Excise duty must attach to manufacture or production, not to shop rent for exclusive liquor sale privileges.

The Mysore Health Cess Act, 1962 could not treat shop rent paid for the auctioned exclusive privilege of selling toddy and arrack as a duty of excise under Entry 51 of List II. A duty of excise is linked to the taxable event of manufacture or production, while collection machinery does not alter its character. The auction amount was consideration for the privilege of retail sale, not a levy on manufacture or production, and it bore no uniform relation to the quantity or value of goods produced. On that basis, the cess on shop rent fell outside the scope of excise duty and was unconstitutional to that extent.

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Issues: Whether the health cess levied on the shop rent paid for the auctioned exclusive privilege of selling toddy and arrack was a duty of excise falling within Entry 51 of List II and Schedule A of the Mysore Health Cess Act, 1962.

Analysis: The charging scheme of the Mysore Health Cess Act, 1962 imposed a cess on items of State revenue mentioned in Schedule A, and the relevant item in Schedule A covered duties of excise leviable on goods manufactured or produced in the State. The auction amount paid for the exclusive privilege of retail sale was held, on the majority view, to be consideration for the privilege of sale and not a levy closely connected with manufacture or production. The character of a duty of excise depends on the taxable event being manufacture or production of goods, while the method of collection is only machinery. Here the levy attached to the right to sell, not to the production of toddy or arrack, and the amount had no uniform relation to quantity or value of goods produced. On that reasoning, the shop rent did not answer the description of excise duty in Entry 51.

Conclusion: The health cess could not validly be imposed on shop rent under Entry 51 of List II or Schedule A of the Mysore Health Cess Act, 1962, and the levy to that extent was unconstitutional.

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