RAMASWAMI, - (1.) THE Judgment of the court was delivered by
(2.) THIS appeal is brought bycertificate from the judgment of the Kerala High court in 0. P. No. 934 of 1964. The respondents are dealers in tobacco and tobacco preparations and are doing business in Mattancherry in the name and style of A. S. Bava, Tobacconist. In the year 1909, Cochin Tobacco Act 7 of 1084 (M. E.) was enacted by the Maharaja of Cochin. Section 4 of that Act prohibited the transport, import or export, sale and cultivation of tobacco except as permitted by the Act and Rules framed thereunder. Section 5 of the Act gave power to the Dewan to make rules from time to time consistent with the Act, to permit absolutely or subject to any condition, the possession for sale, or cultivation of tobacco. In pursuance of the power given by this section the Dewan was making rules from time to time relating to the matters specified in the Act. Cochin State was integrated with Travancore on 1/04/1950 in order to form the new State of Travancore-Cochin. On that date, after the Constitution came into force the State of Travancore-Cochin became a part B State and by the Finance Act, 1950 the central Excise and Salt Act 1 of 1944 was extended to the Travancore-Gochin State. Section 13(2) of the Act provided that if immediately before the first day of April, 1950 there e was in force in. any State other than Jammu and Kashmir a law corresponding to, but other than, an Act referred to in Ss. (1) or (2) of Section 11, such law was repealed with effect from such date. In consequence of this provision in the Finance Act rules which were in force on 1/04/1950 were changed in Cochin and by a notification, dated 3/08/1950 the system of auction sales of A and B Class shops was done away with and instead graded licence fees were introduced for various classes of licences including 'C' class licences. The State of Travancore-Cochin was collecting licence fee from the respondents for the period from 17/08/1950 to 31/12/1957 on the strength of the said rules framed by the Travancore-Gochin State. In 1956 the respondents filed 0. P. No. 70 of 1956 in the High court of Kerala for the refund of the licence fee collected after Aprill, 1950 on the ground that the Cochin Tobacco Act stood repealed by the Finance Act, 1950, because of the extension of the central Excise and Salt Act 1 of 1944 to the 365 Part B State of Travancore-Cochin and in consequence the notifications issued in August 1950 and January 1951 framing new rules for the issue of licences and prescribing fees therefor under the powers conferred by the Cochin and Travancore Acts were ab initio void because the Acts under which the notifications were purported to be issued stood repealed from April, 1950. The petition was opposed by the appellant on the ground that the Act and the rules were not repealed by the extension of the central Excise and Salt Act 1 of 1944 toTravancore-Cochin State. The High court dismissed the writ petition holding that the tax levied by virtue of the rules framed under the Travancore-Cochin Tobacco Acts was not a duty of excise coming within the Union List but it was a tax on luxuries coming within Entry 62 of the State List. The respondents took the matter in appeal to this court which held .that the rules framed under the Cochin Tobacco Act of 1084 (M. E.) and the Travancore Tobacco Regulation of 1087 (M. E.) requiring licences to be taken out for storage and sale of tobacco and for payment of licence fee in respect thereof were law corresponding to the provisions of the central Excise and Salt Act, 1944 and hence were superseded on 1/04/1950 by virtue of Section 13(2) of the Finance Act, 1950. Consequently, the new rules framed in August 1950 and January 1951 for the respective areas of Cochin and Travancore for the issue of licences and payment of fee for storage of tobacco were invalid ab initio. The court did not consider it necessary to decide whether the Cochin and Travancore Acts were within the competence of the State Legislature under Entry 62 of List II for that question would only arise if those Acts were not repealed as corresponding law under Section 13(2) of the Finance Act. Soon after the decision of this court the respondents complained to the appellant that a sum of Rs. 1,11,750.00 had been illegally collected as licence fee from 1125 to 1133 (M. E.). On 29/04/1962 the appellant refunded a sum of Rs. 73, 500.00 but did not return the balance.
(3.) ON 16/12/1963 the government of Kerala promulgated Ordinance I of 1963 which was later replaced by Act 9 of 1964. The Ordinance was promulgated in order to avoid the effect of the decision of this court in A.B. AbdulKadir and Ors. v. The State of Kerala in respect of the period from 17/08/1950 to 31/12/1957. Section 3 of the Act provides: "For the period beginning with the 17th day of August, 1950 and ending on the 31st day of December, 1957 every person vending or stocking tobacco within any area to which this Act extends shall be liable and shall be deemed always to have been liable to pay a luxury tax on: such tobacco in the form of a fee for licence for the vend and stocking of the tobacco, at such rates as may be prescribed not exceeding the rates specified in the schedule." S.4 confers rule making power and states : "(1) The government may, by notification in the Gafette, make rules to carry out the purposes of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for :- (i) the prohibition of the vending of tobacco except under a licence; 366 (ii) the issue of licences for the vend and stocking of tobacco and the procedure therefor ; (iii) Classification of licences and the rate at which tax in the form of a fee for licence may he levied for each class of licences ; (iv) appeals from orders under the rules. (3) The rules and notifications specified below purported to have been issued under the Tobbacco Act of 1087 (Travancore Act 1 of 1087) or the Cochin Tobacco Act VII of 1084 as the case may be, in so far as they relate or purport to ralate to the levy and collection of fees for licences for the vend and stocking; of tobacco, shall be deemed to be rules issued under this section and shall be deemed to have been in force at all material times : x X x X" S.5 provides: "Notwithstanding any judgment, decree or order of any court, all fees for licences for the vend or stocking of tobacco levied or collected or purported to have been levied or collected under any of the rules or notifications specified in Ss. (3) of Section 4 for the period beginning with the 17th day of August, 1950 and ending on the 31st day of December, 1957 shall be deemed to have been validly levied or collected in accordance with law as if this Act were in force on and from the 17th day of August, 1950 and the fees for licences were a luxury tax on tobacco levied under the provisions of this Act and accordingly (a) no suit or other proceeding shall be maintained or continued in any court for the refund of any fees, paid or purported to have been paid under any of the said rules or notifications ; and (b) no court shall enforce a decree or order directing the refund of any fees paid or purported to have been paid under any of the said rules or notification. " S.6 enacts: "Where any amount paid or purported to have been paid as a fee for licence under any of the rules or notifications specified in Ss. (3)of Section 4 has been refunded after the 24th day of January, 1962 and such amount would not have been liable to be refunded if this Act had been in force on the date of the refund, the person to whom the refund was made shall pay the amount so refunded to the credit of the government in any government treasury on or before the 16th day of April, 1964 where such amount is not so paid, the amount may herecovered from him as an arrear of land revenue under the Revenue Recovery Act for the time being in force." The notification, dated 25/01/1951 issued under the Cochin Tobacco Act of 1084 reads as follows : "In exercise of the powers conferred by Section 5 of the Cochin Tobacco Act VII of 1084 as subsequently, amended and as continued in force by the Travancore-Cochin Administration and Application of Laws Act VI of 1 125 and in supersession of all previous notifications and Rules 367 on. the subject, the following rules are prescribed under sanction of His Highness the Raj Prarnukh for the import, export, sale, transport, possession, disposal of things confiscated and the grant of rewards under the said Act and for generally carrying out the provisions thereof. (4)X X X X" Clause 16 : (i) Holders (stockist or 'A' Class licensees) shall be entitled to purchase tobacco from any dealer within or without the State without any quantitative restriction. This class of licensees shall sell only to other 'A' Class licensees or to 'B' class licensees. (ii) the annual fees for these licensees shall be as follows : JUDGEMENT_363_2_1969Html1.htm N.b. - For the purpose of calculating stocking licence fee in respect of tobacco preparations, the cost of the article will be takne into account. The licence fee will be realised only for the qunatities brought in from outside the State." After the enactement of Act 9 of 1964 the appellant made a demand on the respondent to repay the amount of Rs. 73,500.00 which had been refunded to the respondent filed writ petition No. O.P. 934 of 1964 which was allowed the High court on the ground that Act 9 of 1964 abd tge rykes were yktra vures the Constitution of India. It was held by the High court that in the absence of any production of tobacco inside the Kerala State it was not competent for the Kerala Legislature to impose a tax on tobacco imported from outside the State and therefore the provisions of the Luxury Tax on Tobacco (Validation Act) 1964 violated the gurantee contained in Articles 301 and 304 of the Consitution. 368 In reaching this conclusion the High court purported to follow the decision of this court in Kalyani Stores v. The State of orissa;