c) the tobacco has been supplied by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India and in support thereof produces a proof of such sale or export.

3. For the purposes of Sub-section (2), a sale shall be deemed to have taken place,--

(a) in the course of inter-State trade, if such sale has occasioned the movement of tobacco from Maharashtra to any other State ; and

(b) in the course of export outside the territory of India if the sale occasions such export.

Section 3C. Application of certain sections to tobacconists.--The provisions contained in Sub-section (7) of Section 3 and Sections 8, 9 to 21, 23, 24, 26 to 30, 32 to 34, 36, 37 and 43 shall mutatis mutandis apply to a tobacconist as they apply to a hotelier.

6. The dissection of the impugned provisions of the Luxury Tax Act and working thereof in the form of the Chart is being reproduced hereinbelow for immediate understanding of the operation of the said Act which will help to understand how the impugned provisions of the said Act are operating and affect the manufacturers, suppliers and dealers dealing in a pan masala containing tobacco (gutka).

SI. No.

Type of tobacconist

Price

Amount of luxury tax

Supply within Maha-rashtra State

Supply outside Maharashtra State

1.

Manufacturer (section 2(o-2)(i)] A manufacturer who supplies tobacco whether by way of sale or otherwise and includes any person for the purpose of business gets the manufacturing done from any other person, whether or not on job-work basis : but does not include any person who manufactures tobacco only on job-work basis without obtaining any proprietary right over it at any stage.

X

Y

X + Y

X Nil [Section 3B(2)(b) and (c)]

(b) because the tobacco has been supplied by way of inter-State consignment to another State, whether the consignment is to himself or to any other person and further, in support of such claim, produces on demand a certificate as may be prescribed ; and

(c) because the tobacco has been supplied by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India and in support thereof produces a proof of such sale or export.

2.

Importer (section 2{o-2)(ii)] Any person who for the purposes of business brings or causes to be brought tobacco in the State or to whom any tobacco is despatched from any  place  outside the State and who supplies such tobacco whether by way of sale or otherwise.

X

Y

X + Y

X + Nil [Section 3B(2)(b) and (c)] as above

3.

Exporter [section 2(o-2)(iii)) Any person who supplies tobacco from a place within the State to any  place  outside the State, whether by way of sale or otherwise.

X

Exempted

Not applicable

X + Nil (section 3B(2)(b) and (c)l as above

 

A.  

Outside State

Maharashtra

If supplied within Maharashtra

Luxury tax is attracted because of section 3A.

 

B.  Outside State

Maharashtra

If supplied to some other State

Luxury tax is attracted because of section 3B(2)(b) and (c)

 

C.  

Maharashtra

Maharashtra

If supplied within Maharashtra

Luxury tax is attracted because of section 3A

 

D. 

Maharashtra

Outside State

If supplied outside State

No luxury tax is attracted because of section 3B(2)(b) and (c)

 

E. 

Outside State

Outside State

If supplied directly and if the goods happened to pass through the territory of Maharashtra

No luxury tax is attracted because of none of the provisions of the Act are attracted.

Grounds of challenge

7. The learned counsel for the petitioners have set up the following grounds to challenge the constitutional validity of the levy of Luxury Tax Act :

(A) Whether the impugned levy of luxury tax is in pith and substance a tax on sale of pan masala containing tobacco (gutka) falling in the legislative entry No. 54 or a tax on supply of luxury covered by entry No. 62 of List II of the Seventh Schedule to the Constitution of India.

(B) If it is a tax on sale,--

(i) whether such tax is violative of Section 15 of the Central Sales Tax Act, 1956 ?

(ii) whether in view of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the State can levy sales tax on pan masala containing tobacco ?

(C) If, it is a tax on supply of luxury,--

whether it is violative of Article 301 of the Constitution of India not saved by Article 304(b) of the Constitution ?

Re : Contention (A)

8. Submissions : The first and basic contention advanced on behalf of the petitioners by Shri G.S. Jetly is that the impugned levy

though has been termed as luxury tax, but, in fact, it is nothing but in pith and substance a tax on sale of pan masala containing tobacco (gutka) falling in the legislative entry No. 54. According to him, in reality it is not a tax on supply of luxury covered by entry No. 62 of List II of the Seventh Schedule to the Constitution of India. In his submission, the respondents having become aware of the law laid down by the apex Court in the case of Kothari Products Ltd. v. Government of Andhra Pradesh that no sales tax could be levied on the pan masala containing tobacco (gutka), it being an item subjected to levy of additional excise under the Additional Duties of Excise Act, 1957 proceeded to impose tax on sale under the guise of luxury tax. The levy of luxury tax is, therefore, illegal and unconstitutional.

The petitioners submit that after the pronouncement of the judgment by the apex Court in the matter of Kothari Products Ltd. , the State of Maharashtra withdrew levy of sales tax on pan masala containing tobacco (gutka) with effect from May 1, 2001 and, simultaneously, substituted the same with the levy of tax under the Luxury Tax Act. The respondents introduced luxury tax on gutka as device only because the same could not be brought to tax under the BST Act in view of the decision of the apex Court in the case of Kothari Products Ltd. . By this amendment gutka which was originally subjected to the provisions of the BST Act has been taken out and by Maharashtra Act No. 22 of 2001 brought within the purview of Luxury Tax Act. It is, therefore, urged that levy sought to be introduced on gutka in the form of luxury tax under the provisions of Luxury Tax Act is being used as an alternative of the BST Act. The mere change in the nomenclature does not change the incidence of the levy. It amounts to colourable exercise of power beyond the legislative competence of the State of Maharashtra amounting to fraud on Constitution and statute, therefore, liable to be struck down.

9. The learned counsel for the petitioners in order to reinforce the aforesaid submission submitted that the levy of luxury tax under the impugned legislation is being directly levied on the sale price which is evident from the definition of the term "receipt" defined under Section 2(k) of the Luxury Tax Act. Every tobacconist is held liable to register for payment of tax under the Act if the falls under any of the following three categories :

1. his turnover of receipts has exceeds Rs. 50,000 during the year ending March 31, 1995.

2. his turnover of receipts exceeds Rs. 50,000 during the year commencing on the April 1, 1995 ; or

3. his turnover of receipts' exceeds Rs. 50,000 in any year starting on or after the April 1, 1996.

The luxury tax is leviable at the rate of 25 paise in a rupee on the turnover of the tobacconist, its receipt relates to gutka, i.e., pan masala containing tobacco is concerned. However, following deductions from the turnover are made permissible :

(a) Where a tobacconist supplies any tobacco and tax on the very tobacco has already been paid by any other person and proof of such payment is produced, then the receipts of tobacconist in respect of such supply made by him are to be deducted from the turnover of receipts.

(b) If the tobacco has been supplied by way of consignment transfer to another State and in support of such claim, the tobacconist produces on demand a certificate as may be prescribed.

(c) The tobacco has been supplied by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India and proof of such sale or export is produced (if the sale occasions movement of tobacco from Maharashtra to any other State of outside India, then such sale shall be deemed to be an inter-State sale or as the case may be, an export sale).

Our attention was drawn to the special provision which has been made for grant of refund of tax to the tobacconist. The new Rule 27A analogues to Rule 43.0 of the BST Rules has been introduced in Maharashtra Tax on Luxury Rules, 1987. It is provided in Rule 27A that if a tobacconist supplies tobacco by way of inter-State consignment or inter-State sale or export out of India, then he shall be entitled to claim refund of tax on the tobacco that was supplied to him, subject to the proof that the tax leviable under the Act has actually been paid on the very tobacco so supplied, and the tobacco has been supplied by him by way of inter-State consignment transfer or inter-State sale or export out of India. The tax leviable is to be refunded without any deduction. It is also provided that certain provisions of Luxury Tax Rules will apply to a tobacconist as they apply to a hotelier.

10. The submission of the petitioners, based on the entire scheme of the-impugned provisions of the Act, is that the levy of tax is on sale of tobacco and that there is no distinction between supply of luxury and sale of luxury as the supply of tobacco and sale of tobacco both include transfer of goods, i.e., property for consideration. In other words, there is transfer of ownership in goods for a consideration. Therefore, the incidence of tax in substance is on the sale of tobacco products. In the submission of petitioners, if it is not a tax on sale of tobacco, then there was no need for the Legislature to provide for exemption to a tobacconist whose turnover of receipts is less than Rs. 50,000 under the proviso to Section 3A or under amended Section 3B of the impugned Act. The very fact that the inter-State transaction of supply is exempted from the levy of tax is, in his submission, one of the pointer to indicate that, in pith and substance, the levy is on the turnover of receipts in respect of supply of tobacco products and not on consumption or supply of luxury.

11. The learned counsel for the petitioners based on presumption that the impugned levy is on sale, contended that Article 286 of the Constitution provides restriction for imposition of tax on the sale or purchase of goods. It prohibits the State from imposing tax on the sale or purchase of goods, where such sale or purchase takes place outside the State or in the course of the import of the goods into, or export of goods out of the territory of India. Under Sub-article (3) of Article 286, the Parliament has declared certain articles as articles of special importance, one of such article is tobacco and imposed tax thereon under the Central Sales Tax Act (the "CST Act", for short). Under Section 14 of the said Act, tobacco has been declared as one of the goods of special importance. Under Section 15 the maximum tax that can be levied is 4 per cent therefore, the submission is that the tobacco having been declared as one of the goods of special importance under the Central Sales Tax Act, the levying of tax at 4 per cent, i.e., levy of 25 paise on chewing tobacco preparation commonly known as "gutka" in every rupee is consistent with the said declaration. In other words, the submission is that if the levy is a tax on luxuries, then there is no need to exempt inter-State transaction as Article 286(3) applies only to a tax on sale or purchase of goods declared by Parliament to be of special importance in the inter-State trade and commerce. The submission is that while construing the scope of the Act the cumulative effect of all the provisions of the Act needs to be taken into account for determining whether it is a tax on sale or not. The levy of sales tax on gutka under the BST Act being impermissible in view of the decision of the apex Court in Kothari Products Ltd. , the recourse taken by the respondents to introduce levy of the luxury tax on gutka amounts to colourable legislation unsustainable in law.

12. The next line of argument which has been advanced on behalf of the petitioners is that the tax on the vending and stocking of tobacco cannot be considered to be luxury as contemplated by entry 62 of List II of the Seventh Schedule to the Constitution. According to the said entry, the State Legislatures can make laws in respect of "taxes on luxuries, including taxes on entertainments, amusements, betting and gambling". The question, therefore sought to be raised is whether tobacco can be considered to be an article of luxury ?

13. Mr. Aney, learned counsel appearing for some of the petitioners, adopted different line of argument relying on the text of the legislative entry 62 (List II, Seventh Schedule) and contended that the word "luxury" is followed by and associated with the words "entertainments, amusements, betting and gambling" as such the word "luxury" must be given its specific and restricted meaning applying the principle of noscitur a sociis or the analogy of the ejusdem generis principles. In his submission, although a pan masala containing tobacco may be an item of luxury, in that event, the legislation ought to have been to tax the consumption of such items of luxury. In other words, tax ought to have been on consumption or enjoyment of gutka. But the impugned legislation is imposing tax on the turnover of receipts so far as it relates to the petitioners, not on consumption of gutka, as such the impugned legislation is beyond the legislative competence of the State Legislature. He sought to place reliance on Section 2(o) which defines tax to mean, tax levied on luxuries and tax levied by way of cess on other facilities, services, enjoyment utilities, consumption, etc. He also placed reliance on Section 3(1) and (2), i.e., provisions providing for incidence of tax on hotel which clearly show how a tax on the receipts of a hotelier is levied on the luxuries covered under Section 2(g)(1)(ii), which defines luxuries provided in hotels or clubs. No such corresponding provision is to be found in Section 3B which purports to levy luxury tax on a tobacconist. In effect there is no provision in the luxury tax act which makes the consumption of tobacco or enjoyment thereof taxable luxury. The levy of luxury tax is therefore, illegal and unconstitutional in his submission.

14. Per contra, Shri Rana, learned counsel appearing for the State, contended that the impugned enactment is well within the legislative competence of the State Legislature under entry 62, List II of Seventh Schedule to the Constitution. He emphasised that it is not a tax on sale of gutka, but it is a tax on supply of luxury, viz., gutka. In his submission, the essential character of levy is a tax on supply of luxury, viz., gutka. It is, only, as a matter of convenience that supply of gutka made by way of sale is adopted as a yardstick or measure for assessing tax. The fact that it incidentally takes sale as a measure for the levy of tax does not change the essential character of the levy. In support of his contentions he relied on Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, in re : case of the Federal Court , Ralla Ram v. Province of East Punjab , R.R. Engineering Co. v. Zila Parishad ; A.B. Abdul Khadir v. State of Kerala , Union of India v. Bombay Tyre International Ltd. and Express Hotels Private Ltd. v. State of Gujarat .

15. The learned counsel appearing for the State relying upon Abdul Kadir's case , Express Hotels Private Ltd. and Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 [1938] 1 STC 1 (FC) further submitted that the Supreme Court has held that tobacco is an item of luxury and, therefore, now, it is not open to the petitioners to raise a debate contending that tobacco is not a luxury. He submits that the impugned enactment neither over-laps nor encroaches upon the field occupied by the Parliament. The levy is only on luxury, not per se on sale of tobacco or gutka. The Legislature, therefore, has not made any inroad into the field of legislation occupied by the Parliament. He further contended that when a particular legislation falls within the exact words of an entry in the State List, and is valid under Article 246(3) of the Constitution, in that event, no question of reconciliation arises. He placed reliance on Ram Krishna Ramnath Agarwal of Kamptee v. Secretary, Municipal Committee Kamtee and also sought to borrow assistance from the case of Abdul Kadir , to support his contention.

16. The learned counsel for the State further submitted that the distribution of legislative power is to be found in Part XI of the Constitution and not in the entries. In other words, the source of power is articles and not in the entries. The entries are the heads of legislation as such, they should not be read in a narrow or restricted sense. They must be given the widest possible meaning. In support of his submission, he relied upon Banarasi Dass v. Wealth Tax Officer and also placed reliance on the case of Elel Hotels and Investments Ltd, v. Union of India .

17. He further submitted that it is not reasonable to import any limitation or restriction in interpreting any legislative entry. Entry 62 of List II of the Seventh Schedule to the Constitution needs to be construed in broad and liberal sense. There is no warrant to read down the meaning of "luxuries" in entry 62 by applying the principle of noscitur a sociis or ejusdem generis. He sought to place reliance on Western India Theatres Ltd. v. Cantonment Board, Pune Cantonment , Y.V. Srinivasamurthy v. State of Mysore AIR 1959 SC 894 and Express Hotels Put. Ltd. in support of his submission.

18. Learned counsel for the State further submitted that charging section creates a liability for payment of luxury tax, inter alia, on jarda, gutka and pan masala containing tobacco. It is not on the sale of the product. To call the levy, a tax on sale so as to attract Article 286 is to mix up the true nature of the levy with the machinery or measure for collection of the levy. Once the legislative competence and nexus between the taxing power and subject of taxation are established, other incidents are matters of fiscal policy behind the taxing law. He, therefore, reiterated his submission and contended that the impugned legislation is well within the powers of State Legislature, as such, the question of it being a colourable legislation does not arise at all. In his submission, the doctrine of colourable legislation is attracted only when a Legislature in the guise of legislating in respect of a subject-matter for which it has competence, transgresses the limits of its constitutional power. It can never be invoked where the challenge is that the legislation falls under another entry in the same List. In support of his submission he sought to place reliance on the judgment of K.C. Gajapati Narayan Deo v. State of Orissa , Hari Krishna Bhargau v. Union of India and Abdul Khadir . He relied upon Mumbai Grahak Panchayat v. State of Maharashtra and further went on to submit that burden is on the petitioners to show that it is a colourable legislation and they failed to discharge the said burden.

19. The learned counsel for the respondents further submitted that the judgment of the apex Court in Kothari Products Pvt. Ltd. , has no application to the facts of the present case in as much as the luxury tax has nothing to do with the Additional Duties of Excise Act, 1957. The levy is not a tax on sales. Alternatively, he submits that the State's power to legislate in respect of the various entries in List II is not taken away by the Additional Duties of Excise Act, 1957 enacted by the Parliament under entry 84 of List I. He sought to place reliance on the case of State of Bihar v. Bihar Chamber of Commerce . He thus contends that the contention of the petitioners in this behalf is liable to be rejected. He further brought to our notice that so far as legislative competence of the State Legislature under entry 62 is concerned as many as three High Courts of the country, namely, Allahabad High Court in the case of Kamadgiri Agencies v. State of U.P. (unreported) and in Varshney General Sales v. State of U.P. ; Andhra Pradesh High Court in ITC Limited v. State of Andhra Pradesk [1999] 112 STC 506 and the single Judge Bench of Kerala High Court in Hallmark Tobacco Company Limited v. State of Kerala [1998] 108 STC 539, confirmed by their division Bench, upheld the levy of luxury tax on tobacco on the ground that it was within the legislative competence of the State Legislature to enact Luxury Tax Act in exercise of powers under entry 62 of List II of the Seventh Schedule to the Constitution. He, therefore, contended that no shadow of doubt on the legislative powers of the State can be raised.

20. At this juncture, it will not be out of place to mention that Allahabad High Court and Kerala High Court however, held that the above levy is in violation of Article 301 of the Constitution of India and not saved by Article 304(b) of the Constitution. The learned counsel for the State tried to justify the impugned legislation even on the touchstone of Article 301 of the Constitution. He tried to distinguish these judgments of two High Courts and contended that with due respect to the said High Courts the view taken needs reconsideration. However, this part of the submission is being considered separately in subsequent paras while dealing with the specific issue framed in this behalf.

Consideration :

21. In the light of the submission advanced, it is necessary to find out whether impugned levy is in pith and substance a tax on sale or on supply of luxuries, viz., pan masala containing tobacco. Before considering the first question whether the levy of tax in pith and substance is on sale of pan masala containing tobacco or it is a tax on supply of luxury, viz., gutka, it is also necessary to refer to some of the decisions of the Federal Court and the Supreme Court which have laid down certain principles while construing/interpreting the legislative entries in Lists I and II of the pre-Constitution Act and Constitution of India.

22. In Ralla Ram's case AIR 1949 FC 81, the Federal Court was considering the question whether the provisions of the Punjab Urban Immovable Property Tax Act were within the powers of the Provincial Legislature which enacted it. The argument that was advanced was that the basis of the tax is the annual value of the property and since the same basis is used in the Income-tax Act for determining income from property, and generally speaking the annual value is the fairest standard for measuring income and, in many cases, is indistinguishable from it, the tax levied by the impugned Act is in substance a tax on income and, therefore, beyond the legislative competence of the Provincial Legislature.

23. The Federal Court referred to the following observations of Lord Atkin in Gallahagher v. Lynn 1937 AC 863 at page 870, while construing the scope of the Punjab Act :

" 'It is well-established that you are to look at the true nature and character of the legislation' Russell v. The Queen [1882] 7 AC 829, 'the pith and substance of the legislation'. If, on the view of the statute as a whole, you find that the substance of the legislation is within the express powers, then it is not invalidated if incidentally it affects matters which are outside the authorised field. The legislation must not under the guise of dealing with one matter in fact encroach upon the forbidden field."

It was also observed :

"It is the essential character of the particular tax charged that is to be regarded, and the nature of the machinery, often complicated, by which the tax is to be assessed is not of assistance except in so far as it may throw light on the general character of the tax."

In conclusion, it was held as follows :

"In the first place, we have to look into the charging section of the statute, because as was pointed out in Provincial Treasurer of Alberta v. C.E. Kerr (1933) AC 710 (102 LJPC 137) 'the identification of the subject-matter of the tax is only to be found in that section'. The charging section in the present case is Section 3, which in clear terms levies not a tax on income but a tax on buildings and lands. It is true that we must look not to the mere form but to the substance of the levy, and the tax must be held to be invalid, if in the guise of a property tax it is really a tax on income."

While holding as above, a reference was made to the following observations in Subrahmanayan Chettiar v. Muthuswami Goundan where Sir Maurice Gwyer, C.J. observed as follows :

"It must inevitably happen from time to time that legislation, though purporting to deal with a subject in one List, touches also on a subject in another List, and the different provisions of the enactment may be so closely intertwined that blind observance to a strictly verbal interpretation would result in a large number of statutes, being declared invalid, because the Legislature enacting them may appear to have legislated in a forbidden sphere....."

24. In R.R. Engineering Co. v. Zila Parishad , the question that arose for consideration was whether the circumstance and property tax levied under Section 119 of the U.P. Kshetra Samities and Zilla Parishads Act is a tax on status of an individual and not tax on income ? Section 120 of that Act provided that where, before the appointed date, there was in force "Circumstances and Property Tax" under the District Boards Act, 1922, such tax might continue to be levied by the Zilla Parishad at the same rates and on the same conditions under which it was being levied under the District Boards Act. Section 131 provides that the total amount of the tax shall not exceed the amount as may be prescribed by Rules framed under the Act. Rule 7 framed under Section 172 of the District Boards Act, 1922, which provided for a maximum levy of Rs. 2,000 on a single assessee, remained in force until the framing of rules under the Act of 1961. The appellant challenged the said rule on the ground that the State Legislature cannot over-reach its taxing power by making an artificial definition of words and expressions used in the legislative entries. Just as it cannot, by an artificial definition of "sale of goods", exercise a power to legislate in respect of a subject-matter outside its sphere, it cannot exercise the power to levy a tax on circumstances by an artificial and colourable understanding of that expression so as to acquire the power to impose a tax on income. Repelling the above arguments, it was held as follows :

"16. It may be, and is often so, that the tax on circumstances and property is levied on the basis of income which the assessee receives from his profession, trade, calling or property. That is, however, not conclusive on the nature of the tax. It is only as a matter of convenience that income is adopted as a yardstick or measure for assessing the tax. As pointed out In re : A Reference under Government of Ireland Act, 1920 [1936] AC 352 the measure of the tax is not a true test of the nature of the tax. Therefore, while determining the nature of a tax, though the standard on which the tax is levied may be a relevant consideration, it is not a conclusive consideration. One must have regard in such matters, as stated by the Privy Council in Governor General in Council v. Province of Madras [1945] 1 STC 135 ; (1945) 72 IA 91 at page 99, not to the name of the tax but to its real nature, its pith and substance, which must determine into what category it falls. Applying these tests, the tax on 'circumstances' will fall in the category of a tax on 'a man's financial position, his status taken as a whole and includes what may not properly be comprised under the term "property" and at the same time ought not to escape assessment.'

23. .....The mere name of a tax does not bear on legislative competence and the absence of express enumeration of a tax by a particular name will not justify the tracing of legislative authority to the residuary entry. What is true in other jurisdictions is true in this branch of law also, namely, that one must have regard to the substance of the matter and not to the form or label."

25. In A.B. Abdul Kadir's case , the question that arose for consideration was whether the provisions in the Luxury Tax on Tobacco (Validation) Act (9 of 1964) enacted by the State Legislature of Kerala are void on the grounds that (1) the State Legislature lack in the legislative competence to enact the Act ; and (2) the provisions of the Act were not protected by Article 301 of the Constitution of India. It is not necessary to refer to the history prior to the enactment of the Luxury Tax on Tobacco (Validation) Act (9 of 1964) by the Kerala State Legislature. Suffice it to point out that Section 3 was a charging section and provided that "for the period beginning with the 17th day of August, 1950 and ending on 31st day of December, 1957, every person vending or stocking tobacco within any area to which this Act extends shall be liable and shall be deemed always to have been liable to pay a luxury tax on such tobacco in the form of a fee for licence for the vend and stocking of the tobacco, at such rates as may be prescribed, not exceeding the rates specified in the Schedule". The matter went up to the Supreme Court. The arguments that were advanced were that the tax levied under Section 3 of the Act in reality and substance is an excise duty

even though described as luxury in the said charging section and as such the State Legislature was not competent to enact the Act.

26. Repelling the said contention, the Supreme Court held that the levy of tax contemplated by the provisions of Section 3 of the Act has nothing to do with the manufacture or production of tobacco and, as such, cannot be deemed to be in the nature of excise duty. The argument that the tax on the vending and stocking of tobacco cannot be considered to be luxury tax as contemplated by entry 62 of I, ist II of the Seventh Schedule to the Constitution was also repelled. While upholding the levy, the learned Judges referred to the following observations made by the Supreme Court in State of Madras v. N.K. Nataraja Mudaliar :

"Not much argument is needed to show that the power to tax is essential for the maintenance of any governmental system. Taxes are levied usually for the obvious purpose of raising revenue. Taxation is also resorted to as a form of regulation. In the words of justice Stone, 'every tax is in some measure regulatory' [Sonzinsky v. United States (1937) 300 US 506]. According to Roy Blough, the taxing power 'becomes an instrument available to Government for accomplishing objectives other than raising revenues'.

To some extent every tax imposes an economic impediment to the activity taxed as compared with others not taxed, but that fact by itself would not make it unreasonable. It is 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 the tax. As observed by Chief Justice Marshall in McCulloch v. Maryland (1819) 4 L ed 579 at page 607, 'the power of taxing the people and their property is essential to the very existence of Government, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the Government may choose to carry it'. There can also be no doubt that the law of taxation in the ultimate analysis is the result of the balancing of several complex considerations. The Legislatures have a wide discretion in the matter."

It was also held :

"Where a 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 vending 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 of legislation. In other words, the Supreme Court upheld the power of State Legislature to levy luxury tax on the vending of luxury, viz., tobacco."

27. The apex Court while dealing with the entries in the Constitution held in number of cases that it should not be read in a narrow or pedantic sense but must be given their fullest meaning and the widest amplitude and be held to extend to all ancillary and subsidiary matters which can fairly and reasonably be said to be comprehended in them. It is now well-settled that there is always a presumption in favour of constitutionality of an enactment and the burden is upon the person who attacks it to show that there has been a clear transgression of the constitutional principles and that in order to sustain the presumption of constitutionality, the court may take into consideration common report, the history of the times and may assume every state of facts which can be conceived existing at the time of the legislation, [see Ram Krishna Dalmia v. Justice Tendolkar ].

28. In B. Banerjee v. Smt. Anita Pan the Supreme Court after referring to the decision in Ram Krishna Dalmia's case has observed (at p. 1150, para 9) :

"Some courts have gone to the extent of holding that 'there is a presumption in favour of constitutionality, and a law will not be declared unconstitutional unless the case is so clear as to be free from doubt : and "to doubt the constitutionality of a law is to resolve it in favour of its validity" '."

29. It is also necessary to refer to the principle that while considering the question as to whether a legislation is covered by a particular entry in any of the Lists in the Seventh Schedule, the various entries in the three Lists are to be considered as fields of legislation and that the language of those entries should be given the widest scope to which their meaning is fairly capable and each general word should be held to extend to all ancillary or subsidiary matters which can form and reasonably be comprehended in it. It is really not necessary to quote any authorities which lay down this proposition, but if one is required, it will be found in Calcutta Gas Company (Proprietary) Ltd. v. State of West Bengal . The Supreme Court while construing certain legislative entries, has observed in para 8 as follows (as page 1049) :

"Before construing the said entries, it would be useful to notice some of the well-settled rules of interpretation laid down by the Federal Court and this Court in the matter of construing the entries. The power to legislate is given to the appropriate Legislatures by Article 246 of the Constitution. The entries in the three Lists are only legislative heads or fields of legislation : they demarcate the area over which the appropriate Legislatures can operate. It is also well-settled that widest amplitude should be given to the language of the entries. But some of the entries in the different Lists or in the same Lists may overlap and sometimes may also appear to be in direct conflict with each other. It is then the duty of this Court to reconcile the entries and bring about harmony between them."

30. In the Western India Theatres Ltd. the Supreme Court was dealing with the scope of the power of the Provincial Legislature under Section 100 of the Government of India Act, 1935 with respect to entry 50 in the Seventh Schedule of the said Act to make laws with respect to "taxes on luxuries including taxes on entertainments, amusements, betting and gambling". The contention of the appellant in that case was that the entry authorised in a law imposing taxes on persons who received or enjoyed the luxuries, etc., and that law made with respect to that entry could not impose a tax on persons who provide the luxuries, entertainment or amusements. It was contended that those who provide the luxury, etc., did not themselves receive or enjoy the luxury or entertainment or amusement, but were simply carrying on their profession or trade and were not amenable to be taxed under the entry. Rejecting the argument it was said : (SCR p. 69).

"In view of this well-established rule of interpretation, there can be no reason to construe the words 'taxes on luxuries or entertainments or amusements' in entry 50 as having a restricted meaning so as to confine the operation of the law to be made thereunder only to taxes on persons receiving the luxuries, entertainments or amusements. The entry contemplates luxuries, entertainments, and amusements as objects on which the tax is to be imposed. If the words are to be so regarded, as we think they must, there can be no reason to differentiate between the giver and the receiver of the luxuries, entertainments or amusements and both may, with equal propriety, be made amenable to the tax."

The concept of "luxuries" as a subject of tax was not confined to those who received the luxury. It could be on those who provided it.

31. One more principle which has to be borne in mind in the light of the contentions raised on the ground of colourable legislation is that the entries in the three legislative Lists are divided into two groups, one relating to the power to tax and the other relating to power of general legislation in respect of specified subjects. For the purposes of legislative competence, tax is considered as a distinct matter and the power to tax cannot be deduced from a general legislative entry as an ancillary power. The question of determining the validity of a taxing provision or a statute depends upon the nature of the tax levied and normally this is to be ascertained on the basis of a charging provision because the subject of the charge is normally indicated in the charging provision. We may refer to the decision of the Supreme Court in M.P.V. Sundararamier & Co. v. State of Andhra Pradesh wherein at page 341, the Supreme Court observed :

"Under the scheme of the entries in the Lists, taxation is regarded as a distinct matter and is separately set out".

Bearing these principles in mind, we must now proceed to consider the challenge posed by the petitioners that impugned legislation does not levy a tax on luxuries.

32. The tax levied in the exercise of legislative powers under entry 62, List II is a tax on the goods or articles which can be described as luxuries and it may be levied on the person who possesses the luxury articles or goods. We may usefully refer to the decision of the apex Court in State of Bombay v. R.M.D. Chamarbaugwala , where the division Bench has pointed out that the tax which can be imposed under entry 62 is a tax on goods or entries or articles which constitute luxuries. The relevant observations are as follows :

"With regard to luxuries it is significant to note that plural and not singular is used, and the luxuries in respect of which a tax can be imposed under entry 62 is a tax on goods or articles which constitute luxuries, and it is again significant to note that the topic luxuries only is to be found in entry 62 in the taxation power and not in either entry 33 or 34. That clearly shows that what was contemplated was a tax on certain articles or goods constituting luxuries and not legislation controlling an activity which may not be necessary activity but may be unnecessary and in that sense a luxury."

This view has been approved by the Supreme Court in the Western India Theatre's case .

33. The next question to which attention must, therefore, be directed is, what is a luxury and what is the criterion on which an article or goods can be described as luxury in contradistinction with necessaries. We may however point out that a luxury tax is a known concept in the field of taxation. The word "luxury" has not been defined under the Act. Therefore, let us find out the meaning of the word "luxury". In Black's Law Dictionary, 5th edition, "Luxury tax" is described as follows : DONo. 2002-KO-3130 "Generic term for excise imposed in purchase of items which are not "necessaries : e.g., tax on liquor or cigarettes."

The criterion for determining whether an article is an item of luxury or not cannot be uniform in all circumstances. What is a luxury in one part of the country may be a necessity in another part of the country or in some other country and the content of that concept must vary according to time and circumstances and there can never be an absolute definition of "luxury".

In Encyclopaedia Britanica the meaning of the word "luxury tax" is set out thus :

"Luxury tax : A tax on commodities or services that are considered to be luxuries rather than necessaries. Modern examples are taxes levied on the purchase of jewellery, perfume, and tobacco."

The concept of a tax on luxuries in entry 62, List II cannot be limited merely to tax things tangible and corporate in their aspects as luxuries. It is true that while frugal or simple food and medicine be classified as necessities : articles such as jewellery, perfume, intoxicating liquor, tobacco, etc., could be called as articles of luxury. But the legislative entry cannot be exhausted by these cases, illustrative of the concept. The entry encompasses all the manifestations or emotions, the notion of "luxuries" can fairly and reasonably be said to comprehend the element of extravagance or indulgence that differentiates "luxury" from "necessity". It cannot be confined to goods and articles only. There can also be element of extravagance or indulgence in the quality of service and activities.

34. In A.B. Abdul Kadir case , Khanna, J., said :

"The word 'luxury' in the above context has not been used in the sense of something pertaining to the exclusive preserve of the rich. The fact that the use of an article is popular among the poor sections of the population would not detract from its description or nature of being an article of luxury. The connotation of the word 'luxury' is something which conduces enjoyment over and above the necessaries of life. It denotes something which is superfluous and not indispensable and to which we take with a view to enjoy, amuse or entertain ourselves. An expenditure on something which is in excess of what is required for economic and personal well-being would be expenditure on luxury although the expenditure may be of a nature which is incurred by a large number of people, including those not economically well-off.

The use of tobacco has been found to have deleterious effect upon health and a tax on tobacco has been recognised as a tax in the nature of a luxury tax.

A number of factors may have to be taken into account in adjudging a commodity as an article of luxury. Any difficulty which may arise in borderline case would not be faced in case of an article like tobacco, which has been recognised to be an article of luxury and is harmful to health."

From the above, it is clear that it is a well-settled proposition that tobacco is an article of luxury and it has deleterious effect on and is harmful to health. Therefore, it does not warrant any debate on the question whether tobacco is an article of luxury or not.

35. One of the contentions canvassed by Shri Aney, appearing for some of the petitioners is that in so far as Section 3B of the Luxury Tax Act is concerned, it envisages a tax not on consumption or enjoyment of luxury but on the turnover of receipts in respect of supply of tobacco by way of sale as such it is beyond the scope of the

legislative entry. The apex Court repelling more or less similar contention in the case of Express Hotels Put. Ltd. observed as under :

"There might possibly be some distinction between the ideas of 'entertainment' and 'luxuries'. With due respect to the High Court, the interpretation that commended itself to the High Court would unduly restrict the scope of the legislative entry. On such an interpretation, it might be possible for a person to go further and also contend that no 'entertainment' was actually derived. The concept of 'luxuries' in the legislative entry takes within it everything that can fairly and reasonably be said to be comprehended in it. The actual measure of the levy is a matter of legislative policy and convenience. So long as the legislation has reasonable nexus with the concept of 'luxuries' in the broad and general sense in which the expressions in legislative tests are comprehended, the legislative competence extends to all matters 'with respect to' that filed of topic of legislation.

The taxable event need not necessarily be the actual utilisation or the actual consumption as the case may be, of the luxury. The contention, in substance, is that the means of providing luxury, by itself, does not provide the nexus between the taxing power and the subject of tax and there must be an actual and not merely a notional or potential, consumption or utilisation of the luxury. As an instance of what can be said to be fairly and reasonably comprehended in a legislative entry, reference may be made to 'notional' income, for purposes of a tax on income, of a person, from a house property in his own personal occupation or a property not actually let. In that context, this Court said 'that which can be converted into an income can be reasonably regarded as giving rise to income' (See Bhagwan Dass Jain v. Union of India ). A luxury which can reasonably be said to be amenable to a potential conception does provide the nexus.

If the provider of the luxury is also independently amenable to the tax, the further restriction on the power suggested by the argument tends to cut into the plenitude of the field of legislation. If the idea of 'luxuries' is required to be so wide as to comprehend in it, every aspect which can fairly and reasonably be said to be embraced by it, then, the taxing power cannot be limited to or conditioned in the manner suggested. Once the legislative competence and the nexus between the taxing power and the subject of taxation is established, the other incidents are matters of fiscal policy behind the taxing law. The measure of the tax is not the same thing as, and must be kept distinguished from, the subject of the tax."

The survey of aforesaid cases will unequivocally goes to establish that it is a well-settled law that when power is conferred upon the Legislature to levy tax that power must be widely construed : it must include the power to impose tax and select the articles or commodities or persons for the exercise of such power : it must likewise include the power to fix the rate and prescribe the machinery for the transaction. This also gives jurisdiction to make such legislation, so as to prevent evasion of tax. The Legislature has wide discretion in the matter of taxing the people. When a challenge to the validity and legality of an 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 is ostensibly within the legislative competence of the Legislature in question but in substance and reality it covers a field which is outside the legislative competence. In the present case, we find that the State Legislature has properly exercised its power and luxury tax is levied on the supply of luxury. In common parlance of law, luxury tax is the subject of the State legislation in view of entry 62 of List II of the Seventh Schedule to the Constitution, as such, it cannot be said that the legislation is colourable in nature.

36. At this juncture, it would not be out of place to mention that the luxury tax legislations legislated by the Legislature of Uttar Pradesh, State of Kerala, State of Andhra Pradesh have been upheld by the respective High Courts and all of them were unanimous so far as legislative powers of the State Legislature in levying luxury tax is concerned. All the three High Courts upheld the levy of luxury tax on tobacco on the ground that it was within the legislative competence of the respective State Legislatures to impose luxury tax on tobacco or the goods containing tobacco under entry 62, List II of the Seventh Schedule to the Constitution of India. The Kerala High Court, while upholding the legislative competence in enacting Kerala Tax on Luxuries Act, 1976, observed as under :

"(a) In view of the word 'with our sanction' in the section it is difficult to cut down the section as valid on the ground that there is an absolute delegation of legislative function. Even if the section amounted to such a delegation the Maharaja at the time he made it had on the basis of sovereignty which he claimed and exercised had the sole and untrammelled discretion to delegate all or any of his powers to such a person or persons as he deemed fit. He was an absolute ruler and the inhibition against the delegation of legislative power whether it be founded on the doctrine of separation of powers or the concept of due process of law of theory of agency and the maxim, delegata potestas delegare, had no application to him.

37. In the case of ITC Limited [1999] 112 STC 506, the Andhra Pradesh High Court had also an occasion to go into this question and after detailed discussion the legislation was upheld on the ground that it was well within the legislative competence of the State Legislature under entry 62, List II of the Seventh Schedule to the Constitution. The submission of the learned counsel for the petitioners, if accepted, will unduly restrict the scope of the legislative entry which should otherwise have widest and most liberal meaning and connotation given to the entries, the first contention (i.e., contention "A") is unacceptable and hence rejected.

Re : Contention "B"

38. The petitioners submitted that the levy of luxury tax on pan masala containing tobacco (gutka) under Luxury Tax Act is in violation of the Central Sales Tax Act enacted by the Parliament. Under Section 14 of the Central Sales Tax Act there is a list of goods of special importance in inter-State trade or commerce. Item (ix) reffers to tobacco. Section 15 of the said Act provides for restrictions and conditions in regard to tax on sales or purchases of the declared goods (enumerated in Section 14) within the State. Section 15 clearly lays down that every sales tax law of the State shall so far as it imposes or authorises the imposition of a tax on sale or purchase of declared goods be subject to the following restrictions :

(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage ;

(b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, and tax has been paid under this Act in respect of the sale of such goods in the course of inter-State trade or commerce the tax levied under such law shall be reimbursed to the person making such sale in the course of inter-State trade or commerce in such manner and subject to such conditions as may be provided in any law in force in that State.

The submission of the petitioners is that levy of 25 paise in a rupee is a direct infringement of Section 15 of the Central Sales Tax Act, 1956 and, therefore, it cannot be sustained. The same being in contravention of the law made by the Parliament, it should be struck down. The petitioners based on the assumption that the impugned levy is a tax on sale of goods further contended that in view of the apex Court judgment in the case of Kothari Products Ltd. , pan masala containing tobacco, an item of tobacco being covered under the Additional Duties of Excise Act, 1957, the same cannot be brought to tax since the State Government is getting its share of excise duty on goods of special importance under the Additional Duties of Excise Act, 1957 from the Central Government. The State is therefore, denuded of its power to levy sales tax under the BST Act.

39. Per contra, the learned counsel appearing for the State refuted this submission and contended that the judgment of the Supreme Court in Kothari Products Ltd. has no application in the present case in as much as the luxury tax is not a tax on sales and that it has nothing to do with the Additional Duties of Excise Act, 1957. The State's power to legislate in respect of the various entries in List II is not taken away by the Additional Duties of Excise Act, 1957, enacted by the Parliament under entry 84 of List I. He placed reliance on two-Judge Bench judgment of the apex Court in the case of State of Bihar v. Bihar Chamber of Commerce .

40. In our view, the question sought to be debated has become academic in view of our findings on contention "A" : wherein we upheld the levy of luxury tax on pan masala containing tobacco on the ground that the Luxury Tax Act is within the legislative competence of the State Legislature under entry 62 of List II of the Seventh Schedule to the Constitution of India. We, therefore, do not think it necessary to delve on this contention raised by the petitioners. The apex Court, time and again, reiterated and warned the High Courts that while deciding the constitutional issues, the court should restrict itself to the questions which are necessary for determination of the real issues necessary for deciding the case at hand and should avoid discussing or recording findings on academic issues. Respectfully following the said warning, we propose to refrain from dealing with and deciding this question and recording our finding on this issue. The view taken on contention "A", however, relieves us of the necessity of going into this question.

Re : Contention "C"

Submissions :

41. Mr. Jetly on behalf of the petitioners contended that the provisions of the impugned Act are violative of Article 301 not saved by Article 304(b) of the Constitution. In his submission, the impugned Act would impede the freedom of trade, commerce and intercourse throughout the country. It is thus violative of Article 301 of the Constitution. He strongly relied on the judgments of the High Courts, namely, Allahabad High Court and Kerala High Court (both cited supra) wherein, similar levy of luxury tax has been held to be violative of Article 301, not saved by Article 304(b) of the Constitution of India. He also relied upon the judgment of the Gauhati High Court in the case of All Assam Zarda Merchant Association v. State of Assam [1999] 115 STC 92, which deals with the levy of sales tax, with which we are not concerned in the present proceedings.

42. Mr. Rana, learned counsel appearing for the State, on the other hand, contended that taxation simpliciter is not within the sweep of Article 301. He further contended that freedom as contemplated does not mean freedom from taxation. In his submission, petitioners must show that the tax directly and immediately is restrictive of trade, commerce and intercourse. He submits that it is well-settled that to some extent every tax imposes an economic impediment to the activity taxed. But that by itself would not make it unreasonable. He further urged that the tax is on luxury. The movement of goods is incidental to and consequence of sale/transfer and supply. He placed reliance on the case of State of Madras v. Nataraja Mudliar , referred to with approval in the case of Ratlan Lal and Co. v. Assessing Authority, Patiala which was in turn followed in the case of Video Electronics Pvt. Ltd. v. State of Punjab .

43. The learned counsel for the State further canvassed that there is no discrimination between imported goods or local goods. Submission is that where the taxing State is not imposing rates of tax on goods imported from outside the State different from the rates of tax on goods manufactured or produced in the State, the Article 304 has no application. He, at the cost of repetition submits that where burden of tax is the same on supply of luxury whether brought from outside or produced within the State, Article 304(b) is not attracted. He referred to various judgments of the apex Court such as State of Madras v. N.K. Nataraja Mudaliar [1968] 22 STC 376 ; AIR 1969 SC 147, Andhra Sugar Ltd. v. State of Andhra Pradesh and Video Electronics Put. Ltd. case in support of his submission.

44. The learned counsel appearing for the State, repelling the contentions of the petitioners, contended that the object and purpose of the levy on pan masala containing tobacco is not only to augment revenue but also to suppress or limit or discourage consumption of tobacco which is hazardous to health. Article 47 of the Constitution mandates that the State shall regard improvement of public health as its primary duty. Article 37 provides that the State shall apply the directive principles of the State Policy in making the laws and this precisely what the State has done. He placed reliance on the Finance Minister's budget speech, the contents of which are as under :

"38. In the Union Budget, certain changes have been made regarding classification of pan masala and gutka. It is necessary to make corresponding changes in the Luxury Tax Act and Sales Tax Act. At this stage, it is not necessary to hold forth on the harmful effects of addiction to tobacco products such as jarda, snuff, gutka. In order to discharge such consumption, I propose to tax jarda and snuff at the rate of eight per cent, and to tax gutka at the rate of twenty five per cent instead of the present rate of twenty-three per cent."

In nutshell, the submission is that the luxury tax is merely regulatory in nature and does not infringe Article 301 of the Constitution.

Consideration :

45. Article 301 imposes a limitation upon the exercise of legislative power, whether by the Union or by the State. The object of the freedom declared by this Article 301 is to ensure that the economic unity of India may not be broken up by internal barriers.

Part XIII of the Constitution is headed "Trade, commerce and intercourse within the territory of India". Article 301 of the Constitution is in general term which reads as under :

Article 301 which deals with freedom of trade, commerce and intercourse provides :

"Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free."

Article 304 which deals with restrictions on trade, commerce and intercourse among State provides :

"Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law :--

(a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced ; and

(b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest :

Provided that no Bill or amendment for the purposes of Clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President."

Article 305 of the Constitution saves certain existing laws providing for State.

46. Though the word business is ordinarily comprehensive than the word trade, the one is used is synonymous with other. So used, trade or business would mean some real, substantial and systematic or organic cause of activity or conduct with a set purpose. The word intercourse provides the freedom declared by Article 301 the largest import. It thus includes the freedom to import things for personal or commercial use. The words throughout the territory of India extend the freedom not only to inter-State, but also in intra-State transactions and movements. "Freedom" in this article does not mean absolute freedom but freedom from all restrictions except those which are provided in other articles of Part XIII, as well as regulatory and compensatory measures. The power of the Union or the State to exercise legitimate regulatory control is independent of the restrictions imposed by Articles 302 to 305.

47. A violation of freedom guaranteed by Article 301 would take place only where a legislative or executive act operates to restrict trade, commerce or intercourse, directly and immediately as distinct from creating some indirect or inconsequential impediment which may be regarded as remote. It therefore, follows that regulatory or compensatory measures cannot be regarded as violative of the freedom. It is not the case of the State that the levy is compensatory but a positive case is sought to be made out that the levy is regulatory.

48. Let us consider whether the impugned levy of luxury tax can be said to be regulatory in nature and beyond the pale of challenge on the score of Article 301 of the Constitution. Although, the Directive Principles of State Policy contained in Part IV of the Constitution are not enforceable by the courts, nonetheless the articles included in Part IV of the Constitution (Articles 36 to 51) contain certain directives which it shall be the duty of the States to follow both in the matter of administration as well as in making of laws. They embody the aims and objects of the State under a republican Constitution that of bringing about ideal economic justice. It has been described as a matter of constitutional obligation of the State to implement Directive Principles of State Policy. A large body of legislation under Article 19(1)(g) when challenged, has been upheld by the Courts as being in furtherance of such policy, as being valid on the touchstone of directive principles. So far as intoxicating drinks are concerned, their effects are well-established specially for the Indian society. This was the reason why the framers of the Constitution considered it fit to include it, in expressed terms : in Article 47 while indicating the duty of the State to raise standard of living and to improve the public health. Lot many cases of the various High Courts, are available wherein liquor has been recognised and held to be injurious, hazardous to the health and it has been consistently ruled that no person can claim right to trade in it nor fundamental rights. In this connection, we may usefully quote following extract from the case of State of Bombay v. F.N. Balsara AIR 1951 SC 318.

" 'Laws of this nature designed for the promotion of public order, safety, or morals and which subject those who contravene them to criminal procedure and punishment, belong to the subject of public wrongs rather than to that of civil rights. They are of a nature which falls within the general authority of Parliament to make laws for the order and good Government of Canada.....'"

Again, referring to liquor laws and liquor control, a learned British author says as follows :

'The dominant motive everywhere, however, has been a social one, to combat a menace to public order and the increasing evils of alcoholism in the interests of health and social welfare the evils vary greatly from one country to another according to differences in climate, diet, economic conditions and even within the same country according to differences in habits, social customs and standards of public morality. A new factor of growing importance since the middle of the 19th Century has been the rapid urbanisation, industrialization and mechanisation of our modern every day life in the leading nations of the world, and the consequent wider recognition of the advantages of sobriety in safeguarding public order and physical efficiency'."

The question which arises, here is : whether restrictions are permissible only in relation to alcoholic liquor directly or can be extended to the articles like tobacco or pan masala containing tobacco which are not intoxicating by themselves but which have potentiality to injure the public health. Strong reliance is placed on the Full Bench decision in T.K. Abraham v. State of Travencore , the observations wherefrom were approved by the Supreme Court in A.B. Abdul Kadir's case in the following words :

"(13) It is no doubt true that for those who have been lured by the charms and blandishments of Lady Nicotine there are few things which are so soothing to the distraught nerves and so entertaining as tobacco and its manifold preparations. One of them has gone to the extent of saying that he who doth not smoke hath either known no great griefs, or refuseth himself the softest consolation, next to that which comes from heaven (Bulwer Lytton. What will he Do with it ?) Charles Lamp in 'A Farewell to Tobacco' observes : Tor thy sake, tobacco, I would do anything but die'. The fact all the same remains that the use of tobacco has been found to have deleterious effect upon health and a tax on tobacco has been recognised as a tax in the nature of a luxury tax. One of the earliest indictments of tobacco is in Robert Burton's Anatomy of Melancholy wherein he says :

'It's a plague, a mischief, a violent purger of goods, lands, health, hellish, devilish, and damned tobacco, the ruin and overthrow of body and soul.'

Another indictment is from James I of England (Counterblaste to Tobacco) when it is said :

'A custom (smoking) loathsome to the eye, harmful to the brain, dangerous to the lungs and in the black stinking fume thereof, nearest resembling the horrible Stygian smoke of the pit that is bottomless.'

The taxation of the objects or procedures of luxurious consumption has aimed at two purposes, on the surface contradictory : the suppressing or limiting of this consumption and the deriving of a public income from it. On closer inspection of a good deal of this contradiction vanishes, when it is seen that prohibition and taxation of luxury tend equally to fix certain levels and standards of living, as against economic and social progress, which is tending to 'level' such differences (see page 634 of the Encyclopaedia of the Social Sciences Volumes IX-X, 14th Printing)."

Considering the recent medical data available, this Court cannot afford to ignore that the tobacco is injurious to public health and it would be one of the duties of the State to prevent its injurious effect on the citizens of the country. In our view, time has come when tobacco can very well be equated with liquor so far as the effect thereof on the health of the citizens is concerned.

49. Only two causes are large and growing worldwide : HIV and tobacco. While most countries have begun, to respond to HIV, the response to global tobacco epidemic has so far been limited and patchy though tobacco is universally regarded as one of the major public health hazards and is responsible directly and indirectly for estimated eight lakh deaths annually in this country alone. It has also been found by the Parliamentary Committee on Subordinate legislation (10th Lok Sabha) that treatment of tobacco related diseases and the loss of productivity caused therein cost the country almost Rs. 13,500 crore annually, which more than offsets all the benefits accruing in the form of revenue and employment generated by tobacco industry.

50. One of the World Bank publications carrying title "Curbing the Epidemic Governments and the Economics of Tobacco Control" in no uncertain terms mentions that smoking already kills one in ten adults worldwide. By 2030, perhaps a little sooner, the proportion will be one in six, or 10 millions deaths per year--more than any single cause. Whereas until recently this epidemic of chronic disease and premature death mainly affected the rich countries. It is now rapidly shifting to the developing world. By 2020, seven of every 10 people killed by smoking alone will be in low and middle income nations.

Gutka--the pleasure poison has started to claim young victims in our country. A scientific study has revealed that 70 per cent of the patients, suffering from a Gutka--induced high risk pre-cancerous oral disease, are below the age of 35 years.

51. It is also a well-established fact that the patients with pre-cancerous disease have 400-times higher chances of developing oral cancer than the normal persons. In our country the unprecedented rise in the young gutka eaters, especially school going children, has became a real cause of concern. The most dangerous aspect of the trend is that the tobacco chewing (mainly gutka eating) habit has a younger generation firmly in its grip.

52. A control study conducted in Central India by Public Health Institution, Nagpur, Department of Preventive and Social Medicine, Clinical Epidemiology Unit, Government Medical College, Nagpur, Dy. Patil Women's Medical College, Pune, with respect to tobacco consumption practices and risk of Oro-pharyngeal cancer is one of the leading cancers in South and Southeast Asia. In Bangladesh, India, Pakistan and Sri Lanka, it is the most common and accounts for about a third of all cancers (WHO, 1984). Approximately, 90 per cent of Oro-pharyngeal cancers in these regions have been attributed to the habit of tobacco chewing and smoking.

53. The impact of tobacco on health is extensively documented. Tobacco is a very dangerous product. It is only legally available consumer product, which is addictive and highly dangerous when simply used as intended by the manufacturer. This is why government must use every method at their disposal in order to reduce the consumption of this product. Experience in many countries has demonstrated that price rise is an extremely effective in reducing tobacco consumption.

54. For centuries, tobacco has been considered as an ideal consumer goods for taxation : it is not a necessity, it is consumed widely, and demand for it is relatively inelastic, so it is likely to be reliable and easily administered source of Government revenue. Adam Smiths, writing in Wealth of Nations in 1776, suggested that, through such a tax, the poor "might be relieved from some of the most burdensome taxes : from those which are imposed either upon the necessaries of life, or upon the materials of manufacture". A tobacco tax, Smith argued, would allow poor people to "live better, work cheaper, and to send their goods cheaper to market". Demand for their work would increase, in turn raising the incomes of poor people and benefiting the entire economy.

55. The question now comes which individual in any country can influence future rates of disease and premature death more than all the doctors, health workers and scientific researcher together. The reason for this surprising answer is that the Minister for Finance can increase the tax on tobacco product causing their price to rise, which will result in less tobacco product being purchased, used and consumed. So less used today means less disease, disability and premature death in future years.

56. Taxation is a powerful weapon for reducing tobacco consumption ; while simultaneously raising extra revenue for the Government. Tax is used as potential tobacco product control measure. Progress is being made in many countries to make tax policy workable for health.

In most countries, tobacco products are among the leading preventable causes of disease and in short term. Price, which is directly affected by tax, is the single most important influence on tobacco consumption. The combination of these facts explains why the Minister of Finance who has ability to rise tobacco tax is potentially such important ally of public health.

Tobacco taxes can take several forms. Specific tobacco taxes, added as fixed amount to the price of tobacco products, allow the greatest flexibility and allow Governments to raise the tax with less risk, that the industry will respond with actions that keep low the real amount charged. Ad valorem taxes, such as value added taxes (VAT) or sales taxes are a percentage of the base price and are imposed virtually by all countries--often on top of the specific excise tax. Ad valorem taxes may be imposed at the point of sale or as in African countries on wholesale price. Taxes may vary according to the place of manufacture or the type of product : for example, some Governments impose higher taxes on tobacco products produced abroad than on domestically produced ones. An increasing number of countries now earmark taxes raised on tobacco for anti smoking activities or other specific activities. For example, one of China's largest cities, Chonggning, and several U.S. States earmark part of the revenue from tobacco taxes for education about tobacco's effects, counter advertising and other control activities. Other countries use earmarked tobacco taxes to support health services and some of them to prevent its use and consumption.

57. The nature and the amount of tax charged varies from country to country. A basic law of economies states that as the price of commodity rises, the quantity demanded of that product will fall. A growing volume of research now shows that price increased has resulted in less tobacco products being purchased. For example, tax increases in Canada between 1982 and 1992 lead to a steep increase in the real price of cigarettes and the consumption fell substantially. Similarly, higher taxes have reduced cigarette consumption in South Africa, United Kingdom and number of countries.

58. Based on evidence currently available we can safely conclude that tax increases are a highly effective way to reduce consumption of tobacco products in low and middle income countries where most tobacco product consumer now live. The study conducted by the World Bank in collaboration with World Health Organisation (WHO) and International Monetary Fund reveals that even modest price increase could have a striking impact on the consumption of tobacco products and on the number of tobacco related premature deaths.

59. If primary purpose of the tax is to discourage the consumption of tobacco product a strong case can be made to levy a luxury tax. The State has successfully made out a case that the impugned levy is to prevent injurious effect of tobacco product (gutka) on public health.

60. The learned counsel for the State rightly relied upon the speech of the Minister introducing the budget. The courts are entitled to consider such external or historical facts as may be necessary to understand the subject-matter to which statute relates or to have regard to the mischief which statute is intended to remedy. In State of M.P. v. Dadabhoy's New Chirimiri Ponri Hill Colliery Co. Put. Ltd. reference was made to the speech of the Minister introducing the Bill to find out the object intended to be achieved. Further, in Union of India v. Steel Stock Holders Syndicate reference was made to the speech of the Deputy Minister introducing the Bill. In our opinion, the budget speech of the Finance Minister can very well be taken into account to find out the legislative intent.

61. Having considered the material placed before us, and the rival submissions debated by the parties, we are of the opinion that the impugned legislation is regulatory in nature and is not open to challenge on the touchstone of Article 301 of the Constitution.

62. Alternatively, assuming trade in tobacco would constitute to be a trade within the meaning of Article 301, then the second limb of the defence is that even if it is a trade, the imposition of tax does not impede movement of goods directly and immediately. In this view of the submission, the most important question that falls for determination in this batch of cases is whether the impugned provisions of the Act impede provision of Part XIII referred to in Article 301.

63. The complexity of the problem with which we are concerned and called upon us to decide in the present proceedings has been considered in some of the reported judgments of the apex Court.

Our attention was drawn to the decision of the apex Court in the case of Atiabari Tea Co. Ltd. v. State of Assam , wherein it has been held that the freedom of trade, commerce and intercourse guaranteed by Article 301 was wider than the one contained in Section 297 of the Government of India Act, 1935, and it included freedom from tax laws also. Article 301 provides that the flow of trade shall run smooth and unhampered by any restrictions either at the boundaries of the State or at other points inside the States themselves and of any Act if it imposes any direct restrictions on the movement of the goods, it attracts the provisions of Article 301 and its validity can be sustained only if it satisfied the requirements of Article 302 or Article 304. Further the operation of Article 301 cannot be restricted to legislation under entries dealing with the trade and commerce. Gajendragadkar, J. (as he then was), in the majority judgment, observed that free movement and exchange of goods throughout the territory of India was essential for sustaining the economy and improving living standards of the country and that Article 301 guaranteeing freedom of trade and commerce and intercourse embodied and enshrined a principle of paramount importance that the economic unity of the country would provide the main sustaining force for the stability and progress of the political and cultural unity of the country and it was based on the theory that the people of several States may sink or swim together. It was also held that though the power of levying tax was essentially for existence of the Government, its exercise must inevitably be controlled by the Constitutional provisions and the power was not to be exercised outside the purview of any constitutional limitations.

64. In State of Bombay v. R.M.D. Chamarbaugwala , the Supreme Court has held that the protection afforded by Article 301 is confined to such activities as may be regarded as lawful trading activity and does not extend to any activity which is res extra commercium and cannot be said to be trade. The words "throughout the territory of India" extend the freedom not only to inter-State but also to intra-State transactions and movements. Freedom under Article 301 does not mean absolute freedom from all restrictions and barriers except those which are provided in other articles of Part XIII as well as regulatory and compensatory measures. The power of the Union or the State is to be exercised with legitimate restrictions imposed by Articles 302-305 as has been ruled by the Supreme Court in State of Madras v. N.K. Natraja Mudaliar . While examining whether there is a violation of the freedom guaranteed by Article 301, one has to scrutinise whether the impugned legislative or executive act operates to restrict or barricade trade, commerce and intercourse directly and immediately, as distinct from creating some indirect or inconsequential impediments which may be regarded as remote.

65. In Atiabari Tea Co. Ltd. v. State of Assam tax on goods carried by road outside State was struck down. In Automobile Transport (Rajasthan) Ltd, v. State of Rajasthan , Sub-section (1) of Section 4 of the Rajasthan Motor Vehicles Taxation Act which provided that no motor vehicles should be used in any public place or kept for use in Rajasthan unless the owner thereof had paid in respect of it a tax at the appropriate rate specified in the Scheme to the Act within the time allowed was challenged on the ground that it constituted direct and immediate restriction on the movement of trade and commerce with and within Rajasthan in as much as the motor vehicles which carries passengers and goods within or through Rajasthan had to pay the tax which imposed a pecuniary burden on a commercial activity and was, therefore, hit by Article 301 of the Constitution of India and was not saved by Article 304(b). The Rajasthan High Court dismissed the writ petition and the appeals were dismissed by the Supreme Court in accordance with the opinion of the majority. Thus, both Atiabari Tea Co. Ltd. v. State of Assam and Automobile Transport case dealt with fiscal measures.

66. In Indian Cement v. State of A.P. , it was held that the restriction provided in Article 301 can within the ambit be limited by law made by the Parliament and the State Legislature and that no power is vested in the executive authority to act in any manner which affects or hinders the essence and this is contained in the scheme of Part XIII of the Constitution which is against creation of economic barriers and/or pockets which would stand against the free-flow of trade, commerce and intercourse. There can be no dispute that taxation is a deterrent against free-flow. The reasonable restrictions contemplated in Part XIII have been backed by the law and not by executive action provided the same are within the limitations prescribed under the scheme of Part XIII.

67. The principle which emerges from the dominant cases is that taxing law is not out of the purview of Article 301 of the Constitution. Such imposition may amount to impeding movement of goods, but mere imposition of tax would not amount to impede trade, commerce and intercourse, unless, it impedes its movement directly and immediately.

68. In Weston Electroniks v. State of Gujarat [1988] 70 STC 52 (SC) ; AIR 1988 SC 2038, it was reiterated that while State Legislature may enact a law imposing a tax on the goods imported from other States as is levied on similar goods manufactured in that State the imposition must not be such as to discriminate between goods so imported and the goods so manufactured and that taxing laws could be restrictions on trade, commerce and intercourse, if they hamper the flow of trade and if they were not what could be termed to be compensatory taxes or regulatory measures.

69. It is by now settled law that the object of Part XIII is not to make inter-State trade, commerce or intercourse absolutely free. Reasonable restrictions in public interest are permissible. Mandate against discrimination dictates the placing of inter-State trade, commerce and intercourse undergone not at greater disadvantage than that borne by intra-State trade, commerce and intercourse. The primary object is to avoid barriers around the State borders. Fractionalisation of the country's trade, commerce and intercourse is to be avoided. A tax which is made condition precedent of the right to enter upon and carry on business is a restriction on the right to carry on trade and commerce within Article 301 of the Constitution. It is in this light we must examine the impugned provisions. It is necessary to bear in mind that taxes may and sometimes do amount to restrictions but it is only such taxes as directly and immediately restrict trade that would fall within the mischief of Article 301 of the Constitution. The taxes which do not directly or immediately restrict or interfere with trade, commerce and intercourse throughout the territory of India, would therefore be excluded from the ambit of Article 301 of the Constitution.

70. It has to be borne in mind that levy of tax like sales tax has only an indirect effect on trade and commerce. Reference may be made to the Constitution Bench judgment in Andhra Sugar Ltd. v. State of Andhra Pradesh , wherein the Supreme Court observed that normally a tax on sale of goods does not directly impede the free movement of transport. See also the observations in State of Madras v. N.K. Nataraja Mudaliar case it was observed that a tax on sale would not normally offend Article 301. That article made no distinction between movement from one part of State to another part of the same State and movement from one State to another. In this connection, reference may also be made to the observations in Bengal Immunity Company Ltd. v. State of Bihar . Both the preceding cases clearly establish that if a taxing provision in respect of intra-State sales does not offend Article 301, logically it would not affect the freedom of trade in respect of free-flow and movement of goods from one part of the country to the other under Article 301 as well.

71. Let us now examine the material provisions of the Act so as to consider their impact on the trade, commerce and intercourse of the country.

Now coming to the impugned provisions of the amended Act, Section 2(o-2) defines "tobacconist", Section 2(o-2)(i) defines the manufacturer who supplies tobacco whether by way of sale or otherwise, and includes any person for the purpose of business who gets the manufacturing done from any other person, whether or not on job-work basis ; but does not include any person who manufactures tobacco only on job-work basis without obtaining any proprietary right over it at any stage :

The importer under Section 2(o-2)(ii) means any person who for the purposes of business brings or causes to be brought tobacco in the State or to whom any tobacco is despatched from any place outside the State and who supplies such tobacco whether by way of sale or otherwise.

Similarly, exporter has been defined in Section 2(o-2)(iii) as any person who supplies tobacco from a place within the State to any place outside the State, whether by way of sale or otherwise. Reading of these provisions along with charging section would show that if the pan masala containing tobacco (gutka) is to be brought from outside in the State of Maharashtra and supplied within Maharashtra, luxury tax is attracted because of Section 3A. However, if it is brought from the other State to the State of Maharashtra and supplied to any other States, no luxury tax is attracted because of Sections 3B(2)(b) and (c). If it is supplied within the State of Maharashtra, i.e., by way of intra-State transactions, then the luxury tax is attracted because of Section 3A. However, if it is supplied from Maharashtra to any other outside State, no luxury tax is attracted because of Sections 3B(2)(b) and (c). Similarly, if the goods are supplied from outside Maharashtra to any other outside States directly, no luxury tax is attracted even if the goods happened to pass through the territory of Maharashtra because none of the provisions of the Act intervenes in such transactions. It is thus clear that the general rate applicable to the goods locally made and made on those imported from other States is the same. Therefore, one fails to understand as to how Article 301 would get attracted and much less violated. At this juncture, it would be proper to refer to the observations made in N.K. Nataraja Mudaliar case , Mr. Justice Bachawat after referring to several cases observed as follows :

"But, there can be no doubt that a tax on such sales would not normally offend Article 301. That article makes no distinction between movement from one part of the State to another part of the same State and movement from one State to another. Now, if a tax on intra-State sale does not offend Article 301, logically, I do not see how a tax on inter-State sale can do so. Neither tax operates directly or immediately on the free-flow of trade or the free movement of the transport of goods from one part of the country to the other. The tax is on the sale. The movement is incidental to and a consequence of the sale."

72. There was a reference in the said judgment to the observations of Jagannadha Das, J., in Bengal Immunity Co. Ltd, case , wherein it was stated :

"Now it is not disputed that a tax on a purely internal sale which occurs as a result of the transportation of goods from a manufacturing centre within the State to a purchasing market within the same State is clearly permissible and not hit by anything in the Constitution. If a sale in that kind of trade can bear the tax and is not a burden on the freedom of trade, it is difficult to see why a single point tax on the same kind of sale where a State boundary intervenes between the manufacturing centre and the consuming centre need be treated as a burden, especially where that tax is ultimately to come out of the residents of the very State by which such sale is taxable. Freedom of trade and commerce applies as much within a State as outside it. It appears to me again, with great respect, that there is no warrant for treating such a tax as in any way contrary either to the letter or the spirit of the freedom of trade, commerce and intercourse provided under Article 301."

73. In V. Guruviah Naidu and Sons v. State of Tamil Nadu [1976] 38 STC 565, the Supreme Court observed as follows :

"Article 304(a) does not prevent levy of tax on goods : what it prohibits is such levy of tax on goods as would result in discrimination between goods imported from other States and similar goods manufactured or produced within the State. The object is to prevent discrimination against imported goods by imposing tax on such goods at a rate higher than that borne by local goods since the difference between the two rates would constitute a tariff wall or fiscal barrier and thus impede the free-flow of inter-State trade and commerce. The question as to when the levy of tax would constitute discrimination would depend upon a variety of factors including the rate of tax and the item of goods in respect of the sale of which it is levied. The scheme of items 7(a) and 7(b) of the Second Schedule to the State Act is that in the case of raw hides and skins which are purchased locally in the State, the levy of tax would be at the rate of 3 per cent at the point of last purchase in the State, When those locally purchased raw hides and skins are tanned and are sold locally as dressed hides and skins, no levy would be made on such sales as those hides and skins have already been subjected to local tax at the rate of 3 per cent when they were purchased in raw form. As against that, in the case of hides and skins which have been imported from other States in raw form and are thereafter tanned and then sold inside the State as dressed hides and skins, the levy of tax is at the rate of 1 1/2 per cent at the point of first sale in the State of the dressed hides and skins. This levy cannot be considered to be discriminatory as it takes into account the higher price of dressed hides and skins compared to the price of raw hides and skins. It also further takes note of the fact that no tax under the State Act has been paid in respect of those hides and skins. The Legislature, it seems, calculated the price of hides and skins in dressed condition to be double the price of such hides and skins in raw State. To obviate and prevent any discrimination or differential treatment in the matter of levy of tax, the Legislature therefore prescribed a rate of tax for sale of dressed hides and skins which was half of that levied under item 7(a) in respect of raw hides and skins."

As a matter of fact, the burden is upon the petitioners to show that the provisions have direct and immediate effect of impugned freedom of intercourse. No such material has been placed before us to reach to this conclusion.

74. Having examined the various provisions of the impugned legislation in the light of the law laid down by the apex Court it is clear that none of the provisions directly interferes with trade, commerce and intercourse. The impugned levy of luxury tax does not attempt to hinder their carrying on intra or inter-State trade and commerce. The levy operates after importation of goods or the inter-State commerce leading to importation has ended. The obligation to pay luxury tax arises only when the goods are committed to intra-State trade and commerce. It is not because the petitioners are importers of gutka that they are required to comply with that law. The levy operates at that stage, not beforehand ; it does not restrict the trade and commerce of the petitioners. If the impugned provision or section entails any consequence to the petitioners' intra-State trade or commerce, the consequence is economic, it does not operate on inter-State trade and commerce.

The obligation to pay luxury tax which the Act imposes is upon those who wish to sell the goods in question in the State of Maharashtra. It is not because he wishes to conduct inter-State trade and commerce by supplying luxury.

75. A person, who in the course of his inter-State trade brings gutka into the State of Maharashtra from other State may store the goods for further trading, he may destroy them, may send them on to another State and may supply them in the State, but levy of luxury tax will only be in such last mentioned case. In other words only in the last mentioned case the goods are subjected to levy of luxury of tax. To say that this last requirement infringes Article 301 of the Constitution seems to us to be a proposition that cannot be supported.

76. Let us now turn to the decisions referred to by the petitioner from two different High Courts, who did not sustain levy of luxury tax imposed by the respective States and held it to be violative of Article 301 not saved by Article 304(b) of the Constitution. With due respect, we have already indicated our dissent, as we could not persuade ourselves to accept the view taken by them.

The first judgment cited was from Allahabad High Court in the case of Varshaney General Sales [2003] 130 STC 202 ; 1995 UPTC 105. In that case, the transfer by way of inter-State or consignment basis or by way of stock transfer under ordinance were subjected to levy of luxury tax on the total gross receipt irrespective of the fact whether the same has been sold in U.P. or sent to other State. In this view of the matter, the levy of luxury tax was held to be ultra vires Article 301 of the Constitution.

The second judgment cite was from Kerala High Court in the case of Hall Mark Tobacco Co. Ltd. [1998] 108 STC 539. The Kerala High Court in paras 19, 31, 34 of the judgment, after analysing the provisions of the Act, elicited the nature of the impugned levy in the following words :

"From the above what is prominently revealed is that the person to whom the cigarette is dispatched from any place outside the State for supply within the State is made liable to pay the tax at the point of first supply on the value of the goods so dispatched for supply. This dispatch and supply is inevitable in the course of inter-State or intra-State trade and commerce inasmuch as the person who is made liable to pay the tax, i.e., the stockiest who receives dispatch of cigarettes for supply for the purpose of his business or trade. What indubitably evinced here is that the levy of tax directly collides with the despatch and supply of cigarettes in the course of its movements from place to place or from State to State since tax is directly on value of goods. This is no doubt a direct and immediate restriction on the free movements of the goods in the course of inter-State trade and commerce. This is the result when tests 2 and 3 formulated above are applied to the facts of this case.

.....In this context it must be recalled that what is levied under Section 4A of the impugned Act is the levy of tax on the dispatches and supply of a declared commodity, i.e., cigarettes in the course of inter-State trade and commerce. In other words, the movement part of the inter-State trade and commerce in cigarettes is involved here. Under Section 4A, the tax is levied on the value of the tobacco dispatched for supply in the course of inter-State trade and commerce and the rate of tax is 5 per cent. What is necessary to find out here is whether the impugned levy directly and immediately impedes or restricts the movement of cigarette in the course of trade and commerce.

.....Section 4A of the impugned Act in substance and form imposes a levy of tax at the rate of 5 per cent on the despatch of cigarettes for supply made in the course of inter-State trade and commerce which is declared to be free. In other words, it is an imposition of tax direct on the movement of goods at the rate higher than 4 per cent specified under Section 15(a) of the Central Sales Tax Act. It is an impediment or restriction which is direct and immediate. Due to compulsion arising out of existing statute the impugned levy cannot be enforced on the movement of the goods in the course of inter-State trade and commerce, whatever form and shape it may assume at the point of levy or collection.

In the result, Section 4A of the Kerala Tax on Luxuries Act, 1976 and Schedule thereto as amended by the Kerala Finance Bill, 1994 are declared unconstitutional, invalid and inoperative."

77. Having examined the basis and mechanism to levy luxury tax adopted by the State of Uttar Pradesh and State of Andhra Pradesh in contrast to the impugned legislation, its provisions, basis and mechanism, we prima facie feel that the provisions of the impugned legislation are quite different than that of the two legisr lations which were subject-matter of judicial scrutiny in the judgments of the two High Courts referred to herein. None of the petitioners could satisfy us that the provisions involved in the present cases are similar and identical with that of two legislations with which both High Courts were dealing. In our view, these two judgments referred to herein are of no assistance to the petitioners. Apart from this, we are unable to subscribe ourselves to the view taken by two High Courts assuming the provisions which were under challenge to be similar to one involved in these petitions.

78. As already pointed out, in the present case it has not been shown as to how the levy of luxury tax imposed by the State has direct and immediate effect on the freedom of trade, commerce and intercourse. Accordingly, we reject the challenge set up by the petitioners on this count and hold that the levy of luxury tax is legal, valid and well within the legislative competence of the State Legislature. No other contentions other than the contentions dealt with are canvassed.

For the reasons stated above, the petitions are dismissed and rule is discharged in all the petitions, with no order as to costs.