1950 (3) TMI 23 - SC - Central Excise

Summary

Issues Involved:
1. Validity of Octroi Duty on Tobacco under the Central Provinces Municipalities Act, 1922.
2. Conflict between Octroi Duty and Excise Duty under the Central Excises and Salt Act, 1944.
3. Interpretation of Legislative Powers under the Government of India Act, 1935, and the Constitution Act.

Detailed Analysis:

1. Validity of Octroi Duty on Tobacco under the Central Provinces Municipalities Act, 1922:
The appellant, a bidi manufacturer, brought tobacco into Kamptee and was charged octroi duty by the municipality under Section 66(1)(e) of the Central Provinces Municipalities Act, 1922. The appellant contended that the municipality had no right to levy this duty as tobacco was already subject to excise duty under the Central Excises and Salt Act, 1944. The High Court rejected this contention, and upon appeal, the Supreme Court examined the validity of the octroi duty. The Court found that the octroi duty, as levied by the respondent, falls within the exact wording of Entry 49 of List II of the Seventh Schedule to the Constitution Act, making the levy valid and unaffected by Section 292 of the Constitution Act.

2. Conflict between Octroi Duty and Excise Duty under the Central Excises and Salt Act, 1944:
The appellant argued that since tobacco became excisable under Item 9 in Schedule I of the Excise Act, the Central Government alone was entitled to levy excise duty on it. Therefore, any tax imposed while tobacco was being converted into bidis was excise duty, making the octroi duty invalid. The Court, however, clarified that excise duty is a tax on manufactured goods, while octroi duty is a tax on the entry of goods within a particular area. The Court cited previous judgments, including The Province of Madras v. Boddu Paidanna and Sons, to distinguish between excise duty and sales tax, concluding that the nature of the tax is what matters. The Court held that the levy of octroi duty is not in conflict with the levy of excise duty, as they are separate and distinct imposts.

3. Interpretation of Legislative Powers under the Government of India Act, 1935, and the Constitution Act:
The appellant contended that the levy of octroi duty was ultra vires the Provincial Government under Section 100 of the Government of India Act, 1935, as legislation related to excise duty was within the exclusive province of the Central Legislature. The Court examined Sections 143 and 292 of the Government of India Act, 1935, which allowed pre-existing provincial legislation to continue unless contrary provisions were made by the Federal Legislature. The Court found no express provision in the Excise Act contrary to the Municipal Act, and thus, the levy of octroi duty remained valid. The Court also rejected the appellant's argument that Entry 49 in List II should be read as "for consumption or use, except for manufacture of goods," affirming that the Provincial legislation was valid.

Conclusion:
The Supreme Court dismissed the appeal, upholding the validity of the octroi duty levied by the municipality on tobacco brought into Kamptee for the manufacture of bidis. The Court concluded that the octroi duty did not conflict with the excise duty under the Central Excises and Salt Act, 1944, and that the legislative powers under the Government of India Act, 1935, and the Constitution Act supported the validity of the Provincial legislation. The appeal was dismissed with costs.