1991 (7) TMI 297 - SC - Central Excise

Whether the vend fee in respect of the industrial alcohol under different legislations and rules in different States is valid? Whether is the vend fee an impost leviable or extractable by the States under different Acts? Whether the power to levy excise duty in case of indust trial alcohol was with the State legislature or the Central legislature? what is the scope and ambit of Entry? Held that - Appeal allowed. Entire basis for striking down the levy that even though the State had plenary power to impose tax on sales/purchase of goods can exercise taxing power under Entry 54 of List II so long as it does not militate against the legislative field occupied by the Central Government under the IDR Act or any other enactment made under Entry 52 of List I proceeded on complete misconception of taxing powers of State. In fact as stated earlier the entire theory of occupied field or State legislation being repugnant to Central legislation is available when the two legislatures exercise their powers under Concurrent List. Therefore the order of the High Court striking down the levy cannot be upheld.

Summary

Issues Involved:
1. Legislative competence of the State to levy purchase tax on industrial alcohol.
2. Validity of the Uttar Pradesh Sales of Motor Spirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976.
3. The impact of Central Government's Price Control Orders on State's taxing power.
4. Application of the rule of sub-silentio and per incurium in judicial precedents.

Detailed Analysis:

1. Legislative Competence of the State to Levy Purchase Tax on Industrial Alcohol:
The primary issue was whether the State of Uttar Pradesh had the legislative competence to levy purchase tax on industrial alcohol under Entry 54 of List II of the Seventh Schedule of the Constitution. The Supreme Court held that the taxing power of the State on a matter falling within its competence under Entry 54 of List II, namely, the sale or purchase of goods, is plenary and unlimited, subject to the taxing power of Parliament under Entry 92A of List I and other provisions of the Constitution. The Court emphasized that the power to levy taxes on the sale or purchase of goods is not curtailed by the general legislative control vested in Parliament under Entry 52 of List I or Entry 33 of List III.

2. Validity of the Uttar Pradesh Sales of Motor Spirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976:
The Act levied a tax at the point of first purchase of alcohol in the State. The High Court had declared this levy null and void, reasoning that it would interfere with the price control orders issued by the Central Government under the IDR Act. However, the Supreme Court overruled this, stating that the impugned provision falls within the legislative competence of the State under Entry 54 of List II. The Court clarified that the control exercised by the Central Government under the IDR Act is in a field far removed from the State's taxing power under Entry 54 of List II.

3. Impact of Central Government's Price Control Orders on State's Taxing Power:
The High Court had held that the State's levy of purchase tax on industrial alcohol would disturb the price structure regulated by the Central Government, thus making the State's action invalid. The Supreme Court disagreed, stating that taxes on sale or purchase are not governed by the Price Control Orders, which aim to prevent sellers from pricing goods beyond prescribed limits. The Court emphasized that the power of the State to levy taxes on the sale or purchase of goods is a valid exercise of its constitutional power and is separate from price control measures.

4. Application of the Rule of Sub-Silentio and Per Incurium in Judicial Precedents:
The Court examined whether the conclusion in the Constitution Bench decision in Synthetics and Chemicals Ltd. v. State of U.P., [1990] 1 SCC 109, which stated that sales tax cannot be charged on industrial alcohol, was binding. The Court noted that this conclusion was not preceded by any discussion or reasoning and was therefore per incurium (rendered in ignorance of a statute or binding authority). The Court reiterated that a decision that is not founded on reasons or consideration of issues cannot be deemed to be law declared under Article 141 of the Constitution.

Conclusion:
The Supreme Court allowed the appeal, holding that the State of Uttar Pradesh had the legislative competence to levy purchase tax on industrial alcohol under Entry 54 of List II. The impugned provision of the Uttar Pradesh Sales of Motor Spirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976, was upheld as valid. The Court clarified that the legislative power of the State to levy taxes on the sale or purchase of goods is not curtailed by the Central Government's regulatory control under the IDR Act. The reference to sales tax in the Synthetics case was deemed per incurium and not binding.