1966 (9) TMI 143 - SC - Indian Laws

State lacks authority to collect health cess on shop rent under Mysore Health Cess Act, 1962

M/s. Guruswamy & Co. Etc Versus State Of Mysore & Ors

M/s. Guruswamy & Co. Etc Versus State Of Mysore & Ors - 1967 AIR 1512, 1967 (1) SCR 548 Issues Involved:1. Competence of Mysore Legislature to enact the Mysore Health Cess Act, 1962.2. Nature of the levy under the Mysore Health Cess Act, 1962.3. Validity of the health cess on shop rent.4. Refund of health cess collected under the Mysore Health Cess Act, 1962 and 1951.Detailed Analysis:1. Competence of Mysore Legislature to Enact the Mysore Health Cess Act, 1962The appellants challenged the competence of the Mysore Legislature to enact the Mysore Health Cess Act, 1962, arguing that the health cess was in reality a tax and not a mere cess. They contended that the State Legislature had no competence to levy a health tax and that the levy was in substance a tax on tax, which is not permissible under the Constitution. The court held that the Mysore Legislature was competent to enact the law under various entries of List II, which enable it to levy land revenue, duties of excise, or other taxes mentioned in Section 3(iii) of the impugned Act. The court found that the legislature was levying a health cess on a number of items of State revenue or tax and adopted the form of calling it a cess, prescribing the rate of nine naye paise in the rupee on the State revenue or tax.2. Nature of the Levy Under the Mysore Health Cess Act, 1962The appellants argued that the shop rent was not a duty of excise and did not fall within Entry 51 of List II or Schedule A of the Act. They contended that the duty of excise is primarily a duty levied on the manufacture or production of goods, and the taxable event was not manufacture or production in this case. The court examined the relevant provisions of the Mysore Excise Act and the Hyderabad Abkari Act, noting that the word 'duty' in the opening sentence of Section 17 of the Mysore Excise Act does not mean only excise duty. The court concluded that the shop rent or kist was not an excise duty as it did not have a close relation to the production or manufacture of toddy but was rather a payment for the exclusive privilege of selling toddy from certain shops.3. Validity of the Health Cess on Shop RentThe court held that the health cess sought to be levied under the impugned Act on shop rent does not fall within item 1 of Schedule A of the impugned Act or Entry 51 of List II of the Constitution. The court reasoned that the taxable event was not the manufacture or production of goods but the acceptance of the license to sell, indicating that the levy was in respect of the business of carrying on the sale of toddy. The court found that there was no connection of any part of the levy with any manufacture or production of any goods, and the privilege of selling was auctioned well before the goods came into existence.4. Refund of Health Cess Collected Under the Mysore Health Cess Act, 1962 and 1951The court declined to adjudge the validity of the Health Cess Act, 1951, and the notifications issued under it due to the absence of arguments and fuller materials. The court left the point open, allowing the petitioners to file suits if so advised to recover the amounts alleged to have been paid under the Health Cess Act, 1951. The court ordered that the State of Mysore had no authority to levy and collect health cess under the Mysore Health Cess Act, 1962, on shop rent, and issued a writ of mandamus restraining the respondents from enforcing the demand for payment of health cess under the impugned Act. The court also directed the respondents to refund the health cess illegally collected under the Health Cess Act, 1962.Separate Judgments:- Hidayatullah, J.: Dissented, holding that the so-called shop rent was a means of collecting excise duty and the health cess was an additional levy along with the excise duty, thus valid.- Bachawat, J.: Concurred with the majority, holding that the shop rent was not a duty of excise and thus the levy under the Mysore Health Cess Act, 1962, on shop rent was invalid. Left open the question of refund and the validity of the Mysore Health Cess Act, 1951, for further adjudication.Conclusion:The appeals were allowed, declaring that the State of Mysore had no authority to levy and collect health cess under the Mysore Health Cess Act, 1962, on shop rent. The court issued a writ of mandamus restraining the respondents from enforcing the demand for payment of health cess under the impugned Act and directed the respondents to refund the health cess illegally collected under the Health Cess Act, 1962. There was no order as to costs.