D. CAWASJI AND CO. MYSORE versus THE STATE OF MYSORE AND ANR.

Citation: [1985] 1 S.C.R. 825 · Decided: 26-09-1984 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

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D. CAWASJI AND CO. MYSORE 
v. 
THE STATE OF MYSORE AND ANR. 
Stptember 26, 1984 
(P.N. BHAOWATI, AMARENDRA NATH SEN AND RANOANATH 
MISRA, JJ.) 
82S 
Mysore. Sales Tax Act 1957, Mysore Act 25 of 1957-Second Schedule 
· Columfl No.3 Serial No. 39-Provision whether conJtilutionally valid. 
Arrack-Sale by Government to licensed contractors-Recovery of sales tax 
at 6 If 2% on total amount of selling price-High Court holding provi1ion void and 
A 
B 
a 
that sales tax can be collected only on basic price excluding exci1e duty-Amend-
D 
ment introduced by the Mysore Sales Tax (Amendment) Act 1969-Rate of tax 
enhanced to 45% with retrospective effect from April I, 1969-Va/idity of 
amendment. 
Interpretation of Statutes: Amending Act and Validating Act-Difference 
between-Explained. 
The appellants were Excise Contractors who had secured the excise privilege 
of retail sate of Toddy, Arrack or Special Liquor. The State Government had 
the monopoly of the first sale of Arrack which is country liquor other than 
Toddy. The manufacture of Arrack by distillation is done in the State under 
State control and the entire quantity manufactured in the State is sold to the 
State Government which in its turn supplies it to the bonded depots in Taluks. 
Under the Mysore Excise Act, Arrack is liable to excise duty at rates pre-
scribed by the Government. The State does not collect excise duty from the 
distillers. From the distillery arrack is transferred to Bonded Depots and 
excise duty together with cesses thereon is collected from the contractors who 
are given the privilege or right to effect retail sales of Arrack. 
The exclusive privilege of retail vending of Arrack for each excise year 
which commences on the first day of July and ends on 30th June of the follow. 
ing year is sold by the State by auction. Under the terms and conditions 
governing the Jicenses, granted to the contractor whose bid is accepted and to 
whom the licenses for vending arrack is granted, the licensees were required to 
deposit in the State Treasury under separate heads of account the safoi t:it 
E 
F 
G 
payable to the Stgte Government and the excise duty with cesses. 
H 
A 
B 
826 
SUPREME COURT REPORTS 
[1985] l S.C.R. 
However, with effect from J. 4. 1966 the State Government started collect-
ing saJes tax computed on the sale price of Arrack together with excise duty 
and cesses payable thereon. So con1puted sales tax came to about 24 Paise a 
litre which was collected alongwith the price of Arrack sold to the licensees. 
The validity of the collection of the sales tax on the aforesaid basis was 
challenged by the appellants. A Division Bench of the High Court allowed 
the writ petition, D. Cawasji and Co. Mysore v. State of Mysore 1969.(l) Mys. 
L.J. 461, holding that the State Government could not under s.19 of the Sales 
Tax Act, collect sales tax on excise duty which is not a part of the selling price 
of Arrack. The appeal preferred by the State Government to this Court was 
withdrawn. 
C 
During the pendency of the appeal the privileges o.f vending liquor in the 
D 
F 
G 
H• 
excise year 1968.69 were sold without any variation in the price of Arrack fixed 
by the Government during the previous year at 55 paise a litre. During the 
year 1968·69 the State Government collected safes tax computing the same 
@ 6.1{2% of the actual safe price without !including therein excise duty 
and cess. 
As the liability of the States to refund the amount collected as sales tax 
in excess amounted to lacs of Rupees, and with the object of avoiding the 
liability of refund by the State Government of the excess amount so collected, 
the State passed Ordinance No. 3 of 1969 on 17th July, 1969 which was replaced 
by the Mysore Sales Tax (Amendment) Act, 1969 on 19th July, 1969. 
Th• validity of this Amending Act was challenged by the appellants on the 
ground that the Amending Act was unreasonable and arbitrary but the High 
Court dismissed the writ petition. 
In the appeal to this Court, it was contended on behalf of the appellant that 
the Amending Act does not seek to rectify or remove the defect or lacuna on 
the basis of which the collection of the excess saJcs tax had been set aside by 
the High Court, and that the increase in the rate of sales tax from 6f % to 
4.5% with retrospective effect is clearly arbitrary and unreasonable for if, any 
particular provision of the statute is for some lacuna or defect in the statute 
declared unconstitutional or inva

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