STATE OF KERALA AND OTHERS v. FR. WILLIAM FERNANDEZ ETC. ETC.

62Copy pinpoint62. Further, in Mathuram Agrawal v. State of M.P., 1999(8) A sec 667, in paragraph 12 following has been stated: "12.... The intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing B purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give c a meaning to the statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter. "

63Copy pinpoint63. There cannot be any dispute to the proposition as laid down by this Court in the above noted cases. Statutes which are in consideration are the statutes where clear charging provision has been enacted and charging of entry tax is on entry of the scheduled goods into a local area for consumption, use or sale. Thus, the charging event arises on entry of scheduled goods into a local area. Any goods which are entering into a local area of a State whether coming from another local area of State, any other State or outside the country, the charging event is same for all goods entering into local area. We, thus, are of the clear view that charging Section is clear, unambiguous and the provisions cannot be read to mean that the imported goods coming from outside the country are excluded from charge of entry tax. No such indication is discernible from any provision of the Act. Charging event is complete as and when goods G. enter into local area for use, sale or consumption irrespective of its origin. We, thus, are of the vie\V that definition clause, Section 2(d) read with Section 3 does not exclude the charging of the entry tax on goods entering into local area for consumption, use or sale from outside the coiintry.

708 SUPREME COURT REPORTS [2017] 13 S.C.R.

64Copy pinpoint64. In so far as reference of Section 2( c) of the Bihar Act, 1993 as amended in 2003 by adding an explanation and as amended in 2006 by inserting a new Section 2(c ), Section 2(1 )(c) ofUttar Pradesh Tax on Entry of Goods into Local Area Act, 2007, Section 2( 1)(c) of the Uttarakhand Tax on Entry of Goods into Local Areas Act, 2009 as well as Section 2(l)(c)ofthe West Bengal Tax on Entry of Goods into Local Areas Act, 2012 which expressly includes entering into local area from any place outside the territory of India, we only say that the said inclusion of words 'from outside the India' is a provision made by way ofabundant caution.

65Copy pinpoint65. The Bibar ArnendmentAct, 2006 by which Section 2(c) was inserted by inclucjing clause (iii) is also by way of abundant caution and to provide it expressly which was already included in the definition of Section 2(c) read with Section 3.

66Copy pinpoint66. Similarly when by Bihar Act 11 of2003 Section 2 was amended in following manner:- D "2. Amendment of Section-2 of Bihar Act 16, 1993- i)Aftt!r the proviso to sub-section(e) of section-2 of the Act, the following explanation shall be inserted and shall be deemed always to have been so inserted- E "Explanation- Entry of goods into a local area for consumption, use or sale therein from any place outside the territory 11f India shall also be deemed to be an ·entry of goods for the p11rposes of this Act.

F the intent and purpose of amendment was clear that it was clarificatory and explanatory. It did not-introduce a concept which was not already there. ·

67Copy pinpoint67. In Section 2(d) the word used is 'any place outside that local area or outside the State'. The word 'any' is a word of very wide meaning G · and use of word 'any' excludes any limitation. We, thus, are of the view that all the three legislations clearly did not exclude goods coming from outside the territory of India and the definition of entry of goods read with charging section clearly included all goods entering into a local area. Thus, the submissions of learned counsel fur~he petitioners that entry H tax legislation did not include imported goods cannot be accepted.

STATE OF KERALA v. FR. WILLIAM FERNANDEZ . 709 [ASHOK BHUSHAN, J.]

Entry 41 & 83 of List I and Entrv 52 of List II A·

68Copy pinpoint68. Issue Nos. 2 and 3 being interrelated are being taken together. Entry tax legislation by the State Legislature are referable to Entry 52 List II as it exist prior to 101" Amendment Act, 2016, which was as follows:- "Taxes on the entry of goods into a local area for consumption, B use or sale therein."

69Copy pinpoint69. The submission, which has been pressed to impugn the State · legislation is that the entry tax legislation intrude into the field which is reserved to Parliament under Entry 41 and Entry 83 of List I, which are as follows:- C Entry 41- "Trade and commerce with foreign countries; import and export across customs frontiers; definition of customs frontiers." Entry 83- "Duties of customs including export duties." D

70Copy pinpoint70. In so far as trade and commerce with foreign countries, import and export across the customs frontiers and definition of customs frontiers, it is the Parliament which has exclusive legislative competence to make a law under Entry 41 and under Entry 83 on duties of customs including export duties. E· 7 I. The Constitution of India, Part XI, Chapter I deals with legislative relations, legislative powers of Parliament and State Legislatures are clearly demarcated. Power to tax is an incidence of sovereignty'and there is a clear demarcation of taxing field, which has been earmarked to the Parliament as weUas to the State Legislatures. F Taxing power of both Union and State Legislatures are mutually exclusive and has been clearly demarcated. This is further clear by the fact that in List III, i.e. Concurrent List, no taxing entry is included except the entry of stamp duty & levying offee in respect -0fany of the matters in List III but not including fees taken in any Court.

72Copy pinpoint72. Constitution Bench of this Court .in Godfrey Phillips India G Ltd. & Anr. Vs. State of U.P. & Ors., (2005) 2 SCC 515, had elab-Orately considered the entries in Seventh Schedule of the Constitution of India. Following was laid down in Paragraphs 44 and 45:-

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A "44. The Indian Constitution is unique in that it contains an exhaustive enumeration and division of legislative powers of taxation be(ween the Centre and the States. This mutual exclusivity is reflected in Article 246(1) and has been noted in H.M Seervai s Constitutional Law of India, 4th Edn.. Vol. 1 at p. 166 in para 1A.25 where, after commenting on the B problems created by the overlapping powers of taxation provided for in other countries with federal structures such as the United States, Canada and Australia, the learned author opined: "The lists contained in Schedule VII to the Government of c India Aot, 1935, provided for distinct and separate fields of taxation, and it is not without significance that the concurrent legislative list contains no entry relating to taxation but provides only for 'fees' in respect of matters contained in the list but not including fees taken in any D court. List I and List II of Schedule VII thus avoid overlapping powers of taxation and proceed on the basis of a/locating adequate sources of taxation for the federation and the provinces. with the result that few problems of conflicting or competing taxing powers have arisen under the Government of India Act, 1935. This E scheme of the legislative lists as regards taxation has been taken over by the Constitution of India with like beneficial results,"

45. This view has also been reiterated in Hoechst Pharmaceuticals Ltd. v. State of Bihar, (1983) 4 SCC 45: (SCC F pp. 92-93, paras 75 & 76) "A scrutiny of Lists I and II of the Seventh Schedule would show that there is no overlapping anywhere in the taxing power and the Constitution gives independent sources of taxation to the Union and the States. Following the scheme G of the Government of India Act, 1935, the Constitution has made the taxing power of the Union and of the States mutually exclusive and thus avoided the difficulties which have arisen in some other Federal Constitutions from overlapping powers of taxation. H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 711

[ASHOK BHUSHAN, J.]

.:. Thus, in our Constitution, a conflict of the taxing power of A the Union and of the States cannot arise." (See also State of WB. v. Kesoram Industries Ltd., (2004) JO sec 201.r

73Copy pinpoint73. This Court further held that in construction of a taxing entry, an interpretation which may lead to overlapping must be eschewed. If B the taxing power is within a particular legislative field, it would follow that other fields in the legislative lists must be construed to exclude this field. In Para 46,following was held : "46. Therefore, taxing entries must be constmed with clarity and precision so as to maintain such exclusivity, and a C construction of a taxation entry which ,;,ay lead to overlapping must be eschewed. If the taxing poV.>er is within a particular legislative field, it would follow that other fields in the legislative lists must be constmed to exclude this field so that there is no possibility of legislative trespass. " D

74Copy pinpoint74. Entries in VII'" Schedule are not powers but fields oflegislation. It is also well settled that in deciding whether any particular enactment is within the purview of one Legislature or the other, it is pith and substance of the legislation that has to be looked into. Whenever a State legislation is challenged as being under the competence of the State Legislature, E the test, which has been laid down by this Court is that one must find out by applying the rule of pith and substance that whether the legislation falls within any of the List II, if it does, no further question arises. Attack on the ground oflegislative competence must fail. This Court in State of A.P. & Ors. Vs. Mcdowell & Co. & Ors., (1996) 3 SCC 709 laid down following in Paragraph 36:- F "36. Jn view of our finding that the impugned enactment is perfectly within the legislative competence of the State Legislalllre and is fully covered by Entry 8 read with Entry 6 of List JI, it is not necessary for us to deal with the arguments based upon clause (3) of Article 246 of the Constitution except G to say the following: once the impugned enactment is within the four corners of Entry 8 read with Entry 6, no Central law whether made with reference to an ·entry in List I or with reference to an entry in List Ill can affect the validity of such State enactment. The argument of occupied field is totally out H

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A ofplace in such a context. If a particular matter is within the exclusive competence of the State Legislature, i.e.. in List II that represents the prohibited field for the Union. Similarly, if any matter is within the exclusive competence of the Union, it becomes a prohibited field for the States. The concept of occupied field is really relevant in the case of laws made with B reference to entries in List Ill. In other words, whenever a piece of legislation is said to be beyond the legislative competence of a State Legislature, what one must do is to find out, by applying the rule of pith and substance, whether that legislation falls within any of the entries in List JI. If it does, c no further question arises; the attack upon the ground of legislative competence shall fail .... "

75Copy pinpoint75. The distribution of power between Union and States is done in a mutually exclusive manner as is reflected by precise and clear field oflegislation as allocated under different list under the Seventh Schedule. D No assumption of any overlapping between a subject allocated to Union and State arises. When the field of legislation falls in one or other in Union or State Lists, the legislation falling under the State entry has always been upheld. The Scheme of distribution of legislative power between Union and States in the Constitution of India relies on the distribution of legislative power between the Federal Government and E Provincial Government as contained in Seventh Schedule of the Government of India Act, 1935. The Government of India Act, 1935 has been referred to as ConstitutionAct by the Privy Council. In this context, reference is made to a judgment of Federal Court reported in AIR 1942 FC 33, The Province of Madras Vs. Messrs. Boddu Paidanna and F Sons.(1942 FCR 90), the Madras Legislature has enacted Madras Genera! Sales Tax Act, 1939. The respondent was carrying on business which consists of purchase of ground nuts for the purpose of extracting oil from the kernels of the nuts and the making of groundnut cake out of the residue was assessed to tax under the 1939 Act. The levy of tax was challenged by the respondent before the District Munsif and the G High Court of Madras on the ground that first sale of goods manufactured in the Province was a duty of excise, which is not within the competence of Provincial Legislature. The High Court accepted the challenge and held that State Legislature was not competent to tax. In the Government oflndiaAct, 1935, the Federal Legislature, under List I Entry 45, has an H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 713

[ASHOK BHUSHAN, J.]

exclusive power to impose duties of excise whereas the Provincial A Legislature, under List II Entry 48, has an exclusive power to impose taxes on the sale of goods. CHIEF JUSTICE GWYER reversing the judgment of the High Court held that duties are levied upon· the manufacturer or producer in respect of manufacturer or production of the commodity taxed whereas tax on the sale of goods is levied as qua B seller and not qua manufacturer. Federal Court held that there is no overlapping in law. Following observations were made:- "The duties of excise which the Constitution Act assigns exclusively to the Central Legislature are, according to the Central Provinces Case, duties levied upon the manufactory or producer in respect of the manufacture or production of c the commodiiy taxed. The tax on the sale of goods, which the Act assigns exclusively to the Provincial Legislatures, is a tax levied on the occasion of the sale of the goods. Plainly a tax levied on the first sale must in the nature of things be a tax on the sale by the manufacturer or producer ; but it is levied D upon him qua seller and not qua manufacturer or producer. It may well be that a manufacturer or producer is sometimes doubly hit ; but so is the taxpayer in Canada who has to pay income-tax levied by the Province for provincial purposes, and a/so income-tax levied .by the Dominion for Dominion purposes: see Caron v. The King {1924} A.C. 999; Forbes v. E Att.-Gen. for Manitoba {1937] A.C. 260. /(the taxpayer who pays a sales tax is also a manufacturer or producer of commodities subiect to a central duty of excise. there may no doubt be an· overlapping in one sense ; but there is no overlapping in law. The two taxes which he is called on to pay are economically two separate and distinct imposts .... "

76Copy pinpoint76. Federal Court further laid down that manufacture and sale has no necessary connection and both are independent. It was further held that:- "•..• JI is the fact of manufacture which attracts the duty, even though it may be collected later; and we may draw attention to the Sugar Excise Act in which it is specially provided that the duty is payable not only in respect of sugar w.hich is issued from the factory but also in respect ofsugar which is consumed within the factory. In the case of a sales tax. the liability to H

714 SUPREME COURT REPORTS (2017] 13 S.C.R.

A tax arises on the occasion of a sale. and a sale has No. necessary connexion with manufacture or production. The manufacturer or producer cannot of course sell his commodity unless he has first manufactured or produced it : but he is liable. ifat all. to a sales tax because he sells and not because he manufactures or produces: and he would be free (ram B liability ifhe chose to give away everything which came (ram his factory. In our opinion the power of the Provincial Legislatures to levy a tax on the sale of goods extends to sales of every kind. whether first sales or not; and we regret that we are unable to c agree with the contrary opinion which has been expressed by the High Court.. .. "

77Copy pinpoint77. The above judgment of Federal Court was upheld by Privy Council in The Governor General in Co11ncil Vs. The Province of Madras, reported in 58 L.W. 228. LORD SIMONDS held that in event a controversy should arise whether one or other Legislature is not exceeding its own, and encroaching on the other's, constitutional legislative power, and in such a contrbversy it is a principle, that it is not the name of the tax but its real nature, its "pith and substance", which must determine into what category it falls. After referring to the provisions of Madras General Sales Tax Act, 1939, Lordship opined that its real nature, its pith and substance is that it imposes a tax on the sale of goods. The Privy Council further observed that the Indian Constitution (The Government of India Act, 1935) contains what purports to be an exhaustive enumeration and division of legislative powers between the Federal and the Provincial Legislatures. Upholding the Legislative power of the Provincial Legislature, the Privy Council laid down following:- "....An exhaustive discussion of this subject. from which their Lordships have obtained valuable assistance, is to be found in the judgment of the Federal Court in re the Central Provinces and Berar Sales of Motor Spirit and Lubricants G Taxation Act No. 14 of 1938 ('39) 26 A.I.R. 1939 F.C. 1. Consistently with this decision, their Lordships are of opinion that a duty of excise is primarily a duty levied upon a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax upon goods not upon sales or the proceeds of sale of goods. Here again their H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 715

[ASHOK BHUSHAN, J.]

78Copy pinpoint78. This Court in the case of Ram Krishna Ramnath Agarwal of Kamptee Vs. Secretary, Municipal Committee, Kamptee, AIR D 1950 SC 11 had occasion to consider the levy of octroi on the entry of excisable goods. The appellant, on 30.11.1945 brought to Kamptee, from outside tobacco to make bi dis. Municipality directed for recovery of the octroi duty under Section 66( 1)( e) of the Central Province Municipalities Act, 1922. The appellant challenged the leviability of octroi on the ground that tobacco is excisable goods under Central Excises and E Salt Act, 1944. It is only Central Government, who is entitled to recover the excise duty and the octroi is not payable. The High Court had rejected the contention and the appeal was dismissed by this Court holding that levy of excise duty is not in conflict with the levy of an impost on the entry of the goods. In Para 10 of the judgment following has been held:- F "JO. This discussion clearly shows that the relevant question is what is the nature of the tax. Excise duty is a tax on manufactured goods. Octroi duty is a tax levied on the entry of goods within a particular area. Under the Excise Act, tobacco becomes excisable goods within the meaning of Item G 9 in the Schedule. The subsequent use of such manufactured goods in making different articles only affects the rate of tax. Therefore, tobacco becomes subject to excise duty when it reaches the stage of manufacture mentioned in Item 9 of the Schedule to the Excise Act. Even before it is converted into H

716 SUPREME COURT REPORTS [2017] 13 S.C.R.

A bidis or any other article mentioned in the entry it has become excisable goods and liable to pay excise duty. The levy of such duty is therefore not in conflict with the levy of an impost on the entry of the goods within a certain area. "

79Copy pinpoint79. Another judgment which needs to be noticed is Jiyajeerao B Cotton Mills Ltd., Bir/anagar, Gwalior Vs. State ofMadhya Pradesh, AIR 1963 SC 414. The appellant was a textile mill generating electricity for the purpose of running its mills. State of Madhya Pradesh imposed electricity duty under Central Provinces and Berar Electricity Duty Act,

1949. The imposition of duty was challenged on the ground that Provincial Legislature has no competence to impose electricity duty since on c manufacture of electricity, it is Central Legislature under Entry 84 List I has competence. This Court repelling the contention laid down following in Paragraph 6 :- "6. It is difficult to see how the levy of duty upon consumption of electrical energy can be regarded as duty of excise falling within Entry 84 of List I. Under that Entry what is permitted to Parliament is levy of duty of excise on manufacture or production of goods (other than those excepted expressly by that entry). The taxable event with respect to a duty of excise is "manufacture" or "production". Here the taxable event is not production generation of electrical energy but its conrmmption. If a producer generates electrical energy and stones it up, he would not be required to pay any duty under the Act. It is only when he sells it or consumes it that he would be rendered liable to pay the duty prescribed by the Act. The Central Provinces and Berar Electricity Act was enacted under Entry 48-B of List II of the Government of India Act,

1935. The relevant portion of that Entry read thus: ''Taxes on the consumption or sale of electricity" Entry 53 of List II of the Constitution is to the same effect............ The language used in the legislative -entries in the Constitution must be interpreted in a broad way so as to give the widest amplitude ofpower to the legislature to legislate and not in a narrow and pedantic sense. We cannot, therefore, accept either of the two grounds urged by Mr Viswanatha Sastri challenging the vires of the Act. " H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 717

[ASHOK BHUSHAN, J.]

80Copy pinpoint80. This Court in the above case further held that language used A in the legislative entries in the Constitution must be interpreted in a broad way so as to give the widest amplitude of power to the legislature to legislate and not in a narrow and pedantic sense. Constitution bench judgment in D. G Gose and Co. (Agents) Pvt. Ltd. Vs. State of Kera/a &Anr., (1980) 2 SCC 410 also need to be noticed. TheKeralaBuilding B Tax Act, 1975 imposing tax on building under List II Entry 49 "tax on land and buildings" whereas List I Entry 86 "Taxes on the capital value of assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies."

81Copy pinpoint81. Referring to the aforesaid two taxes under List I and List II, this Court laid down that two taxes are separate and distinct imposts and they cannot be said to be over-lap each other and shall be within the competence of the Legislatures concerned In Para 9 of the judgment, following has been held:- "9. It has to be appreciated that in almost all cases, a tax has two elements which have been precisely stated by Seervai in his "Constitutional Law of India", 2nd Edn., Vol. 2, as follows, at p. 1258: "Another principle for reconciling apparently conflicting tax entries follows from the fact that a tax has two elements: the person, thing or activity on which the tax is imposed, and the amount of the tax. The amount may be measured in many ways; but decided cases establish a clear distinction between the subject-matter of a tax and the standard by which the amount of tax is measured. These two elements are described as the subject of a tax and the measure of a F tax. "

It may well be that ones building may imperceptibly be the subject-matter of tax, say the wealth I.ax. as a component of his assets, under Entry 86 (List I); and it may also be subjected to tax, _say a direct tax under.Entry 46 (sic 49)(List JI), but as G the two taxes are s_eparate'iind distinct imposts, they cannot be said to overlap each other, and would be within the competence of the legislatures concerned. "

82Copy pinpoint82. Nine Judges Constitution Bench in Jindal Stainless Ltd. & Ors. Vs. State of Haryana & Ors., (2016) 11SCALE1 has also held H

718 SUPREME COURT REPORTS (2017] 13 S.C.R.

A that taxing power of the Union and the States are mutually exclusive. Approving the findings expressed by H.M. Seervai in its treatise Constitutional Law of India, following was observed:- '" ...... The celebrated author, in our opinion, was right in saying so jbr the taxing power of the Union and the States are B mutually exclusive. While the Parliament cannot legislate on the subjects reserved for the States, the States cannot similarly trespass onto the taxing powers of the Union. If the Constitutional scheme does not allow the Parliament to usurp the taxing powers of the State Legislatures, such process of usurpation cannot also be permitted to take place in the garb c of making Union executive's concurrence an essential pre- reqiiisite for any taxing legislation. The following passage from Seervai s book (Vol. 3, Page 2607) is in this regard instructive: 23.43. Thirdly, the whole scheme of taxation in our D Constitution would be completely dislocated if Article 304(b) included a tax. The taxing powers of the Union and the States have been made mutually exclusive so that Parliament cannot deprive the States of their taxing powers as has happened in countries where the powers of taxation are concurrent. It E would be surprising if the Union legislature, i.e. Parliament could not take away the taxing powers of the State legislatures and yet it would be open to the Union executive Under Article 304(b) to deprive the State legislatures of their taxing powers."

83Copy pinpoint83. As noted above, although, Nine Judges Constitution Bench F had left the question open of validity of entry tax on goods imported from countries outside the territories of India, the two Hon 'ble Judges, i.e. Justice R. Banumathi and Justice Dr. D. Y. Chandrachud while delivering separate judgment have considered the leviability of entry tax on imported goods in detail. Both Hon 'ble Judges have held that there is no clash/overlap between entry levied by the State under Entry 52 List G II and the custom duty levied by the Union under Entry 83 List I. We have also arrived at the same conclusion in view of the foregoing discussions. We thus hold that entry tax fegislations do not intrude in the legislative field reserved for Parliament under Entry 41 and under Entry 83 of List I. The State Legislature is fully competent to impose tax on the entry of goods into a local area for consumption, sale and use. We H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 719

[ASHOK BHUSHAN, J.]

thus repel the submission of petitioner that entry tax legislation of the A State encroaches in the Parliament's field. Concept & Extent of Import

84Copy pinpoint84. Now, we come to Issue No.IV relating to import and its extent. Import and export are concepts which denote trade between different countries. The term "import" signifies etymologically "to bring in". To B import goods into the territory of India means to bring them into the territory of India from abroad.· Black's Law Dictionary, Tenth Edition, defines import as follows:- "J, A product brought into a country from a foreign country where it originated imports declined in the third quarter. c See parallel imports. 2. The process or activity of bringing foreign goods into a country the import of products affects the domestic economy in significant ways. Cf Export. n. 3. Meaning; esp .. implied meaning the court must decide the import of that obscure provision. 4. Importance; significance time will tell the relative import of Judge Kozinski s decisions in American law. "

85Copy pinpoint85. In Advanced Law Lexicon, by P. Ramanatha Aiyar, 3"' Edition, import has been defined in following words:- "The term "import" means to bring into a country merchandise from abroad, and is the direct converse of the term "export" which means to carry from a state or country, as wares in commerce. " .

86Copy pinpoint86. The Customs Act, 1962 defines the terms "import", "imported goods" and "importer" in Sections 2(23), 2(25) and 2(26) respectively, which are as follows;- "2(23) "import" with its grammatical variations and cognate expressions, means bringing into India from a place outside India;" 2(25) "Imported goods" means any goods brought into India G from a place outside India but does not include goods which have been cleared for home consumption; 2(26) "importer", in relation to any goods at any time between their importation and the time when they are cleared for home H

720 SUPREME COURT REPORTS [2017] 13 S.C.R.

A consumption, includes [any owner, beneficial owner] or any person holding himself out to be the importer;"

87Copy pinpoint87. This Court had occasion to consider the concept of import and export ii:t c_ontext of Article 286 of the Constitution of India in State of Travancore-Cochin & Ors. Vs. Shanmugha Vilas Cashewnut B Factory, Qui/on, AIR 1953 SC 333. Travancore-Cochin General Sales Tax Act, Section.3 provided for levy of a tax on the total turnover of every dealer for each year. Facts of the case have been noted in Para 3 of the judgment, which are as follows:- "3. The respondents are dealers in cashewnuts in the State, c and their business consists in importing raw cashewnuts from abroad and the neighbouring districts in the State of Madras in addition to purchases made in the local market, and, after converting them by means of certain processes into edible kernels, exporting the kernels to other countries, mainly America. The oil pressed from the shells removed from the cashewnuts was also exported. The Constitution having come into force on January 26, 1950, the respondent in each appeal claimed exemption under Article 286(/)(b) in respect of the purchases made from that date till May 29, 1950, the end of the account year. The Sales Tax authorities having ·rejected the clqim, the resppndents applied to the High Court under Article 226, and that court uphf!/d the claim and quashed the assessments in so far as they related to the said period The State has preferred the appeals. "

88Copy pinpoint88. This Court while considering the exemption under Article F 286(l)(b) has laid down the following in Para 10:- "As regards the first mentioned category, we are of opinion that the transactions are not within the protection of clause (J){b). What is exempted under the clause is the sale or purchase of goods taking place in the course of the import of the goods into or export of the goods out of the territory of G India. Jt is obvious that the words "import into" and "export out pf' in this context do not mean the article or commodity imported or exported. The reference to "the goods" and to "the territory of India" make it clear that the wort;ls "export out of" and "import into" mea'! ·the exportation out of the H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 721

[ASHOK BHUSHAN, J.]

country and importation into the country respectively. The A word "course" etymologically denotes movement from one point to another, and the expression "in the course of" not only implies a period of time during which the movement is in progress but postulates also a connected relation .... "

89Copy pinpoint89. The purchase for the purpose of import and similarly, the sale B after import were held to be distinct legal transactions, it was held:- " JO. The phrase "integrated activities" was used in the previous decision to denote that "such a sale" (i.e. a sale which occasions the export) "cannot be dissociated from the export without which it cannot be effectuated, and the sale c and the resultant export form parts· of a single transaction". It is in that sense that 'the two activities - the sale and the export - were said to be integrated. A purchase for the purpose of export like production or manufacture for export, is only an act preparatory to export and cannot, in our opinion, be regarded as an aci done "in the course of the export of the goods out of the territory of India", any more than the other two activities can be so regarded. As pointed out by a recent writer: "From the legal point of view it is essential to distinguish the contract of sale which has as its object the exportation of goods from this country from other contracts of sale relating to the same goods, but not being the. direct and immediate cause for the shipment of the goods.... When a merchant shipper in the United Kingdom buys for the purpose ofexport goods from a manu.facturer in 'the same country the contract of sale is a home trdnsaction; but when he resells these goods to a buyer abroad that contract of sale has to be classified as an export transaction. " This passage shows that, in view of the distinct character · and quality ofthe two transactions, it is not correct to speak of a purchase for export, as an activity so integrated with the exportation that the former could be regarded as done "in the course of'' the latter. The same reasoning applies to the first sale after import which is a distinct local transaction effected after the i'r'portation of the goods into the country H

722 SUPREME COURT REPORTS [2017] 13 S.C.R.

A has been completed. and having no integral relation with it. Any attempt therefore to invoke the authority of the previous decision in support a/the suggested extension of the protection of clause (J)(b) to the last purchase for the purpose of export and the first sale cifter import on the gro11nd of integrated activities m11st fail." B

90Copy pinpoint90. The writ petitioners have also placed reliance on the contents of Article 286 of the Constitution especially Article 286(1 )(b) read with Article 286(2). Article 286(1) and (b) are as follows: "Article 286. Restrictions as to imposition of tax on the sale C or purchase of goods:- (/)No law of a State shall impose. or authorise the imposition of, a tax on the s11pp/y of goods or of services or both, where such supply takes place- (a) ... ..... . D (b) in the course of' the import of the goods or services or both into. or export of the goods or services or both out of, the territory of India. "

91Copy pinpoint91. It is supported that though Article 286 deals with the restriction on the State kgislative power qua imposition of tax on the sale or purchase of goods nevertheless the formulation of the principle by the Parliament with regard to "in the course of the import or export" clearly shows that the legislative domain in this regard is with Parliament and not with States. In point of fact, any legislation relating to the "course of import or export" has to relate to Entry 41 read with Entry 83 of List I and it cannot relate to any other Entry and definitely not to any Entry in State List. Reliance was also placed on Section 5(3) of the Central Sales Tax Act, 1956. On the strength of Section 5, it is sought to be contended that on parity of logic the first sale after the import be treated as in the course of import.

92Copy pinpoint92. Article 286 of the Constitution provides for restrictions as to the imposition of the tax on the sale or purchase of goods. The subject- matter of laws made by Parliament and legislatures of the States as per Article 246 read with Seventh Schedule and Article 245 are subject to the provisions of the Constitution. Legislative power as contained in List II is thus subject to express restrictions as imposed by Article 286. Article 286 sub-clause (I) uses the expression "in the course of the import of H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 723

[ASHOK BHUSHAN, l]

the goods". The concept "in the course of import of goods" as used in A Article 286( 1) can very well be implied while considering the concept of the import of goods. In so far as Section 5 sub-section (3) of Central Sales Tax Act, 1956, the said provision provides that last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory oflndia shall also be deemed to be in the B course of such export. Section 5(3) is with regard to the export of the goods out of the territory of India and has not been used with regard to the concept of import. Section 5(1), (2), (3) are relevant which are to the following effect: "Section 5. When is a sale or purchase ofgoods said to take place in the course of import or export.- (I) A sale or purchase c of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the good' qfier the goods have crossed the customs frontiers of India. D (2) A sale or purchase of good shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is ~fleeted by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. E (3) Not withstanding anything contained in sub-section (I), the last sale or purchase of any good' preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, F and was for the purpose of complying with, the agreement or order for or in relation to such export. "

93Copy pinpoint93. The submissions of the writ petitioners on the strength of Section 5(3) that even first sale after the import should be treated during the course of the import is not supported by the concept as contained in G Section 5 of the 1956Act and the reliance on the said provision is wholly misplaced.

94Copy pinpoint94. As noted above, the restriction in the legislative power of the State as contained in Article 286 is with regard to taxing on sale or purchase of goods which takes place outside the State or in the course H

724 SUPREME COURT REPORTS [2017] 13 S.C.R.

A of import of the goods or services or export of goods or services. The restriction of Article 286 does not ipso facto can be placed while considering the legislative field of the State under Entry 52 and by virtue ofArticle 286 no restriction can be put on the legislative competence of the State in the field as defined under Entry 52. However, the concept underlined in "the course ofimport of the goods" as in Article 286( I)(b) B can very well be1applied to find out as to when the import of goods come to an end. We thus proceed to examine certain cases/judgments of this Court which were delivered in the context of Article 286.

95Copy pinpoint95. The tenn import again came for consideration before this Court in J. V. Gokal& Co. (Private) Ltd. Vs. Assistant Collector of Sales c Tax (Inspection) & Ors., AIR 1960 SC 595. This Court explained the word import and the phrase "in the course of the import of the goods into the territory of India". In paragraphs 9and11, following has been held:- "9. What does the phrase "in the course of the import of the goods into the territory of India" convey? The crucial words of the phrase are "import" and "in the course of". The term "import" signifies etymologically "to bring in". To import goods into the territory of India therefore means to bring into the 'territory of India goods from abroad. The words "course" means "progress from point to point". The course of import. therefore, starts from one point and ends at another. It starts when the goods cross the customs barrier in foreign country and ends when they cross the customs barrier in the importing country. These words were subject ofjudicial scrutiny by this Court in State of Travancore-Cochin v. Shanmugha Vilas Cashew Nut Factory}. Construing these words, Patanjali F Sastri, C.J.. observed at p. 62: "The word 'course' etymologically denotes movement from one point to another. and the expression 'in the course of' not only implies a period oftime during which the movement is in progress but postulates also a connected relation. " G As regards the limits of the course. the learned Chief Justice observed at p. 68: "it would seem. therefore, logical to hold that the course of the export out of. or of the import into the territory of India does not commence or terminate until the goods cross the customs barrier. " H

STATE OF KERALA v. FR WILLIAM FERNANDEZ 725

[ASHOK BHUSHAN, J.]

Das, J., as he then was, in his dissenting judgment practically A agreed with Patanjali Sastri, C.J., on the interpretation of the said words. The learned Judge expressed his view at p. 92 thus: "The word 'course' conveys to my mind the idea of a gradual and continuous flow, an advance, a journey, a B passage or progress from one place to another. Etymologically it means and implies motion, a forward movement. The phrase 'in the course of' clearly has reference to a period of time during which the movement is in progress. Therefore, the words "in the course of the import of the goods into and the export of the goods out of the territory of India 'obviously cover the period of time during which the goods are on their import or export journey'." We respectfully agree with the aforesaid observations of the learned Judges. The course of the import of the goods may be said to begin when the goods enter their import journey i.e. when they cross the customs barrier of the foreign country and end when they cross the customs barrier of the importing country." "II. The legal position vis-a-vis the import-~_ale can be summarised thus: (1) The course of import of goods starts at a point when the goods cross the customs barrier of the foreign country and ends at a point in the importing country after the goods cross the customs barrier; (2) the sale which occasions the import is a sale in the course of import; (3) a purchase by an importer of goods when they are on the high seas by payment against shipping documents is also a purchase in the course of import, and (4) a sale by an importer of goods, after the property in the goods passed to him either after the receipt of the documents of title against payment or otherwise, to a third party by a similar process is also a sale in the course of import. "

96Copy pinpoint96. Learned counsel for the petitioners has placed much reliance on Nine Judges Constitution Bench in re Sea Customs Act Case, AIR

726 SUPREME COURT REPORTS [2017] 13 S.C.R.

A 1963 SC 1760. This Cuurt in the aforesaid case had answered a reference made tmder Article 143( I). Three questions to be answered were as follows:- "(!)Du the provisions of Article 289 of the Constitution preclude the Union from imposing. or authorising the imposition of, custums duties on the import or export of the property of a Stale used.for purposes other than those specified in c/a11se (2) of that article? (2) Do the prol'isions of Article 289 of the Constitution of India preclude the Union Ji-om imposing, or authorising the imposition of, excise duties on the production or manufacture in India of the property of a State used for purposes other than those specified in clause (2) of that article? (3) Will sub-section (2) of Section 20 of the Sea Customs Act, I878 (Act 8 of 1878), and sub-section (I-A) of Section 3 of the Central Excises and Salt Act, 1944 (Act I of I944) as amended by the Bill set out in the annexure be inconsistent with the provisions of Article 289 of the Constitution of India?"

97Copy pinpoint97. In the above context, this Court had examined the distribution oflegislative power between the Union and the States. This Court held that there is no overlapping in the matter of taxation between the two Lists, i.e., List I and List II. This Court held that all customs duties including export duties are within the powers of Parliament with which States are not concerned. In Para 9 of the judgment, following observations are made:- F "..... All customs duties, including export duties, relating as they do to transactions of import into or export out of the country are within the powers of Parliament. The States are not concerned with those. They are. only concerned with taxes on the entry of goods in local areas for consumption, use or G sale therein, covered by entry 52 in the State List. Except for duties of excise on alcoholic liquors and opium and other narcotic drugs. all duties of exercise are leviable by Parliament. Hence, it can be said that by and large, taxes on income, duties of customs and duties of excise are within the exclusive power of legislation by Parliament. " H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 717

[ASHOK BHUSHAN, J.]

98Copy pinpoint98. It is relevant to notice that this Court clearly noticed the power of States to levy entry tax on entry of goods in local area for consumption, sale or use. The above observations. made by the Constitution Bench clearly support the submission ofleamed counsel for the State that power of State under Entry 52 was recognised while considering the Union's power to levy the customs duty. This Court filrther laid down that in the case of levy of customs duty, the taxable event is the import of goods within the customs barriers. In paragraph 26 of the judgment, following was stated:- "(26) Similarly in the case of duties of customs including export duties though they are levied with reference to goods, the taxable event is either the import of goods within the c customs barriers or their export outside the customs ~arriers. They art: also indirect taxes like excise and cannot in our opinion be equated with direct taxes on goods themselves. Now, what is the true nature of an import or export duty? Truly speaking, the imposition of an import duty, by and large, D' results in a condition which must be fulfilled before the goods can be brought inside the customs barriers i.e. before they form part of the mass of goods within the country. Such a condition is imposed by way of the exercise of the power ~f the Union to regulate the manner and terms on which goods may be brought into the country from a foreign land. ... " E

99Copy pinpoint99. Learned counsel for the writ petitioners has laid much emphasis on the observations made by nine-Judge Constitution Bench in paragraph 26 as quoted above. The above observations were made by the nine- Judge Constitution Bench while considering the nature of import and export. It was held that the imposition of import duty results in a condition which must be fulfilled before the goods can be brought inside the customs barriers i.e. before they form part of mass of goods within the country. When the goods land in the custom area of the Indian territory and released for the home consumption, it forms part of the mass of goods within the country and the importation is complete. We, thus, do not find any inconsistency in the constitutional concept of import as envisaged in Article 286( 1)(b) and the concept of import as is contained in Customs Act, 1962.

100Copy pinpoint100. This Court had also occasion to consider the issue as to when import would be completed in the case of Kiran Spinning Milfs H

728 SUPREME COURT REPORTS [2017] 13 S.C.R.

A Vs. Collector of Customs, (2000) 10 SCC 228, following was held in paragraph 6:- ".... The import would be completed only when the goods are to cross the customs barriers and that is the time when the import duty has to be paid and that is what has been termed B by this Court in Sea Customs case (SCR at p. 823) as being the taxable event. The taxable event, therefore, being the day of crossing of customs barrier, and not on the date when the goods had landed in India or had entered the territorial waters, we find that on the date of the taxable event the additional duty ofexcise was leviable under the said Ordinance · c and, therefore, additional duty under Section 3 of the Tariff Act was rightly demanded from the appellants. "

101Copy pinpoint101. Similar view was expressed in the case of Garden Silk Mills Ltd. & Anr. Vs. Union of India & Ors., (1999) 8 SCC 744, in paragraph 18, which is to the following effect:- D "18. It would appear to us that the import of goods into India would commence when the same cross into the territorial waters but continues and is completed when the goods become part of the mass of goods within the country; the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed. "

102Copy pinpoint102. The law relating to customs has been consolidated by the Customs Act, 1962. The definitions of"import", "imported goods" and "importer" have already been noticed above. The definition of imported goods as given in Section 2(25) is - any goods brought into India from the place outside India but does not include goods, which have been cleared for home consumption. The provision clearly contemplates that once the goods are released for home consumption, the character of imported goods is lost and thereafter no longer the goods could be called as imported goods. The import transit is only till the goods are released for home consumption. The taxing event for entry tax under Entry 52 List II is entirely different and has nothing to do with the customs duty. The State by imposing entry tax in any manner is not entrenching in the power of the Parliament to impose customs duty. The goods are released for home consumption only after payment of the customs duty due to the Central Government. The goods which are imported cannot be held H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 729

[ASHOK BHUSHAN, J:]

to be insulated so as to not subject to any State tax, any such insulation A of the imported goods shall be a protectionist measure which will be ·discriminatory and invalid. When all normal goods are subjected to State tax no exemption can be claimed by goods, which have been imported from payment of entry tax. To take a common example, all goods, which pass through a toll bridge are liable to pay toll tax, can it be said that the F imported goods which after having been released from customs barriers and are pa5sing through a toll bridge, are not liable to pay the toll tax, the answer has to be in No. Thus, the event for levy of customs duty, which is in the domain of the Parliament, is entirely different from that of event of entry tax. The liability to pay State entry tax arises only when goods enter into a local area for consumption, use and sale, which event is c entirely different and separate from the levy of a customs duty, which is on import,

103Copy pinpoint103. Learned counsel for the petitioner has contended that the definition given in the provisions of the Customs Act, 1962 cannot control · the scope and ambit of the Constitutional entries. It is submitted that D Constitutional entries have to be read giving widest possible amplitude and have to be given wide meaning and their scope and ambit cannot be controlled by a Parliamentary Legislation or by the definitions given in a Parliamentary Legislation. In the case of ITC Ltd. Vs. Agricultural Produce Market Committee & Ors.(2002) 9 SCC 232, the Constitutional Bench in paragraph 32 laid down as under:- E

"32. In State of A.P. v. McDowell & Co. also it was held that the ambit and scope of a constitutional entry cannot be determined with reference to a parliamentary enactment. If it is otherwise, it would result in Parliament enacting and/or amending an enactment thereby controlling the ambit and scope of the constitutional provision. That cannot be the law. The power to legislate with which we are concerned is contained in Article 246. The fields are demarcated in the various entries. On reading both, it has to be decided whether the legislature concerned is competent to legislate when its validity is questioned. The ambit and scope of an entry cannot be determined with reference to a parliamentary enactment. "

104Copy pinpoint104. There cannot be any dispute to the proposition as laid down by this Court in the above case that the scope and ambit of the Constitutional entries have to be given a wide meaning and scope. There H

730 SUPREME COURT REPORTS [2017] 13 S.C.R.

A is no inhibition on the Parliament in exercising its legislative power under Entry 41 List I to define customs frontiers and further legislate with regard to duties of customs. Even if we do not confine to the definition of imported goods as given in the Customs Act, 1'!62, the generally accepted meaning and definition of import as has been laid down in cases as note<l above is that import commences when the goods lea','_e B the customs frpntiers of the country from where the goods are imported and continue ''1Jen the goods enters into the wstoms frontiers of imported country and ends when goods are released for home consumption. Till the event of import is over, Parliamentary Legislation. the control of Union continues for ensuring the realisation of the customs duties. · c 105. In view of the foregoing discussions, we are of the clear opinion that taxing event with regard to levy of customs duty by Parliament and levy of entry tax by States under Entry 52 List II are entirely different and separate. The taxing event pertaining to levy of entry tax occurs only after the taxing event of levy of customs duty is over. Thus, the State Legislation imposing entry tax in no manner encroaches upon the Parliamentary Legislation under Entry 4 I and Entry

83. There is no invalidity in levy of entry tax by the States. Origimd/Unbroken Package Theory

106Copy pinpoint106. The Original Package/Unbroken Package is a theory which was evolved by U.S. Supreme Court in reference to the imported goods. The genesis of the theory is from the Chief Justice Marshall, in the case of Brown Vs. The State of Maryland, 6 L.Ed. 678. State of Maryland has enacted a law that all importers of foreign articles or commodities shall, before they are authorized to sell, take out a license for which they shall pay fifty dollars. The above provision of the State of Maryland was challenged by Brown on the ground that the provision is repugnant to following two provisions in the Constitution of the United States:- " I. To that which declares that 'no State shall, without the consent of Congress, lay any imposts, or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws. '

2. To that which declares that Congress shall have power 'to regulate commerce with foreign nations, and among the several. States, and with the Indian tribes. '" H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 731

[ASHOK BHUSHAN, J.]

107Copy pinpoint107. Chief Justice Marshall in above context has laid down following:- " .... .It is sufficient for the present to say. generally. that when the importer has so acted upon the thing imported, that it has become incorporated and mixed up with the mass of property in the country, it has. perhaps. lost its distinctive character as an import. and has become subject to the taxing power of the State; but while remaining the property of the importer, in his warehouse. in the original form or package in which it was imported, a tax upon it is too plainly a duty on imports to eoc·ape the prohibition in the constitution.

108Copy pinpoint108. The Original Package theory is propounded from the aforesaid c judgment. Another judgment of the U.S. Supreme Court, which relied on the case of Brown Vs. The State ofMaryland and further formulated the doctrine is C. Adolph Low V. Alexander Austin, 20 L.Ed. 517. The facts and issue which arose in the aforesaid case had been noted in the beginning of the judgment, which is to the following effect:- D "The plaintiffs have been for several years past. and still are. importing, shipping and commission merchants, in the city of San Francisco, in the state of California. Jn 1868. they received. on consignment from parties in France, certain champagne wines of the value of $10,000, upon which they paid the duties and charges at the custom-house. They then stored the wine in their warehouse in San Francisco, in the original cases in which the wines were imported, where they remained for sale. While in this condition they were assessed as the property of the plaintiff. for state, city and country taxes, under the general revenue law of California, which subjects all property, real or personal, in the state, with certain exceptions to an ad valorem tax. The defendant was at the time the tax collector of the city and country of San Francisco, and as such officer levied upon the cases of wines thus stored, for the amount of the tax assessed and was about to sell them, when the plaintiffs paid the amount and the charges incurred, under protest, and then brought the present action in one of the district courts of the state, to recover back money paid. The district court gave judgment for the plaintiffs; the supreme court of the state reversed the judgment and the case is brought here on writ of error. H

732 SUPREME COURT REPORTS (2017] 13 S.C.R.

A The simple question presented in this case for our consideration is whether imported merchandise, upon which the duties and charges at the custom-house have been paid, is subject to state taxation, whilst remaining in the original cases, unbroken and unsold, in the hands of the importer" B I09. Ju~tice Field relied on the statement made by Chief Justice Marshall in the case of Brown Vs. The State of Maryland as quoted above. Relying on the said judgment, Justice Field laid down following:- " .... But the obvious answer to this position is found in the fact, which is in substance, expressed· in the citations made c from the opinions of Marshal and Taney, that the goods imported do not lose their character as imports, and become incorporated into the mass of property of the Stale, until they have passed from the control of the importer or been broken up by him from their original cases. Whilst retaining their character as imports, a tax upon them in any shape, is within the constitutional prohibition...... "

110Copy pinpoint110. The law laid down in the above two cases is relied upon by the counsel for the petitioner to contend that original import package continues till the goods reaches to the premises/factory of the petitioner and during such continuance ofimport under original package, State has no jurisdiction or authority to levy any tax including the impugned entry tax.

111Copy pinpoint111. We now proceed to first examine the subsequent judgments ofthe United States Supreme Court, which deal with the above mentioned two decisions of the United States Supreme Court. Michelin Tire F Corporation Vs. W.L. Wages, Tax Commissioner, 46 L.Ed. 2d 495 is the case which is relied upon by the counsel for the State. In the above case, respondent has imported tires and tubes from France and Nova Scotia. Thus, articles were included in an inventory maintained in a wholesale distribution warehouse in the county. The Tax Commissioner G and Tax Assessors of Gwinnett County assessed ad valorem property taxes against inventory of imported tires and tubes. The petitioner challenged it on the ground that State taxes were prohibited by Art. I, § 10, cl. 2, of the Constitution. The State Supreme Court held against the respondents that the tyres were subject to ad valorem property tax. The

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 733

[ASHOK BHUSHAN, J.]

appeal was taken to the U.S. Supreme Court questioning the decision of A the Georgia Supreme Court. Referring to the judgment of Low Vs. Austin as well as Brown Vs. The State of Maryland, the U.S. Supreme Court observed as under:- "Low v. Austin, supra, is the leading decision of this Court holding that the States are prohibited by the Import-Export B Clause from imposing a nondiscriminatory ad valorem property tax on imported goods until they lose their character as imports and become incorporated into the mass ofproperty in the State. The Court there reviewed a decision of the California Supreme Court that had sustained the constitutionality of California s nondiscriminatory ad valorem c tax on the ground that the Import-Export Clause only prohibited taxes upon the character of the goods as imports and therefore did not prohibit nondiscriminatory taxes upon the goods as property. See 13 Wall., at 30-31 20 L Ed 517. This Court reversed on its reading of the se"'.inal opinion D construing the Import-Export Clause, Brown v. Maryland, 12 Wheat. 419, 6 L.Ed. 678 (1827), as holding that "(w)hilst retaining their character as imports, a tax upon them, in any shape, is within the constitutional prohibition." I 3 Wall., at 34 20 L Ed 517. E Scholarly analysis has been uniformly critical ofLow v. Austin. It is true that Mr. Chief Justice Marshall, speaking for the Court in Brown v. Maryland, supra, at 442, 6 L Ed 678 said that "while (the thing imported remains) the property of the importer, in his warehouse, in the original form or package in which it was imported, a tax upon it is too plainly a duty on imports to escape the prohibition in the constitution." Commentators have· uniformly agreed that Low v. Austin misread this dictum in holding that the Court in Brown included nondiscriminatory ad valorem property taxes among prohibited "imposts" or "duties, "for the contrary conclusion is plainly to be inferred from consideration of the specific abuses which led the Framers to include the Import-Export Clause in the. Constitution. See, e. g., Powell, State Taxation of Imports When Does an Import Cease to Be i;m Impoft?, 58 Harv L Rev 858 (1945); lf_ote, The Supreme Court, 1958 Term, H

734 SUPREME COURT REPORTS [2017) 13 S.C.R.

A 73 Harv L Rev i26, i 76 (1959); Early & Weitzman, A Century of Dissent: The Immunity of Goods imported.for Resale From Nondiscriminatory State Personal Property Taxes, 7 Sw U l Rev 247 (1975); Dakin, The Protective Cloak of the Export- Import Clause: Immunity for the Goods or Immunity for the Process?, i9 la L Rev 747 (1959). B Our independent study persuades us that a nondiscriminatory ad valorem property tax is not the type of state exaction which the Framers of the Constitution or the Court in Brown had in mind as being an "impost" or "d11ty" and that Low v. A11stin s reliance upon the Brown dict11m to reach the contrary c conclusion was misplaced. "

112Copy pinpoint112. U.S. Supreme Court further held:- "Nothing in the history of the import-Export Clause even remotely suggests that a nondiscriminatory ad valorem property tax which is also imposed on imported goods that are no longer in import transit was the type of exaction that was regarded as objectionable by the Framers of the Constit11tion. For such an exaction, unlike discriminatory state taxation against imported goods as imports, was not regarded as an impediment that severely hampered commerce or constituted a form of tribute by seaboard States to the disadvantage of the inferior States. it is obvious that such nondiscriminatory property taxation can have no impact whatsoever on the Federal Governments exclusive regulation of foreign commerce, probably the most important purpose of the Clause's prohibition. By definition, such a tax does not fall on imports as such because of their place of origin. It cannot be used to create special protective tarijft or particular preferences for certain domestic goods, and it cannot be applied selectively to encourage or discourage any importation in a manner inconsistent with federal regulation. "

113Copy pinpoint113. It was fiirther held: ".... The Import-Export Clause clearly prohibits state taxation based on the foreign origin of the imported goods, but it H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 735

[ASHOK BHUSHAN, J.)

cannot be read lo accord imported goods preferential A treatment that permits escape from uniform taxes imposed without regard to foreign origin for services which the State supplies ..... "

114Copy pinpoint114. Referring to Brown Vs. The State ofMaryland, it was further held:- B "The Court stated that there were two situations in which the prohibition would not apply. One was the case of a stale lax levied after the imported goods had lost their status as imports. The Court devised an evidentimy tool, the "original package" test, for use in making that determination. The formula was: C "It is sufficient for the present to say, generally, that when the importer has so acted upon the thing imported, that ii has become incorporated and mixed up with the mass of property in the count1y, it has, perhaps, lost its distinctive character as an import, and has become subject to the taxing power of the State; but while remaining the property of the importer. in his warehouse, in the original form or package in which it was imported, a lax upon ii is too plainly a duty on imports to escape the prohibition in the constitution." Id., at 441-442 6 L Ed 678. "It is a matter of hornbook knowledge that the original package statement of Justice Marshall was an illustration, rather than a formula, and that its application is evidentimy, and not substantive .... Galveston v. Mexican Petroleum Corp., 15 F2d 208 (SD Tex 1926)."

115Copy pinpoint115. The U.S. Supreme Court concluded by holding:- " Thus, it is clear that the Courts view in Brown was that merely because certain actions taken by the importer on his imported goods would so mingle them with the common property within the State as to "lose their distinctive character as imports" and render them subject to the taxing power of the State, did not mean that in the absence of such action, no exaction could be imposed on the goods. Rathe1; the Court clearly implied that the pmhibition would not apply to a state tax that treated imported goods in their original packages no differently from the "common mass ofproperty in the count1y "; that is, treated it in a manner that did not depend on the foreign origins of the goods." H

736 SUPREME COURT REPORTS (2017] 13 S.C.R.

116Copy pinpoint116. Only one more judgment of U.S. Supreme Court needs to be noticed is Joanne Limbach Tax Commissioner of Ohio Vs. The Hooven & Allison Company, 80 L.Ed. 2d 356. This Court referring to C. Adolph Low Vs. Austin (supra), Brown Vs. The State of Maryland (supra) and Michelin Tire Corporation Vs. W.L. Wage,, Tax Commissioner (supra) made following observations:- B "In Low v. Austin, supra, this Court, in an opinion by Justin· Field, unanimously enunciated the "original-package" doctrine, although perhaps not for the first time, see Browr1 v. Maryland, I2 Wheat 4I9, 442, 6 L Ed 678 (I827). It he/cl that, under the Import-Export Clause, goods imported .from " c foreign country are not subject to state ad va/orem propert.1· taxation while remaining in their original packages, unbroken and unsold, in the hands of the importer. In Michelin Tire Corp. v. Wages, supra, an importe1 challenged the assessment of Georgia s nondiscriminatory aci valorem property tax upon an inventory of imported tires and tubes maintained at a wholesale distribution warehouse. Thi." Court rejected the challenge to the state tax on the imported tires.I It found that in the history of the Import-Export Clause, there was nothing to suggest that a tax of the kind imposea on goods that were no longer in import transit was the type of exaction that was regarded as objectionable by the Framers. The tax could not affect the Federal Governments exclusive regulation offoreign commerce since it did not fall on imports as such. Neither did the tax interfere with the free flow of imported goods among the States. The Clause, while not specifically excepting nondiscriminatory taxes that had some impact on imports, was not couched in terms of a broad prohibition of every tax, but prohibited States only from laying "Imposts or Duties," which historically connoted exactions directed only at imports or commercial activities as such. The G Court concluded that its reliance a century earlier in Low v. Austin "upon the Brown dictum ... was misplaced." 423 US, at 283, 46 L Ed 2d 495, 96 S Ct 535. Chief Justice Taneys opinion in the License Cases, 5 How 504, 12 L Ed 256 (1847), was carefully analyzed, with the Court concluding that that

STATE OF KERALA v. FR WILLIAM FERNANDEZ_ 737 [ASHOK BHUSHAN, J.]

117Copy pinpoint117. Justice Blackmun delivering the judgment in the above case clearly noticed the departure in the opinion of U.S. Supreme Court and abandonment of Original Package Doctrine, it is useful to quote following observations of the Court:- " To repeat: we think it clear that this Court in Michelin specifically abandoned the concept that the Import-,Export Clause constituted a broad prohibition against all forms of state taxation that fell on imports. Michelin changed the focus of Import-Export Clause cases from the nature of the goods as imports to the nature of the tax at issue. The new focus is not on whether the goods have lost their status as imports but is, instead, on Whether the tax sought to be imposed is an "Impost or Duty." See P. Hartman, Federal Limitations on State and Local Taxation, § 5:4 (1981); Hel/erstein, State E Taxation and the Supreme Court: Toward a More Unified Approach to Constitutional Adjudication?, 75 Mich L Rev 1426, 1427-1434 (1977). Cf Montana v. United States, 440 U.S. 147, 59 L Ed 2d 210, 99 S Ct 970 (1979). Hooven I held that, under the Clause, a nondiscriminatory state ad valorem personal property tax could not be imposed until the imported goods had lost their status as imports by being removed from their original packages. This decision was among the progeny ofLow v. Austin for it, too, was decided on the original-package doctrine. Thus, Hooven I is inconsistent with the later ruling in Michelin that such. a tax is not an ''Impost or Duty" and therefore is not prohibited by the Clause. Although Hooven I was not expressly overruled in Michelin, it must be regarded as retaining no vitality since the Mic~elin decision. The conclusion of the Supreme Court of Ohio that Hooven I retains· current validity in this respect H

738 SUPREME COURT REPORTS . [2017) 13 S.C.R.

A is therefore in error. A contrary ruling would return us to the original-package doctrine. So that there may be no misunderstanding, Hooven I, to the extent it espouses that doctrine, is not to be regarded as authority and is overruled. "

118Copy pinpoint118. From the above, it is clear that the U.S. Supreme Court itself B has abandoned the Original Package theory and it has been held that imported goods are not immuned from non-discriminatory ad valorem taxes imposed by the State. I I 9. Now, we come to the judgment of Federal Court and this Court wherein the aforesaid doctrine has been considered and specifically c departed with.

120Copy pinpoint120. Federal Court in the case of The Province of Madras Vs. Messrs. Boddu Paidanna and Sons.(supra) has noticed the case of Brown Vs. The State of Maryland (supra). The Federal Court held that in our Constitution no such question arises and made the following observations:- "... .In the Indian Constitution Act no such question arises; and the right of the Provincial Legislatures to levy a tax on sales can be considered without any reference to so formidable a power vested in the Central Government. Lastly. the prohibition in the American Constitution is against the laying of "any imposts or duties on imports or exports"; the prohibition is not merely against the laying of duties of customs, but is expressed in what we conceive to be far wiser terms ; and it does not appear to us that it would necessarily follow from the principle of the Maryland decision that in F India the payment of customs duty on goods imported from abroad or the payment of an excise duty on goods manufactured or produced in India can be regarded as conferring some kind of licence or title on the importer or· manufacturer to sell his goods to any purchaser without G incurring a further liability to tax. That was the view which commended itself to the Court in the Maryland Case and it .was a view adopted and argued before us. The analogy with the American case is an attractive one; but for -the reasons which we have given we are wholly unable to accept it. "

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 739

[ASHOK BHUSHAN, J.]

121Copy pinpoint121. In State of Bombay & Anr. Vs. RN. Balsara, AIR 1951 A SC 318, this Court has clearly held that Original Package Theory has no application in this country. In Paragraph 23, following has been held:- "23. I find considerable force in the opinion thus expressed by G)l'.J'er. C.J. and agree that the "original package" doctrine has no application to this country. In the United States, the B widest meaning could be given to the Commerce clause, for there was no question of reconciling that clause with another clause containing the legislative power of the State. Under the provisions of the Government of India Act, a limited meaning must be given to the word "import" in Entry 19 of List I .in order to give effect to the very general words used in c Entry 31 of List II."

122Copy pinpoint122. One more judgment of this Court, which needs to be noticed is Gramophone Company of India Ltd. Vs. Birendra Bahadur Pandey & Ors., (1984) 2 SCC 534,in which again Original Package doctrine.has been disapproved. In Paragraph.JO, following has been laid down:- "..... We must however say that the "original package doctrine" as enunciated by Chief Justice Marshall on which reliance was placed was expressly disapproved first by the Federal Court in the Province of Madras v. Boddu Paidanna and again by the Supreme Court in State of Bombay v. F.N. Balsara..... "

123Copy pinpoint123. In view of the foregoing discussions, we conclude that goods imported after having been released from customs barriers ~e not immuned from any kind of State taxation, which fall equally on other similar goods and the submission of the learned counsel for the petitioner that immunity from State taxation shall continue till it reaches in the premises where it is to be taken for consumption, sale and use cannot be accepted. . . J

NON-INCLUSION OF CUSTOM DUTY IN PURCHASE VALUE G

124Copy pinpoint124. The petitioners referring to definition of purchase value as given in Section 20) of the OrissaAct, 1999 and other entry tax enactments contends that the definition ofpurchase value having not included "custom duty" legislature intended that no entry tax be levied on the purchase value. For ready reference Section 20) is reproduced below: - H

740 SUPREME COURT REPORTS (2017] 13 S.C.R.

A "2lj). "Purchase value" means the value of scheduled goods as ascertained, from original invoice or bill and includes insurance charges, excise duties countervailing charges, sales tax, transport charges, freight charges and all other charges incidental to the purchase of such goods: B Provided that where purchase value of any scheduled goods -is not ascertainable on account of non-availability or non- production of the original invoice or bill or when the, invoice or bill produced is proved to be false or if the scheduled goods are required or obtained otherwise than by way of purchase, then the purchase value shall be the value or the price at c which the scheduled goods of like kind or quality is sold or is capable of being sold in open market; "

125Copy pinpoint125. From the definition of purchase value given in 2(j) three aspects are noticeable. Firstly, purchase value means the value of scheduled goods as ascertained from original invoice or bill. Secondly, it includes insurance charges excise duty and other charges mentioned therein. And thirdly, other charges incidental to the purchase of such goods. The original invoice or bill of scheduled goods, generally include the entire value including the import duty or custom duty and in any event the inclusion of 'all other charges incidental to the purchase of such goods' has to necessarily mean all charges including custom duty which is incidental to the purchase. Thus, non-inclusion of custom duty specifically in definition of purchase value in 2(j) is inconsequential and cannot lead to mean that the legislature never intended to include the imported goods under the entry tax legislation. This Court had occasion to consider a provision in Maharashtra Municipalities (Octroi) Rules, F 1968 which contained provision to determine the value on which octroi is leviable. In Garware Nylons Ltd. vs. Pimpri Chinchwad Mahanagar Palika and Ors, (1995) 3 SCC 345 Rule 17 came for consideration. The facts were given in para 2 of the judgment in following manner: G "2. The appellant is a public limited company. It manufactured nylon and polyester yarn. Between September 1983 and August 1984 it imported goods liable to octroi. The Corporation authorities claimed that the appellant was liable to include the customs duty paid by it in the valuation of the goods as it was a component of the value of the· said goods H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 741

[ASHOK BHUSHAN, J.]

for the purpose ofRule 17(a). The appeal filed by the appellant before the Civil Judge failed. The order was challenged by way of writ petition under Article 226 of the Constitution. The High Court negatived the claim. Rule I 7(a) is extracted below: "17: Provisions to determine value where octroi is leviable ad-valorem. - (a) If the original invoice is produced by the importer and accepted by the Octroi Officer the value of the goods means the value made up of the cost price of the goods as ascertained from that invoice plus freight charges, carrier charges, shipping dues, insurance, excise duties, sales tax, vend fee and all other incidental charges incurred by the importer till the arrival of the goods within the octroi limits". Since the words "custom duty" are not mentioned in the rule, it gave rise to an argument before the High Court and in this Court whether it could be included while determining the value under Rule 17. The High Court relying basically on the decision of this Court in Shroff & Co. v. Municipal Corpn of Greater Bombav. 1989 Supp(I) SCC 347 held that even though the customs duty was not mentioned in the rule yet it was liable to be included while determining the value under E Rule 17. The learned counsel for the appellant urged that since the words "custom duty" do not find place in Rule 17, they could not be included for determining valuation under the rule. Reliance was also placed on Goodyear India Ltd. v. State of Haryana, (1990) 2 SCC 71 and McDowell & Co. Ltd. v. CTO, (1977) I SCC 441 and it was urged that in case F the provision in taxing statute was susceptible to two constructions, then the one favouring the assessee should be accepted. "

126Copy pinpoint126. Similar argument was raised before Court that custom duty having not mentioned in Rule 17, no octroi is leviable bn import of goods. G The argument was repelled by this Court in para 4 of the judgment which is to the following effect: "4. Rule 17 provides for determination of value of goods brought inside the Corporation or Municipal Board for H

742 SUPREME COURT REPORTS (2017] 13 S.C.R.

A consumption, use or sale. The use of various words in the rule widens its scope. It provides for inclusion of cost price, charges such as freight, carrier, customs duties and then all other incidental charges, dues etc. The mention of various charges. am;I duties is more illustrative than exhaustive. It only indicates that it is not only the expenses which are usually B incurred in normal course of commercial activity, but any incidental expenditure shall constitute the value of the goods. The rule has to be understood in broad sense. No goods can be imported from outside without payment of customs duty unless it is exempt. There appears to be no reason to exclude c it while determining the value of the goods. In any case, if duty countervailing could be considered to be incidental charg~ for importation, there is no valid reason to exclude custom duty from it. "

127Copy pinpoint127. We thus do not find any substance in the submission of petitioner that non-inclusion of custom duty in definition of purchase value leads to conclusion that entry tax is not payable on entry tax. Whether entry tax legislations are not covered by Entry 52 List II?

128Copy pinpoint128. Shri l\jay Agarwal one of the learned counsel for the writ petitioners has emphatically submitted that entry tax is ultra vires of Entry 52. Elaborating his submission, he contended that on proper interpretation of Entry 52, the tax described therein is to be levied only by a local authority. The tax leviable in Entry 52 is nothing but octroi. The entry tax was imposed by the several States in 1990, up to which date local bodies continued to impose octroi. He submits that tax is not covered by Entry 52. Learned counsel for the petitioner referring to a definition of tax in Article 366(28) contends that Constitution itself contemplates local taxes and tax under Entry 52 is nothing but local tax to be levied by local authorities for purpose oflocal area. The history of entry tax and legislative practice also leads to the same conclusion. The G Government of India Act, 1.93 5 included in the Provincial List Item No. 49 to the effect that 'Cesses on the entry of goods into a local area for consumption, use or sale'.

129Copy pinpoint129. Neither the Government of India Act, 1935 nor the Constitution ofIndia has used 'octroi'. Constitution of India consciously H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 743

[ASJiOK BHUSHAN, J.]

avoided to use the term 'Octroi'. List II Item No. 52 provided tax on the entry of goods in local area for consumption, use or sale. List I Entry 89 contained another tax, namely, 'terminal tax on goods and passengers carried by railway, sea or air, tax on railway fair and freight'. This court in Burmah-Shell Oil Storage and Distributing co. of India Ltd. Belgaum vs. The Belgaum Borough Municipality, Belgaum, AIR 1963 SC 906, had addressed the history of octroi and the constitutional entry regarding entry of goods. This Court has stated that Constitution has avoided the word 'octroi', in para 15 following has been mentioned: "15. It will be noticed that in the Government of India Act 'octroi' was named but not described and now the Constitution avoids the word 'octroi ', as did the Government of India Act C 1935 before, and gives a description .... "

130Copy pinpoint130. In para 17 & 18 following has been held: . "17. Octrois and terminal taxes were different taxes though they resembled in one respect, namely. that they were leviable D in respect of goods brought into a local area. While terminal taxes were leviable on goods 'imported or exported' from the Municipal limits denoting thereby that they were connected with the traffic of goods, octrois, according to the legislative practice then obtaining were, leviable in respect of goods brought into a Municipal area for consumption or use or sale. E It is not necessary lo cite the Municipal Acts prior to 1935 but a reference to them will amply prove that such was the tax which was contemplated as octroi. " "18. When the Government of India Act 1935 was enacted terminal taxes became a central subject, vide entry No. 58 of F List I, which reads as follows:- "58. Term_inal taxes on goods or passengers carried by railway or air. " At that time, it was suggested by Sir Walter Leyton that both G octrois and terminal taxes should be provincial subjects and that it would perhaps be possible to fuse the two. The Joint Committee, however. recommended otherwise and terminal taxes were separated from octrois and included in the central list. The proceeds of the terminal taxes, however. were to be H

744 SUPREME COURT REPORTS [2017) 13 S.C.R.

A distributed among the provinces. In a/locating 'octrois' to the Provinces, the word itself was avoided because terminal taxes are also octroi in a sense and instead a description of the tax was mentioned in entry No. 49, which has been quoted already, · and which read "Cesses on the entry of goods into a local area for consumption, use or sale ". This scheme has been B repeated in the Constitution with the difference that the entry relative to terminal tax now reads "terminal taxes on goods and passe11gers carried by railway, sea or air", and the word "taxes" replaced the word "cesses" in the entry relative to octrois. " c 131. The distribution oflegislative power between Union and State is a Constitutional Scheme included in the Constitution of India after great deliberation. Different tax entries in List I and List II are fields of legislation which have to be widely interpreted and no restricted meaning of an entry has to be taken to fetter the legislative power of the Union or D State.

132Copy pinpoint132. lt is well settled that the nomenclature or form of a tax is not a decisive factor to find out the nature of the tax. It is the matter of legislative policy as to how the tax is to be collected. The definition of taxation as given in Article 266 (28) that tax includes general or local tax does not in any manner support the contention of the petitioner that tax under Entry 52 is only a local tax which ought to be collected through local bodies. It is the matter of legislative policy that whether a tax is collected as a general tax or a local tax. The nature of tax, measure of tax and machinery for tax collection are all different aspects. The submission of the petitioner that tax in Entry 52 should be collected by local authorities and State has no legislative competence to levy such tax is fallacious. It is well within the jurisdiction of the legislature to formulate its policy regarding levy of tax and its collection. Entry 52 of List II has to be given its wide and full meaning and no limitation in the legislative power of the State can be read as contended by counsel for the petitioner.

133Copy pinpoint133. The Constitution framers have abandoned the use of word 'octroi' which has to be given a meaning and purpose. While interpreting a taxing entry no shackles can be put nor use of any expression in the Constitution of India, referring to a tax can be tied up to any pre- H constitutional tax or levy. Further, any pre-constitutional tax practice

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 745

[ASHOK BHUSHAN, J.]

cannot put any fetter on Constitution farmers to define any tax, to elaborate the concept of tax or to move away or forward from any kind of earlier levy. This Court in Municipal Corporation ofDelhi v. Birla Cotton, Spinning and Weaving Mills, Delhi and Anr, 1968 (3) SCR 251 has laid down the following: "To insist that the legislature should provide for every matter connected with municipal taxation would make municipalities mere tax collecting departments of Government and not self-governing bodies which they are intended to be. Government might as well collect the taxes and make them available to the municipalities. That is not a correct reading of the history of Municipal Corporations and c other self governing institutions in our country. "

134Copy pinpoint134. Thus, taxes which are to be used by the local authorities can be collected by the local authorities as well as by the State Government. It is the matter of legislative policy as to how the tax is collected and distributed. Under List II Entry 5, the State has legislative power to lay down powers of the Municipal Corporation by legislation. It is again legislative policy that as what machinery is to be provided by the State legislature regarding collection of taxes on the entry of goods into a local area for consumption, use or sale. No capital can be made on the submission that since tax is not being collected by local authorities it is beyond the power of the State under Entry 52 List n.

135Copy pinpoint135. We thus do not find any substance in the submission of the learned counsel for the petitioner that entry tax legislation is not covered by Entry 52 List II. EXPRESSION "MACHINERY AND EQUIPMENT" AS USED F IN THE SCHEDULE OF ORISSA ACT 1999

136Copy pinpoint136. Part II of the Schedule to the Orissa Act, 1999 provides Item 9 as follows: "Item 9. Machinery and equipments [including earthmovers, G excavators, bulldozers and road-rollersJ [and spare parts and components} used in manufacture, mining, generation of electricity, or for execution of works contract or for any other purposes. "

746 SUPREME COURT REPORTS [2017] 13 S.C.R.

A 13 7. The submission which has been pressed by learned counsel for the petitioner is that the plant which is imported by petitioners in completely knocked out condition is not covered by expression machinery and equipments. It is submitted that plant and machinery are two different concept and when plant is imported in a knocked out condition Item No. B 9 of Part II of Schedule is not applicable.

138Copy pinpoint138. Thie Advance Law Lexicon of P RamanathaAiyar 3"' Edition defines 'Plant' as follows: "Plant" means the fixtures, machinery, tools, apparatus, appliances etc., necessary to carry on any trade or mechanical c business, or any mechanical operation or process. , Webster defines the word "plant" to be "the fixtures and tools necessary to carry on any trade or mechanical business. " The word is defined by Worcester to be "The machinery, apparatus or fixtures by which a business is carried on". The D word is not equivalent to the word "undertaking", which is defined by Webster as "any business. work or project which a person engages in or attempts to perform; enterprise". "

139Copy pinpoint139. The Plant in a knocked out condition is nothing but a collection of machineries. The plant being a wide term including machinery also, E we fail to see how a knocked out plant shall not be covered by Item No. 9 of Part II of the Schedule. Machinery and equipments are wide words which shall also cover plant in a knocked out condition. We thus reject the contention of the counsel for the petitioner_ that a plant which is imported in knocked out condition is not covered by the Part II of Schedule of Orissa Act, 1999. F

140Copy pinpoint140. One more submission raised by one of the learned counsel for the writ petitioners also needs to be noted. Section 4 of Bihar Act, 1993 as inserted by Bihar Act 19 of 2006 was also challenged on the ground that it violates constitutional provision ofArticle 266. Section 4 deals with "utilization of the proceeds of the levy under the Act". Section G 4 sub-section ( l) provides that the proceeds of the levy under the Act shall be appropriated to the fund and shall be utilised exclusively for the development of trade, commerce and industry in the State of Bihar. Presumably, the said amendment was brought by the State Legislature to support the State's claim that levy is compensatory in nature. The H submission of the writ petitioners is that Section 4 indicates that the tax

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 747

[ASHOK BHUSHAN, J.] ·

levied under the Act would be collected and kept in a separate fund which according to the writ petitioners is contrary to the constitutional mandate ofArticle 266 of the Constitution, which specifically mandates that all public money must be credited to the Consolidated Fund of respective States. There are two reasons due to which the above submissions cannot be accepted. Firstly, Section 4 relates to creation of fund and utilisation of funds received from the collection of entry tax. The creation of fund and its utilisation can in no manner effect the levy of the entry tax and the compensatory tax theory having already negated by nine-Judge Constittition Bench of this Court in Jindal Stainless (supra), the inquiry as to whether tax is compensatory or not is not relevant. Secondly, this Court in Jaora Sugar Mills(P) Ltd. v. State of C Madhya Pradesh and Ors., 1996 {1) SCR 523 while considering Article 266 of the Constitution of India has already held that it is difficult to understand how the Act can be ·said to be invalid because the cesses recovered under it are not dealt with in the manner provided by the Constitution. Following observations were made by the Court: D "It is doubtful whether a plea can be raised by a citizen in support of his case that the Central Act is invalid because the moneys raised by it are not dealt with in accordance with the provisions of Part XII generally or particularly the provisions of Article 266. We will, however. assume that such a plea can be raisep by a citizen for the purpose of this appeal. Even so, it is difficult to understand how the Act can be said to be invalid because the cesses recovered under it are not dealt with in the manner provided by the the Constitution. The validity of the Act must be judged in the light of the legislative competence of the Legislature which passes the Act and may have to be examined in certain cases by reference to the question as to whether fandamental rights of citizens have been improperly contravened, or other considerations which may be relevant in that behalf Normally, it would be inappropriate and indeed illegitimate to hold an enquiry into the manner in which the funds raised by an Act would be dealt with when the Court is considering the question about the validity of the Act itself."

141Copy pinpoint141. Although learned counsel for the writ petitioners sought o distinguish the above decision on the ground that the said observations H

748 SUPREME COURT REPORTS (2017] 13 S.C.R.

A were made while the Court was considering the entirely different issue that is an issue relating to inter-se transfer of money from Consolidated Funds of respective States to Consolidated Fund of India. As per aforesaid judgment the challenge to the validity of the Act on the ground that it is violative of Article 266 was repelled. What was held by this Court as quoted above clearly negates the submissions raised by the learned counsel for the writ petitioners on the basis of Article 266. In any view of the matter, the said ground has no relevance with regard to levy of entry tax on imported goods.

142Copy pinpoint142. Learned counsel appearing for the various petitioners relating to civil appeals from State of Orissa in the end has sought for liberty from this Court to urge grounds of discrimination under Article 304( a) of the Constitution of!ndia. Learned counsel for the petitioners have relied on order of this Court in Civil Appeal No. 4756 of 2017, M/s Bharati Airtel Ltd vs. Assessing Authority Orissa Entry Tax & Anr dated 29.03.2017 as well as order of this Court in Civil Appeal Nos. 997-998 D of 2004, State of UP and Ors vs. M/s Indian Oil Corporation Ltd. & Etc dated 21.03.2017. It is submitted that this Court has granted liberty to petitioner to file fresh writ petition in order dated 29.03.2017 to raise question of discrimination under Article 304( a) as per law laid down by Nine Judges Bench in Jindal Stainless Ltd & Anr vs. State of Haryana & ors. E

143Copy pinpoint143. Learned counsel appearing for the State of Orissa has opposed the prayer of the petitioner seeking liberty to raise the issue. It is contended that petitioners have not raised the relevant issues nor pleaded in support of the plea of discrimination under Article 304(a). The parameters under which entry tax can violate the Article 304(a) has now been conclusively laid down by Nine Judges Bench in Jindal Stainless Ltd.(supra). We are thus of the view that liberty be given to petitioners to raise the plea of discrimination under Article 304(a) in accordance with the law as laid down by Nine Judges Bench in Jindal Stainless Ltd.(supra). We, however, are of the view that for the above purposes, it is not necessary to grant any liberty to file a fresh writ petition at this stage and at this distance of time. The ends ofjustice shall be served, if liberty is granted to the petitioners to revive their writ petitions by making a proper application before the High Court. In the writ petitions which have been dismissed by the Orissa High court against which present appeals are decided, the liberty to revive such petition H

STATE OF KERALA v. FR. WILLIAM FERNANDEZ 749

[ASHOK BHUSHAN, J.]

and to urge ground under Article 304(a) is granted which can be availed A only within the period of30 days from the date of this judgment.

144Copy pinpoint144. In view of foregoing discussion, we arrive at the following CONCLUSIONS: (i) Orissa Entry Tax Act, 1999, Kerala Tax Act, 1994 and Bihar Tax on EnJry of Goods in Local Area for Consumption, Use or B Sale, 1993 (before its amendment by Bihar Act, 2003 and 2006) do not exclude levy of entry tax on the goods imported from any place outside territories of India into a local area for consumption, use or sale. (ii) All the Entry Tax Legislations questioned in these appeals are C legislations which are within the legislative competence of the State legislatures and do not intrude the legislative domain of Parliament as reserved in Entry 41 & Entry 83 of List I. (iii) The import of goods from any territory outside India comes to an end when the goods enter into the custom frontiers of India D and are released for home consumption. (iv) After import of goods comes to an end the State legislature has full legislative competence to levy entry tax under Entry 52 List II. E (v) The Original Package Theory as developed by the American Supreme Court in case of Brown vs. State of Maryland(supra) is not applicable in this country and the imported goods are not exempted from entry tax till it reaches to the factory premises/ destination of its consumption, use or sale. F (vi) Non inclusion of custom duty in the definition of purchase value in the statute of entry tax is not an indicator of the fact that legislature never intended to levy entry tax on imported goods. (vii) Entry tax legislation are fully covered by Entry 52 List II and the submission that essence of Entry 52 is octroi which can be levied only by local authorities and State has no legislative G competence to impose entry tax under Entry 52 List II is fallacious. (viii) A plant imported in knocked out condition is fully covered with the definition of machinery and equipment under Part II of Schedule of the Orissa Act, 1999. H

750 SUPREME COURT REPORTS (2017] 13 S.C.R.