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PETITIONER: STATE OF U.P. AND ANR.

       Vs.

RESPONDENT: M/S. SYNTHETICS AND CHEMICALS LTD. AND ANR.

DATE OF JUDGMENT18/07/1991

BENCH: THOMMEN, T.K. (J) BENCH: THOMMEN, T.K. (J) SAHAI, R.M. (J)

CITATION:  1991 SCR  (3)  64        1991 SCC  (4) 139  JT 1991 (3)   268        1991 SCALE  (2)110

ACT:     Constitution  of India, 1950--Article  141---Declaration of Law--Binding effect of--Precedent--Principle and  purpose of--Supreme Court decision in (1990) 1 SCC 109---Effect  and consequences of.     Constitution  of India, 1950--VIIth Schedule,  List  II, Entry  54 Industrial alcohol--Whether State can levy tax  on sale  or  purchase thereof--Central  Government  controlling price under Ethyl Alcohol (Price Control) Orders--Effect and consequences of.     Industries    (Development    and    Regulation)    Act, 1951---Section    18G--Ethyl   Alcohol    (Price    Control) Orders--Enactment  of  by  Central  Government--Whether  re- stricts  the powers of the State to levy tax  on  industrial alcohol--United Provinces Sales of Motor Spirit, Diesel  Oil and  Alcohol Taxation Act, 1939--Section 3(1) as amended  by the Uttar Pradesh Sales of Motor Spirit, Diesel and  Alcohol Taxation (Amendment) Act, 1976--Validity of.

HEADNOTE:     The Uttar Pradesh Sales of Motor Spirit, Diesel Oil  and Alcohol  Taxation (Amendment) Act, 1976 amended  sub-section (1)  of  section 3 of the United Provinces  Sales  of  Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939 purporting to levy purchase tax on industrial alcohol, which was  chal- lenged  in a writ application before the High Court  by  the respondents.     The respondents contended before the High Court that the State Legislature was incompetent to levy tax with reference to  Entry 54 of List II in respect of industrial alcohol  in so far as that article was the subject of regulation by  the Central  Government in exercise of its power  under  section 18G  of  the Industries (Development  and  Regulation)  Act, 1951;  that the price of that article was regulated  by  the relevant Price Control Orders made by the Central Government under the IDR Act and any levy of sales tax or purchase  tax by  the State by recourse to Entry 54 of List II would  come into direct conflict with the law made by Parliament and the control  exercised by the Central Government under that  law in  regard to an industry falling under Entry 52 of  List  I read with Entry 33 of List III. 65

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   Relying  upon  the decision of a Constitution  Bench  of this  Court  in Synthetics and Chemicals Ltd.  &  Others  v. State  of  U.P. & Others, [1990] 1 SCC 109  the  respondents further contended that, in so far as industrial alcohol  was concerned,  the State was incompetent to levy sales tax,  by reason of the operation of the Ethyl Alcohol (Price Control) Orders  made by the Central Government under section 18G  of the IDR Act.     The  appellants-Opposite  parties  contended  that   the decision of this Court in (1990) 1 SCC 109 did not deal with the  question of levy of tax failing under Entry 54 of  List 1I and that the power of the State to levy taxes on the sale or purchase of goods was not the subject of consideration in that decision.     The High Court allowing the writ petition and  declaring the  U.P.  Act 8 of 1976 to be null and void held  that  the levy  of purchase tax on industrial alcohol was, during  the operation of the PriCe Control Orders of the Central Govern- ment beyond the legislative competence of the State, against which the State filed the present Appeal.     The appellant submitted that the reference to sales  tax in the judgment of this Court in (1990) 1 SCC 109, which the High Court in the present case thought was binding upon  it, was  accidental and per incurium and did not arise from  the judgment; that the levy of sales tax was not in question  at any stage of the arguments, nor was the question  considered as it was not in issue; that the Court gave no reason  what- ever for abruptly stating that sales tax was not leviable by the  State  by reason of the Ethyl Alcohol  (Price  Control) Orders.     The  respondents  contended  that  the  prices  strictly controlled  by  the Central Government in  exercise  of  its power  under the IDR Act; that the State Law cannot  be  al- lowed to disturb such prices; that any attempt to raise  the prices, despite the strict control  exercised by the Central Government  by  means of statutory orders,  was  an  invalid exercise of power.     On  the question, whether or not the power of the  State to  levy tax on the sale or purchase of goods falling  under Entry  54  of List 1I will  comprehend  industrial  alcohol, allowing the appeal of the State, this Court, HELD: Per T. Kochu Thommen & R.M. Sahai, JJ. 66     1.01.  The High Court was clearly in error  in  striking down the impugned provision in sub-section (1) of section  3 of  the United Provinces Sales of Motor Spirit,  Diesel  Oil and Alcohol Taxation Act, 1939 as amended by the U.P. Act  8 of 1976, undoubtedly fails within the legislative competence of the State being referrable to Entry 54 of List 11. [91A]     1.02. The decision of this Court in Synthetics (1990)  1 SCC 109 is not an authority for the proposition canvassed by the  assessee. This Court has not, and could not  have,  in- tended  to  say that the Price Control Orders  made  by  the Central Government under the IDR Act imposed a fetter on the legislative power of the State under Entry 54 of List II  to levy  taxes on the sale or purchase of goods. The  reference to  sales  tax in paragraph 86 of that judgment  was  merely accidental  or per incuriam and has therefore, no effect  on the  impugned  levy. So far ds industrial alcohol  was  con- cerned,  the  State  was incompetent to levy  sales  tax  by reason of the operation of the Ethyl Alcohol (Price Control) Orders  made  by the Central Government in exercise  of  its power under section 18G of the IDR Act. [91A-C, 73E-F] Per T. Kochu Thommen, J.     2.01. This Court in Synthetics & Chemicals Ltd. & Others

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v.  State of U.P. & Others, [1990] 1 SCC 109  was  concerned with  only  one question, and that was  whether  the  States could levy excise duty or vend fee or transport fee and  the like by recourse to Entries 51 or 8 in List 11 in respect of industrial alcohol and it did not deal with the taxing power of the State under 54 of List II, although there is a refer- ence  to  sales tax. "The State may charge  excise  duty  on potable  alcohol and sales tax under Entry 52 of  List  II". Entry  52 of List II is mentioned in connection with  Excise duty  and sales tax, but neither of them fails  under  Entry 52.  Reference  to Entry 51 of List 11 ought  to  have  been made,  if  it was excise duty that the Court  had  in  mind. Entry  54  of List 11 would have been referred to,  and  not Entry  52, if the Court had in mind sales tax. On the  other hand, Entry 52 had any application to the fees or charges in question. [80B-F]     The abrupt observation of this Court in (1990) 1 SCC 109 was  without a preceding discussion, and  inconsistent  with the  reasoning  adopted by this Court in  earlier  decisions from which no dissent was expressed on the point. [80G-H] 2.02. The question in the instant case is whether or not the 67 impugned  legislation  fails in pith  and  substance  within Entry 54 of List 11, and not whether the industry (Producing goods  the  sale of which is leviable to tax under  the  im- pugned legislation) is controlled within the ambit of  Entry 52  of List I was not considered in (1990) 1 SCC 109.  [87H- 88B]     Synthetics and Chemicals Ltd. & Others v. State of  U.P. JUDGMENT:     State  of  Uttar Pradesh & Others v. M/s.  Synthetics  & Chemcials  Ltd.  & Others, [1980] 2 SCC  441,  overruled  in (1990) 1 SCC 109, Referred to. Per R.M. Sahai, J. (Concurring)     2.03. A decision which is not express and is not founded on reasons nor it proceeds on consideration of issue  cannot be  deemed to be a law declared to have a binding effect  as is  contemplated by Article 141. Uniformity and  consistency are  core of judicial discipline. But that which escapes  in the  judgment without any occasion is not  ratio  decedendi. [93B-C]     2.04.  Any  declaration or  conclusion  arrived  without application of mind or preceded without any reason cannot be deemed  to be declaration of law or authority of  a  general nature  binding as a precedent. Restraint in  dissenting  or overruling  is  for  sake of stability  and  uniformity  but rigidity beyond reasonable limits is inimical to the  growth of law. [93D-E]     2.05.  Law  declared is not that can be culled  out  but that  which is stated as law to be accepted and  applied.  A conclusion without reference to relevant provision of law is weaker than even casual observation. [93E-F]     2.06.  In absence of any discussion or any argument  the order  was founded on a mistake of fact, and, therefore,  it could not be held to be law declared. [94B-C]     2.07. The conclusion of law by the Constitution Bench in (1990)  1  SCC 109 that no sales or purchase  tax  could  be levied  on  industrial alcohol with utmost respect  fell  in both the exceptions, namely, rule of sub-silention and being in per incurium to the binding authority of the  precedents. [94C-D] 68     Young v. Bistol Aeroplane Ltd., [1944] I KB 718;  Jaisri Sahu  v. Rajdewan Dubey, [1962] 2 SCR 558;  Lancaster  Motor Company  (London)  Ltd.  v. Bremith Ltd.,  [1941]  IKB  675;

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Municipal Corporation of Delhi v. Gurnam Kaur, [1989] 1  SCC 101 and Shama Rao v. State of Pondicherry, AIR 1967 SC 1680, Referred to. Per T. Kochu Thommen.     3.01.  The power of regulation and’control  is  separate and  distinct from the power of taxation. Legislative  exer- cise of regulation or control referrable to Entry 52 of List I  or  Entry 8 of List 11 is distinct and different  from  a taxing power attributable to Entry 54 of List I or Entry 92A or  92B of List I. The power to levy taxes on sale  or  pur- chase  or  consignment is referrable to these  Entries,  and subject  to  the other provisions of the  Constitution,  the taxing  power  of the State is not cut down by  the  general legislative  control vested in Parliament and referrable  to the general topics of legislation. [86G-87H]     3.02.  Any exercise of power by the State  which  trans- gresses  upon  the  power of Parliament or  of  the  Central Government, as its delegate, is to the extent of such trans- gression null and void. [85C]     3.03.  None of the entries in the Concurrent List  deals with  tax but general subjects of legislation.  No  conflict can, therefore, arise between the taxing powers of the Union and  the  States. Parliament has the power to  legislate  in respect of a ’controlled’ industry failing under Entry 52 of List I, and both Parliament and the States have the power to legislate  in respect of the trade and commerce in, and  the production,  supply and distribution of, the products  of  a ’controlled’ industry (Entry 33 of List Ill). These are  not taxing  entries and do not, therefore, relate to taxes,  but powers  of  regulation  and-control. The  power  to  control industry  being thus vested in Parliament (Entry 52 of  List I)  and the legislative power in respect of trade  and  com- merce  in  such industry being concurrently  vested  in  the Union and the States (Entry 33 of List III) any exercise  of control  by  the State must be subject  to  the  legislative power of Parliament. [84H-85C]     3.04. The taxing power of the State on a matter  falling within  its  competence under Entry 54 of List  II,  namely, sale  or purchase of goods (other than newspapers) is,  sub- ject  to the taxing power of Parliament under Entry  92A  of List I and other provisions of the Constitution, plenary and unlimited, and untrammelled by the supervisory or regulatory power of Parliament under Entry 52 of List I read with its 69 concurrent  power  under Entry 33 of List III. This  is  the crucial:  distinction between the wide taxing power  of  the State  under  Entry  54 of List II and  its  conditional  or restricted  taxing power, for example, over  mineral  rights mentioned in Entry 50 of that List. [82E-G]     3.05.  Similarly, the power of the State in  respect  of potable  alcohol (as distinguished from industrial  alcohol) falling  under  Entry 8 of List II is  significantly  unfet- tered,  unlike, for example, mines and  mineral  development over which the regulatory power of the State is specifically stated  to be subject to the regulatory power of  Parliament (see Entry 23 of List II read with Entry 54 of List I).  The legislative competence of the State in respect of mines  and minerals was held to be denuded to the extent that the field was  covered by section 9 of the Central Act, namely,  Mines and Minerals (Regulations and Development Act), 1957.  [82G- 83A]     3.06.  Unlike  mines and minerals, alcohol stands  on  a different footing, and is dealt with differently,  dependent on whether it is potable or not. What is significant is that legislation  failing in pith and substance under Entry 8  or

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Entry  51  of List 1I in relation to  alcoholic  liquor  for human consumption (as distinguished from industrial alcohol) whether for the purpose of levying vend fee or transport fee or  excise duty, strictly confined to such articles, is  not subject  to challenge on the ground of legislative  incompe- tence or repugnancy by reason of the power vested in Parlia- ment  under  Entry 52 or Entry 84 of List I or Entry  33  of List  III. Incompetence or repugnancy arises only  when  the impact  of  the  legislation falls,  not  incidentally,  but substantially on industrial alcohol so as to transgress on a field occupied by Parliament. [83A-C]     3.07.  The matters concerning intoxicating  liquors  are included within the legislative competence of the States. In respect of any such matter, the States are competent to levy fees (Entry 66 of List II). Entry 51  of List II relating to excise  duty  on  alcoholic liquors  for  human  consumption clearly  refers  to liquor for human consumption,  the  same meaning has been judicially ascribed in (1990) 1 SCC 109  to ’intoxicating  liquors’  in Entry 8 of the  same  List,  the legislative  competence of the State in respect of  ’intoxi- cating  liquors’ referred to in Entries 8 and 66 of List  II as  a  subject of legislation and fee respectively  and  the power of the State to levy excise duty on "alcoholic liquors for  human consumption" falling under Entry 51 of  the  same List  must necessarily be confined to potable  alcohol,  and cannot  include industrial alcohol or medicinal  and  toilet preparations containing alcohol (see Entry 84 of List I). 70 Any transgression by the State on industrial alcohol will be invalid  for want’ of power by reason of the  limitation  of Entries  8  and  51 of List II (being  confined  to  potable alcohol)  and consequent transgression on areas  covered  by Entries  52  and 84 of List I respectively relating  to  de- clared  industry and excise duty on industrial  alcohol  and medicinal  and toilet preparations containing  alcohol,  and also for repugnancy arising from a clash with the  centrally occupied  field  failing under Entry 33 of List  III.  [85E, 85H-86D]     3.08. The power to tax under Entry 54 of List II being a specific  power,  it  cannot be cut down or  in  any  manner lettered  by the general power of control exercised by  Par- liament,  by legislation on a matter failing under Entry  52 of  List I relating to an industry, the control of which  by the  Union is declared by Parliament by law to be  expedient in  the  public  interest, read with Entry 33  of  List  III dealing  with  trade anti commerce in, and  the  production, supply  and  distribution of the products of any  such  con- trolled  industry,  and imported goods of the same  kind  as such  products,  and other articles mentioned in  Entry  33. [89F-H]     3.09. The impugned provision of the Uttar Pradesh  Sales of Motor Spirit, Diesel Oil and Alcohol Taxation (Amendment) Act,  1976  levying tax at the point of  first  purchase  of alcohol  in  the State is undoubtedly an impost  failing  in pith and substance under Entry 54 of List II. In the absence of any fetter on the legislative power and in the absence of any  valid challenge against the provision as  a  colourable piece  of legislation, the impugned  legislative  enactment’ remains unimpeachable. [89H-90B]     3.10. The control exercised by the Central Government by virtue  of  section  18G  of  the IDR  Act  is  in  a  field far/removed  from the taxing power of the State under  Entry 54 of List II. So long as the impugned legislation fails  in pith and substance within the taxing field of the State, the control  of the Central Government in exercise of its  power

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under the IDR Act in respect of a controlled industry  fail- ing under Entry 52 of List     cannot in any manner  prevent the  State  from imposing taxes on the sale or  purchase  of goods which are the products of such industry and which  are referrable to Entry 33 of List III. The taxing power of  the State  under Entry 54 of List II cannot be cut down  by  the general legislative power of control of the Centre. [90B-D]     3.11. The levy of fee, whether called vend fee or trans- port fee or duty or charge, whether levied by Rules purport- edly made under the Excise Act or the Prohibition Act or any other statute, otherwise than as 71 a  proper levy falling in pith and substance under a  taxing Entry, was not valid, to the extent that it lacked quid  pro quo  and  applied  to industrial alcohol. Any  such  fee  or charge can he justified as a mode of control falling in pith and  substance under Entry 8 read with Entry 66 of  List  II only to the extent that it remains within the bounds of  the concerned  subject matter, namely,  ‘intoxicating  liquors’, which must necessarily exclude industrial alcohol. [90D-F]      3.12. Taxes on sale or purchase are not governed by the Price Control Orders, made under the IDR Act, the purpose of which is to prevent the seller from pricing his goods beyond the limit prescribed by the Orders. That is a fetter on  the free  play of demand and supply. When supply is scarce,  the prices  are bound to rise and it is that vice which is  con- trolled  by fixing the maximum price. But that does  not  in any  manner curtail the power of the State to levy taxes  on the sale or purchase of goods. It is no doubt true that  the consumer of the article must, in addition to the price,  pay purchase  tax due in respect of them. But that is by  reason of a valid levy which is within the constitutional power  of every State, and is dehors the price, though often  referra- ble to it. [90F-H]       State  of  Bombay & Anr. v. F.N. Balsara,  [1951]  SCR 682; India Cement Ltd. & Ors. v. State of Tamil Nadu & Ors., [1990] 1 SCC 12;I M.P.V. Sundararamier & Co. v. The State of Andhra  Pradesh  &  Anr.,  [1958] SCR  1422  at  1479;  M/s. R.M.D.C.  (Mysore) Private Limited v. The State  of  Mysore, [1962]  3 SCR 230; Ganga Sugar Corporation Ltd. v. State  of Uttar Pradesh & Others, [1980] 1 SCC 223: [1980] 1 SCR  769; Ch. Tika Ramji & Others etc. v. The State of Uttar Pradesh & Ors.,  [1956] SCR 393; Kannan Devan Hills  Produce  Company. Ltd. v. The State of Kerala & Another, [1973] 1 SCR 356  and Hoechst Pharmaceuticals Ltd. & Anr. v. The State of Bihar  & Others., [1983] 3 SCR 130: AIR 1983 S.C. 1019, referred to. "        Per.R.M. Sahai, J. (Concurring)     3.13.-Power  to  tax  is a sovereign  power.  In  federal system  of  governance it is exercised  by  distribution  of power  between the Union and the State Both are  supreme  in their sphere. That is brought out Clearly by  Article-246(1) and  Article  246(3) of the  Constitution.  The  legislative field  for levying tax by Union is set out in Entries 82  to 92 in List I and State in Entries 45to 63 in List II of  the VIlth Schedule. There is no overlapping. Fields are  clearly demarcated. Limitations and restrictions are also mentioned. Unlike general entries power to levy tax 72 cannot be deducted from another Entry as ancillary  exercise of  power.  Since the Concurrent List does not  contain  any Entry relating to taxing power the concept of occupied field or repugnancy cannot arise. If there is clash between  exer- cise of power under List II and List I then the State legis- lation may be invalid due to Article 246(1) But since  there can  be no clash or invalidity in relation to  taxing  power

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the question of invalidity cannot arise. [94G-95C]     3.14. Price fixation of ethyl alcohol is an exercise  of power for regulating distribution and supply of the  general entry  for regulating distribution and supply  is  different from exercise of taxing power. The two do not even  remotely touch each other. Therefore if the price goes up in exercise of  taxing power the subject to its being arbitrary or  con- fiscatory  it could not be struck down as intruding in  for- bidden field. [95C-D]

&     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2722 (NT) of 1991.     From  the  Judgment  and Order dated  12.7.1990  of  the Allahabad High Court in Civil Misc. W.P. No. 361 of 1976.     Umesh  Chandra, Rakesh Srivastava, A.K.  Srivastava  and K.D. Misra for the Appellants.     M.H.  Baig,  P.S. Shroff, R.  Sasiprabhu,  S.S.  Shroff, Suresh A. Shroff and Rajan Mahapatra for the Respondents. The Judgment of the Court was delivered by THOMMEN, J. Leave granted.     This  appeal  is brought by the State of  Uttar  Pradesh against  the judgment of the Allahabad High Court  in  Civil Miscellaneous Writ Petition No. 361 of 1976. The High Court, allowing the writ petition, declared the Uttar Pradesh Sales of Motor Spirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976 (Act No. 8 of 1976) to be null and’ void in so far as it purported to levy purchase tax on industrial  alcohol. By  this  Act, sub-section (1) of section 3  of  the  United Provinces  Sales  of Motor Spirit, Diesel  Oil  and  Alcohol Taxation  Act,  1939 was amended, so as  to  substitute  the following clause:               "3(1)  There shall be levied with effect  from               May 2, 1974.               73               (b) at the point of first purchase of  alcohol               in  the State, a tax at the rate of  40  paise               per litre for the first million liters and  at               the rate of 20 paise per litre for the remain-               der, payable by the purchaser, and which shall               be collected and paid in the prescribed manner               to the State Government. This  levy  was sought to be justified by  the  state,  when challenged  in the writ proceeding, as a valid  exercise  of its legislative power on a matter falling under Entry 54  of List II of the Seventh Schedule of the Constitution/The writ petitioners, challenging the levy, contended that the  State Legislature  was incompetent to levy tax with  reference  to Entry  54 of List II in respect of industrial alcohol in  so far  as  that article was the subject of regulation  by  the Central  Government in exercise of its power  under  section 18G of the Industries (Development and Regulation) Act, 1951 (Act  No. 65 of 1951) (hereinafter referred to as  ’the  IDR Act) and that the price of that article was regulated by the relevant Price Control Orders made by the Central Government under the said Act. Any levy of sales tax or purchase tax by the  State by recourse to Entry 54 of List II, it  was  con- tended, would come into direct conflict with the law made by Parliament and the control exercised by the Central  Govern- ment  under that law in regard to an industry falling  under Entry 52 of List 1 read with Entry 33 of List III. The  writ petitioners,  relying  upon the decision of  a  Constitution Bench  of  this  Court in Synthetics and  Chemicals  Ltd.  &

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Others v. State of U.P. & Others, [1990] 1 SCC 109, contend- ed  before  the  High Court that, in so  far  as  industrial alcohol  was  concerned, the State was incompetent  of  levy sales  tax by reason of the operation of the  Ethyl  Alcohol (Price  Control)  Orders made by the Central  Government  in exercise of its power under section 18G of the IDR Act.     The  State  contended  before the High  Court  that  the aforesaid decision of this Court did not deal with any  levy of  tax falling under Entry 54 of List II. The power of  the State to levy taxes on the sale or purchase of goods was not the  subject  of consideration in that  decision.  What  was considered was the power of the State to collect vend fee or transport  fee or the like by recourse to Entry 8 or  51  of List  II  with  reference to  the  production,  manufacture, possession,  transport,  purchase  and  sale  of  industrial alcohol  during the operation of the IDR Act and  the  rules made thereunder.     The  High  Court  accepted the contention  of  the  writ petitioners  and  held that the impugned  purchase  tax,  if allowed to be levied on 74 industrial  alcohol,  would have the effect of  raising  its price  beyond the limit prescribed under the  Price  Control Orders made by the Central Government in relation to  indus- trial  alcohol in exercise of its power under the  IDR  Act. The  High Court accordingly declared that the impugned  levy of purchase tax on industrial alcohol was, during the opera- tion of the Price Control Orders of the Central  Government, beyond the legislative competence of the State.      In  Synthetics, [1990] 1 SCC 109 this Court  held  that vend  fee, transport fee and the like levied by  Uttar  Pra- desh,  Maharashtra and certain other States by  recourse  to Entry 8 or Entry 51 of List II were null and void in so  far as  such impost came into direct conflict with the  exercise of power by the Centre for the control of supply,  distribu- tion, price, etc. of industrial alcohol under section 18G of the  IDR Act and the rules or orders made  thereunder.  That case  was  apparently  not concerned with  the  exercise  of legislative  power  with reference to Entry 54  of  List  II which reads:               "Taxes on the sale or purchase of goods  other               than newspapers, subject to the provisions  of               Entry 92-A of List I". Significantly,  this Entry shows that, subject to Entry  92A of List I, taxeson the sale or purchase of goods (other than newspapers) taking place within the State are the  exclusive preserve of the State. The only restriction on this legisla- tive  power is what is stated in Article 286.  Nevertheless, in  the concluding portion of the judgment, Sabyasachi  Muk- harji, J. (as he then was) stated:           "The position with regard to the control of  alco- hol industry  has undergone material and significant  change after the amendment of 1956 to the IDR Act. After the amend- ment,  the State is left with only the following  powers  to legislate  in respect of alcohol: (a) It may pass any legis- lation in the nature of prohibition of potable liquor refer- able  to Entry 6  of List II and regulating powers.  (b)  It may lay down regulations to ensure that non-potable  alcohol is  not diverted   and misused as a substitute  for  potable alcohol.  (c)  The State may charge excise duty  on  potable alcohol  and  sales tax under Entry 52 of List  H.  However, sales  tax cannot be  charged on industrial alcohol  in  the present  case,  because     under the Ethyl  Alcohol  (Price Control)  Orders, sales tax  cannot be charged by the  State on  industrial  alcohol. I  (d) However,  in-case  State  is

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rendering any service, as 75 distinct from its claim of so-called grant of privilege,  it may charge fees based on quid proquo." (1990) ISCC 109, 158, (emphasis supplied)     So stating, the earlier decision Of this Court in  State of  Uttar  Pradesh & Others v. M/s. SynthetiCs  &  Chemicals Ltd.  &  Others,. [1980] 2 SCC 441 so far as it  related  to industrial alcohol., was overruled, but only  prospectively, so  as not to affect collection of taxes already made  While invalidating the fees levied under various enactments  chal- lenged  in  Synthetics,  (1990) 1 SCC  109  (including  ’the transport fee levied under the Bombay Prohibition Act,  1949 and  the vend fee. levied by the State of Uttar  Pradesh  in respect of industrial     alcohol) tO the extent ’that  such levies  were  unsupported by quid pro quo, this  Court  also held, as seen above, that sales tax could not be charged  on industrial  alcohol  because  of the  Ethyl  Alcohol  (Price Control) Orders.     Vend  fee  or  transport fee was  collected  by  various States  purportedly in exercise of the power  referrable  to Entry 8 of List II. The fee was at times sought to be levied under  the Excise Rules ’made under the Excise Act  and  ex- tended  to  potable alcohol and  industrial  alcohol  alike. Though the fee was collected supposedly in return for  serv- ice  rendered, it was more often than not the price  of  li- cence  to deal in what is otherwise the exclusive  privilege of the State.     No citizen has a fundamental right to deal in intoxicat- ing  liquors  and it is the right of the  State  to  control production,  manufacture, sale, etc. of such liquors with  a view  to even prohibiting the trade. The term  ’intoxicating liquors’  was so widely interpreted in decisions  like  Syn- thetics (1980) 2 SCC 44 1 that-State interference by way  of control-albeit  as  vend fee or transport fee--of  trade  in non-potable alcohol was challenged as a transgression on the area  reserved  for Parliament in respect  of  a  controlled industry  (see  Entry  52 List I) and as  repugnant  to  the control  exercised by the Centre as regards the products  of such  a  controlled industry (see Entry 33  List  III).  The challenge was specially on the ground that the levy of  fees could  not be justified except within the bounds of Entry  8 of  List  II which is a subject of  legislation  limited  to potable alcohol, but not a taxing Entry, and-of Entry 51  of List  II  which  relates to duties of  excise  on  alcoholic liquors  for human consumption, but excluding medicinal  and toilet  preparations containing alcohol. The contention  was that no fee or duty could be levied by the States in respect of industrial alcohol. This contention was accepted by  this Court in Synthetics (1990) 1 SCC 109 as correct provided the levy 76 of fees in respect of industrial alcohol was unsupported  by quid  pro quo. In other words, although Entry 66 of List  II justified  collection of fees in respect of matters  falling in that List, levy of any such fee, by reason of the limita- tion of the entries in that List concerning alcohol, had  to be  confined to potable liquor and could not be extended  to industrial  alcohol unless there was quid pro quo. This  was the  rationale of the challenge in Synthetics (1990)  1  SCC 109 and the crux of the ratio decidendi of that decision. It was  never contended by the States that the vend fee  was  a tax  referfable to Entry 54 of List II or the transport  fee imposed  by  the Prohibition Act and the Rules  was  a  levy under  Entry  56  of List II. The  Bombay  Rectified  Spirit

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(Transport in Bond) Second Amendment Rules, 1981 (made under the  Bombay Prohibition Act, 1949) was challenged  precisely for  the  reason that it was an invalid  collection  of  fee amounting to an impermissible interference with the  Central control  of industrial alcohol. This Court,  as  seen,above, upheld  the  challenge in so far as industrial  alcohol  was concerned, unless there was quid pro quo.     The Advocate General, appearing for the  appellant-State of  U.P.  (respondent in the High Court), submits  that  the reference  to  sales tax in the judgment of  this  Court  in Synthetics  (1990)  1 SCC 109 which the High  Court  in  the present case thought was binding upon it, was accidental and did  not arise from the judgment. The levy of sales tax  was not  in question at any stage of the arguments. Nor was  the question  considered as it was not in issue. The Court  gave no  reason whatever for abruptly stating that sales tax  was not  leviable  by the State by reason of the  Ethyl  Alcohol (Price Control) Orders. The question which arose for consid- eration was in regard to the validity of vend fee and  other fees  charged  by  the States. The argument  was  that  such impost,  to the extent that it fell on  industrial  alcohol, encroached  upon the legislative field reserved for  Parlia- ment in respect of a controlled industry coming under  Entry 52  of List I (read with Entry 33 of List III). Vend fee  or transport fee and similar fees, unless supported by quid pro quo, this Court held, interfered with the control  exercised by-  the Central Government under the IDR Act, 1951 and  the various  orders  made  thereunder with  respect  to  prices, 1licences,  ’permits,  distribution,  transport,   disposal, acquisition, possession, use, consumption, etc., of articles related  to a controlled industry, industrial alcohol  being one  of them. But none of the observations in  the  judgment warranted  the abrupt conclusion, to which the  Court  came, that  the power to levy taxes on sale or purchase  of  goods referrable  to  Entry. 54 of List II was  curtailed  by  the control  exercised by the Central Government under  the  IDR Act. The casual reference to sales tax in the 77 concluding  portion  of the judgment, the  Advocate  General points out was accidental and per incurium.      Counsel for the respondents-writ petitioners,  however, submits  that  the  prices are strictly  controlled  by  the Central  Government in exercise of its power under  the  IDR Act. The State law cannot be allowed to disturb such prices. Any attempt to raise the prices, despite the strict  control exercised  by the Central Government by means  of  statutory orders,  is an invalid exercise of power. Levy of  sales  or purchase  tax  affects the price, for the incidents  of  tax fall  on  the customer. The customer will have  to  pay  the amount  of tax levied at the point of first  purchase  which would be in addition to the price determined by the  Central Government under the Price Control Orders. This is a  trans- gression on the legislative control exercised by  Parliament and by the Central Government acting as its delegate.      The  Government  of  U.P. charged fee  under  the  U.P. Excise Act, 1910 (as amended in 1972 and 1976); the  Govern- ment  of Maharashtra charged transport fee under the  Bombay Rectified Spirit (Transport in Bond) Rules, 1951 made  under the  Bombay  Prohibition Act, 1949, and the  Andhra  Pradesh Government extended the Excise Act, 1968 and the  Distillery Rules,  1970  and the Rectified Spirit Rules,  1971  to  all alcohol  plants.  The applicability of these  Acts  and  the Rules,  so  far  as industrial alcohol  was  concerned,  was challenged in Synthetics (1990) 1 SCC 109 principally on the ground  that  the  legislative power of the  State  to  levy

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excise  duty  under Entry 51 of List II did  not  extend  to industrial  alcohol; and, in respect of that article no  fee in the nature of a regulation or control or licence could be charged  by reference to Entry 51 or 8 of List II which  had no application to industrial alcohol,  and also by reason of the control exercised by Parliament and the Central  Govern- ment  under the IDR Act, 1951 which is a law  referrable  to Entry  52 of List I and Entry 33 of List III.  Dealing  with that contention, this Court states:               "The  main question that falls for  considera-               tion in these matters is whether the vend  fee               in  respect  of the industrial  alcohol  under               different legislations and rules in  different               States is valid. The question is--is the  vend               fee  an impost leviable or extractable by  the               States  under  different  Acts.........    The               questions  with which we are mainly  concerned               are the following:               (i)  whether the power to levy excise duty  in               case of indust-               78               trial  alcohol was with the State  legislature               or the Central legislature?                        what is the scope and ambit of  Entry               8.List  11  of  the Seventh  Schedule  of  the               ’Constitution?               (iii) whether, the State Government has exclu-               sive  right  or  privilege  of  manufacturing,               selling,  distributing, etc. of  alcohols  in-               cluding industrial alcohol......". (Para 2). This Court further says-               "   .......  In these matters, this  Court  is               concerned with the taxing power of the  States               to  impose and levy excise duty on  industrial               alcohol  and/or imposts as  vend  fees........               (Para 4).     After  elaborately  discussing  the  increasing  use  of industrial  alcohol, as distinct from potable alcohol,  this Court says:               "The only question which has to be  determined               is  whether intoxicating liquor in Entry 8  in               List  H is confined to potable      liquor  or               includes all liquors......". (Para 41).                                  (emphasis supplied) Answering that question, which is characterised as the  only question. this Court categorically states that  intoxicating liquor within the meaning of Entry 8 of List II is  confined to potable liquor and does not include industrial liquor.      Referring  to  the  Constitutional  obligations  of  the State, this Court says:               "Article  47 of the Constitution imposes  upon               the State the duty to endeavour to bring about               prohibition  of  the  consumption  except  for               medicinal  purpose of intoxicating drinks  and               products  which are injurious to  health......               Does  Article 47 oblige the State to  prohibit               even such industries as are licensed under the               IDR  Act  but  which  manufacture   industrial               alcohol..... ? (Para 77).               In  that view of the matter it appears  to  us               that the relevant provisions of the U.P.  Act,               A.P. Act, Tamil Nadu Act,               79               Bombay Prohibition Act, as mentioned hereinbe-               fore,  are unconstitutional insofar  as  these

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             purport  to levy a tax or charge imposts  upon               industrial  alcohol, namely, alcohol used  and               usable  for industrial  purposes......   (Para               82).               Furthermore, in view of the occupation of  the               field  by the IDR Act, it was not possible  to               levy this impost. (Para 84).                         After the 1956 amendment to the  IDR               Act  bringing  alcohol              industries               (under fermentation industries) as Item 26  of               the    First Schedule to IDR Act, the  control               of  this industry has           vested  exclu-               sively  in the Union. Thereafter, licences  to               manufacture   both  potable  and   non-potable               alcohol  is            vested in  the  Central               Government      Distilleries     are      manu               facturing  alcohol under the central  licences               under IDR   Act. No privilege for  manufacture               even if one existed, has           been trans-               ferred  to the distilleries by the State.  The               Statecannot   itself  manufacture   industrial               alcohol  without the            permission  of               the  Central  Government.  The  States  cannot               claim  to pass a right which they do not  pos-               sess. Nor can the States claim exclusive right               to produce and manufacture           industri-               al  alcohol which are manufactured  under  the               grant            of licence from the  Central’               Government.   Industrial  alcoholcannot   upon               coming  into  existence under  such  grant  be               amenable to States’ claim of exclusive posses-               sion  of  pri          vilege. The  State  can               neither  rely  on  Entry  8  of  List  II   no               Entry  33  of List III as a basis for  such  a               claim. The State cannot claim that under Entry               33  of List III, it can regulate    industrial               alcohol  as a product of the scheduled  indus-               try,  because the Union, under Section 18-G of               the  IDR Act,  has evinced clear intention  to               occupy  the  whole  field.  Even     otherwise               sections like Sections 24A and 24B of the U.P.               Act  do not constitute any regulation  in  re-               spect of the  industrial alcohol as product of               the  scheduled  industry.  On   the  contrary,               these  purport  to  deal  with  the  so-called               transfer of privilege regarding  manufacturing               and  sale. This  power, admittedly,  has  been               exercised by the State purporting to act under               Entry  8 of List II and not under Entry 33  of               List III". (Para 85). Summing  up  in  paragraph 86 of the  judgment,  this  Court stated  what  we have already set out  above.  However,  for continuity, we will repeat clause (c) of that paragraph: 80               "(c)  The  State  may charge  excise  duty  on               potable  alcohol and sales tax under Entry  52               of  List  II.  However, sales  tax  cannot  be               charged on" industrial alcohol in the  present               case,  because under the Ethyl Alcohol  (Price               Control)Orders, sales tax cannot be charged by               the State on industrial alcohol"     We  have  extensively quoted from the  judgment  of  the Constitution  Bench in Synthetics & Chemicals Ltd. &  Others v. State of U.P. & Others, [1990] 1 SCC 109, with a view  to showing that the Court was concerned with only one question,

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and  that was whether the States could levy excise  duty  or vend  fee or transport fee and the like by recourse  to  En- tries  51 or 8 in List II in respect of industrial  alcohol. This Court held, as seen above, that the States had no  such power under either Entry in respect of non-potable or indus- trial alcohol. The Court did not deal with the taxing  power of  the  State under Entry 54 of List I1  which  deals  with ’taxes  on  the sale or purchase of goods other  than  news- papers,  subject to the provisions of Entry 92A of List  I’. The power of the State to levy taxes on sale or purchase  of goods under that Entry was not the subject matter of discus- sion by this Court,, although in paragraph 86 of the leading judgment of Sabyasachi Mukharji, J. as he then was, there is a  reference  to sales tax. He says "The  State  may  charge excise duty on potable alcohol and sales tax under Entry  52 of List II". Entry 52 of List II is mentioned in  connection with  excise duty and sales tax, but neither of  them  fails under  Entry 52. Reference to Entry 51 of List 1I  ought  to have  been made if it was excise duty that the Court had  in mind.  Entry 54 of List II would have been referred to,  and not  Entry  52, if the Court had in mind sales tax.  On  the other hand, Entry 52 refers to "Taxes on the entry of  goods into  a  local area for consumption, use or  sale  therein". None  had a case that this Entry had any application to  the fees or charges in question. The Court further says:               "However,  sales  tax  cannot  be  charged  on               industrial  alcohol in the present  case,  be-               cause under thee Ethyl Alcohol (Price  Control               Orders)  sales  tax cannot be charged  by  the               State on industrial alcohol". That  was an abrupt observation without a preceding  discus- sion,  and inconsistent with the reasoning adopted  by  this Court  in  earlier decisions from which no dissent  was  ex- pressed on the point. Coming, as it does, immediately  after a reference to Entry 52 of List II in connection with excise duty and sales tax when neither falls under that Entry, the 81 submission  of  the Advocate General  that  the  observation regarding  sales  tax  in para 86 of the  judgment  was  per incurium assumes great significance.     The  genesis  of the problem dealt  with  in  Synthetics (1990)  1 SCC 109 is traceable to the decision in the  State of Bombay & Anr. v. F.N. Balsara, [1951] SCR 682, where this Court  stated that the word ’liquor’ as understood  in  this country  at  the time of the Government of India  Act,  1935 comprehended not only alcoholic liquors which were generally used as beverages and which produced intoxication, but  also all liquors containing alcohol. Section 2(24) of the  Bombay Prohibition  Act, 1949 was held to be intra vires.  However, so  far  as  medicinal and  toilet  preparations  containing alcohol  were concerned, sections 12 and     is of  the  Act were  held to be invalid, being an unreasonable  restriction on the fundamental right, to the extent that they prohibited possession, sale use and consumption of liquors for medicine and  toilet preparations, but were held to be valid  to  the extent  that they applied to other categories  of  alcoholic liquors,  namely, spirits of wine, methylated spirit,  wine, beer and toddy, as these items Were distinctly separable and easily  severable from the other category, namely, all  liq- uors containing alcohol.     It  was this principle which was followed by this  Court in  Synthetics,  [1980] 2 SCC 44 1, where it was  held  that there  was  no fundamental right for a citizen to  carry  on trade or business in liquor and that the State had the power to  enforce absolute prohibition on manufacture or  sale  of

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intoxicating liquor by reason of Article 47 of’the Constitu- tion and that the State had exclusive right or/privilege  to manufacture  or sell liquor. This Court also held  that  the expression ’intoxicating liquor’ was not confined to potable liquor,  but would also include all liquors which  contained alcohol.  The State Government had the power to levy  a  fee for  parting with its exclusive right respect  of  intoxicat ing  liquor. This Court stated that ‘alcohol’ included  both ordinary  as well as specially denatured  spirit.  Denatured spirit  contains  ethyl  alcohol.  The  specially  denatured spirit  for industrial purposes is different from  denatured spirit  only because of the difference in the  quantity  and quality  of the denaturants. Specially denatured spirit  and ordinary denatured spirit were classified according to their use  and denaturants used. This Court rejected the  distinc- tion sought to be drawn between denatured spirit for  indus- trial purposes and ordinary denatured spirit. It was this wider understanding of ’intoxicating liquor’  so as to 82 comprehend  not  only potable alcohol, but  also  industrial alcohol,  that was disapproved in Synthetics, [1990]  1  SCC 109.  In  drawing the distinction between potable  and  non- potable  alcohol,  this  Court had in  mind  the  tremendous changes which have taken place in science and technology and industry  and commerce and the increasing use of  industrial alcohol in various industries. Drawing a distinction between potable and non-potable alcohol and, confining the  doctrine of Article 47 to the former, this Court came to the  conclu- sion  that  the impugned  statutory  provisions  purportedly levying fees or enforcing restrictions in respect of  indus- trial  alcohol  were impermissible in view  of  the  control assumed  by the Central Government in exercise of its  power under  section 18G of the IDR Act in respect of  a  declared industry  falling under Entry 52 of List I, read with  Entry 33  of  List III. Alcohol as an industry being  one  of  the industries  brought  within the purview of the IDR  Act  and thus under the regulatory control of the Union, the power to grant  licence for the manufacture of alcohol is  vested  in the Central Government. Distilleries manufacturing  alcohol- are necessarily licensed under the IDR Act for such distill- eries  can manufacture alcohol of all types and,  therefore, are  necessarily  brought under the control of  the  Central Government.     It is in this background that the cardinal question  has to  be  examined, that is, whether or not the power  of  the State  to levy tax on the sale or purchase of goods  falling under  Entry 54 of List II will comprehend industrial  alco- hol. It is significant that the taxing power of the State on a  matter  falling within its competence under  this  Entry, namely,  sale or purchase of goods (other  than  newspapers) is,  subject to the taxing power of Parliament  under  Entry 92A  of  List I, and other provisions of  the  Constitution, plenary  and unlimited, and untrammelled by the  supervisory or  regulatory power of Parliament under Entry 52 of List  I read  with its concurrent power under Entry 33 of List  III. This  is  the crucial distinction between  the  wide  taxing power of the State under Entry 54 of List II and its  condi- tional or restricted taxing power, for example, over mineral rights mentioned in Entry 50 of that List which was  consid- ered  in India Cement Ltd. & Ors. v. State. of Tamil Nadu  & Ors., [1990] 1 SCC 12. Similarly, the power of the State  in respect of potable alcohol (as distinguished from industrial alcohol)  falling under Entry 8 of List II is  significantly unfettered, unlike, for example, mines and mineral  develop-

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ment over which the regulatory power of the State is specif- ically  stated  to  be subject to the  regulatory  power  of Parliament  (see entry 23 of List II read with Entry  54  of List I). The legislative competence of the State in  respect of mines and -I  minerals was accordingly held to be denuded to the extent that the 83 field  was covered by section 9 of the Central Act,  namely, Mines  and Minerals (Regulation and Development  Act),  1957 see India Cement (supra). Unlike mines and minerals, alcohol stands on a different footing, and is dealt with  different- ly,  dependant  on  whether it is potable or  not.  What  is significant  is  that legislation falling in pith  and  sub- stance  under Entry 8 or Entry 51 of List II in relation  to alcoholic  liquor  for human consumption  (as  distinguished from industrial alcohol) whether for the purpose of  levying vend fee or transport fee or excise duty, strictly  confined to such articles, is not subject to challenge on the  ground of  legislative incompetence or repugnancy by reason of  the power  vested  in Parliament under Entry 52 or Entry  84  of List  I or Entry 33 of List III. Incompetence or  repugnancy arises  only when the impact of the legislation  falls,  not incidentally, but substantially on industrial alcohol so  as to transgress on a field occupied by Parliament.     In  M.P.V.  Sundararamier & Co. v. The State  of  Andhra Pradesh  & Anr., [1958] SCR 1422 at 1479 Venkatarama  Aiyar, J.,  speaking  for the Constitution Bench, referred  to  the Entries  in the three lists of the Seventh Schedule  of  the Constitution  and drew a distinction between the  main  sub- jects  of  legislation forming one group and  taxes  forming another  group. Entries 1 to 81 of List I are the main  sub- jects  of legislation within the competence  of  Parliament. Entries  82  to 92 of that List (92A and B have  since  been added) enumerate the taxes which Parliament is competent  to impose. Likewise, Entries 1 to 44 forming one group in  List II relate to the main subjects within the legislative compe- tence  of  the States, while Entries 45 to 63 of  that  List deal specifically with the taxes leviable by the States. The general power of legislation vested in the States  regarding trade  and commerce, production, supply, etc. is  referrable to  Entries 26 and 27 of List II. The power of the State  to levy  taxes  on  the sale or purchase of  goods  other  than newspapers  is mentioned in Entry 54 of List II. This  power is, however, subject to certain restrictions imposed  trader Article  286.  Clause (1) of Article 286 prohibits  a  State from  imposing, or authorising the imposition of, a  tax  on the sale or purchase of goods taking place outside the State or in the course of import into or export out of the  terri- tory  of India. Parliament is empowered under clause (2)  of this Article to formulate by law principles for  determining when  a sale or purchase takes place outside a State  or  in the course of import into or export out of the territory  of India.  Clause  (3)  of  this  Article  empowers  Parliament to/impose certain restrictions and conditions on the  taxing power  of the State in respect of goods declared by  Parlia- ment  to  be  of special importance in inter-State trade  or commerce and certain other goods falling under clause (29-A) of Article 366. The legislative 84 power  of  Parliament  in respect of  inter-State  trade  or commerce  and its taxing power in regard to it  are  respec- tively mentioned in Entries 42, 92A and 92B of List I.     Taxes  levied and collected by the Union on the sale  or purchase of goods other than newspapers, where such sale  or purchase  takes place in the course of inter-State trade  or

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commerce,  are assigned to the State in the manner  provided in  clause  (2) of Article 269. Clause (3) of  that  Article says  that  Parliament may by law formulate  principles  for determining when a sale or purchase or Consignment of  goods takes place in the course of inter-State trade or  commerce. It  was by virtue of this power that Parliament enacted  the Central  Sales  Tax  Act, 1956, sections 3 and  4  of  which formulate principles for determining when a sale or purchase of goods has taken place in the course of inter-State  trade or  commerce or outside a State. In all other  respects  the State enjoys legislative power to levy taxes on the sale  or purchase of goods.     Industry  as a subject of legislation falls under  Entry 24 of List II. But this provison is subject to Entries 7 and 52 of List I dealing respectively with "Industries  declared by  Parliament  by law to be necessary for  the  purpose  of defence  or for the prosecution of the war" and  "Industries the control of which by the Union is declared by  Parliament by law to be expedient in the public interest". It is  Entry 52 of List 1 that is relevant for the present purpose for it is in respect of that Entry that Parliament enacted the  IDR Act,  1951 to provide for the development and regulation  of certain  industries.  This  Act contains  a  declaration  by Parliament that ’it is expedient in the public interest that the  Union  should  take under its  control  the  industries specified in the First Schedule’. ’Fermentation  Industries’ i.e.  Alcohol and Other products of fermentation  industries is Item 26 of the First Schedule. Section 18G of the IDR Act confers upon the Central Government the power of control  of supply, distribution, price, etc. of the articles  mentioned in  the First Schedule of the Act. All powers vested in  the Central  Government  under section 18G of the  IDR  Act  are referfable  to Entry 52 of List I dealing with  ’controlled’ industries, read with Entry 33 of List III which pertains to ’Trade and commerce in, and production, supply and distribu- tion of’ the products of controlled industries.     None  of the entries in the Concurrent List  deals  with tax  but general subjects of legislation. No  conflict  can, therefore, arise bet-ween the taxing powers of the Union and the States. Parliament has 85 the power to legislate in respect of a ’controlled’ industry falling  under Entry 52 of List I, and both  Parliament  and the  States  have the power to legislate in respect  of  the trade  and commerce in, and the production, supply and  dis- tribution of, the products of a ’controlled’ industry (Entry 33  of List III). These are not taxing entries and  do  not, therefore,  relate  to taxes, but powers of  regulation  and control. The power to control industry being thus vested  in Parliament (Entry 52 of List I) and the legislative power in respect of trade and commerce in such industry being concur- rently vested in the Union and the States (Entry 33 of  List III) any exercise of control by the State must be subject to the legislative power of Parliament and the power  conferred on the Central Government by such legislation (Article 246). Any  exercise of power by the State which transgresses  upon the power of Parliament or of the Central Government, as its delegate,  is to the extent of such transgression  null  and void.               Entry 8 of List II reads-               "Intoxicating  liquors,  that is to  say,  the               production,  manufacture,  possession,  trans-               port,  purchase and sale of intoxicating  liq-               uors". These  matters  concerning  intoxicating  liquors  are  thus

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included within the legislative competence of the States. In respect of any such matter the States are competent to  levy fees (Entry 66 of List II). Entry 51 of List II relating  to excise  duty  on  alcoholic liquors  for  human  consumption reads-               "Duties  of  excise  on  the  following  goods               manufactured  or  produced in  the  State  and               countervailing  duties  at the same  or  lower               rates  on similar goods manufactured  or  pro-               duced elsewhere in India:               (a) alcoholic liquors for human consumption;               (b)  opium,  Indian hemp  and  other  narcotic               drugs and narcotics;               but not including medicinal and toilet prepar-               tions  containing  alcohol  or  any  substance               included in sub-paragraph (b) of this entry". While this Entry clearly refers to liquor for human consump- tion, the 86 same  meaning  has been judicially ascribed  in  Synthetics, [1990] 1 SCC 109 to ’intoxicating liquors’ in Entry 8 of the same  List. The legislative competence of the State  in  re- spect Of ’intoxicating liquors’ referred to in Entries,8 and 66  of List II as a subject of legislation and  fee  respec- tively  and  the power of the State to levy excise  duty  on "alcoholic  liquors  for human  consumption"  falling  under Entry  51 of the same List must necessarily be  confined  to potable  alcohol, and cannot include industrial  alcohol  or medicinal  and toilet preparations containing  alcohol  (see Entry  84  of  List I). Any transgression by  the  State  on industrial  alcohol  will be invalid for want  of  power  by reason  of  the limitation of Entries 8 and 51  of  List  II (being  confined to potable alcohol) and  consequent  trans- gression  on  areas covered by Entries 52 and 84 of  List  I respectively  relating to declared industry and excise  duty on industrial alcohol and medicinal and toilet  preparations containing  alcohol, and also for repugnancy arising from  a clash with the centrally occupied field falling under  Entry 33 of List III. This is why this Court in Synthetics  [1990] 1  SCC  109 held that the State should not impose  any  fee, whether called vend fee, transport fee, excise duty and  the like,  on industrial alcohol as such impost  would  trespass upon the statutory orders made by the Central Government  in exercise  of its power of control under section 18G  of  the IDR  Act  as  regards ethyl alcohol  and  other  non-potable products of fermentation industries.     Article 298 of the Constitution says that the  executive power  of  the  State, within the area  of  its  legislative competence,  or,  subject to legislation by  Parliament,  in areas  falling  outside its  legisaltive  competence,  shall include  the conduct of any trade or business, the  acquisi- tion, holding and disposal of property and the making of any contract  for  such purpose. The regulatory  powers  of  the State extend to every form of activity concerning intoxicat- ing  liquor for human consumption. The production,  manufac- ture,  possession,  transport, purchase and  sale,  of  such articles fall within the regulatory power of the State.  The State is entitled to levy fees in respect of any such matter (Entry 66 List II).   The  power of regulation and control is separate and  dis- tinct the power of taxation. Legislative exercise of regula- tion or control referfable to Entry 52 of List I or Entry  8 of  List  II is distinct and different from a  taxing  power attributable  to Entry 54 of List II or Entry 92A or 92B  of List  I.  The  power to levy taxes on sale  or  purchase  or

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consignment  in referrable to these Entries, and subject  to the  other provisions of the Constitution, the taxing  power of  the  State is not cut down by  the  general  legislative control vested in Parliament and 87 referrable to the general topics of legislation.     In  M/s. R.M.D.C. (Mysore) Private Limited v. The  State of  Mysore, [1962] 3 SCR 230, a Constitution Bench  of  this Court held:               "that the subject of ’betting and gambling" in               entry 34 of List II of the Seventh Schedule to               the Constitution of India and that of  "’taxes               on  betting and gambling" in entry 62 of  List               II  have  to be read  separately  as  separate               powers,  and  therefore,’  when  control   and               regulation  of prize competitions was  surren-               dered  to Parliament by the  resolution  dated               February 23, 1956, the power to tax could  not               be said to have been surrendered.               Therefore,  if the Mysore Legislature had  the               power, which in our opinion, it had and it had               not surrendered its power to Parliament which,               in our opinion, it had not, then it cannot  be               said that the imposition of the tax is a piece               of  colourable  legislation  and  is  on  that               ground unconstitutional"     In  Ganga Sugar Corporation Ltd. v. State of Uttar  Pra- desh & Others, [1980] 1 SCC 223, Krishna Iyer, J.,  speaking for  the Constitution Bench, dealt with a challenge  against the  levy of purchase tax on the raw material consumed by  a controlled industry, namely, the Sugar Industry, and stated:               "Is  the legislation ultra vires  because  the               State enters the forbidden grounds by enacting               on controlled industry? It is undisputed  that               sugar  industry  is  a  controlled   industry,               within  the  meaning of Entry 52,  List  I  of               Seventh Schedule and, therefore, the  legisla-               tive  power of Parliament  ’covers  enactments               with  respect to industries having  regard  to               Article  246(1)  of the Constitution.  If  the               impugned legislation invades Entry 52 it  must               be  repulsed  by this Court. But Entry  54  in               List  II of the Seventh Schedule  empower  the               State  to legislate for taxes on  purchase  of               goods and so if the Act under consideration is               attracted,  in  pith and  substance,  by  this               entry legislative incompetence cannot void the               Act......". This is precisely the question in the instant case, namely, 88 whether  or not the impugned legislation falls in  pith  and substance  with in Entry 54 of List II, and not whether  the industry  (producing goods the sale of which is leviable  to tax under the impugned legislation) is controlled within the arebit of Entry 52 of List I. This question was not  consid- ered in Synthetics, [1990] 1 SCC 109.     A  like question arose in a different form in  Ch.  Tika Ramji  & Others etc. v. The State of Uttar Pradesh  &  Ors., [1956]  SCR 393. This Court rejected the challenge  in  that case against the constitutional validity of the U.P.  Sugar- cane  (Regulation of Supply and Purchase) Act, 1953 and  the notifications  issued thereunder. It was held that  the  im- pugned Act and the notifications were intra rites the  State Legislature  as they were concerned with the  regulation  of the  supply  and  purchase  of sugarcane  which  in  no  way

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trenched upon the exclusive  jurisdiction of the Centre with regard to sugar. No question of repugnancy under Article 254 of  the Constitution could arise because Parliament and  the State legislated in different fields and dealt with separate and  distinct  matters even though of a cognate  and  allied character. There is no inconsistency between the two  enact- ments.  The provisions of section 18G of the IDR  Act,  1951 did  not  cover sugarcane or indicate any intention  on  the part of Parliament to cover the entire field of such  legis- lation.  Raw material did not come within the ambit of  ’any article  or  class of articles relatable  to  any  scheduled industry within the meaning of that Act’. The Court  further pointed out that even if sugarcane was an article which fell within  the  purview  of section 18G of the  Act,  no  order having  been  issued by the Central  Government  under  that provision, no repugnancy could arise, for repugnancy had  to exist as a fact and not as a mere possibility. The existence of  an  order  covering the entire field  was  an  essential prerequisite to give rise to repugnancy.     Similarly, in Kannan Devan Hills Produce Company Ltd. v. The State of Kerala & Another, [1973] 1 SCR 356 a  Constitu- tion Bench of this Court stated:               "It  seems  to  us clear that  the  State  has               legislative  competence to legislate on  entry               18  List II and entry 42 List III. This  power               cannot  be  denied on the ground that  it  has               some  effect on an industry  controlled  under               entry 52 List I. Effect is not the same  thing               as subject-matter. If a State Act,  otherwise,               valid,  has  effect on a matter in List  I  it               does  not cease to be a legislation  with  re-               spect   to  an  entry  in  List  II  or   List               III ....." 89     In Haechst Pharmaceuticals Ltd. & Anr. v. State of Bihar &  Others,  [1983]  3 SCR 130 this  Court,  reiterating  the observations  of the Constitution Bench  in  Sundararamier’s case  [1958]  SCR 1422 as regards  the  distinction  between general subjects of legislation and taxes in List 1 and List II  and  the absence of any entry in List  III  relating  to taxes (apart from levy of fees stated:               ".....   Thus in our Constitution, a  conflict               of  the taxing power’ of the Union and of  the               States  cannot  arise. That being  so,  it  is               difficult  to comprehend the  submission  that               there  can be intrusion by a law made by  Par-               liament  under  Entry 33 of List  III  into  a               forbidden  field  viz. the  State’s  exclusive               power  to make a law with respect to the  levy               and imposition of a tax on sale or purchase of               goods relatable to Entry 54 of List II of  the               Seventh Schedule. It follows that the two laws               viz. sub-s. (3) of s. 5 (of the Bihar  Finance               Act,  1981)  and paragraph 21 of  the  Control               Order  issued by the Central Government  under               sub-s.  (1) of s. 3 of the Essential  Commodi-               ties Act, operate on two separate and distinct               fields  and both are capable of being  obeyed.               There is no question of any clash between  the               two  laws and the question of repugnancy  does               not come into play".     These  decisions unmistakably demonstrate the  power  of the  State  to levy taxes on the sale or purchase  of  goods other  than  newspapers but subject to Entry 92A of  List  I which deals with the legislative power of Parliament to levy

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taxes on the sale or purchase of goods other than newspapers where  such  sale or purchase takes place in the  course  of inter-State  trade  Or commerce. Subject to  the  overriding power of Parliament in respect of what falls under Entry 92A and the provisions of Article 286, the State has full legis- lative  competence in levying taxes on the sale or  purchase of goods other than newspapers. The power to tax under Entry 54 of List 11 being a specific power, it cannot be cut  down or  in any manner lettered by the general power  of  control exercised  by Parliament by legislation on a matter  falling under  Entry 52 of List I relating to an industry, the  con- trol of which by the Union is declared by Parliament by  law to  be expedient in the public interest, read with Entry  33 of  List  III  dealing with trade and commerce  in  and  the production,  supply and distribution of the products of  any such  controlled  industry, and imported goods of  the  same kind as such products, and other articles mentioned in Entry 33.  The  impugned provision of the Uttar Pradesh  Sales  of Motor  Spirit, Diesel Oil and Alcohol  Taxation  (Amendment) Act, 1976 levying tax at the 90 point of first purchase of alcohol in the State is  undoubt- edly an impost failing in pith and substance under Entry 54- of List II. In the absence of any fetter on the  legislative power and in the absence of any valid challenge against  the provision as a colourable piece of legislation, the impugned legislative enactment remains unimpeachable.     The  control  exercised  by the  Central  Government  by virtue  of  section  18G of the IDR Act is in  a  field  far removed from the taxing power of the State under Entry 54 of List  II. So long as the impugned legislation falls in  pith and  substance  within the taxing field of  the  State,  the control  of the Central Government in exercise of its  power under the IDR Act in respect of a controlled industry  fall- ing  under Entry 52 of List 1 cannot in any  manner  prevent the  State  from imposing taxes on the sale or  purchase  of goods which are the products of such industry and which  are referrable  to  Entry  33 of List III. As  seen  above,  the taxing  power of the State under Entry 54 of List II  cannot be  cut down by the general legislative power of control  of the Centre.     The  levy of fee, whether called vend fee  or  transport fee  or duty or charge, whether levied by Rules  purportedly made  under the Excise Act or Prohibition Act or  any  other statute, otherwise than as a proper levy falling in pith and substance under a taxing Entry, was not valid, to the extent that it lacked quid pro quo and applied to industrial  alco- hol.  Any such fee or charge can be justified as a  mode  of control  falling  in pith and substance under Entry  8  read with Entry 66 of List 1I only to the extent that it  remains within  the bounds of the concerned subject  matter,  namely ’intoxicating  liquors’,  which  must  necessarily   exclude industrial alcohol.     We  see  no substance in the contention that  the  Price Control Orders made by the Central Government in exercise of its  power under the IDR Act fettered the legislative  power of the State on a matter falling under Entry 54 of List  II. Taxes  on  sale or purchase are not governed  by  the  Price Control Orders, for the purpose of the latter is to  prevent the  seller  from pricing his goods beyond  the  limit  pre- scribed by the orders. That is a fetter on the free play  of demand  and  supply. When supply is scarce,  the  price  are bound  to  rise and it is that vice which is  controlled  by fixing  the maximum price. But that does not in  any  manner curtail the power of the State to levy taxes on the sale  or

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purchase of goods. It is no doubt true that the consumer  of the article must in addition to the price, pay purchase  tax due  in  respect of them. But that is by reason of  a  valid levy  which  is  within the constitutional  power  of  every State,  and is dehors the price, though often referrable  to it. 91     The  High  Court, in our view, was clearly in  error  in striking down the impugned provision which undoubtedly falls within the legislative competence of the State, being refer- rable to Entry 54 of List II. We are firmly of the view that the  decision of this Court in Synthetics, [1990] 1 SCC  109 is  not  an authority for the proposition canvassed  by  the assessee  in challenging the provision. This Court has  not, and  could not have, intended to say that the Price  Control Orders  made  by the Central Government under  the  IDR  Act imposed  a  fetter on the legislative power  of  the   State under  Entry  54  of List II to levy taxes on  the  sale  or purchase  of goods. The reference to sales tax in  paragraph 86  of that judgment was merely accidental or  per  incurium and has, therefore no effect on the impugned levy.     R.M.  SAHAI,  J.  I have, carefully,  gone  through  the judgment of brother Thommen, J. I agree with every word that has  been  said by him. But considering  the  importance  of issues involved I would like to add few words of my own.     The dispute is about levy of purchase tax on  industrial alcohol. The High Court held that the State legislature  was competent  to  enact a law imposing purchase tax  on  it  in exercise  of power under Entry 54 of List II. But it  struck down the levy as it would disturb price structure  regulated by  Central Government. It was held that control of  alcohol industry  having  been  taken over by  the  Parliament,  for purpose of regulation and development the State stood denud- ed  of  its taxing power under Entry 54 of List  II  to  the extent the field of price fixation was covered by the  price control  order  issued by the Government. And  the  purchase price being component of price fixation which squarely  fell within  the  power of Central Government the  imposition  of purchase  tax amounted to intrusion into the forbidden  area of  price fixation by Central Government. Support  for  this was  drawn,  principally, from the  two  Constitution  Bench decision  in  Indian  Cement Ltd. v. State  of  Tamil  Nadu, [1990]  1  SCC 12 and Synthetic and Chemicals  v.  State  of U.P., [1990] 1 SCC 1091. The first was relied for the  prin- ciple  that even a taxing legislation by the State could  be invalid to the extent it trenched on Central legislation  on the  same subject. And the latter for the  conclusion  that, ’however, sales tax cannot be charged on industrial  alcohol in the present case, because under the Ethyl Alcohol  (Price Control) Orders sales tax cannot be charged by the State  on industrial alcohol’. Reliance on Indian Cement Ltd.  (supra) was  under complete misapprehension. The State in that  case attempted  to  levy cess on royalty. It was held to  be  in- valid. To save it the State attempted to justify it as a tax in exercise of power under Entry 50 of 92 List  II.  The submission was negatived as  the  legislative power of State under Entry 50 of List II was ’subject to any limitation  imposed  by the Parliament by  law  relating  to mineral  development’.  The Bench held that in view  of  the Parliamentary legislation under Entry 54 of List ’I and  the declaration made under Section 2 and provisions of Section 9 of  the  Act the State legislation was  overridden  to  that extent.  No such restriction or limitation is  placed  under Entry  54 of List II except that the exercise of  power  has

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been made subject to the provisions of Entry 92 of List I.     But the problem has arisen due to the conclusion in  the case of Synthetic and Chemicals (supra). The question was if the State legislature could levy vend fee or excise duty  on industrial  alcohol. The Bench answered the question in  the negative  as industrial alcohol being unfit for  human  con- sumption  the State legislation was incompetent to levy  any duty  of excise either under Entry 51 or Entry 8 of List  II of the VIIth Schedule. While doing so the Bench recorded the conclusion  extracted  earlier. It was not preceded  by  any discussion.  No  reason or rationale could be found  in  the order.  This  gives  rise to an important  question  if  the conclusion is law declared under Article 141 of the  Consti- tution or it is per incuriurn and is liable to be ignored:     ’Incuria’  literally means ’carelessness’.  In  practice per incurium appears to mean per ignoratium.’ English Courts have  developed this principle in relaxation of the rule  of stare decisis. The ’quotable in law’ is avoided and  ignored if  it  is rendered, ’in ignoratium of a  statute  or  other binding authority’. (1944 IKB 718 Young v. Bristol Aeroplane Ltd.  Same has been accepted, approved and adopted  by  this Court  while  interpreting Article 141 of  the  Constitution which  embodies  the doctrine of precedents as a  matter  of law. In Jaisri Sahu v. Rajdewan Dubey, [1962] 2 SCR 558 this Court  while pointing out the procedure to be followed  when conflicting decisions are placed before a Bench extracted  a passage  from Halsbury Laws of England incorprating  one  of the  exceptions when the decision of an Appellate  Court  is not binding.      Does this principle extend and apply to a conclusion of law, Which was neither raised nor preceded by any considera- tion.  In other words can such conclusions be considered  as declaration  of law? Here again the English Courts  and  ju- rists  have  carved out an exception to the rule  of  prece- dents.  It  has been explained as rule  of  sub-silentio.  A decision  passed sub-silentio, in the technical  sense  that has come to be attached to that phrase, when the particular’ point of law involved in 93 the decision is not perceived by the Court or present to its mind’  (Salmond  12th Edition). In Lancaster  Motor  Company (London) Ltd. v. Bremith Ltd., [1941] IKB 675 the Court  did not feel bound by earlier decision as it was rendered  ’wit- hout any argument, without reference to the crucial words of the rule and without any citation of the authority’. It  was approved by this Court in Municipal Corporation of Delhi  v. Gumam  Kaur, [1989] 1 SCC 101. The Bench held that,  ’prece- dents  sub-silentio and without argument are of no  moment’. The  Courts thus have taken recourse to this  principle  for relieving from injustice perperated by unjust precedents.  A decision which is not express and is not founded on  reasons nor  it proceeds on consideration of issue cannot be  deemed to be a law declared to have a binding effect as is  contem- plated  by Article 141. Uniformity and consistency are  core of judicial discipline. But that which escapes in the  judg- ment  without any occasion is not ratio decedendi. In  Shama Rao  v.  State of Pondicherry, AIR 1967 SC 1680 it  was  ob- served,  ’it is trite to say that a decision is binding  not because  of its conclusions but in regard to its  ratio  and the  principles,  laid  down therein’.  Any  declaration  or conclusion  arrived without application of mind or  preceded without any reason cannot be deemed to be declaration of law or  authority  of a general nature binding as  a  precedent. Restraint in dissenting or overruling is for sake of stabil- ity and uniformity but rigidity beyond reasonable limits  is

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inimical to the growth of law.     Effort  was made to support the conclusion,  indirectly, by  urging that the State having raised same  objections  by way of review petition and the same having been rejected  it amounted  impliedly asproviding reason for  conclusion.  Law declared  is  not that can be culled out but that  which  is stated  as  law  to be accepted and  applied.  A  conclusion without  reference  to relevant provision of law  is  weaker than even casual observation. In the order of brother  Thom- men,  the  extracts from the judgment  of  the  Constitution Bench  quoted  in extenso demonstrate that the  question  of validity  of levy of sales and purchase tax was  neither  in issue  nor was it raised nor is there any discussion in  the judgment except of course the stray argument advanced by the learned Attorney General to the following effect.               "But alcohol not fit for human consumption are               not luxury and as such the State  Legislatures               according  to  Attorney General will  have  no               power to levy tax on such alcohol." Sales  tax or purchase tax under Entry 54 is levied on  sale or  purchase of goods. It does not contemplate any  distinc- tion between luxury and 94 necessity.  Luxuries are separately taxable under Entry  62. But that has nothing to do with Entry 54. What prompted this submission is not clear. Neither there was any occasion  nor there is any constitutional inhibition or statutory restric- tion under the legislative Entry nor does the taxing statute make  any distinction between luxuries and  necessities  for levying  tax. In any case the Bench did not examine  it  nor did it base its conclusions on it. In absence Of any discus- sion or any argu ment the order was founded on a mistake  of fact  and,  therefore, it could not be held to  be  law  de- clared.  The Bench further was not apprised of earlier  Con- stitution Bench decisions in Hoechest Chemicals v. State  of Bihar,  AIR  1983 SC 1019 and Ganga Sugar Mill v.  State  of U.P.,  [1980]  1 SCR 769 which specifically dealt  with  the legislative  competence of levying sales tax in  respect  of any industry which had been declared to be of public  impor- tance. Therefore, the conclusion of law by the  Constitution Bench  that  no  sales or purchase tax could  be  levied  on industrial  alcohol  with utmost respect fell  in  both  the exceptions,  namely, rule of sub-silentio and being  in  per incurium, to the binding authority of the precedents.     Ethyl  alcohol is not fit for human consumption.  It  is principally  used as raw material for manufacture of  rubber etc. Since it was of all India importance the activities  of which affected the country as a whole, it was declared as of public  importance by adding it as item no. (1) under  Entry 26 of the first Schedule appended to the Industrial  (Devel- opment  and Regulation) Act, 1951, (hereinafter referred  as IDRA).  The  effect of this declaration was  that  it  stood removed  from Entry 24 of List II and allocated to the  Cen- tral legislature. The control thus vested in the Parliament. But Entry 33 in Concurrent List permits both the  Parliament and the State Legislature to deal with trade and commerce in it and also regulate production, supply and distribution  of goods declared to be of public importance. The State  could, therefore,  enact law under Entry 33 subject to it that  the State legislation could not be repugnant to central legisla- tion. That is if the field is already occupied by a  Central enactment then the State legislation to that extent shall be invalid. (See Tika Ramji v. State of U. P., AIR 1956 SC  676 and  Hoechest  Pharmaceuticals Ltd. v. State of  Bihar,  AIR 1983 SC 1019).

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   Can  this principle apply to levy of purchase tax by  an enactment made in exercise of legislative power under  Entry 54 of List II? Power to tax is a sovereign power. In federal system  of  governance it is exercised  by  distribution  of power  between the Union and the State. Both are supreme  in their sphere. That is brought out clearly by Arti- 95 Cle  246(1)  and  Article 246(3) of  the  Constitution.  The legislative  field  for levying tax by Union is set  out  in Entries 82 to 92 in List i and of State in Entries 45 to  63 in  List II of the VIIth Schedule. There is no  overlapping. Fields are clearly demarcated. Limitations and  restrictions are also mentioned. Unlike general entries power to levy tax cannot  be deduced from another Entry as ancillary  exercise of  power.  Since the Concurrent List does not  contain  any Entry relating to taxing power the concept of occupied field or repugnancy cannot arise. If there is clash between  exer- cise of power under List II and last I then the State legis- lation may be invalid due to Article 246(1). But since there can  be no clash or invalidity in relation to  taxing  power the question of invalidity can not arise.     Price fixation of ethyl alcohol is an exercise of  power for  regulating distribution and supply of it.  The  general entry  for regulating distribution and supply  is  different from exercise of taxing power. The two do not even  remotely touch  each other. Therefore, if the price goes up in  exer- cise of taxing power then subject to its being arbitrary  or confiscatory  it  could not be struck down as  intruding  in forbidden  field. In Hoechest Pharmaceuticals  (supra)  this Court  while  examining  the ambit of Entry 54  of  List  II observed,  ’Entry 54 of List II of the Seventh  Schedule  is only  subject  to Entry 92A of List I and there  can  be  no further  curtailment  of the status of  power  of  taxation. Therefore- the entire basis for striking down the levy  that even  though  the State had plenary power to impose  tax  on sales/purchase  of  goods can exercise  taxing  power  under Entry 54 of List II so long as it does not militate  against the  legislative  field occupied by the  Central  GOvernment under the IDR Act or any other enactment made under Entry 52 of  List  I proceeded on complete  misconception  of  taxing powers of State. In fact as stated earlier the entire theory of  occupied field or State legislation being  repugnant  to Central  legislation is available when the two  legislatures exercise their powers under ConcUrrent List.      Therefore, the order of the High Court striking down the levy cannot be upheld. V.P.R.                                                Appeal allowed. 96