Supreme Court of India
M/S SHANTI FRAGRANCESversusUNION OF INDIA AND ORS.
- Citation
- 2017 INSC 971
- Decided
- 21 September 2017
- Disposal
- Hearing Adjourned
Holding
Due to the conflicting precedents on whether a specific rate entry can withdraw a general exemption, the Court referred the matter to a larger bench for determination.
Summary
The appeal concerned the taxability of pan masala containing tobacco (gutka) under the Delhi Sales Tax Act, 1975, the U.P. Trade Tax Act, 1948 and the Tamil Nadu General Sales Tax Act, 1959. The central issue was whether the specific entry introducing "Pan Masala and Gutka" in the rate schedule overrode the general exemption for "tobacco" in the third schedule. The Court noted a direct conflict between two lines of Supreme Court precedent – the Kothari Products line, which holds that a specific rate entry cannot defeat an existing exemption, and the Agra Belting Works line, which allows a later rate notification to withdraw an exemption. It also examined the doctrine of precedent concerning the numerical strength of benches. Finding the matter unsettled, the Court declined to decide the taxability and referred the issue to a larger bench for resolution.
Issues considered
- The taxability of pan masala containing tobacco under the Delhi Sales Tax Act, U.P. Trade Tax Act and Tamil Nadu General Sales Tax Act.
- Whether a specific entry in the rate schedule can override a general exemption entry in the third schedule.
- Which line of Supreme Court precedent (Kothari Products line or Agra Belting Works line) is authoritative.
- The effect of bench composition and numerical strength on the doctrine of precedent.
Legislation cited
Subjects
sales taxtobaccopan masalagutkaexemptionspecific vs general entryprecedentbench compositionDelhi Sales Tax ActU.P. Trade Tax ActTamil Nadu General Sales Tax Act
Judgment
[2017] 8 S.C.R. 711
MIS SHANTI FRAGRANCES A
v.
UNION OF INDIA AND ORS.
(Civil Appeal No. 8485 of 201 l)
SEPTEMBER21, 2017 B
· [R.F. NARIMAN AND SANJAY KISHAN K'AUL, JJ.)
Tax/Taxation:
Delhi Sales Tax Act, 1975 - U.P. Trade J:ax Act, 1948.- Tamil
Nadu General Sales Tax Act, 1959 - Pan masala containing tobacco C
and Gutka - Exigibility to sales tax - Under the 1975 Act, 1948 Act
and 1959 Act - Conflicting views - Held: Jn view of the conflict
between the *Kothari Products line of judgments and the **Agra
Belting Works line of judgments, together with the said challenge
·insofar as the doctrine of precedent qua this Court, appropriate
Bench to be constituted in order to decide as to whether the *Kothari D
Products line or the **Agra Belting Works line is correct in law -
Also as to whether and to what extent the propositions contained in
Ningappa Ramappa Kurbar case, Supreme Court Advocates-on-Record
Association's case and the Harper's case that the question ofnumerical
strength gains poignancy when one judgment is overruled by E
another, would guide this Court.
Precedent - Conflicting views - Tearing of judicial veil -
Under· the present practice, view of four Judges speaking for the
majority (including dissenting judges) in a 7 Judge Bench would
prevail over a unanimous 5 Judge Bench decision, because they F
happen to speak for a 7 Judge Bench - Question to be answered
that a view of five Judges cannot be overruled by a view of four
Judges speaking for a· Bench of 7 Judges - Judicial veil.
. Reliance Trading Company v. State of Kera/a (2000)
119 STC 321 (Ker.); *Kothari Products Ltd. v. G
Government of A.P., (2000) 9 SCC 263; State of Orissa
v. Radheshyam Gudakhu Factory, (1987) 68 STC 92;
**Commissioner, Sales Tax U.P. v. Mis Agra Belting
Works, Agra (1987) 3 SCC 140 : [1987) 3 SCR 93;
Sales Tax Officer, Section IX. Kanpur v. Dealing Dairy
H
711
712 SUPREME COURT REPORTS [2017] 8 S.C.R.
A Products and Another, 1994 Supp. (2) SCC 639; State
of Bihar and Others v. Krishna Kumar Kabra and
Another (1998) 108 STC 1; Tata Sky Limited vs. State
of Madhya Pradesh and Others (2013) 4 SCC 6S6 :
(2013) 2 SCR 849; Commissioner of Income Tax
(Central)-/, New Delhi v. Vatika Township Private
B
Limited (201S) 1 sec 1 : (2014) 12 SCR 1037;
Reliance Trading Company, Kera/a v. State of Kera/a
(2011) lS SCC 762; Union of India v. Raghubir Singh
(19891 3 SCR 316; Ningappa Ramappa Kurbar and
Another v. Emperor AIR 1941 Bombay 408; Supreme
c Court Advocates-on-Record Association and Another
v. Union of India (2016) S SCC 1 - referred to.
Harper and Others v. National Coal Board [19741 2
All ER 441; Central Asbestos Co Ltd v. Dodd (19721 2
All ER 113S - referred to.
D
Case Law Reference
(2000) 119 STC 321 (Ker.) referred to Paras
(2000) 9 sec 263 referred to Paras
E
(1987) 68 STC 92 referred to Paras
(1987) 3 SCR 93 referred to Paras
1994 Supp. (2) SCC 639 referred to Paras
F (1998) 108 STC 1 referred to Paras
(2013) 2 SCR 849 referred to Para 7
(2014) 12 SCR 1037 referred to Para 7
G (2011) lS SCC 762 referred to Para8
(1989) 3 SCR 316 referred to Para 10
AIR 1941 Bombay 408 referred to Para 10
H (2016) S SCC 1 referred to Para 11
MIS SHANTI FRAGRANCES v. UNION OF INDIA AND ORS. 713
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8485 A
of2011.
From the Judgment and Order dated 05.11.2004 of the High Court
of Delhi at New Delhi in Writ Petition No. 11251 of2004
WITH
B
C. A. Nos. 8486, 8487, 8488, 8491-8494, 8495, 8496-8501 and
8502of2011.
C. A. Nos. 8617 and 10374-10379 of2014.
S. K. Bagaria, Dhruv Agrawal, Sr. Advs., Praveen Kumar, Nalin
Talwar, Kumar Ajit Singh, Ms. Babita Sant, NishitAgrawal, V. J. Francis, C
G. Prakash, Jishnu M. L., Mrs. Priyanka Prakash, Mrs. Beena Prakash,
Vijay Shankar V. L., Vipin Kumar Jai, Mrs. Prabha Swami, Nikhil Swami,
Ms. Divya Swami, Pawanshree Agrawal, Advs. for the Appellant.
Yashank P. Adhyaru, Sr. Adv., Mrs. V. Mohana, Mrs. Asha G.
Nair, Ms. Sadhana Sandhu, Ms. KiranBhardwaj, Ms. Rashmi Malhotra, D
.B. V. Balramdas, B. Krishna Prasad, Mrs. Anil Katiyar, D.S. Mahra,
Ms. Maitreyee Mishra, K. V. Vijayakumar, R. Nedumaran, Aditya Dubey,
Ashutosh Kumar Sharma, Vinay Garg, Ravi Prakash Mehrotra, Advs.
for the Respondents.
The Judgment of the Court was delivered by E
R.F. NARIMAN, J. 1. This batch of cases concerns Pan Masala
containing tobacco and Gutka and their taxability under three State
legislations, namely, the Delhi Sales Tax Act, 1975, the U.P. Trade Tax
Act, 1948 and the Tamil Nadu General Sales Tax Act, 1959. The central
question raised in all these appeals is the same. We shall first take up F
the Delhi case.
2. Under the Delhi Sales Tax Act, 1975, all sales (of goods) that
are effected after the commencement of the Act, are made to suffer tax
under Section 3( 1) ofthe Delhi Act, whose marginal note reads "incidence
of tax". Section 3 (1) states as under:- G
. "3. Incidence of Tax
(1) Every dealer whose turnover during the year immediately
preceding the commencement of this Act exceeds the taxable
quantum and every dealer who at the commencement of this Act,
is registered or is liable to pay tax under the Central Sales Tax H
714 SUPREME COURT REPORTS [2017] 8 S.C.R.
A Act, 1956 (74of1956) shall be liable to pay tax under this Act on
all sales effected by him on or after such commencement."
The obverse side of incidence of tax is provided by Section 7
of the said Act, which reads as under:-
"7. Tax free goods
B
(I) No tax shall be payable under this Act on the sale of goods
specified in the Third Schedule subject to the conditions and
exceptions, if any, set out therein.
(2) The Lieutenant Governor may by notification in the Official
C Gazette, add to, or omit from, or otherwise amend, the Third
Schedule either retrospectively or prospectively, and thereupon
the Third Schedule shall be deemed to be amended accordingly:
PROVIDED that no such amendment shall be made
retrospectively if it would have the effect of prejudicially affecting
the interests of any dealer."
D
3. Under Section 4, the marginal note of which reads "rate of
tax", if tax is payable by a dealer under the Act, various rates in respect
of taxable turnover are set out depending upon whether the goods are
"declared goods" under the Central Sales Tax Act, 1956 or are goods
E which suffer tax at the rate of either twelve paise or twenty paise in the
rupee, depending upon whether they are specified in the First Schedule
or Fourth Schedule of the Act. In addition, food or drink served for
consumption in a hotel or restaurant with which a cabaret, floor show or
similar entertainment is provided, is taxed at the rate of forty paise in the
rupee. All cases not covered by the above are then covered by a
F residuary sub-clause, in which the relevant rate at the given time was
eight paise in the rupee. Section 4 of the said Act reads as under:
"4. Rate of tax
(1) The tax payable by a dealer under this Act shall be levied-
(a) in the case of taxable turnover in respect of the
G goods specified in the First Schedule, at the rate of twelve paise in
the rupee;
(b) in the case of taxable turnover in respect of the goods
specified in Schedule II, at such rate not exceeding four paise in
rupee as the Central Government may, from time to time, by
H notification in the official Gazette, determine;
MIS SHANTI FRAGRANCES v. UNION OF INDIA AND ORS. 71 S
[R.F. NARIMAN, J.]
(c) in the case of taxable turnover in respect of any food or A
drink served for consumption in a hotel or restaurant or part thereof,
with which a cabaret, floor show or similar entertainment is pro-
vided therein, at the rate of forty paise in the rupee; '
[(cc) in the case of taxable turnover in respect of the goods
. specified in the Fourth Schedule, at the rate of twenty paise in the B
rupee;)
[(ccc) [***)
(d) in the case of taxable turnover of any other goods, at the rate
of eight paise in the rupee:
c
[PROVIDED that the Lieutenant Governor may, by notifica-
tion in the Official Gazette, add to, or omit from, or otherwise
amend, the First Schedule, the Second Schedule or the Fourth
Schedule, either retrospectively or prospectively, and there upon
the First Schedule or the Second Schedule or, as the case may
be, the Fourth Schedule, shall be deemed to be amended ac- D
cordingly:]
PROVIDED FURTHER that no such amendment shall be made
retrospectively if it would have the effect of prejudicially af-
fecting the interests of any dealer:
E
PROVIDED ALSO that in respect of any goods or class of
goods if the Lieutenant Governor is of the opinion that it is
expedient in the interest of the general public so to do, he may,
by notification in the Official Gazette, direct that the tax in re-
spect of taxable turnover of such goods or class of goods shall,
subject to such conditions as may be specified, be levied at F
such modified rate not exceeding the rate applicable under this
section, as may be specified in the notification.
(2) For the purpose of this Act, "taxable turnover" means that
part of a dealer's turnover during the prescribed period in any
year which remains after deducting there from: G
(a) his turnover during that period on-
(i) sale of goods, the point of sale at which such goods shall be
taxable is specified by the Lieutenant Governor under section
S and in respect of which due tax is shown to the satisfaction
H
716 SUPREME COURT REPORTS [2017) 8 S.C.R.
A of the Commissioner to have been paid;
(ii) sale of goods declared tax-free under section 7;
(iii) sale of goods not liable to tax under section 8;
(iv) sale of goods which are proved to the satisfaction of the
Commissioner to have been purchased within a period of twelve
B months prior to the date of registration of the dealer and sub-
jected to tax under the Bengal Finance (Sales Tax) Act, 1941
(Bengal Act VI of 1941 ), as it was then in force, or under this
Act;
(v) sale to a registered dealer;
c (A) offor "the Administrator is of opinion that it is expedient in
the interest of the general public to do, he may, with the previ-
ous approval of the Central Government and" goods of the
class or classes specified in the certificate of registration of
such dealer, as being intended for use by him as raw materials
D in the manufacture in Delhi of any goods, other than goods
specified in the Third Schedule or newspapers, -
(I) for sale by him inside Delhi; or
(2) for sale by him in the course of inter-State trade or com-
merce, being a sale occasioning, or effected by transfer of docu-
E ments of title to such goods during the movement of such goods
from Delhi; or
(3) for sale by him in the course of export outside India being a
sale occasioning the movement of such goods from Delhi, or a
sale affected by transfer of documents of title to such goods
effected during the movement of such goods from Delhi, to a
F
place outside India and after the goods have crossed the cus-
toms frontiers of India; or
(B) of goods of the class or classes specified in the certificate
of registration of such dealer as being intended for resale by
him in Delhi, or for sale by him in the course of inter-State
G trade or commerce or in the course of export outside India in
the manner specified in sub-item (2) or sub-item (3) of item
(A), as the case may be; and
(C) of containers or other materials used for the packing of
goods, of the class or classes specified in the certificate of
H
MIS SHANTI FRAGRANCES v. UNION OF INDIA AND ORS. 717
[R.F. NARIMAN, J.]
registration of such dealer, other than goods specified in the A
Third Schedule, intended for sale or resale;
(vi) such other sales as are exempt from payment of tax under
section 66 or as may be prescribed:
PROVIDED that no deduction in respect of any sale referred to B
in sub-clause (iv) shall be allowed unless the goods, in respect of
which deduction is claimed, are proved to have been sold by the
dealer within a period of twelve months from the date of his reg-
istration and the claim for such deduction is included in the return
required to be furnished by the dealer in respect of the said sale:
[PROVIDED FURTHER that no deduction in respect ofany sale
c
referred to in sub-clause (v) shall be allowed unless a true decla-
ration duly filled and signed by the registered dealer to whom the
goods are sold and containing the prescribed particulars in the
prescribed form obtainable from the prescribed authority in the
manner and subject to such condition as may be prescribed is D
furnished in the prescribed manner and within the prescribed time,
by the dealer who sells the goods:]
PROVIDED ALSO that where any goods are purchased by a
registered dealer for any of the purposes mentioned in sub-clause
(v), but are not so utilised by him, the price of the goods so pur- E
chased shall be allowed to be deducted from the turnover of the
selling dealer but shall be included in the taxable turnover of the
. purchasing dealer; and
(b) the tax collected by the dealer under this Act, as such and
shown separately in cash memoranda or bills, as the case may F
be."
The question that has been raised in the present appeals relates to
"tobacco" specified in the Third Schedule, read with Section 7, as tax
free goods as follows:-
"22. Tobacco as defined under the Central Excises and Salt Act, G
1944 (1 ofl944)."
4. We have been taken to the Central Excises and Salt Act, 1944
as it obtained in the year 1975. The relevant entry in the said Act
contained in the First Schedule reads as follows:-
H
718 SUPREME COURT REPORTS [2017] 8 S.C.R.
A "4. TOBACCO -
"Tobacco" means any form of tobacco
whether cured or uncured and whether
manufactured or not, and includes the leaf,
stalks and stems of the tobacco plant, but
B does not include any part of a tobacco plant
while still attached to the earth.
Item Description of goods Rate of duty
No.
c I. Unmanufactured tobacco - Per kilogram
(1) if flue cured and used in the Five rupees
manufacture of cigarettes.
(2) if flue cured and used for the Forty rupees
D manufacture of smoking
mixtures for pipes and cigarettes.
(3) If flue cured and not otherwise Four rupees
specified.
E
(4) if other than flue cured and used Four rupees
for the manufacture of -
(a) cigarettes or (b) smoking
mixtures for pipes and cigarettes.
(5) If other than flue cured and not Three rupees
actually used for the manufacture
of(a) cigarettes or (b) smoking
mixtures for pipes and cigarettes
or (c) biris-
G (i) stems of tobacco larger than
6.35 milli-meters in size,
(ii) dust of tobacco.
(iii) xx xx xx xx
(iv) tobacco cured in whole leaf form and
packed or tied in bundles, hanks or bunches
H or in the form of twists or coils.
MIS SHANTI FRAGRANCES v. UNION OF INDIA AND ORS. 719
[R.F. NARIMAN, J.]
A
(6) if other than flue cured and not otherwise Four rupees
specified.
(7) if used for agricultural purposes Nil
B
(8) stalks. One rupee &
ninety paise.
II. Manufactured tobacco-
(1) Cigars and cheroots. Twenty-five c
rupees per
hundred
(2) Cigarettes. Two hundred
and fifty
percent. D
ad valorem.
(3) (i) Biris in the manufacture of which Three rupees
any process has been conducted with and eighty
the aid of machines operated with or paise per
without the aid of power. thousand E
(ii) other biris Eighty paise
per thousand
(4) Smoking mixtures forpipes and Two hundred F
cigarettes. per cent.
ad valorem
(5) Chewing tobacco. Ten per cent.
' advalorem
G
(6) Snuff. Two rupees
and fifty
paise per
kilogram"* 1'
1
Effective from 1-3-75
H
720 SUPREME COURT REPORTS (2017] 8 S.C.R.
A This is obviously a case ofle gislation by incorporation as a result
of which the only thing that is to be looked at is "tobacco" contained in
this Schedule and not subsequent amendments that have been made
after the introduction of the Central Excise (Tariff) Act, 1985 w.e.f.
February, 1986. It has, in any event, been argued before us that the
B subsequent legislation would throw light on what is contained in the earlier
legislation, for subsequently under the Central Excise Tariff, Pan Masala
which contains tobacco, commonly known as Gutka, is specified under
Entry 2404.49 under the heading "Chewing Tobacco and preparations
containing chewing Tobacco; Pan Masala containing Tobacco". In
addition, it was pointed out that under the Chapter notes, para 3 in particular,
C the definition of"tobacco" remains exactly what it was in 1975, which
now subsumes Pan Masala which includes tobacco.
5. The impugned judgment of the Delhi High Court dated
05.11.2004 has held, on a reading of the aforesaid provisions, that a
notification dated 31.03.2000, which introduced as Item 46 in the First
D Schedule "Pan Masala and Gutka" w.e.f. 01.04.2000, would have to be
read as eating into the exemption for "tobacco" generally, and that
therefore, on and from this date, Pan Masala which includes tobacco
would become exigible to sales tax. This was done on two bases; first,
that, as was held by the Kerala High Court in Reliance Trading
Company vs. State ofKerala, (2000) 119 STC 321 (Ker.), ifthere are
E two entries, one general and another specific, the general entry must
give way to the specific entry. The exemption entry being general in
nature, therefore, must give way to the specific entry contained in the
First Schedule, and that therefore, sales tax became payable on Pan
Masala which includes tobacco. The other basis of the judgment is that
F there is a dichotomy between two lines of Supreme Court judgments.
The first line is contained in Kothari Products Ltd. vs. Government
of A.P., (2000) 9 SCC 263 and State of Orissa vs. Radheshyam
Gudakhu Factory, ( 1987) 68 STC 92; the second line of decisions being
Commissioner, Sales Tax U.P. vs. Mis Agra Belting Works, Agra
(1987) 3 SCC 140 as followed in Sales Tax Officer, Section IX, Kanpur
G vs. Dealing Dairy Products and Another, 1994 Supp. (2) SCC 639
and State of Bihar and Others vs. Krishna Kumar Kabra and
Another, (1998) 108 STC l. Whereas the Kothari Products (supra)
line of judgments had held that an entry under a sales tax statute which
only specifies rate cannot be used to eat into an exemption entry, the
H
MIS SHANTI FRAGRANCES v. UNION OF INDIA AND ORS. 721
[R.F. NARlMAN, J.]
Agra Belting Works (supra) line ofjudgments states the exact opposite, A
which is that the charging section, the rate of tax section, and the
exemption section all form part of one scheme, and when a notification
is issued under a rate of tax section, which is subsequent to a notification
exempting certain goods, the intention of the legislature is that such
exemption then gets withdrawn and makes the sale of such goods liable B
to tax. The High Court preferred to follow the Agra Belting Works
(supra) line, and therefore, dismissed the writ petition of the assessees.
6. To similar effect are the impugned judgments from the Allahabad
and Madras High Courts which are contained in C.A. No. 8617/2014
and C.A. No. 8502/2011. It may only be noted that in the Madras High
Court judgment, though this point was squarely raised and argued, the C
Madras High Court has preferred to rest its decision on only one point,
which is that even though additional duty of excise may be levied on Pan
·Masala containing tobacco, the legislative competence of the State to
enact a State sales tax levying sales tax on the same goods is not taken
away. D
7. It is well settled that in the area of taxation, the question of
going to the measure of a tax would arise only if it is found that the
charge of tax is attracted. [See Tata Sky Limited vs. State of Madhya
Pradesh and Others, (2013) 4 SCC 656 at para 29] Also, in a recent
Constitution Bench judgment delivered by this Court in Commissioner E
of Income Tax (Central)-!, New Delhi vs. Vatika Township Private
Limited, (2015) l SCC l, after referring to an earlier judgment of this
Court, this Court stated that the components which enter into the concept
of taxability are well known and distinct. The first is the imposition of tax
which prescribes the taxable event attracting the levy. The second is an
indication of the "taxable person" i.e. the person on whom the levy is F
imposed and who is obliged to pay the tax. The third is the rate at which
tax is imposed. The fourth is the measure or value to which the levy will
·be applied for computing tax liability.
8. Keeping these parameters in mind, a three-Judge Bench of this
Court held, in Reliance Trading Company, Kerala vs. State ofKerala, G
(2011) 15 SCC 762 at 766-767, on pari materia provisions of the Kerala
General Sales Tax Act, that there can be no confusion or mixing up
between the incidence of tax and exemption of tax on the one hand and
the rate of tax on the other. On the facts of that case, ''Tarpaulin" was
H
722 SUPREME COURT REPORTS [2017] 8 S.C.R.
A separately classified under the First Schedule to the KeralaAct and was
made taxable at a certain specified rate. The Third Schedule, which
contained entries enumerating exempted goods from sales tax, contained
entry 7 which read, inter alia, "cotton fabrics". The case of the assessee
was that so far as cotton based Tarpaulin is concerned, it was exempted
B from the payment of tax since it fell within the term "cotton fabrics"
under the relevant entry contained in the Third Schedule to the Kerala
Act. On the other hand, the Revenue urged that since "Tarpaulin" was
a specific entry as opposed to "cotton fabrics" which was general, the
latter must give way to the former.
9. This Court repelled the aforesaid argument of the Revenue,
C and set aside the Kerala High Court judgment, which was referred to
and relied upon by the Delhi High Court in the impugned judgment dated
05.11.2004, as follows:
"15. The High Court seems to have brushed aside the argument
of the appellant by merely focusing on the general principle that
when there are two taxing entries - one general and the other
specific - then the specific entry would have to be given priority
as compared to the general entry. In our view, this principle has
no application in the facts of the present appeal as it was not a
case of goods being exigible to tax under two entries. On the
E other hand, the appellant's case is one where the goods had been
granted a special exemption provided they were already subjected
to tax under the ADEA. The High Court fell into the error of
assuming that the problem presented to it with regard to exemption
could be solved by resort to the general principle of specific entry
versus general entry of a taxable head."
F
More importantly, the Revenue's contention that when an
exemption has already been granted, if the State legislature amended
Schedule I, which only deals with the rate of tax, such amendment would
take away exemption of tax of the same goods, was directly turned
down by this Court, stating as under:
G
"16. The Revenue's contention that when an exemption had
already been granted to the goods concerned, if the State
Legislature had specifically amended Schedule I so as to include
the said goods in Schedule I and make it exigible to tax, it would
be incorrect to interpret an entry in a manner so as to defeat the
H
MIS SHANTI FRAGRANCES v. UNION OF INDIA AND ORS. 723
[R.F. NARIMAN, J.]
object of the statute, is also not tenable. In the first place, there A
could be nothing like exemption from tax unless goods are exigible
to tax. Thus, unless the goods were specified in Schedule I or II
of the KGST Act the goods would not be liable to tax at all and,
therefore, there would be no question of granting exemption from
tax. Thus, it would be unnecessary to specify them in the Third B
Schedule, unless by reason of Section 5 read with Schedule I or
II, the goods were exigible to tax. The fact that "tarpaulin" was
included in the First Schedule does not carry the matter any further
in favour of the Revenue as it is clear that the exemption operating
in favour of cotton-based tarpaulin as covered by "cotton
fabrics" in the Third Schedule continues as no corresponding C
_change has been made therein by the legislature even after the
amendment of the First Schedule by the introduction of"tarpaulin".
The legal result, consequently, is that cotton-based tarpaulin
would continue to be leviable to tax under the ADEA, and by
reason of Entry 7/Entry 11 of the Third Schedule the said goods D
would be exempted from exigibility to sales tax under the KGST
· Act. This legal result would follow irrespective of whatever might
have been the presumed intention of the legislature in amending
Schedule I. The intention of the legislature has to be gathered
from the words used in the statute, and as long as Entry 11 in the
Third Schedule remains unamended, the legal result of exemption E
of cotton-·based tarpaulin from exigibility to sales tax under the
KGST Act cannot be avoided."
I0. It does appear that there is a direct conflict between Kothari
Products (supra), Radheshyam Gudakhu Factory (supra) and
Reliance Trading Company (supra) judgments on the one hand, and F
Agra Belting Works (supra), which was also followed by two other
judgments, on the other. We may hasten to add that there are three
Judge Bench decisions on both sides. Interestingly enough, in Agra
Belting Works (supra), this Court held by a majority of two to one as
follows:
G
"6. As has been pointed out above, Section 3 is the charging
provision; Section 3-A authorises variation of the rate of tax and
Section 4 provides for exemption from tax. All the three sections
are parts ot the taxing scheme incorporated in the Act and the
power both under Section 3-A as also under Section 4 is
H
724 SUPREME COURT REPORTS [2017] 8 S.C.R.
A exercisable by the State Government only. When after a
notification under Section 4 granting exemption from liability, a
subsequent notification under Section 3-A prescribes the rate of
tax, it is beyond doubt that the intention is to withdraw the
exemption and make the sale liable to tax at the rate prescribed in
the notification. As the power both for the grant of exemption
B
and the variation of the rate of tax vests in the State Government
and it is not the requirement of the statute that a notification of
recall of exemption is a condition precedent to imposing tax at
any prescribed rate by a valid notification under Section 3-A, we
see no force in the contention of the assessee which has been
c upheld by the High Court. In fact, the second notification can
easily be treated as a combined notification-both for withdrawal
of exemption and also for providing higher tax. When power for
both the operations vests in the State and the intention to levy the
tax is clear we see no justification for not giving effect to the
second notification. We would like to point out that the exemption
D
was in regard to a class of goods and while the exemption continues,
a specific item has now been notified under Section 3-A of the
Act."
(at pages 142-143)
E B.C. Ray, J. dissented from this view and followed the view of
the Allahabad High Court, which accords the view of this Court in the
Kothari Products (supra) and Reliance Trading Company (supra)
judgments. One other interesting feature of this case is whether, after
Union oflndia vs. Raghubir Singh, 1989 (3) SCR 316 at 335-337, it
can be stated that Judges of this Court do not sit in 2's and 3's for mere
F convenience, but that a Bench which is numerically superior will prevail
over a Bench oflesser strength. If the doctrine of precedent, as applied
by this Court, is to be a matter of numbers, then, interestingly enough, as
has been held by Beaumont C.J. in Ningappa Ramappa Kurbar and
Another vs. Emperor, AIR 1941Bombay408 at 409, the position in
G law could be as under:
" ... The Court in that case consisted of five Judges, one of whom,
Shah J ., dissented from that proposition. The authority of the case
may be open to question, since there had been a previous decision
of a Full Bench of this Court of four Judges in Queen-Empress
H
MIS SHANTI FRAGRANCGS v. UNION OF INDIA AND ORS. 725
[R.F. NARIMAN, J.]
v. Mugappa, (1894) 1.8 Born 377 (FB), which had reached a A
different conclusion. Apparently it was considered that five Judges,
by a majority of four to one, could overrule a unanimous decision
of four Judges, the net result being that the opinion of four Judges
. prevailed over the opinion offive Judges ofco-ordinate jurisdiction.
There seems to be very little authority on the powers and B
·constitution of a Full Bench.
There can be no doubt that a Full Bench can overrule a Division
Bench, and that a Full Bench must consist of three or more Judges;
but it would seem anomalous to hold that a later Full Bench can
overrule an earlier Full Bench, merely because the later bench
. consists of more Judges than the earlier. If that were the rule, it C
would mean that a bench of seven Judges, by a majority of four to
three, could overrule a unanimous decision of a bench of six Judges,
though all the Judges were ofco-ordinate jurisdiction. In Enatullah
v. Kowsher Ali, (1926) 54 Cal 266, Sanderson C.J., stating the
practice in Calcutta, seems to have been of opinion that a decision D
of a Full Bench could only be reversed by the Privy Council or by
a bench specially constituted by the Chief Justice. Even if this be
the true rule, there is nothing to show that the Chief Justice acted
. upon it in Emperor v. Purshottam Ishwar ( 1921) 45 Born 834.
I do not recollect myself ever to have constituted a Special Bench
to consider the ruling of a Full Bench; though I have constituted E
many Full Benches to consider rulings of Division Benches.
However, I need not pursue this subject further, since, for the
purpose of the present appeal, I am prepared to assume that an
alternative charge of perjury lies, and that it was a charge of that
nature which the learned Additional Sessions Judge contemplated. F
The question then is whether it is expedient in the interests of
justice that such a charge should be made."
11. This conundrum was also addressed by M.B. Lokur, J. in
Supreme Court Advocates-on-Record Association and Another
vs. Union oflndia, (2016) 5 SCC 1at577-578 as follows: G
"669. One of the more interesting aspects of Pradeep Kumar
Biswas (Pradeep Kumar Biswas v. Indian Institute of
Chemical Biology, (2002) 5 SCC 111) is that out of the 7 (seven)
· learned Judges constituting the Bench, 5 leamed Judges overruled
H.
726 SUPREME COURT REPORTS [2017] 8 S.C.R.
A the unanimous decision of another set of 5 learned Judges in
Sabhajit Tewary (Sabhajit Tewary v. Union of India, (1975) l
SCC 485). Two of the learned Judges in Pradeep Kumar Biswas
found that Sabha}it Tewary had been correctly decided. In other
words, while a total of7 learned Judges took a particular view on
an issue of fact and law, that view was found to be incorrect by 5
B
learned Judges, whose decision actually holds the field today. Is
the weight of numbers irrelevant? Is it that only the numbers in a
subsequent Bench are what really matters? What would have
been the position if only 4 learned Judes in Pradeep Kumar Biswas
had decided to overrule Sabhajit Tewary while the remaining 3
c learned Judges found no error in that decision? Would a decision
rendered unanimously by a Bench of 5 learned Judges stand
overruled by the decision of 4 learned Judges in a subsequent
Bench of 7 learned Judges? Pradeep Kumar Biswas presents a
rather anomalous situation which needs to be addressed by
appropriate rules of procedure. If this anomaly is perpetuated then
D
the unanimous decision of9 learned Judges in the Third Judges
case (Special Reference No. I of 1998, In Re, (1998) 7 SCC
739) can be overruled (as sought by the learned Attorney General)
by 6 learned Judges in a Bench of 11 learned Judges, with 5 of
them taking a different view, bringing the total tally of Judges
E having one view to 14 and having another view to 6, with the view
of the 6 learned Judges being taken as the law!"
12. lt may be pointed out that in the present case, if numbers are
toted up, the Kothari Products (supra) line, as followed in Radheshyam
Gudakhu Factory (supra) and Reliance Trading Company (supra),
F will go to a Bench strength, numerically speaking, of eight learned Judges,
as against the Agra Belting Works (supra) line, which goes up to a
numerical strength of six learned J11ri17es. If the dissenting judgment of
B.C. Ray, J. is to be added to the Kothari Products (supra) line, then
we have a numerical stn:ngth of9:6. The question ofnumerical strength
gains poignancy when one judi,'!Ilent is overruled by another, as has been
G pointed by Beaumont C.J. in Ningappa Ramappa Kurbar (supra), and
by Lokur, J. in Supreme Court Advocates-on-Record (supra).
13. Let us consider a hypothetical example, where a 2 Judge Bench
has laid down the law in a particular way. If nine other 2 Judge Benches
have followed the first 2 Judge Bench decision, is it open for three learned
H
MIS SHANTI FRAGRANCES v. UNION OF INDIA AND ORS. 727
[R.F. NARIMAN, J.]
Judges to overrule all of the 2 Judge Benches i.e. twenty learned Judges? A
The obvious answer would be yes, because the 3 Judge Bench is really
overruling the first 2 Judge Bench decision, which was merely followed
by nine other 2 Judge Benches. As against this, however, if a unanimous
S Judge Bench decision is overruled by a 7 Judge Bench, with four
learned Judges speaking for the majority, and three learned Judges B
_speaking for the minority, can it be said that the S Judge Bench has been
overruled? Under the present practice, it is clear that the view,offour
learned Judges speaking for the majority in a 7 Judge Bench will prevail
over a unanimous S Judge Bench decision, because they happen to speak
1
for a 7 Judge Bench. Has the time come to tear the judicial veil and hold
that in reality a view of five learned Judges cannot be overruled by a C
view of four learned Judges speaking for a ~ench of7 learned Judges?
This is a question which also needs to be addressed and answered.
14. An allied question, which often arises, is the discovery of the
trne ratio decidendi in a given case. In Harper and Others vs. National
Coal Board [1974] 2 All ER 441, the Court of Appeal was faced with a D
judgment of the House of Lords in Central Asbestos Co Ltd vs. Dodd
[ 1972] 2 All ER 1135 by five learned Judges. Whereas Lord Reid and
Lord Morris took a particular view of the law in favour of Dodd, stating
that his claim was not barred, two other learned Judges namely, Lord
Simon and Lord Salmon disagreed on the law, and held that his claim
was barred. Lord Pearson was stated to be the odd man out'. He held E
that time did not run against Dodd, since Dodd did not appreciate that
the appellants were at fault and that his injuries were attributable to their
fault. On that ground, he agreed with Lord Reid and Lord Morris, as a
result of which Dodd succeeded,. However, he went on to say that he
agreed with the opinion of the minority as to the proper construction of F
the statute in law. Faced with this, Lord Denning M.R. set out four
interesting propositions on how a ratio is to be discovered and or read in
a judgment. He stated:
"How then do we stand on the law? We have listened to a most
helpful discussion by counsel for the proposed plaintiffs on the G
doctrine of precedent. One thing is clear. We can only accept a
line of reasoning which supports the actual decision of the House
of Lords. By no possibility can we accept any reasoning which
would show the decision itself to be wrong. The second proposition
is that, if we can discover the reasoning on which the majority
H
728 SUPREME COURT REPORTS [2017] 8 S.C.R.
A based their decision, then we should accept that as binding on us.
The third proposition is that, if we can discover the reasoning on
which the minority based their decision, we should reject it. It
must be wrong because it led them to the wrong result. The fourth
proposition is that if we cannot discover the reasoning on which
the majority based their decision we are not bound by it. We are
B
free to adopt any reasoning which appears to us to be correct, so
long as it supports the actual decision of the House."
(at page 446)
He then went on to state as follows:
c "Applying the propositions to the decision in Central Asbestos
Co Ltd v Dodd the position stands thus. (I) The actual decision
of the House in favour of Dodd must be accepted as correct. We
cannot accept any line of reasoning which would show it to be
wrong. We cannot therefore accept the reasoning of a minority
0 of two- Lord Simon of Glaisdale and Lord Salmon - on the law.
It must be wrong because it led them to the wrong result. (2) We
ought to accept the reasoning of the three in the majority if we
can discover it. But it is not discoverable. The three were divided.
Lord Reid and Lord Morris ofBorth-y-Gest took one view of the
law. Lord Pearson took another. We cannot say that Lord Reid
E and Lord Morris of Borth-y-Gest were correct, because we know
that their reasoning on the law was in conflict with the reasoning
of the other three. We cannot say that Lord Pearson was correct
because we know that the reasoning which he accepted on the
law led the other two (Lord Simon ofGlaisdale and Lord Salmon)
F to a wrong conclusion. So we cannot say that any of the three in
the majority was correct. (3) The result is that there is no discernible
ratio among the majority of the House of Lords. In these
circumstances I think we are at liberty to adopt the reasoning
which appears to us to be correct.
In my opinion we should adopt the reasoning which was accepted
G in this court in the long line of cases before the decision of the
House of Lords. None of these was overruled. They may
therefore be said to be binding on us. But in any case we should
follow their reasoning, especially as it was accepted by two of
their Lordships who were in the majority and was expressed
H
MIS SHANTI FRAGRANCES v. UNION OF INDIA AND ORS. · 729
[R.F. NARIMAN, J.]
convincingly by Lord Morris of Borth-y-Gest in the passage I A
have quoted."
(at page 446)
Stephenson LJ. concurred. The learned Lord stated:
"I agree. I cannot find any discernible ratio decidendi common to B
·the majority of the House of Lords in deciding Dodd~ case. Their
Lordships were divided three to two in the decision to affirm the
. judgment of the Court of Appeal; but in the reasons for their
decision they appeared to be divided two to two, Lord Pearson
taking a third view which perhaps came closer to the view of the C
minority. In those circumstances I do not think that we can treat
the reasoning of the majority of the majority - Lord Reid and
Lord Morris ofBorth-y-Oest-as the ratio decideridi of the house.
It is the ratio given by only two out of five. Still less can we treat
the 'ratio dissentiendi' appearing from the speeches of the minority
- Lord Simon ofGlaisdale and Lord Salmon - as binding if added D
to Lord Pearson's. That seems to have been the view ofThesiger
J; but having had the advantage denied to him of counsel's
argument, I respectfully disagree with him. We are therefore bound
by the decision of the House of Lords affirming the decision of
this court, but not by the reasoning in the speeches of their
Lordships. That, in my judgment, sends us back to the decision of E
this court2 and the ratio of its decision. If there is in the Court of
Appeal a discernible reason for their decision common to the
· majority, it stands and binds us. I think that there is. I agree that
we should take the same view of the 1963 Act as was taken by
the Court of Appeal in Dodd's case, confirmed as it is most f
persuasively by the approval of Lord Reid and Lord.Morris of
Borth-y-Oest in the House of Lords. Applying that construction
·of the Act to the circumstances of this case, I agree with Lord
Denning MR that they are stronger on the facts, as we have them
on affidavit only, than those which enabled Dodd to bring himself,
not without difficulty, within the Act. I therefore concur in allowing G
this appeal and giving the appellants leave.
(at page 447)
'[1971) 3 All ER 204, [1972) I QB 244
H
730 SUPREME COURT REPORTS [2017) 8 S.C.R.
A 15. Given the head on conflict between the Kothari Products
(supra) line of judgments and the Agra Beltil!g Works (supra) line of
judgments, together with the aforesaid conundrum insofar as the doctrine
of precedent qua this Court is concerned, we request the Hon 'ble Chief
Justice oflndia to constitute an appropriate Bench in order to decide as
B to whether the Kothari Products (supra) line or the Agra Belting
Works (supra) line is correct in law, and also to lay down, as a matter of
law, as to whether and to what extent the propositions contained in
Ningappa Ramappa Kurbar (supra), Lokur, J. 's observation in
Supreme Court Advocates-on-Record Association (supra), and the
Harper (supra) judgment of the Court of Appeal in U.K. should guide
C us for the future.
Nidhi Jain Matter referred to appropriate bench.
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "sales tax"Sign in to search