LexIN RE. THE BILL TO AMEND S. 20 OF THB SEA CUSTOMS ACT, 1878, AND S. 3 OF THE CENTRAL EXCISES AND SALT ACT, 1944 versus VS.
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3 S.C.R. SUPREME COURT REPORTS 787 We are of opinion that the order of the High Court is correct and therefore dismiss the appeal with costs. u.i. ... 1 '""' • •• M "'41• T.lal.llc.\ Appeal dismissed. &1Ji.Hr D,,,,J J • IN RE. THE BILL TO AMEND S. 20 OF THB SEA CUSTOMS ACT, 1878, AND S. 3 OF THE CENTRAL EXCISES AND SALT ACT, 1944 (B. P. SINHA c. J., s. K. DAS, P. B. GAJENDIU.· G.olDKAR, A. K. SARKAR, K. N. WANCHOO, M. HIDAYATULLAH, K.C. DAS GUPTA, J.C. SHAJI, and N. RAJAGOPALA AYYANGAR JJ.) Pre6ident'• Reference-Ouatom., dutiea and dutiea of e11:ci1t- Parliamenl'• power to levy such dutiea on the property of Btolt•- Direct and indirect taxes-Distinction, if valid under 00111- titution-·Ouatoms duties and duties of exciBe, if ta:u1 Oii properly-"Taxation", Definition-Bea Oustoma Act, 1878 (8 of 1878), s 20-0entral Excises and Bait Act, 1944 (1 of 1944). •· 3 (11-Go•vernment of India Act, 1935 (25 It 25 Geo. Ii, Oh. 42), as. 154, llili-Oon•titution of India, .frll. 246, 246, 285, 289, 366 \28). As a result of a proposal to introduce in Parliament a Bill to amend s. 20 of the Sea Customs Act, 1878, ands. 3 of the Central Excises and Salt Act, 1944, with a view to apply· ing the provisions of the ·said two Acts to goods belonging to the State Governments, in regard to which certain doubts arose as to whether the provisions of the Bill were inconsistent with Art. 289 of the Constitution of India, the President of India referred under Art. 143 of the Constitution certain questio111 for the opinion of the Supreme C mrt to ascertain if the pro- posed amendment• would be constitutional. The question was whether the provisions of Art. 289 of the Constitution precluded the Union from imposing, or authorising the impo1i• tion of (a) custom• duties on the import or export, or (b) excise duties on the production or manufacture in India, of 1he /HJ M9 II ~~. -' ha,, s,a· Cwtonil · ..let. .. · \ 788 SUPREME COURT REPORTS (1964] VOL. property of a State used for purposes other than those specified In cl. (2) of that Article. Held (S. K. Das, A. K. Sarkar, Hidayatullah and K. C. Das Gupta,JJ, dissmting), that the provisions of Art. 289 (1) of the Constitution of India were in the nature of an exception to the exclusive field of legislation reserved to Par hament and were limited to taxes on property and on income of a State ; that the immunity granted in favour of States had to be restricted to taxes levied directly on property and .income ; and, that even though import and export duty or duties of excise had refeience to goods and commodities, they were not taxes on property directly and were not within the exemption In Art. 289 (1). Per Sinha C. J., Gajendragadkar, Wanchoo, Shah and Rajagopala Ayyangar JJ.-(1} Though the expression "taxation", as defined in Art. 366 (28), "includes the Imposi- tion of any tax or impost, whether general or local or special", the amplitude of that definition has to be cut down if the context otherwise so requfres. (2) Whereas the Union Parliament has been vested with the exclusive pnwer to regulate trade and commerce and with , the sole responsibility of imposing export and import duties and duties of excise, with a view to regulating trade and commerce and raising revenue. an exception has been engrafted In Art. 289 (1) in favour of States granting them immunity from certain kinds of Union taxation and it is necessary that the general words of the exemption in that Article should be limited in their scope so as not to come in conflict with the power of the Union to regulate trade and commerce. (3) Though the Constitution of India does not make a clear distinction between direct and indirect taxes, the exemp- tion provided in Art., 289 (I) from Union taxation to property must refer to what arc known to economists as direct taxes on property and not to indirect taxe< like duties of customs and excise which are in their essence trading taxes and not tax on property. Per Das, Sarkar and Das GuptaJJ.-(1} The exemption clause under Art. 289 (I) ha• to be interpreted with the key furnished by Art. 366 (28) Under the Constit11tion the word "taxation" has been defined by the Constituiion itflelf, and the Court is not free to give a different meaning to the word so as to make a diotinction between direct and indirect a s.c.R. SUPREME COURT REPORTS 789 taxation, nor is the Court free to make a distinction between
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