1970 (11) TMI 101 - SC - Central Excise

Whether education cess could be levied by the State Legislature under Entry 62 of List II? Held that - As Counsel for the State. informed us that since the judgment of the High Court the Schedule has been amended by the State Legislature, but he did not very properly ask us to determine the question whether under the a mended Schedule the cess is leviable. We express no opinion on the question whether the State is competent to levy the cess after amendment of the Schedule to the Mysore Elementary Education Act, 1941. It will be open to the State to agitate the question if hereafter the education cess is sought to be levied under the authority of the amended Schedule. Appeal dismissed.

Summary

Issues:
1. Validity of levying education cess on "shop-rent," "tree-tax," and "tree-rent" by the State under the Mysore Elementary Education Act, 1941.
2. Interpretation of the Schedule to determine the imposition of education cess on excise revenue items.
3. Competency of the State Legislature to levy taxes on specific items under List II Entries 8, 51, and 62 of Schedule VII.

Detailed Analysis:

1. The judgment dealt with the issue of the validity of levying education cess on "shop-rent," "tree-tax," and "tree-rent" by the State under the Mysore Elementary Education Act, 1941. Excise contractors challenged the levy of education cess and sought a declaration that they were not liable to pay it. The High Court held that the State was incompetent to levy the education cess as it did not fall within the charging provision of the Act. The High Court declared the levy of education cess on these items as invalid.

2. The interpretation of the Schedule was crucial in determining the imposition of education cess on excise revenue items. The High Court observed that no education cess was lawfully levied in the year 1955 and before that, hence the liability did not arise. The Court analyzed the Schedule under the Mysore Elementary Education Act and concluded that certain items like "shop-rent" were not excise revenue, therefore education cess could not be levied on them.

3. The judgment delved into the competency of the State Legislature to levy taxes on specific items under List II Entries 8, 51, and 62 of Schedule VII. The State contended that it had the power to levy taxes on "shop-rent," "tree-tax," and "tree-rent" under various entries. However, the Court referred to previous judgments to establish that "shop-rent" was not excise revenue and could not be subjected to education cess. The Court also discussed the statutory nature of the liability to pay cess, emphasizing that it must be supported by law.

In conclusion, the Supreme Court dismissed the appeals, upholding the High Court's decision that the State was not competent to levy education cess on certain excise revenue items. The judgment highlighted the importance of legal provisions and specific taxing entries in determining the validity of tax levies, ultimately emphasizing the need for statutory authorization for tax collection.