LexM/S. GURUSWAMY & CO. ETC. versus STATE OF MYSORE & ORS.
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M/S. GURUSWAMY & CO. ETC. A V. STATE OF MYSORE & ORS. September 26, 1966 (K. SUBBA RAO, C. J., M. HIDAYATULLAH, S. M. SIKRI, R. S. B . BACHAWAT AND RAGHUBAR.DAYAL, JJ.) Mysore Health Cess Act, 1962-Competence of the State Legislature to levy health cess-Validity of Act-Cess whether excise duty under lttm 1 of Schedule A of the Act. Mysore Excise Act (Act S of 1901) s. 18, and Hyderabad Abkarl Act (Act 1 of 1916 F)-Levy of duty on liquor by way of shop rent- Highest bidder given exclusive right to sell-Such duty whether an excise duty within meaning of Entry S 1 of List II of the Constitution. The Mysore Health Cess Act 1962 provided in s. 3 for the levy and collection of a health cess at the rate of nine naye paise in the rupee, inter alia, on the items of the State revenue mentioned in Schedule A. Item I of Schedule A mentioned duties of excise leviable by the State under any law for the time being in force in any area of the State on alcoholic liquors for human consumption (and opium etc.) manufactured or produced in the State and for countervailing duties levied on similar g?Ods manufactured or produced elsewhere. The Mysore Excise Act, 1901 empowered the State Government to grant exclusive or other privi~ lege of selling by retail any country liquor or intoxicating drugs to any person or persons on such conditions and for such period as it thought fit. According to s. 18 of the Act the privilege of sale in a specified shop was to be disposed of periodically by public auction held by the exctse authorities. As a result of such public auctions held subject to the terms and conditions notified by the Slate Government the appellant.! were granted the exclusive privilege of selling country liquor in certain arrack shops, beer tavcrcs and toddy shops in consideration of their agreeing to pay specified 'shop rent' thereon at the rate of nine naye paise in the rupee. The appellants challenged the levy of tho health cess on the shop rent in writ petition before the High C-Oun and thereafter ap- pealed to this Coun wirh the following contentions : (I) That the Mysore Lcgisllture was not competenr to enact the impugned Act because no entry in List II or List Ill authorities a tax on tax or a health-tax and that if the inlention was to levy a surcharge on existing items of revenue the State legislature could have easily used the words "surch3rge' or 'additiol)al revenue'. c D E F (2) Even if the impugned tax was valid the Act did nor empower the G levy of health cess on shop rent because shop rent was not an excise duty falling within Schedule A of the impugned Act or Entry 51 of List II. HELD: Per Subba Rao, C. J., Sikri and Dayal, JJ. (i) By the impugned Act the State Legislature was levying a health cess on a num- ber of items of State revenue or tax and it adopted the form of calling it a cess and prescribed the rate of nine naye paise in the rupee on the State revenue or tax. Section 4 of the impugned Act makes it quite. H clear that the cess is Ieviable and recoverable in the same manner u 1 items of land revenue, State revenue or tax. In the context, the word 'on' in s. 3 does not indicate that the subject matter of taxation is land 1 A B c D E F G H GURUSWAMY & CO. V. MYSORE (Sikri, I.) 549 revenue or State Revenue but that 9% of the land revenue or Stato revenue is to be. levied and collected, the subject matter remaining the same as in the law imposing liµ1d revenue or any duty or tax. .It wo read ss. 3 and 4 together the fact that the words 'stircbarge' or 'additional duty' bav~ not been mentioned does not detract from the real substance of the legislation, Accordingly the Mysore Legislature was com.Potent to enact the law under the various entries of List II which enable 1t to !en: land revenue or the duties of excise or the other taxes mentioned m s. 3(iii) of the impugned Act. [560 A-CJ (ii) For a duty to be a duty of excise it must be shown that the duty bas Leen levied on goods which have been produced or manufai:tured, the taxable event being production or manufacture of goods. However, it is not easy to decide in a particular case whether the particular levy is a levy in respect of manufacture or production of ~oods. This question bas to be decided on the facts of each case but Ill deciding it certain principles must be borne in mind. First, one of the essential ·characteris- tics of an excise duty is uniformi
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