A.P.Misra, J. - (1.) These groups of petitioners have challenged the vires of the U.P. Tax on Luxuries Ordinance, 1994 (U.P. Ordinance No. 8 of 1994) promulgated by the Governor of Uttar Pradesh on 14th May, 1994 and the Notification No. TT-2-1767/IX-9 (382)/93-U.P., dated 28th May, 1994, the Notification No. TT-2-1768/IX-9 (382)/93-U.P., dated 28th May, 1994 and Notification No. TT-2-2032/XI-9 (382), dated 15th June, 1994. The petitioners are either manufacturers, producers, sellers within and outside State of specific branded cigarettes, pan masala, zarda, chewing tobacco, khaini under branded or unbranded name also sellers of unmanufactured tobacco. The purchase and sale by all the petitioners are done within or outside the State. Some of the petitioners have specifically pleaded their sale of tobacco outside the State being up to 98 per cent. The validity of the Ordinance is challenged being violative of Articles 14, 19(1)(g), 213, 245, 246, 265, 269, 286, 301 and 304 of the Constitution of India and further being ultra vires of the Central Sales Tax Act, 1956 (hereinafter referred to as "the 1956 Act"). During the hearing of this case the impugned Ordinance was repealed and substituted by the U.P. Tax on Luxuries (Second) Ordinance, 1994 (Ordinance No. 22 of 1994) retrospectively with effect from 1st June, 1994 which is almost similar to the earlier Ordinance except some minor changes which we shall be referring to later hence, this is also challenged by an amendment. It is also relevant to mention that during the hearing, under Section 4 of the U.P. Ordinance No. 8 of 1994 by Notification No. TT 2-3355/XI-9 (383)-93 U.P. dated 24th September, 1994 with effect from 25th September, 1994 tobacco priced at Rs. 150 or less per kg. and pan masala by whatever name called with or without tobacco have been exempted from tax. By virtue of the deeming clause under Section 13(2) of the substituted Ordinance No. 22 the notification is deemed to be continuing. Thus even those petitioners on whom there is no liability of tax by virtue of this, still maintain their challenge as this notification being only prospective with effect from September 25, 1994.
(2.) It is urged that the impugned tax to the extent it levies tax on supply for consideration by way of sale of tobacco is nothing but a tax on sale falling within the definition of the expression "a tax on sale or purchase of goods" under Article 366(29A) of the Constitution. Thus the impugned Ordinance under the guise of luxury tax is pertaining to impose tax on sale and purchases of tobacco which has been declared to be goods of special importance under Article 286(3) of the Constitution read with Section 14 of the 1956 Act, inasmuch as Ordinance authorises a levy of tax on it up to a maximum of 25 per cent which is in excess of 4 per cent thus violative of Section 15 of the 1956 Act and Article 286(3) of the Constitution. Further, in view of enactment of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, by Parliament the State cannot levy sales tax on tobacco, since the levy of additional duties of excise under it is also in lieu of sales tax. Under this Act, the State gets proportionate share of the levy and collection of additional excise duty. The impugned Ordinance so far as it seeks to levy tax on tobacco manufactured within the State is in pith and substance levy of excise duty falling under List I, entry 84, the competence to legislate on which is only with Parliament hence ultra vires articles 245 and 246 of the Constitution. It is also violative of Article 14 of the Constitution being unreasonable, arbitrary and discriminatory in so far as in the definition of tobacco under Section 2(g) it excluded cigarettes priced at rupees five or less per packet of ten and biris but includes "khaini" which is consumed by the poorest of poor of this country and sold in small pouches of 25 paise to 50 paise only. Further the imposition of the tax by the Ordinance impedes freedom of trade and commerce and intercourse within and outside the State, hence ultra vires Article 301 and is further not saved by Article 304(b) as prior assent of the President is required under it and under Article 313(1) was not obtained. Further it purports to impose tax on goods otherwise than by sale, i.e., when goods are sent by a person to his own godown or depots from within to outside the State would amount to a tax on consignment, the levy which is exclusively with the Union under entry 92-B of List I read with Article 269(1) of the Constitution and thus ultra vires. Finally this Ordinance is also void since it purports to legislate in respect of tobacco, the control of this industry has been taken over by the Parliament by passing of the Tobacco Boards Act, 1975 and the entire field being covered by it the State was not competent to legislate on it. This last point though raised in the petition but only learned counsel appearing for the Writ Petition No. 730(T) of 1994 made formal submissions.
(3.) The Ordinance came into force from 1st June, 1994, in pursuance of notification dated May 28, 1994 issued under Section 1(2). By notification issued on the same day, i.e., May 28, 1994 under Section 3 of the Ordinance, a tax has been fixed at 15 per cent payable on the turnover of receipts of all classes of tobacco except pan masala, by every tobacconist. By subsequent notification dated June 15, 1994, pan masala was also included to be taxed at 15 percent as luxury tax. But again by notification dated September 24, 1994 as aforesaid "pan masala" tobacco priced at Rs. 150 or less per kg. have been exempted from tax from September 25, 1994. Thus liability of tax on these items is confined to the price from June 1, 1994 to September 24, 1994.;