http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: JAGANNATH AND OTHERS

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT: 20/04/1961

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. SARKAR, A.K. WANCHOO, K.N. GUPTA, K.C. DAS AYYANGAR, N. RAJAGOPALA

CITATION:  1962 AIR  148            1962 SCR  (2) 118  CITATOR INFO :  R          1973 SC1034  (15,18)  APL        1974 SC1111  (10)

ACT: Excise  Duty-Tobacco-Different  rates  for  whole  leaf  and broken leaf-If discriminatory-Central Excises and Salt  Act, 1944  (1 of 1944), First Schedule Entry 4(1) Items 5 and  6- Constitution of India, Art.  14.

HEADNOTE: Item  5 of entry 4(1) of the First Schedule to  the  Central Excise and Salt Act, 1944, imposes an excise duty of Rs.  1- 10 nP. per kilogram on tobacco other than flue cured and not actually  used  for the manufacture of  cigarettes,  smoking mixtures for pipes and cigarettes or birds in the whole leaf form.  Item 6 imposes a duty of Rs. 2-20 nP. per kilogram on tobacco in the broken leaf form.  The petitioners who  dealt in  tobacco  in the broken leaf form  contended  that  their tobacco  could  not be distinguished on any  rational  basis from  the whole leaf form in Item 5 and the imposition of  a double  tariff on their tobacco was invalid as it was  based on unconstitutional discrimination, the tariff being on  the basis of use to which the tobacco was put.                             119 Held,  that there was no unconstitutional discrimination  in the  imposition of the excise duty on tobacco in the  broken leaf  form.  Tobacco in the broken leaf form was capable  of being used in the manufacture of biris while tobacco in  the whole leaf form could not be so used economically.  The  two forms of tobacco were different by the test of capability of user.   The  tariff  was not based  either  wholly  or  even primarily  by reference to the use of tobacco.  There was  a clear  and  unambiguous distinction between tobacco  in  the whole leaf form covered by item 5 and tobacco in the  broken leaf form covered by item 6 which had a reasonable  relation to the object intended by the imposition of the tariff. Kunmathat  Thathunni  Moopil Nair v. The  State  of  Kerala, [1961] 3 S.C.R. 77, referred to.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

JUDGMENT: ORIGINAL JURISDICTION: Writ Petition No. 84 of 1958. Petition  under  Art. 32 of the Constitution  of  India  for enforcement of Fundamental Rights, G.   C. Mathur, for the petitioners. C.   K. Daphtary, Solicitor-General of India, B. Sen, R.   H. Dhebar and T. M. Sen, for the respondent. 1961. 1961. April 20.  The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-This is a petition filed under Ga.   Art. 32  of  the  Constitution challenging the  validity  of  the excise tariff imposed by el. (6) in entry 4(1) in the  First Schedule  to  the Central Excises and Salt Act, 1944  (1  of 1944).   Petitioners Nos.  1 to 17 are  tobacco  cultivators and they carry on the trade and business of growing  tobacco and  of  selling it in Kaimganj Tahsil in  the  District  of Farrukhabad  in  Uttar Pradesh.  Petitioners 18  to  30  are partners or proprietors or agents of firms which are private bonded  warehouse  licensees  and they carry  on  trade  and business  of purchasing tobacco from the cultivators and  of selling  the same to dealers or to other  private  warehouse licensees.  By their petition the petitioners have asked for a  writ, direction or order in the nature of mandamus to  be issued to the respondent, the Union of India, restraining it from levying excise duty on hooka and chewing tobacco  under the  impugned  item and any other writ, direction  or  order which may be found suitable to 120 protect  the fundamental rights of the petitioners to  carry on their trade and business of dealing in hooka and  chewing tobacco.   The attack against the validity of  the  impugned tariff  item is based substantially on two grounds.   It  is urged  that  the  rates imposed by  the  impugned  item  are excessive and they virtually destroy the petitioners’  trade and  it  is  argued  that the  impugned  item  is  based  on unconstitutional   discrimination.   Mr.  Mathur,  for   the petitioners,  fairly conceded that he would not be  able  to substantiate the first ground of challenge, and indeed it is obvious that a challenge to tax law on the mere ground  that the tariff imposed by the tax law is heavy cannot be  enter- tained.  That leaves the question of discrimination alone to be  considered in the present petition.  For the purpose  of this  petition  we  will assume that  if  discrimination  in respect of commodities taxed is proved it ultimately amounts to a discrimination against the persons taxed and  therefore Art. 14 can be invoked in such a case.  Mr. Mathur  contends that  is  the  effect  of the  decision  of  this  Court  in Kunmathat  Thathunni  Moopil  Nair, etc., v.  The  State  of Kerala (1) and as we have just observed we will assume  that such  a  challenge  can be made against the  validity  of  a taxing statute with provisions such as we have before us and deal with the petition on that basis. The  tariff  entry in dispute as it now  obtains  under  the taxing  statute is entry 4 in the First Schedule.  It  deals with tobacco.  Under this entry "tobacco" means any form  of tobacco,  whether cured or uncured and whether  manufactured or  not,  and  includes the leaf, stalks and  stems  of  the tobacco  plant, but does not include any part of  a  tobacco plant while still attached to the earth.  Clause I in  entry 4  deals with unmanufactured tobacco and  prescribes  tariff per  kilogram in respect of the several items  specified  in it.   Item (1) under this clause deals with five  categories of  tobacco  which  are  flue cured  and  are  used  in  the manufacture of cigarettes as indicated in the said five sub-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

clauses.   Item (2) deals with tobacco which is  flue  cured and used for the manufacture of smoking (1)  [1961] 3 S.C.R. 77. 121 mixtures  for pipes and cigarettes.  Item (3) provides,  for flue  cured  tobacco which is not otherwise  specified;  and item (4) is concerned with tobacco other than flue cured and used  for the manufacture of (a) cigarettes or  (b)  smoking mixtures for pipes and cigarettes.  The, tariff varies  from Rs.  16.15 nP. per kilogram to’ Rs. 1.65 nP.  per  kilogram. That  takes  us to item (5).  This item deals  with  tobacco other  than  flue  cured  and  not  actually  used  for  the manufacture  of (a) cigarettes or (b) smoking  mixtures  for pipes and cigarettes or (e) biris.  The fourth clause  under this item is tobacco cured in whole leaf form and packed  or tied  in bundles, banks or bunches or in the form of  twists or coils.  For tobacco falling under the four clauses  under item (5) the tariff is Rs. 1.10nP. per kilogram.  Clause (6) in  this  item with which we are concerned  in  the  present petition  deals with tobacco other than flue cured  and  not otherwise  specified.  For this residuary clause the  tariff prescribed  is  Rs. 2.20 nP. per kilogram.  This  tariff  is double  the  tariff  prescribed  for  the  classes  in   the preceding item.  Mr. Mathur’s grievance is that the  tobacco with  which the petitioners deal cannot-be distinguished  on any rational basis from the tobacco covered by item (5), cl. (4), and so the imposition of a double tariff on the tobacco in  which the petitioners deal is invalid inasmuch as it  is based  on  unconstitutional  discrimination.   The  argument proceeds  on the assumption that the tariff is prescribe  by reference to the use to which tobacco is put and it is urged that the tobacco with which the petitioners are concerned is not actually used either for cigarettes or smoking  mixtures or  biris and the fact that it is broken and not whole  leaf does not afford any rational basis for classification. In  dealing  with. this argument it would be  relevant  very briefly  to  refer  to  the report  of  the  Tobacco  Expert Committee  whose  recommendations have  furnished  the  main basis for the present revised tariff in respect of  tobacco. In  substance  this  report shows that  the  present  tariff cannot be said to have been prescribed either wholly or even primarily  by  reference  actually to the  use  of  tobacco. Tobacco, as the 16 122 Committee’s report points out, is a rich man’s solace and  a poor  man’s  comfort.  Since it is used by  all  classes  of people in various forms it is necessary to frame the  tariff in such a way that the incidence of tax shall fall equitably on  all classes of people using it. The report  then  points out  that  the Intention Tariff based on  the  principle  of intention   was  found  to  be,  ineffective   because   the assessee’s  declaration of intended use left large room  for evasion  of  tax.   That is why  the  Intention  Tariff  was substituted  by a flat rate of duty.  By experience  it  was found  that  even  this method was  not  very  effective  or equitable and then was adopted the capability tariff.  Under this  test the criterion of assessment was to be whether  or not  a particular specimen of tobacco was capable of use  in bird  manufacturing.  If so capable it was assessable  on  a higher  rate, if not so capable then at a lower  rate.   The report has examined the advantages of the capability  tariff and has quoted the opinion of the Taxation Enquiry Committee which  made its report in 1953.  The report  considered  the volume  of evidence adduced before it and took into  account

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

all  the  suggestions  made.   "In  view  of  the  practical difficulties  brought  before  us",  says  the  report,  "we consider that, within the present tariff, the only  workable and  satisfactory method of classifying tobacco will  be  to prescribe standards readily identifiable either visually  or by  other  simple  tests and manipulations with  a  view  to determine empirically what is capable and what is  incapable of  use in biris.  The position is complicated  because  the same  tobacco  is used for different purposes  in  different parts of the country according to the prevalent  consumption habits  of  different types of tobacco"; and  the  Committee realised  that  any system of classification  on  a  uniform basis for the whole of the Indian Union is bound to  involve greater  imposts  on  consumers of  those  areas  where  the prevalent custom is to consume a variety for chewing, snuff, hooka,  cigar purposes while the same varieties are used  in other  areas  for biris.  The conclusion of  the  Committee, therefore,  ’was  that the only criterion which is  safe  to adopt is the one relating to the physical form 123 of  tobacco  as affecting its suitability for  biri  making. The  Committee  realised  that  it  was  very  difficult  to classify  specified  varieties  as  solely  chewing  tobacco because  many  of these varieties are also used  for  making snuff  and  for  hooka purposes.   Normally,  however,  most chewing  varieties are in whole leaf form and are’ cured  by addition  of  moisture.  Tobacco cured in  whole  leaf  form cannot be converted into flakes as readily as tobacco  cured by dry curing methods, and in the opinion of the  Committee, although  it  is possible to prepare flakes out  of  tobacco cured  in  whole leaf form the process  of  conversion  into flakes causes much higher proportions to crumble into  dust, raw and other unsalable forms.  The Committee was  conscious that  the whole leaf varieties after  suitable  manipulation can  be  utilised  for biri manufacturing  purposes  but  it thought  that this could be done only after converting  them into  graded flakes, and even thereafter only  by  admixture with other tobacco on a small localised scale.  In regard to the  broken  leaf  grades which  the  Committee  recommended should be liable to assessment at the higher rate relief was recommended  by permitting any owner to convert  his  broken leaf  tobacco into fine rawa or dust in which form  it  will become  physically  unusable for biris.   According  to  the Committee,  after  such manipulation of physical  form,  the resultant,  if  it fulfils the specifications for  rawa  and dust, may be allowed assessment at the lower rate. We have referred to these observations made by the Committee in  its report because they clearly and  emphatically  bring out  the distinction between "tobacco other than flue  cured and not otherwise specified" which is the subject-matter  of the, residuary clause and "tobacco other than flue cured and not  actually.  used for the manufacture  of  cigarettes  or smoking  mixtures for pipes or cigarettes or biris"  covered by  el. (5).  By the test of physical form the two  articles are  different.  By the test of capability of user they  are different  and in  a sense according  to  the  Committee’s recommendations  they partake of the character of  different commodities.  In this connection it may be 124 pointed  out  that though the tariff impost on  the  tobacco falling under the impugned cl. (6) is much higher, biris  in the manufacture of which no process has been conducted  with the  aid  of machines operated with or without  the  aid  of power  are  not  subject to any  tariff,  whereas  cigars, chewing,  cigarettes and biris in the manufacture  of  which

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

any  process  has been conducted with the  aid  of  machines operated  with  or without the aid of power are  subject  to tariff.  The problem which the Committee had to face was  to classify  tobacco other than flue cured which would be  used for  the manufacture of biris, and with that object cl.  (5) and  el. (6) have been devised.  Therefore, in our  opinion, the  distinction between tobacco falling under cl.  (5)  and cl.  (6),  according to the report of the Committee,  is  so clear  and  unambiguous  and  its  relation  to  the  object intended   by  the  imposition  of  tariff  is  so   clearly reasonable  that  the  attack against its  validity  on  the ground of unconstitutional discrimination cannot be upheld. There  is  one more point to which Mr. Mathur  referred  and which may be incidentally considered.  Mr. Mathur contended that  Nicotiana Rustica with which the petitioners  deal  is used  exclusively  for hooka and chewing in  Uttar  Pradesh. The  petition  avers that the variety of  Nicotiana  Rustica which  is  used in biris is not grown in Uttar  Pradesh  and that all the tobacco which is grown in Kaimganj is Nicotiana Rustica  which is either pit cured or ground cured.   It  is used exclusively for hooka and chewing and is unfit for  use in biris and cigarettes and is never so used.  The argument, therefore,  is  that this tobacco  cannot,  be  legitimately taxed  under the impugned clause.  Apart from the fact  that the  question as to whether the particular tobacco in  which the petitioners deal falls under the impugned clause or  not cannot be legitimately raised in a, petition under Art.  32, the answer to the plea is furnished by the counter-affidavit and  the report of the Committee.  In the  counter-affidavit the  allegations  made in regard to the  exalusive  user  of Nicotiana Rustica are generally denied, and what is more the report of the Committee specifically points 125 out  that though Rustica varieties of tobacco are  generally not  known  to  be used for biris, when they  are  cured  in broken leaf grades they can be used with admixture with biri tobacco  like Pandharpuri tobacco for imparting strength  to biri  mixtures,  and  so  according  to  the  Committee   no generalisation  in this matter is possible and it cannot  be asserted  that, all forms of this variety are  incapable  of use  in  biris.   Besides, it would be  quite  possible  for dealers  in  the said varieties of tobacco to send  them  to other  parts  of  the country where they are  used  for  the purpose  of manufacturing biris.  Therefore,  the  grievance made by the petitioners that the tobacco in which they  deal can never be used for biris is obviously not well founded. In  the  result  the petition fails and  is  dismissed  with costs. Petition dismissed.