LexSTATE OF MYSORE & ORS versus M/S. D. CAWASJI & CO. AND ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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799
STATE OF MYSORE & ORS.
v.
MIS. D. CA WASJI & CO. AND ORS.
November 18, 1970
(J. C. SHAH, G. K. MITTER, K. S. HEGDE, A. N. GROVER,
AND A. N. RAY, JJ.]
Cess-When can be levied.
Constitution of India List II Entry 8, Entry 51 and Entry 62-Wliet/Jer
enable legislature to levy cess on "shop-rem", etc.-Whet/Jer shop-rent.
under M,vsore Excise Act. 1901 1nd 1965 amoumed to excise revenue. ·
Tax-;:-Power. to legislate in respect of-If derived from a specific tax·
ing entry of as incidental or sub:sidiary power to legislate 011 any other
tqpic.
Under the Mysore Excise Act, 1901, later substituted by the Act
of 1965, the exclusive privilege of retail vending of toddy in different
areas was sold by auction for which the consideration paid by the Jicencce
to the State was popularly known as "shop·rent". In addition a "tree-tax"
and "tree-rent" were also levied separateiy, in respect of tapping toddy·
yielding trees.
JW the notification• inviting bids for the privilege of 1ctail
vending of toddy, ·it was stipulated that education cess shall be paid in
accordance with a condition applicable to all excise licences.
Although the three levies were originally charged separately by a
Notification in 1907. "tree-rent'' and "tree-tax" were merged into "shop-
rent".
However, the State continued to collect education cess on these
items.
Under the Mysore Elementary Education Act, 1941, an education
cess was levied as a percentage~ inter alia, of excise revenue. After this
Act was amended by the Mysore Elementary Education (Amendment)
Act, 1955, by a provision in the Schedule, education ces-. was levied on all
items o(' land revenue, forest revenue and excise ·revenue "on which edu-
cation cess is now being_ levied."
A . number of Excise c;ontractors moved petitions under Article 226
of' the Constitution challenging the levy of education cess on "sho1>-rent",
"tree-tax" and "tree-rent". The High Court alowed the petitions holdina
that liability to pay education cess. arose in respect of all ilems of excise
revenue on which education cess was being levied and since no education
cess was being lawfully levied in 1955 and for a long time before, the
liability. to pay -education cess did not arise. · The Court further held th.at
G . by virtue of Art. 265 of the Constitution no tax could be levied or collect-
ed except by authority of law; and that since the provision in the Schedule
to the Act did not impose the charge of education cess on "shor-rent",
•'tree..~" and "tree6 rent" and "shop-rent" was not a duty of excise, no
education cess could be levied on these items.
It was contended on behalf of the appellant State that ( i) under List
II Entry 8 the State Legislature is competent io legislate for lc»y of cess
H' in respect of "intoxicating liquors"; fii) the High Court was in eror in
holding that "shop-rent" was not excise revenue; (iii) that in any event
the State was entitled to levy "tree-tax" and "tree-rent" at ·the 'rates Pr<;S-
cribed; and (iv) that even if education cess on "shop-rent" is not withm
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SUPREME COURT REPORTS
[1971] 2 s.c.R.
the competence of the State Legislature under Entry S 1 List II, it is still
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a tax on "luxuries" within the meaning of Entry 62 of List II.
HELD : Dismissing the appeal,
( i) I.egislative power normally includes all incidental and subsidiary
powers, but the power to ta:t is neither incidental nor subsidiary to the
power to legislate on a matter or topic. Entdes in Lists 1 ancl II in
Schedule VU dealing with certain specific topics do not grant power to
levy tax on transactions relating to those topics. Power to tax must be
derived from a specific taxing entry. Tax cou.ld thm-efore no! be levied
on intoxicating liquors relying Upon Entry 8 List II. [804 GJ
M. P. V. Sundararamier & Co. v. The State of Andhra Pradesh and
Another, [1958J S.C.R. 1422; referred to.
The taxing power under Entry 51 List II ln respect of alcoholic
liquors for human consumption is circumscribed. It may only be le•ied
as excise duty, that is, a duty levied on the manufacture and productioa
of alcoholic liquors. [805 CJ
R. C. Jail v. Union of India, [1962) Supp, 3 S.C.R. 436; referred to.
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(ii) "Shop-rent" is not exci!le revenue within the meaning of the
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Schedule to the Mysore Elementary Education Act, 1941 and no educa-
tim cess could be levied on "shop-rent". [805 HJ
M/s. Guruswamy & Company v. State df Mysore & Ors., [!967Excerpt shown. Read the full judgment & AI analysis in Lexace.