Luxury tax on tobacco and tobacco products treated as activities not goods; taxes on such goods declared legislatively impermissible, collected sums repayable.

The word "luxuries" in entry 62, List II is to be read in the sense of activities of indulgence, enjoyment or pleasure - not as encompassing goods per se - by applying noscitur a sociis to limit its scope alongside entertainments, amusements, gambling and betting. Consequently, state enactments imposing a luxury tax by treating goods (including tobacco) as "luxury goods" exceed legislative competence and are constitutionally impermissible; taxation of the supply of goods remains subject to constitutional curbs and central statutes. Where appellants collected luxury tax after interim court orders, those amounts must be paid to the respective State Governments to prevent unjust enrichment.

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Issues: Whether the expression "luxuries" in Entry 62 of List II of the Seventh Schedule to the Constitution of India covers goods/articles (such as tobacco) so as to permit State Legislatures to levy a luxury tax on their supply, and whether the Uttar Pradesh, Andhra Pradesh and West Bengal luxury tax statutes impugned are constitutionally competent.

Analysis: Entry 62 couples the general word "luxuries" with "including taxes on entertainments, amusements, betting and gambling"; the word "including" and the context clarify the attribute common to the group. Principles of construction of the legislative Lists-(i) mutual exclusivity of taxing powers, (ii) need to avoid overlap, (iii) pith and substance analysis, and (iv) harmonious reading with other entries-require that taxing entries be construed with precision. Taxes on goods have been allocated to other entries (e.g., duties of excise under List I and taxes on sale or purchase of goods under entry 54 of List II and related constitutional provisions such as Article 286 and clause (29A) of Article 366). Allowing Entry 62 to cover goods would permit States to bypass constitutional restrictions (including the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Sections 14-15 of the Central Sales Tax Act, 1956) and intrude upon Union fields. Historical practice and precedents show that Entry 62 has ordinarily been treated as relating to activities or services of enjoyment; while earlier cases assumed articles could be covered, the proper construction-applying noscitur a sociis and the constitutional scheme-is that Entry 62 is directed at activities of indulgence, enjoyment or pleasure rather than taxes on goods or articles per se. The impugned statutes levy tax by reference to supply/stock/turnover of tobacco and tobacco products-i.e. they tax goods-and thus fall outside the ambit of Entry 62 and intrude into fields reserved by other entries and statutes.

Conclusion: The word "luxuries" in Entry 62 of List II refers to activities of indulgence, enjoyment or pleasure and does not permit the levy of a tax on goods or articles. The Uttar Pradesh, Andhra Pradesh and West Bengal enactments challenged in these proceedings, insofar as they seek to impose luxury tax on tobacco and tobacco products as goods, are legislatively incompetent and are declared invalid. The decision is in favour of the assessees. If amounts were collected as luxury tax by the appellants after interim orders, those amounts collected shall be paid to the respective State Governments; no refunds of taxes already paid under the impugned Acts are permitted and bank guarantees, if any, shall stand discharged.

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