Holding

The movement of poppy husks from Madhya Pradesh to Bombay is an export within the meaning of the Opium Act, making the levy of export duty under the Madhya Pradesh Poppy Husks Rules valid, and Section 5 of the Opium Act is a permissible regulatory provision saved by Article 372.

Summary

Organon (India) Ltd., later known as Infer (India) Ltd., obtained a wholesale licence for poppy husks in Madhya Pradesh and entered into a contract to export 1,000 tonnes to the Netherlands. The company sought a permit from the Collector of Excise, Mandsaur, to move the husks to Bombay for export, claiming that no excise duty was payable because the goods were destined for export across the customs frontier. The Collector demanded payment of export duty under the Madhya Pradesh Poppy Husks Rules, 1959, leading the appellant to file writ petitions which were ultimately dismissed. The Supreme Court held that the movement from Madhya Pradesh to Bombay constitutes an export within the meaning of the Opium Act, subject to duty, while the actual export from India begins at the port and falls under the Dangerous Drugs Act. Section 5 of the Opium Act was deemed a regulatory provision, not a taxing one, and its delegation of rule‑making power was upheld as it provided sufficient guidance. The pre‑constitutional Opium Act and the Rules made thereunder are saved by Article 372 of the Constitution. Consequently, the appeal was dismissed and the duty liability upheld.

Issues considered

The nature of the movement of poppy husks from Madhya Pradesh to Bombay: whether it is an export under the Opium Act or merely a transit under the Dangerous Drugs Act.
Whether the Collector of Excise could levy export duty under the Madhya Pradesh Poppy Husks Rules, 1959.
The constitutional validity of Section 5 of the Opium Act, 1878, particularly its character as a regulatory provision versus a taxing provision.
Whether Section 5 involves an impermissible delegation of legislative power by the State Government.
The applicability of Article 372 of the Constitution to pre‑constitutional statutes and rules made thereunder.

Legislation cited

Constitution of Indias. Article 372
Dangerous Drugs Act, 1930s. 5, s. 7
Dangerous Drugs (Import, Export and Transhipment) Rules, 1957s. Rule 6, s. Rule 7, s. Rule 8, s. Rule 9
Madhya Pradesh Poppy Husks Rules, 1959s. Rule 3(A), s. Rule 5, s. Rule 6, s. Rule 8
Opium Act, 1878s. 4, s. 5
Sea Customs Act, 1878s. 3A

Subjects

Opium ActDangerous Drugs ActExport dutyExcise lawArticle 372Pre‑constitutional legislationDelegation of legislative powerRegulatory feeString of movementsExport from India

Judgment

A ORGANON (INDIA) LTD. (NOW KNOWN AS INFER
(INDIA) LTD.) AND ANR.
v.
THE COLLECTOR OF EXCISE AND OTHERS

JULY 22, 1994
B
(M.M. PUNCHH!, S.C. AGRAWAL AND B.P. JEEVAN REDDY, H.]

Excise Law-Opium Act 1878-Section !r-Va/idity of-{lpheld.

C Movement of Opium-From one State to another in the course of
export across the frontier of India-Held, is an export within the meaning of
the Opium Act and not under the Dangerous Drngs Act 193()-ffence, levy of
excise duty by State valid.

M.P. Poppy Husks Rules, 195'>-Rules 3A, 5, 6 & 8 provisions imposing
D duty on opiunt-Held, primary pwpose regulatory and not collection of
revenue hence peifectly valid.

Constitution of Indi"a, Article 372-Schedule VII-Entry 24 of List-II
Entry 19 of List-Ill-Opium Act, 1878 M.P. Poppy Husks Rules, 195f)-/feld,
E preconstitutional Aci-Saved by the Constitution-Hence, rnles made there-
under valid.

Administrative Law-Opium Act, 1878-Sections 4, 5-Delegation of
powers-Essential functions-Provision not to be faulted as conferring Rule
making power without layfr1g down any policy-Held, scheme of the Act
F furnishes adequate guidance to the State.

The appellant obtained a wholesale licence under Rules S and 6 or
the M.P. Poppy Husks Rules, 1959 in the year 1974. In pursuance of a
'certificate of official approval of import' granted by Dutch authorities,
. the appellant entered into a contract for sale of Poppy Husks to a Dutch
G buyer. The appellant obtained the 'official authorisation or export' from
the office or the Narcotics Commissioner, with reference to the Import
Certificate granted by Dutch authorities. The export authorisation
specified that the said goods shall be exported through the Customs
House, Bombay, by sea, to Holland within three months from the date or
H issue or the said authorisation.
50
INFER (I) LTD. v. COLLECTOR OF EXCISE 51

The appellant then applied to the Collector of Excise, Mandsaur, A
Madhya Pradesh for grant of permission to transport the said goods from
Madhya Pradesh to Bombay for the purpose of exporting it to Holland.
The appellant claimed that no excise duty is Ieviable or payable under the
Rules of 1959 inasmuch as the Poppy Husks will be despatched from
Madhya Pradesh for export across customs frontier of India. The Collec-
B
tor of Excise declined to grant any permit without payment of duty under
the Rules of 1959.

The appellant filed writ petitions in the High Court for directing the
Collector of Excise to grant permit without payment of duty. In one of the
petitions the High Court granted interim relief subject to the condition of C
the appellant furnishing a bank guarantee in favour of the Registrar of the
High Court. Finally, the writ petitions were dismissed by a Division Bench.

On appeal before this Court, it was contended (1) that inasmuch as
the movement of poppy husks from Mandsaur district in Madhya Pradesh
to Bombay port for export to Holland is part of one single integrated D
transaction it is a case of nexport from India" within the punriew of
Dangerous Drugs Act, 1930 and therefore outside the purview of Opium
Act (2) that the levy of export duty by the Collector of Excise is incom-
petent; (3) that Section 5 of the Opium Act is in effect ataxiug provision
and relying on the principles in Sundera Ramiers, [1958] SCR 1422 case the E
parliament is not competent to levy duty on opium; (4) that it cannot be
said that the duty of excise is levied by the State in this case in as much
as the said Rules are made by the State as a delegate of the parliament;
(5) that the levy cauuot be justified even on the ground of being a "price
for parting with the privilege" and in any event the theory has been
negatived in Synthetics and Chemicals [1990] 1 SCC 109 case; (6) that the F
duty cannot be justified as a regulatory fees (7) that the duty is excessive
(8) and that Section 5 is void on the ground of excessive delegation of
legislative power, (9) Since no guidance is provided by the Act and it was
open to the State Govt. to prescribe such rate of duty as it thinks ap-
propriate as has been held in M/s Rameshwar Prasad Krishan Gopal's, G
(1973) Tax Law Reporter 2503 : 73 All L.J. 739 case by the Allahabad High
Court.

Dismissing the appeals, the court

HELD : 1. The movement of Poppy Husks from Mandsaur district in H
52 SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A Madhya Pradesh to the Bombay port in Maharashtra Is an export within
the meaning of the Opium Act, 1878. The 'export from India' begins only
from the port of Bombay and is covered by the Dangerous Drugs Act, 1930.
These two movements are governed by two different enactments and a case
of 'string of movements'. The appellant cannot disown the liability to pay
B the said export duty levied under Rule 3-A read with Rule 8 of the M.P.
Poppy Husks Rules, 1959 on the ground that it Is one single movement
commencing in Mandsaur and terminating in Holland. (64-A, B, 66-C]

Mohd. Serajjuddin v. State of Orissa, (1975] 2 SCC 4, relied on.

C 2. The primary purpose of Sectio'! 5 is controlling and regnlating the
possession, transport, import/export and sale of opium and not collection
of revenue - though the relevance and validity of the said purpose is
undeniable in the case of noxious goods. (69-B]

Sunderaramier M.P. v. State of A.P., (1958] SCR 1422; Synthetics and
D Chemicals Ltd. v. State of U.P., (1990] 1 SCC 109 and Cooveljee B.
Bharucha v. Excise Commissioner, Ajmer & Ors., AIR (1954) SC 220, relied
on.

3. Section 5 of the Act does not purport to levy duty of excise but it
only purports to empower the State Government to make rules to permit
E possession, export etc. of opium subject to such conditions as it may think
appropriate to impose including the payment of an amount (duty). (71-E]

4. The duty provided by Rule 3 (A) read with Rule 8 of the Madhya
Pradesh Poppy Husks Rules is perfectly within the four corners of Section
F 5. (71-HJ

5. The so-called duty is not excessive. Even if it is so, the idea
underlying the provisions is to make possession and dealings in opium
prohibitive and commercially a non-paying proposition. [72-A,C]

6. The Opium Act is a law preceding the Government of India Act,
G
1935 and is saved by Article 372 of the Constitution. Hence, the Rules made
by the 1959 Rules under Section 5 of the Act of 1878 are equally within the
protection. (72-D, 74-E]

South India Corporation Pvt. Ltd. v. Secretary, Board of Revenue, AIR
H (1964) SC 207 and Sardar lndu Singh v. The State of Rajasthan, (1957] SCR
INFER (I) LTD. v. COLLECTOR OF EXCISE 53

· 605 at 619-620, relied on. A
Kanyani Stores v. State, [1966) l SCR 865, distinguished.

7. Section 5 is a continuation or Section 4 and it merely empowers
the State Government to lift the prohibition on the possession, transport,
import/export and sale or Opium in such cases as it deems appropriate B
and subject to such conditions, as it may deem fit to impose including
payment or an amount. The Scheme or the Opium Act furnishes adequate
guidance to ihe State Government. [76-G, 77-B)

Hari Shankar Bag/a & Anr. v. State of M.P., [1955) l SCR 380 and C
State of Tamil Nadu v. Hind Store, [1981) 2 SCR 742, relied on.

Devi Dass Gopal Kris/tan v. State of Punjab, [1967) 3 SCR 557,
distinguished.

8. Section 5 cannot be faulted either on the ground that it delegates D
essential legislative £unctions to the State Government or on the ground
that it confers rule making power upon the State Government without
furnishing any guidance and without laying down any policy in that behair.
[78-F]
Mis Rameshwar Prasad Kishan Gopal & Ors. v. The State of U.P. etc., E
1973 Tax Reporter 2503 : 73 AW 739, distinguished.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 230-233
of 1977.

From the Judgment and Order dated 21.10.76 of the Madhya F
Pradesh High Court in W.P. Nos. 6253/74, 490/75, 367 & 90 of 1974.

Dr. Shankar Ghosh, Pallav Shishodia, A.K. Sil, G. Joshi and G.
Kandpal for the Appellants in C.A. Nos. 230-31/77.

H.N. Salve, Pallav Shishodia, A.K. Sil, G. Joshi and Mrs. Sunanda G
Ray for the Appellants in C.A. Nos. 232-33/77.

Joseph Vella Patti, Ashok K. Srivastava, S.V. Deshpande, Salish K.
Agnihotri and C.V.S. Rao for the Respondents.

The Judgment of the Court was delivered by H
54 SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A B.P. JEEVAN REDDY, J. In these appeals, validity of Section 5 of
the Opium Act, 1878 and of certain Rules made thereuuder by the Madhya
Pradesh Government is called in question. Though the Opium Act, 1878
has since been repealed by Section 82 of the Narcotics Drugs and
Psychotropic Substances Act, 1985, things done under the repealed Act are
saved and continued under the 1985 Act. We shall first state the relevant
B
facts.

The appellant-company obtained a whole-sale licence in Form No.I
under Rule 5 read with Rule 6 of the Madhya Pradesh Poppy Husks
Rules, 1959 in February and March, 1974. In the month of March, 1974, it
c entered into a contract with M/s. Veregngde Pharmacutiscbe Fabricken
B.V. Kloosterstreat 6 oss Holland (hereinafter referred to as the 'Dutch
buyer') for supplying to the Dutch buyer 1000 metric tonnes of poppy
husks. This contract was entered into in pursuance of "certificate of official
approval of import" dated April 5, 1973 granted by the Dutch authorities
D in favour of the said Outch buyer to purchase/import 1,000,000 kilograms
of poppy husks from the appellant on or before 31st August, 1974. The
appellant in turn obtained the "Official authorisation of export" from the
Office of th~ Narcotics Commissioner, Government of India permitting him
to export 1,000 metric tonnes of poppy shells {broken and crushed) to the
aforesaid Dutch buyer. This certificate dated 14th March, 1974 refers
E specifically to the aforementioned Import Certificate dated 5th April, 1973
issued by the Dutch Authorities. It further specifies that the said goods
shall be exported through the Customs House Bombay, by sea, to Holland
within three months from the date of issue of the said Authorisation. On
March 30, 1974, the appellant applied to the Collector of Excise, District
F Mandsaur, Madhya Pradesh for grant of permission to transport the said
quantity of poppy husks from Madhya Pradesh. In this application the
appellant stated the following facts : the appellant bolds a wholesale licence
granted under Rules 5 and 6 of Madhya Pradesh Poppy Husks Rules, 1959.
It has received an order from the aforesaid Dutch buyer for supply of 1,000
tonnes of poppy husks in Holland. In pursuance of the said order, the
1
G appellant has to despatch from Mandsaur poppy husks of the said quantity '
for transportation across Indian customs frontier to Holland. The appellant
has obtained the export authorisation dated 14th March, 1974 from the
Narcotics Commissioner of India for despatch of the said poppy husks to
Holland - a copy of which is enclosed. The Dutch buyer has also obtained
H the permit from the Dutch Government on 5th April, 1973 for the import
INFER (I) LID. '"·COLLECTOR OF EXCISE [JEEVAi'I REDDY, J.] 55

of the said goods. The Dutch buyer h~s also arranged for a ship to call at A
the Bombay Port on 5th June, 1974 for taking delivery of the said consign-
J
ment of poppy husks. Accordingly, the appellant is applying "for permission
to transport and for the despatch of the said consignment of poppy husks
of 1,000 tonnes from Madhya Pradesh for th<; purpose of executing the said
order ...... " Inasmuch as the said consignment of poppy husks will be B
despatched fron1 Madhya Pradesh for export across customs frontier of
India, no excise duty is leviable or payable under the Madhya Pradesh
Poppy Husks Rules and hence, no amount is remitted alongwith the
application. The appellant requested for grant of permit urgently so as to
fulfil the contract within the specified date.
c
On April 15, 1974, the Collector of Excise, Mandsaur intimated the
appellant that permission to transport poppy husks from Mandsaur District
to the Port of Bombay would be granted only on payment of the export
duty under and in accordance with the Madhya Pradesh Poppy Husks
Rules. He declined to grant any such permit without payment of duty.
D
On April 16, 1974, the appellant approached the Madhya Pradesh
High Court for issuance of a writ of mandamus and other appropriate writs
directing the Collector of Excise, Mandsaur to grant the permit applied for
without insisting on the payment of the export duty as demanded by him.
In fact more than one writ petition was filed by the appellant before E
different Benches of the said High Court. In one of the writ petitions, an
interim order was granted directing the Collector of Excise, Mandsaur to
permit the export without collecting the export duty but subject to the
condition of the appellant furnishing a bank guarantee for the said amount
in favour of the Registrar of the High Court. No such interim order was F
granted in other writ petitions. The writ petitions were heard and dismissed
by a Division Bench on 21st October, 1976, against which the appellant
approached this Court. Leave was granted on January 28, 1977. Interim
orders were passed from time to time permitting the appellant m export
poppy husks to Holland either on furnishing bank guarantee or on deposit
of a part of the export duty, as the case may be. G

The main issue in these appeals is whether the State of Madhya
Pradesh and its authorities are entitled in law to levy and collect 'duty' as
a condition for permitting the export of poppy husks from Madhya Pradesh
when the said export is not an export from one State to another State within H
56 SUPREME COURT REPORTS (1994] SUPP. 2 S.C.R.

A India but an export across the customs frontier of India, i.e., export to
Holland?

Opium is a noxious drug. It is dangerous to the health of human
beings. The cultivation and trade in opium. leads to problems of law and
order. Over the last few decades, the trade in such drugs has become
B intertwined with crime t!"anscending national borders. With a view to
control cultivation, possession, transport and sale of opium and its deriva-
tives, the Opium Act, 1857 was enacted. A few years later Opium Act, 1878
was enacte~. (In these appeals we are not concerned with the 1857 Act but
only with the later Act. All references hereafter to Opium Act mean
C references only to the 1878 Act). The provisions of the Opium Act have
undergone several amendments, alterations and adaptations over the years.
We need not, however, notice all of them except those effected in 1930 and
thereafter.

D India was a State signatory to the Convention relating t,o dangerous
drugs held at Geneva in the year 1925, whercunder the contracting parties
resolved to take further steps to suppress the contraband traffic in and
abuse of dangerous drugs, especially those derived from opium, Indian
hemp and coca leaf, as set out in the said Convention. Accordingly, the
Dangerous Drugs Act, 1930 was enacted. Since by that time the Opium
E Act was already in operation, it was simultaneously amended so as to make
both the enactments, viz., Opium Act and t!ie Dangerous Drugs Act, 1930
complimentary to each other, occupying different fields. Of course the
Dangerous Drugs Act deals not only with opium but also certain other
dangerous drugs. [The expression "dangerous drug" is defined to include
F coca leaf, hemp and opium and all manufactured drugs - Section 2(h)]. It
would be appropriate at this stage to notice the provisions of both the
enactments insofar as they pertain to opium.

The expression 'opium' has been defined in identical terms in both
the enactments, viz., Section 3 of the Opium Act and clause (e) of Section
G 2 of the Dangerous Drugs Act with a slight difference. We shall set out the
said definition from the Opium Act, underlining the portion which is not
found in the definition in the Dangerous Drugs Act, 1930 :

"3. In this Act, unless there be somet.hing repugnant in the subject
H or context, -
INFER(!) LTD. v. COLLECTOR OF EXCISE [JEEVAN REDDY, J.) 57

"Opium" means- A

(i) the capsules of the poppy (Papaver somniferum L.), whether
in their original forrn or cut, crushed or powdered, and whether
or not juice has been extacted therefrom;

(ii) the spontaneously coagulated juice of such capsules which has B
not been submitted to any manipulations other than those neces-
sary for packing and transport; and

(iii) any mixture, with or without neutral materials, of any of the
above forms of opium,
c
but does not include any preparation containing not more than 0.2
per cent of morphine, or a manufactured drug as defind in section
2 of the Dangerous Drugs Act, 1930."

The expressions 11 import 11 and 11 export" have been defined in the D
Opium Act to "mean respectively to bring into, or take out of, a State
otherwise than across any customs frontiers". "Customs frontiers" is defined
to mean "any of the customs frontiers of India as defined by the Central
Government under section 3A of the Sea Customs Act, 1878."

Two other expressions defined in the Opium Act are "transport" and E
"sale". They read as follows :
1111
Transport11 meaus to remove from or..e _pla~e to another within
the same State.

"Sale" does not include sale for export across customs frontiers. F
and "sell" shall be construed accordingly."

The expression 'opium derivative' is defined in clause (f) and the
expression 'manufactured drug' in clause (g) of Section 2 of the Dangerous
Drugs Act. (These expressions are not defined in the Opium Act.) It is not
necessary to notice the said definitions inasmuch as it is stated before us G
by counsel for both the parties that poppy husks fall within the expression
'opium' and do not fepresent opium derivative or manufactured drug as
defined in the Dangerous Drugs Act. Clause (i) of Section 2 of the
Dangerous Drugs Act defines 11 to import into India 11 to mean 11 to bring into
. lndia by land, sea or air across any of the customs frontiers defined by the H
58 SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A Central Government" and as including "the bringing· into any port or place
in Ir.dia of a dangerous drug intended to be taken out of India without
being removod from the ship or conveyance in which it is being carried".
Clause (k) defines the expression "to export from India" to mean "to take
out of India by land, sea or air across any of the said customs frontiers".
Clauses G) and (1) define the expressions "to import inter-provincially" and
B "to export inter-provincially" to mean to bring into or to take out of a State,
as the case may be, otherwise than across any of the said customs frontiers.
Clause (m) defines the expression "to transport" as meaning taking out
from one place to another in the same State.

C Now, coming to the substantive provisions central to both enact-
ments, in so far as opium is concerned, the following is the position :

Section 4 of the Opium Act (notwithstanding the heading of the
section which does not appear to have been amended correspondingly
while amending the body of the section) deals only with possession,
D transport, import, export and sale of opium. It would be appropriate to set
out Section 4 of Opium Act. It reads :

"4. Except as permitted by this Act, or by any oti)er enactment
relating to opium for the time being in force, or by rules framed
under this Act or under any such enactment, no one shall -
E
(a) possess opium;
(b) transport opium;
(c)ir,.port or export opium; or
(d) sell opiuni."
F
Correspondingly, Dangarous Drugs Act deals with cultivation of
poppy and manufacture of opium (Section 5) import into India and export
from India and transhipment of any dangerous drug (Section 7) - matters
which are not dealt with by the Opium Act. It would be appropriate to set
out Sections 5 and 7 of the Dangerous Drugs Act :
G
"S. Control of Central Government over production and supply of
opium- (1) No one shall -

(a) cultivate the poppy (Papavar somniferum L.) or

H (b) manufactured opium, save in accordance with rules made
INFER (I) LTD. v. COLLECTOR OF EXCISE [JEEVAN REDDY, J.) 59

under sub-section (2) and with the conditions of any licence for A
that purpose which he may be required to obtain under those rules.

(2) The (Central Government)* may make rules permitting and
regulating the cultivation of the poppy (Paperver somniferum L.)
and the manufacture of opium, and such rules may prescribe the
form and conditions of licences for such cultivation and manufac- B
ture, the authorities by which such licences may be granted, the
fees that may be charged therefore, any other matter requisite to
render effective the control of the [Central Government] over such
cultivation and manufacture.
c
(3) The [Central Government] may also make rules permitting and
regulating the sale of opium from Government factories for export
or to [State Governments) or to manufacturing chemists.

"7. Control of Central Government over operations at land and
sea frontiers.- (1) No one shrul- D
(a) import into India,

(b) export from India or

(c) tranship E

any dangerous drug, other t.han prepared opium, save in accord-
ance with rules made under sub-section (2) and with the conditions
of any licence for that purpose which he may be required to obtain
under those rules.
F
(2) The Central Government may make rules pernuttmg and
regulating the import into and export from India and the tranship-
ment of dangerous drugs, other than prepared opium, and such
rules may prescribe the ports or places at which any kind of
dangerous drug may be imported, exported, or transhipped, the G
form and conditions of licences of licences for such import, export
or transhipment, the authorities by which such licences may be
granted, the fees that may be charged therefor, and any other
matter requisite to render effective the control of the Central

(a) Substituted for ttGovemor·Gcncral in Council" by A.O .. 1937. H
60 SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A Government over such import, export and transhipment."

Each Act contains machinery provisions providing for regulation,
control and other allied and incidental matters relevant to the field covered
by oach of them:

B It is thus clear that while the Opium Act defines 'import' and 'export'
as meaning bringing into or taking out of State otherwise than across any
customs frontiers, the Dangerous Drugs Act deals with import into India
and export from India across customs frontiers. Evidently, with a view to
avoid any confusion, while the Opium Act uses the expression 'import' and
C 'export' the Dangerous Drugs Act spe~ks of 'to import into India' and 'to
export from India'. The expression "transport" has been defmed in identical
terms under both the enactments' it means removal of opium from one
place to another within the same State. "Transhipment' referred to in
Section 7 evidently means transhipment in the course of or as part of
import into India or export from India, as the case may be. The two
D enactments thus operate in two distinct, though complimentary, fields so
far as opium is concerned. In the interest of clarity, it may be stated that
so far as the manufactured opium and opium derivatives are concerned, all
its aspects including possession, sale, export, import whether from one
State to another in India or across the customs frontiers are governed by
E the Dangerous Drugs Act alone.

Section 5 of the Opium Act empowers the State Government to make
rules regulating the possession, transport, import, export and sale of opium
subject to payment of duty or subject to such other conditions, as it may
impose. In view of the contentions urged .before us, it is necessary to set
F out Section 5 in its full entity :

'The State Government may, from time to time, by notification in
the Official Gazette, make rules consistent with this Act, to permit
absolutely, or subject to the payment of duty or to any other
conditions, and to regulate, within the whole or any specified part
G
of the territories administered by such Government, all or any of
the following matters : - •
(a) the possession of opium;

H (b) the transport of opium;
INFER (I) LTD. v. COLLECTOR OF EXCISE [JEEVAN REDDY, J.] 61

(c) The importation or exportation of opium; and A

(d) the sale of opium and the farm of duties leviable on the sale
of opium by retail:

Provided that no duty shall be levied under any such rule on
any opium imported and on which a duty is imposed by or under B
the law relating to sea-customs for the time being in force or under
the Dangerous Drugs Act, 1930."

Section 13 empowers the State Government to frame Rules regarding
disposal of things confiscated and rewards. C

In exercise of the powers conferred by Section 5 (read with Section
13) of the Opium Act, 1878, the Government of Madhya Pradesh framed
the Rules called "Poppy Husks Rules, 1959". Rule 2(e) defines "poppy
husks" to mean "such capsules of cleft, cut- open, crushed and powdered
poppy seeds as have been drained of juice". Rule 3 prohibits possession of D
poppy husks of more than specified quantity. Rule 3(A) prescribes the duty
chargeable on export of poppy husks. It is 25 paise per kilogram upon
export (despatch out) of poppy husks and 50 paise per kilogram upon sale
by a wholesale licence holder. Rule 4 prohibits sale of poppy husks other-
wise than in accordance with a permit or licence granted under the Rules. E
Rule 5 prescribes the Collector as the licencing authority. Rule 8(1) says
that "none other than the wholesale licence holder shall export (i.e.
-;
despatch out) poppy husks". For snch export, application for licence has
to be made to the Collector and the duty paid in advance at the rates
prescribed by Rule 3(A), i.e., alongwith the application for licence. It is
not necessary to refer to other Rnles except to say that they seek to regulate F
and monitor the movement, export and import of opium.

Rules have also been framed by the Central Government under
Section 7 of the Dangerous Drugs Act called "Dangerous Drugs (Import,
Export and Transhipment) Rules, 1957". Rule 2(2) defines "Narcotics G
Commissioner" as the narcotics Commissioner appointed by the Govern-
) ment of Indfia. Part-IV of the Rules deals with export by sea, land or air.
Rule 6, which is the first Rule occurring in this part, says that no dangerous
drugshall be exported from India by sea, land or air without cbtaining an
export authorisation from the competent authority. Rule 7 says that "save
as provided in Rule 10, dangerous drugs, other than those mentioned in H
62 SUPREME COURT REPORTS (1994] SUPP. 2 S.C.R.

A sub-rule (2) of Rule 6, shall not be exported by sea from India except under
an authorisation granted in accordance with Rule 8 and from a port
appointed for the purpose in Rule 9". Rule 8 says that the export authorisa-
tion contemplated by Rule 7 shall be granted by the Narcotics Commis-
soner and that except in the case of special permission of tho Central
Government, the export of opium shall be on behalf of the Central Govern-
B ment. Rule 9 prescribes that opium shall be exported by sea only from two
Ports, viz., Bombay and Calcutta. Rules 11 and 12 deal with export by land
while Rules 13, 14 and 15 deal with export by air. Rule 17 in Part-V deals
with transhipment. (This Rule incidentally makes it clear that transhipment
contemplated by the Rules is transhipment in the course of or as part of
c import into or export from India.)

We shall first deal with the contention of Sri Salve, learned counsel
for the appellant that inasmuch as the movement of poppy husks from
Mandsaur district in Madhya Pradesh to Bombay Port for export to
D Holland is part of one single integrated transaction, it is a case of 'export
from India' within the meaning of Section 2(k) and Section 7 of the
Dangerous Drugs Act and, therefore, outside the purview of the Opium
Act. Counsel submitted that first the Dutch buyer obtained the import
permit from the Dutch authorities for importing the said quantity of poppy
husks from the appellant. Correspondingly, the appellant applied for and
E obtained an export authorisation from the Narcotics Commissioner for
exporting the said quantity from Mandsaur district in Madhya Pradesh to
the said Dutch buyer. On the basis of the export authorisation issued by
the Narcotics Commissioner and the permit for import granted by the
Dutch authorities, the appellant applied to the Collector of Excise,
F Mandsaur for grant of export permit. It was thus not a case of export from
Madhya Pradesh to Maharashtra. As per Rules, the poppy husks' packages
could not be opened in Maharashtra. In fact, the very same packages
transported from Madhya Pradesh were to be loaded on to the ship without
breaking bulk and the same packages reached Holland. Thus, there is a
continuity and unit of movement. Indeed, there is no sale of poppy husks t
G in Madhya Pradesh; the only sale being to the Dutch buyer. The permit l
issued by the Collector of Excise, Mandsaur and the permit issued by the •
Maharashtra Excise Authorities must all be read as part and parcel of one
single transaction covered by the import permit issued by the Dutch
authorities and export authorisation granted by the Narcotics Commis-
H sioner. All these permits dovetail into one another and represent one
INFER (I) LTD. v. COLLECTOR OF EXCISE [JEEVAN REDDY, J.) 63

unbroken, continuous movement. The levy of export duty, therefore, by the A
Collector of Excise, Mandsaur under the Rules made under Section 5 of
the Opium Act is incompetent. The Opium Act itself has no application to
the said transaction. The only Act applicable is the Dangerous Drugs Act
- says the learned counsel.
B
For a proper appreciation of the said contention, it is necessary to
reiterate certain features of both the said enactments. Section 5 of the
Opium Act empowers the State Government to do two things, viz., (i) to
make Rules permitting absolutely or subject to the payment of duty or to
any other conditions, the possession, transport, import/export and sale of
opium and (ii) to make Rules regulating the aforesaid matters relating to C
opium in the whole or any specified part of the territories administered by
such Government. The matters specified in the Section 5 are the very same
as are specified in Section 4, viz.i possession, transport, import/export and
sale. (We have already pointed out that import and export as defined in
the Opium Act does not mean import into or export from India but import D
into or export out of a particular State otherwise than across any customs
frontiers.) In other words, Section 5 empowers the State Government to
permit inter alia export of opium subject to such conditions, including
payment of duty, as it may deem appropriate to impose, as part of control
and regulation over opium. Another feature to note is that import or
export, as defined in the Opium Act, does not necessarily involve the E
element of sale. It is not necessary that the import or export should be
occasioned by or result in a sale. Mere movement from one State to
another is sufficient to constitute export or import, as the case may be,
within the meaning of the Act so long as such movement is not across the
customs frontiers. (Sale of opium is dealt with separately from import/ex- F
port under Sections 4 and 5.) Now coming to the other Act, taking opium
out of India across the customs frontiers is 'export from India' within the
meaning of the Dangerous Drugs Act and is governed by Section 7 of the
Dangerous Drugs Act and the Rules made thereunder. The Rules under
the Dangerous Drugs Act, referred to hereinbefore, specifically provide G
only two Ports from which opium can be exported by sea. They are Bombay
and Calcutta. Therefore, any opium to be exported by sea has to first reach
either Bombay or Calcutta. Thus, while movement within India from one
State to another (not involving crossing of any customs frontiers) is
governed by the Opium Act, the movement across the customs frontiers is
governed by the Dangerous Drugs Act. In all these matters, the element H
64 SUPREME COURT REPORTS [1994} SUPP. 2 S.C.R.

A of sale is irrelevant. It is not one of the requirements. Mere movement of
goods is enough. The movement may be the result of 3ale or may not be;
that is immaterial. Therefore, so far «S the movement of poppy husks from
Mandsaur district in Madhya Pradesh to the Bombay Port in Maharashtra
is concerned, it is an export within the meaning of the Opium Act. It is
export from the State of Madhya Pradesh to the State of Maharashtra. The
B 'export from India' begins only from the Port of Bombay and is governed
by the Dangerous Drugs Act. These two movements may be parts of the
same transaction but so far as law is concerned, they are two different
movements governed by two different enactments - a case of 'string of
movements', if we may borrow the expression with a slight adaptation from
C the decision of this Court in Mohd. Serajuddin v. State of Orissa, [1975] 2
S.C.C. 47. the two movements are links in the same chain but each subject
to a different law. As a matter of fact, the principle of Serajuddin has a
close bearing upon the question at issue herein.

D Let us first examine the principle of Serajuddin. The appellant had
entered into four contracts for sale of chrome concentrates. Two of them
were directly with the foreign buyers. The other two were with the State
Trading Corporation since export of mineral ores was camJised through
the said Corporation. The State Trading Corporation in turn entered into
contracts with the foreign buyers. So far as the first two contracts entered
E into directly wiih foreign buyers were concerned, it was held by the High
Court itself that they were sales in the course of export within the meaning
of Section 5 of the Central Sales Tax Act [before the insertion of sub-sec-
tion (3) therein]. But so far as the two contracts entered into with State
Trading Corporation were concerned, it was held that they were not export
p sales since the sales were to the State Trading Corporation and because
the State Trading Corporation had in turn entered into separate contracts
with the foreign buyers. The said view was challenged by the appellant in
this Court. It was argued by the appellant that the said two sales too were
really sales to the foreign buyers through the instrumentality and agency of
the State Trading Corporation - which was termed as an 'agent of necessity'
G - and hence, export sales. This cc.urt (by majority) rejected the said
contention holding inter a/ia :

"The appellant sold the goods directly to the Corporation. The
circumstance that the appellant did so to facilitate the performance
H of the contract between the Corporation and the foreign buyer on
INFER (I) LID. v. COLLECTOR OF EXCISE [JEEVAN REDDY, J.] 65

terms which were similar did not make the contract between the A
appellant and the Corporation the immediate cause of the export.
The Corporation in regard to its contract with the foreign buyer
entered into a contract with the appellant to procure the goods.
Such contracts for procurement of goods for export are described
in commercial parlance as back to back contracts. In export trade B
it is 1101 u1111atural to fi11d a stri1tg of contracts for export of goods. It
is 01tly tile co11tract w/Jic/J occasions the export of goods which will
be elltitled to exemptio11. The appellant was made under no con-
tractural obligation to the foreign buyer either directly or indirect-
ly. The rights of the appellants were against the Corporation.
Similarly the obligations of the appellant were to the Corporation. C
The foreign buyer could not claim any right against the appellant
nor did the appellant have any obligation to the foreign buyer. All
acts done by the appellant were in performance of the appellant's
obligation under the contract with the Corporation and not in
performance of the obligations of the Corporation to the foreign D
buyer."

It was further observed by the majority that :

"The expression "sale" in Section Sof the Act has the same meaning
as in Sale of Goods Act. String contracts or chain contracts are E
separate transactions even when there is similarity relating to quantity,
quality of goods, shipment, sampling and analysis, weighment and
force majeure etc. or other similar tenns. A Contract of sale is a
contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer for the money collsideration called F
the price. There were two separate contracts. The price was
different in the two contracts. This difference also dissociates the
two contracts from each other. The High Court was right ill holding
that the sales of the appellant to the Corporation were exigib!e to

.
;.
tax because the appellant's sales to the Corporation were not sales
in the course of export." G

Since Serajuddin arose under the Sales Tax enactments, the central
concept was the sale of goods, whereas in the enactments concerrted
herein, we are concerned with the movement of opium and not with its
sale, as explained hereinbefore. If we read the expressi'on '~ovement' in H
66 SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A the place of expression 'sale' in the aforesaid passages from Serajuddin, the
matter will become self-evident. It would be a case of string of movements
- links in a chain of movement. There would be separate movements even
where there is similarity relating to quantity and quality of goods, shipment,
sampling and analysis. It would thus be a case of string of movements
B ·resulting in export of opium. It is only the movement of goods across the
customs frontiers that constitutes the 'export from India' and not the earlier
movements. The earlier movements, i.e., from one State to another within
India not involving crossing of customs frontiers would be governed by the
Opium Act and if the Opium Act provides for levy of export duty on such
export, it has to be paid. The appellant cannot disown the liability to pay
c the said export duty levied under Rule 3(A) read with Rule 8 of the
Madhya Pradesh Poppy Husks Rules, 1959 on the ground that it is one
single movement commencing in Mandsaur and terminating in Holland. So
far as the Collector of Excise, Mandsaur is concerned, the permit granted
by him is governed by Rule 8 of the Madhya Pradesh Poppy Husks Rules,
D in Form P-H .. It is true that he would not have granted such pormit unless
the appellant had produced the export authorisation from lhe Narcotics
Commissioner, Government of India but that only shows that the said
export authorisation is the basis for grant of export permit by the Collector.
It does not mean that the export permit granted by the Collector is not an
E independent permit. The Collector's permit is limited and operative within
the four corners of the Opium Act and the Rules made thereunder. He
cannot grant a permit for export of opium from India. It is equally relevant
to notice that the Authorisation of export issued by the Narcotics Commis-
sioner mentions 'Bombay' against the Column "(e) Name of the customs
house through which export is to be effected" and under clause (g), which
F
requires the route to be followed by the goods to be specified, it says "Bombay
to Holland". It does not refer to the presence of poppy husks within Madhya
Pradesh or Mandsaur district nor does .it say from where the poppy husks
should be moved or transported to Bombay. This shows that while the
Narcotics Commissioner is concerned only with the movement of goods from
G Bombay across the customs frontiers, by sea, to Holland, it is the Collector
of Excise, Mandsaur, who is concerned with the movement of the said poppy
husks from Mandsaur district in Madhya pradesh to a place beyond Madhya
Pradesh. As a matter of fact, even for movement within the State of
Maharashtra, i.e., from the Madhya Pradesh-Maharashtra border to the Port
H of Bombay, a pemtit had to be and was obtained from the Maharashtra
INFER (I) LTD. v. COLLECTOR OF EXCISE (JEEVAN REDDY, J.] 67

Excise Authorities. The Shipping Bill (found at P.172 of Vol.-V) furnished by A
the appellant also refers only to the export authorisation granted by the
Narcotics Commissioner from Bombay to Holland and not the prior move-
ment. Indeed, it may be said that Narcotics Commissioner was not strictly
concerned from which place was the appellant to procure the said quantity
for being shipped from the Port of Bombay though it is true, he would not B
have granted the said export authorisation unless he was satisfied that such
quantity was available at some place in India for fulfilling the said export
obligation. 171e Narcotics Commissioner, who is a creature of the Dangerous
Drugs Act could not have pemiitted or awhorised the movemeni of poppy
husks from Madhya Pradesh (Mandsaur district) to Bombay Port, since the
Dangerous Drugs Act does not deal with or govern that aspect. under the C
export authorisation granted by the Narcotics Commissioner, the appellant
could not have moved the poppy husks from Madhya Pradesh to any other
place within the country; the export authorisation does not purport to
authorise such movement. There is no provision in the Dangerous Dmgs Act
saying either expressly or by necessary implication that an export of opium D
within the meaning of Opium Act shall cease to be an export under the said
Act, if that export fonns part of 'export from India' as defined in and dealt
with by the Dangerous Drugs Act. These are two Acts which operate in two
distinct spheres and respect each other's jurisdiction. The anJendments ef-
fected in Opium Act in 1930 simultaneously with the enactment of Dangerous
Drugs Act were nteant to achieve this precise purpose. We are, therefore, of E
the opinion that the appellant cannot refuse to pay the export duty prescribed
by Rule 3-A read with Rule 8 of the Madhya Pradesh Poppy Husks Rules on
the ground that the movement of poppy husks from Madhya Pradesh was
really an integral part of the export of the said quantity from India, i.e., beyond
the customs frontiers of India to Holland. F

The next contention of Sri Salve pertains to the validity of levy of
duty (export duty in this case) under the Rules made by the Madhya
Pradesh Government under Section 5 of the Opium Act. The learned
counsel contends that Section 5 is in truth and in effect a taxing provision. G
The Parliament is not competent to levy duty (tax) on opium. Entry 59 of
List-I or for that matter Entry 19 of List-III does not encompass the power
to levy duty on opium. For this proposition, he relies upon the principle
enunciated in Sunderaramier, M.P. V. v. State of Andhra Pradesh, (1958]
S.C.R. 1422. The learned counsel contends that power to levy duty of excise
on opium is the exclusive province of the StateE under Entry 51 of List-II. H
68 SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A The duty levied in th;, case, it is ture - says the counsel - is levied under
the rules made by the Madhya Pradesh Government but on that account
it cannot be said to be a duty of excise levied by the State inasmuch as the
said Rules are made by the State Government as a delegate of the Parlia-
ment. Only a State Legislature can levy the duty of excise by means of a
B law made by it. The learned counsel submits that the said levy cannot be
justified even on the ground of being a 'price for parting with the privilege'
evolved by this Court in matters relating to intoxicating liquors. The said
theory, the learned counsel contends, has in any event been negatived by
this Court in Synthetics and Chemicals Limited v. State of Uttar Pradesh,
[1990] 1 S.C.C. 109. The power of regulation conferred by the said section
C cannot also warrant the levy of duty of excise nor can the duty be justified
as a regulatory fees, says the counsel.

The first question that arises is whether Section 5 is a taxing provision
? We think not. Section 5 is really a continuation of Section 4. Section 4,
D as it stands after the amendments in 1930, prohibits the possession,
transport, import/export and sale of opium by any one except as permitted
by the said Act or by any other enactment relating to opium for the time
being in force or by the Rules framed under the Opium Act or any such other
enactment. As stated hereinbefore, opium is a noxious drug. It is dangerous
to health. Addiction to opium has brought nations to grief. It is several
E times more dangerous to health than liquor or tobacco. In the modern era,
it has got mixed up with international crime and terror. lt is but natural
that the State should seek to prohibit its possession, movement, sale and
all dealings therein except under strict and close control. To start with,
there is the prohibition, which prohibition is lifted only to the extent
F provided for by the statute or the rules made thereunder. Sections 4 and
5 are thus motifs of the same pattern. Section 4 provides the prohibition
while Section 5 empowers the State Government to specify situations in
which the prohibition will be lifted, either fully or partially and either
unconditionally or subject to such conditions, as may be deemed necessary,
including 'payment of duty'. Section 5 provides for two things, viz., (a) the
G State Goyernment may, from time to time, by notification in the Official
Gazette make rules consistent with this Act to permit absolutely or subject
to the payment of duty or to any other conditions, possession, transport,
import/export and sale of opium and the farm of duties leviable on the sale
of opium by retail and (b) the State Government may, from time to time,
H by notification in the Official Gazette make rules consistent with this Act
INFER(!) LID. v. COLLECTOR OF EXCISE [JEEVAN REDDY, J.] 69

to regulate within the whole or any specified part of the territories ad- A
ministrered by such Government, all or any of the following matters, viz.,
possession, transport, import/export and sale of opium and the farm of
duties leviable on the sale of opium by retail. The primary purpose of
Section 5 is controlling and regulating the possession, transport, import/ex-
port and sale of opium and not collection of revenue · though the relevance
and validity of the said purpose is undeniable in the case of noxious goods,
B
as emphasised by this Court in Cooverjee ·B. Bharnclta v. Excise Commis-
sioner, Ajmer & Ors., A.LR. 1954 S.C. 220. The section empowers the State
Government to make Rules prescribing the situations in which the posses-
sion etc. of opium will be permitted and also to specify in which situations
the permission would be absolute, i.e., unconditional and in which situa- c
tions would it be subject to prescribed conditions. One of the conditions
that can be so prescribed is "payment of duty". The other part of Section
5 speaks of regulating possession etc. of opium again by means of Rules.
Can it be said in the above situation that Section 5 is a provision primarily
concerned with levy of duty. Would it not be more correct to say that it is D
a provision designed to control and regulate the possession, transport etc.
of opium and it is only as a part of such control and regulation (which must
be understood in the light of the prohibition contained in Section 4) that
it provides that payment of duty can also be insisted upon as a condition
for permitting the possession, transport etc. of opium. Much should not be
read into the expression 'duty' used in Section 5. Having regard to the E
context in which the said expression occurs, it cannot be understood in the
sense it carries in Entry 51 of List-II. Opium Act is a pre-constitutional
Act. Indeed, it is a Jaw preceding the 1935 Act. In the context, the
expression 'duty' means an "amount" which shall be collected as a condition
for granting the permission to possess, transport, import/export or sell F
opium. (We need not say anything about "the farm of duties Jeviable on the
sale of opium by retail" referred to in clause ( d) of Section 5 since we are
only concerned herein only with the validity of the "payment of duty"
referred to in the main limb of Section 5.1) All that it means is that it is
open to the State Government to make Rules providing for payment of
such amount as it thinks appropriate as a condition for granting the G
permission contemplated by Section 5. The idea is not to allow possession,
transport etc. of opium freely (except in those cases where it is to be so
permitted having regard to the objects and purposes ,of Act and public
interest) but to make it prohibitive, to make it a non-paying proposition in
H
70 SUPREME COURT REPORTS (1994) SUPP. 2 S.C.R.

A commercial sense. In this context, it would be appropriate to refer to the
decision of this Court in Har Sha11kar & Ors. etc. etc. v. The Deputy Excise
a11d Taxation Commissio11er & Ors., [1975) 3 S.C.R. 254, which affirms the
fact that the name given to a particular payment is not always indicative of
the true nature of the payment. The follo"ing passages bring out the said
principle :
B
"Section 34 of the Act read with Section 59( d) empowers the
Financial Commissioner to direct that a licence, permit or pass be
granted under the Act on payment of such fees and subject to such
restrictions and on such conditions as he may prescribe. In such a
c scheme, it is not of the essence whether the amount charge to the
licensees is pre-determined as in the appeals of Northern India
Caterers and of Green Hotel or whether it is left to be determined
by bids offered in auctions held for granting those rights to licen-
sees. The power of the Government to charge a price for parting
with its rights and not the mode of fixing that price is what
D constitutes the essence of the matter. Nor indeed does the label
affu:ed to the p1ice detennincd either the trne nature of the charge
levied by the Govemment or its right to lery the same.

The distinction which the Constitution makes for legislative
E purposes between a 'tax' and a 'fee' and the characterstic of these
two as also of 'excise duty' are well- known. "A tax is a compulsory
exaction of money by public authority for public purposes enfor-
ceable by law and is not a payment for services rendered". A fee
is a charge for special services rendered to individuals by some
governmental agency and such a charge has an element in it of a
F quid pro quo. Excise duty is primarily a duty on the production or
manufacture of goods produced or manufactured within the
country. The amounts charged to the licensees in the instant case
are, evidently, neither in the nature of tax nor excise duty. But then,
the 'Licence fee' which the State government charged to the
licensees through the medium of actions or the 'Fixed fee' which
G
it charged to the vendors of foreign liquor holding licences in
Forms L-3, L-4 and L-5 need bear no quid pro quo to the services
'ren~ered to the licencees. The 1vord 'for' is n~t used in the Act or
the Rules in the technical sense of the expression. By 'licence fee' or
fu:ed fee' is meallt the price or consideration which the Govemme11t
H charges to the licensees for pa1ting with its privileges and granting
INFER(!) LTD. v. COLLECTOR OF EXCISE [JEEVAN REDDY,J.) 71

thenz to the licensees. As the State can cany on a trade or business, A
such a charge is the nonnal incident of a trading or business trans-
• action."

We are also not prepared to place the tag of "price for parting with
the privilege" on the said payment. We refuse to be drawn into the
controversy whether such a concept - affirmed by this Court consistently B
over a period of forty years - has been negatived in this Court's decision
in Synthetics & Chemicals Ltd. Incidentally, we may say that the majority
opinion delivered by Sabyasachi Mukharji, J., on behalf of the six learned
Judges, does not expressly say so. The said question was not put in issue
and was not pronounced upon expressly. Rejection of such a well-estab-
lished proposition cannot be inferred. If it is proposed to be rejected, it
c
must be put in issue in a straight manner and be pronounced upon. This
has not been done in the majority judgment. Actually, the said case was
concerned only with the States' power to levy taxes and other regulatory
fees on industrial alcohol. It was held that the States are denuded of the
legislative power to do so under Entry 24 of List-II by virtue of the D
declaration made by Parliament under and in terms of Entry 52 of List-I.
Only the separate concurring opinion delivered by G.L. Oza, J. says that
the said concept is unacceptable under our constitutional scheme. We need
express no opinion on the said opinion. It is enough to say for the present
purpose that Section 5 of the Opium Act does not purport to levy duty of
excise but that it only purports to empower the State Government to make E
Rules to permit possession, export etc. of opium subject to such conditions
as it may think appropriate to impose including the payment of an amount
(called 'duty' by the Section). In this view of the matter, the principle
enunciated in Sunderaramier has no application herein. That principle
could perhaps have been relevant if Section 5 had purported to levy duty F
of excise or other tax on opium. Perhaps, it could then have been argued
that Entry 59 of List-I or for that matter Entry 19 of List-III does not take
in the power to levy taxes and duties on opium_ We need express no
opinion on the said aspect. For the same reason, the argument of Sri Salve
that opium among other narcotic drugs has been excluded from the pur-
view of Entry 84 of List-I need not be dealt with. G

We are, therefore, of the opinion that the duty provided by Rule 3(A)
read with Rule 8 of the Madhya Pradesh Poppy Husks Rules is perfectly
within the four corners of Section 5 and cannot be faulted on the ground
aforesaid. H
72 SUPREME COURT REPORTS j 1994) SUPP. 2 S.C.R.

A It is then submitted by learned counsel that the payment of so- called
duty (which according to us must properly be called 'an amount') is
excessive and is almost as much as or more than the price of poppy husks.
•
In our opinion, this contention is equally unsustainable. Firstly, no material
has been placed before us to show the price of poppy husks during ttte
several years under consideration. Secondly, even if the contention is
B factually lure, it matters very little for the very idea underlying Sections 4
and 5 is to make possession and dealings in opium prohibitive and, com-
mercially speaking, a non-paying proposition. The idea is to discourage the
people from possessing Or· otherwise dealing in matters specified in Sec-
tions 4 and 5. Even otherwise, duties of excise at more than IOOt,lt, is not
c unknown in Jaw. (See in this connection the observations of this Court in
Har Shankar at page 279 E to G.)

There is another good reason for upholding the validity of Section 5,
viz., the provision in Article 372. Opium Act is a law preceding ·the
D Government of India Act, 1935. The division of powers between the Centre
and the provinces was first introduced by the 1935 Act. Section 292 of the
said Act provided that "notwithstanding the repeal by this Act of the
Government of India Act but subject to the other provisions of this Act,
all the law in force in British India immediately before the commencement
of Part-Ill of this Act shall continue in force in British India until altered or
E repealed or amended by a competent legislature or other competent
authority". Article 372(1} provides similarly that "notwithstanding the
repeal by this Constitution of the enactments referred to in Article 395 but
subject to the other provisions of this Constitution, all the laws in force in
the territory of India immediately before the commencement of this Constitu-
F tion shall continue in force therein until altered or repealed or amended by a
competent legislature or other competent authority." Explanation-I to the
Article defines the expression 'law in force'. It reads thus: "(Explanation-
I)- The expression 'law in force' in this article shall include a law passed
or made by a legisltature or other competent authority in the territory of
India before the commencement of this Constitution and not previously
G repealed, notwithstanding that it or parts of it may not be then in operation
either at all or in particular areas." The effect of these provisions was
considered by the Constitution Bench of this Court in South India Corpora-
tion Private Limited v. Secretary, Board of Revenue, A.LR. (1964} S.C. 207.
It was held that the said provisions save and continue a law notwithstanding
H the fact that according to the provisions of the Constitution, the law could
INFER (I) LTD. v. COLLECTOR OF EXCISE [JEEVAN REDDY, J.] 73

not have been made by the legislature which had enacted it, though they A
do not save such enactment from inconsistency with other provisions of the
Constitution, viz., provisions other than those relating to legislative com-
petence. The following statement of law brings out the ratio:

"The object of this article is to maintain the continuity of the B
pre-existing laws after the Constitution came into force till they
were repealed, altered or amended by a competent authority.
Without the aid of such an article there would be utter confusion
in the field of law. The assumption underlying the article is that
the State laws may or may not be within the legislative competence
of the appropriate authority under the Constitution. The article C
. would become ineffective and purposeless if it was held that
pre-Constitution laws should be such as could be made by the
appropriate authority under the Constitution. The words "subject
to the other provisions of the Constitution" should, therefore, be
giver. a reasonable interpretation, an interpretation which would D
carry out the intention of the makers of the Constitution and also
which is in accord with the constitutional practice in such matters.
The article posits the continuation of the pre-existing laws made
by a competent authority notwithstanding the repeal of (in?) Art.
395; and the expression "other" in the article can only apply to
provisions other than those dealing with legislative competence. E

The learned Advocate-General relied upon the following
decisions for the said legal position; Gannon Dunkerly and Co. v.
Sales Tax Officer, Maatancherry, !LR (1957) Kerala 462=(S) AIR
(1957) Kerala 146; Sagar Mall v. State, !LR (1952) 1 AIL 862=AIR F
1951 All. 816; Kanpur Oil Mills v. Judge (Appeals) Sales Tax kanpur,
(S) AIR (1955) All 99; Amalgamated Coalfields Ltd. v. Janapada
Sabha, Chhindwara,[1962]1 SCR l=AIR (1961) SC 964; Jagdish
Prasad v. Saharanpur Municipality, AIR (1961) All. 583;
Sheoshankar v. State Govt of M.P., AIR (1951) Nag. 58; State v. G
Yash Pal, (S) AIR (1957) Punj. 91 and Binoy Bhusan v. States of
Bihar, AIR (1954) Pat. 346. It is not neessary to consider in detail
the said decisions, as they either resume the said legal position or
sustain it, but do not go further. They held that a law made by a
competent authority before the Constitution continues to be in force
after the Constitution till it is altered or modified or repealed by the H
74 SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A appropriate authority, even though it is beyond the legislative com-
petence of the said authority under the Constitution. We give our full
assent to the view and hold that a pre-Constitution law made by a
competent authority, though it has lost its legislative competency
under the Constitution, shall continue in force, provided the law does
not contravene the other provisions of the Constitution.
11 11 11

B
(Emphasis added)

Now, objection of Sri Salve to Section 5 is this: it is a taxing provision.
It levies excise duty on opium. But excise duty on opium can be levied only
C by a law made by a State Legislature with reference to Entry 51 of List-II
of the Seventh Schedule to the Constitution. The Parliament has no such
power, though it can make a law relating to cultivation, manufacture and
sale for export of opium by virtue of Entry 59 List-I - or for that matter
with respect to opium generally with reference to Entry 19 of List-III. The
said section is thus alleged to be beyond the Parliament's legislative com-
D petence. Assuming that the said argument is correct, - which argument we
have rejected hereinbefore - still such a law is saved by virtue of Article
372 of the Constitution as interpreted by this Court in South India Cor-
poration. It is not suggested by the learned counsel that Section 5 is
inconsistent with any other provision of the Constitution.
E
Once it is held that the Opium Act is a pre-Constitution Statute and
is saved by Article 372, the Rules made by the Madhya Pradesh Govern-
ment in 1959 under Section 5 of the said Act are equally within the
protection. The principle of the decision of the Constitution Bench in
Sardar Inder Singh v. Ihe State of Rajasthan, [1957] S.C.R. 605 at 619-20
F clearly supports this proposition. It was held in the said decision :

"It is next contended that the notification dated June 20, 1953, is
bad, because after the Constitution came into force, the
Rajpramukh derived his authority to legislate from Art. 385, and
G that under _that Article his authority ceased when the Legislature
of the State was constituted, which was in the present case, on
March 29, 1952. This argument proceeds on a misconception as to
the true character of a notification issued under s.3 of the Or-
dinance. It was not an independent piece of legislation such as
H could be enacted only by the then competent legislative authority
INFER {I) LID. v. COLLECTOR OF EXCISE [JEEVAN REDDY, J.] 75

of the State, but merely an exercise of a power conferred by a A
statute which had been previously enacted by the appropriate
legislative authority. The exercise of such a power is referable not
to the legislative competence of the Rajpramukh but to Ordinance
No. IX of 1949, and provided s.3 is valid, the validity of the
notification is co-extensive with that of the Ordinance. If the B
Ordinance did not come to an end by reason of the fact that the
authority of the Rajpramukh to legislate came to an end- and that
is not and cannot be disputed- neither did the power to issue a
notification which is conferred therein. The true position is that it
is in his character as the authority on whom power was conferred C
under s.3 of the Ordinance that the Rajpramukh issued the im-
pugned notification, and not as the legislative authority of the State.
This objection should accordingly be overruled."

If Section 5 is supposed to empower levy of duty by State Govern-
ment by making Rules, as contended by Sri Salve, this power is saved by D
Article 372. Once the power is saved, it can be exercised even after the
commencement of the Constitution. Otherwise, there would be no meaning
behind the saving clause in Article 372. The reliance upon the decision of
this Court in Kalyani Stores v. State, [1966] 1 S.C.R. 865 by Sri Salve is of
no help to the appellant inasmuch as the Notification of 1961 considered E
therein was held to be violative of Article 301 and not saved by Article 305
- which too is a provision saving the existing law from the operation of
Articles 301 and 303. The said decision did not really turn upon the
language of Article 372, as would be evident from the discussion at page
874. The principle of the said decision carmot be extended to a provision
like Section 5 of the Opium Act. The scheme of part- XIII of the Consitu- F
tion is different and the object of Article 305 is a limited one.

We are also of the opinion that it is unnecessary to go into the
question whether Mandsaur district was a part of a prin~ely State and
whether the Opium Act was extended to the said area after the commen- G
cement of the Consitution becuase no factual foundation has been laid for
this argument in the High Court, though Article 372 was expressly relied
upon by the State. In any event, Explanation-I to Article 372 appears to be
a complete answer to this argument. For all the above reasons, we hold
that Section 5 is a perfectly valid piece of legislation and carmot be faulted.
on the grounds suggested. · H
76 SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A The last submission of Sri Salve is that Section 5 is void on the ground
of excessive delegation of the legislative power. It is argued that Section 5
empowers the State Government to levy duty without prescribing either the
minima or the maxima. The rate of duty is left entirely to the State
Government. No guidance whatsoever is provided by the Act in the said
matter. It is open to the State Government to prescribe such rate of duty
B
as it thinks appropriate. This is a clear case of excessive delegation. The
Parliament has not retained any control over the acts of its delegate, viz.,
the State Government; it is a case of total abnegation, it is submitted. It is
brought to our notice that the Allahabad High Court has held so in M/s.
Rameshwar Prasad Kishan Gopal & Ors. Etc. Etc. v. The State of Uttar
C Pradesh Etc., (1973_Tax law Reporter 2503 : 73 All Law Journal 739. It is
pointed out that appeals were preferred by the State in this Court against
the said decision but by the time the said appels came up for hearing, the
Uttar Pradesh Legislature had intervened and effected local amendments
this Court disposed of the appeals (Civil Appeal Nos. 1657-58 of 1975 and
D batch on July 13, 1993) without going into the said question. This court also
took note of the fact that the respondents in the said appeals had filed
another writ petition in this Court (W.P No. 314 of 1991) challenging the
said State Amendments.

E It isnot possible to agree with the learned counsel. It would be seen
at once tliat this argument is based upon the same premise as the previous
argument.', The argument proceeds on the assumption that Section 5 is a
taxing provision; that it's main purpose is to levy excise duty. We have
pointed out hereinbefore that Section 5 is not a taxing provision, that the
"duty" referred to therein is not "duty" in the sense in which it is used in
F Entry 51 of List-II of the Seventh Schedule to the Constitution and that
the said expression really means an amount. As explained hereinbefore,
Section 5 is a continuation of Section 4 and it merely empowers the State
Government to lift the prohibition on the possession, transport, import/ex-
port and sale of upium in such cases as it deems appropriate and subject
G to such conditions, as it may deem fit to impose including payment of an
amount. It has been held that it is a regulatory provision. For this reason,
the decisions of this Court [e.g., Devi Das Gopal Krishan v. State of Punjab,
[1967] 3 S.C.R. 537, which lay down the proposition that where the taxing
power to fix rates of tax is delegated by the Legislature to another body,
the Legislature must either fix minima or maxima or retain some control
H over the Acts of the delegate ·are not really relevant and need not be deal
INFER (I) LTD. i·. COLLECTOR OF EXCISE [JEEVAN REDDY, J.J 77

with. So for as guidance in the matter of making of Rules providing for the A
matters contemplated by Section 5 is concerned, the Provisions of the Act
do furnish sufficient guidance in the matter of making rules under Section
5. The scheme of the Act including Section 4, which bars any and every
person from possessing, transporting, importing/exporting and selling
opium except as provided by the said Act or the Rules made thereunder
(or by any other Act or Rules made under such other Act) furnish B
adequate guidance to the State Government. It must also be noticed that
the rule-making power is conferred upon a responsible body like the State
Government. The very noxious nature of opium and the desirability to
closely control and regulate possession transport, movement and all deal-
ings therein are matters which the State Government has also to keep in
c
mind while making the Rules. We may in this connection refer to the
decision of the Constitution Bench of this Court in Harishankar Bag/a &
Anr. v. State of Madhya Pradesh, (1955) 1 S.C.R. 380. Section 3(1) of the
Essential Supplies (Temporary Powers) Act, 1946 conferred rule making
power upon the Central Government. Sub-section (1) read as follows :
D
"3.(1) The Central.Government, so far. as it appears to it to be
necessary _or expedient for maintaining oi increasing supplies or
any essential commodity, or for securing their equitable distribu-
tion and availability at fair prices, may by order provide for
regulating or prohibiting the production, supply and distribution
thereof and trade and commerce therein ......... " E

Sub-section (2) elucidated the grounds mentioned in sub;section (1).
It was argued before this Court that the Cotton Textiles (Control of
Movement) Order, 1948 made under Section 3 is invalid inasmuch as the
said section delegated legislative power beyond the permissible limits. The F
argument was rejected in the following words :

"........ .It was settled by the majority judgment in the Delhi Laws
Act case (1951 S.C.R. 747) that essential powers of legislature
cannot be delegated. In other words, the legislature cannot
delegate its function of laying down legislative policy in respect of G
a measure and its formulation as a rule of conduct. The Legislature
must declare the policy of the law and the legal principles which
are to control any given cases and must provide a standard to guide
the officials or the body in power to execute the law. The essential
legislative function consists in the determination or choice .of the H
78 SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A legislative policy and of formally enacting that policy into a binding
rule of conduct. In the present case the legislature has laid down
such a principle and that principle is the maintenance or increase
in supply of essential commodities and of securing equitable dis-
tribution and availability at fair prices. The principle is clear and ,
offers sufficient guidance to the Central Government in exercising
B
its powers under section 3."

The same principle was reiterated in State of Tamil Nadu v. Hind
Store, [1981] 2 S.C.R. 742. It was contended before this Court that a rule
made by the Government of Tamil Nadu under Section 15 of the Mines
c and Minerals (Regulation and Development) Act providing that no lease
for quarrying black granite should be granted to private persons and
creating a monopoly in favour of a Corporation wholly owned by the State
Government was beyond the rule'making power. This argument was
rejected holding that the provisions of the Act furnished sufficient
D guidance. It was held : "The public interest which induced Parliament to
make the declaration contained in S.2 of the Mines & Minerals (Regulation
and Development) Act, 1957, has naturally to be the paramount considera-
tion in all matters concerning the regulation of mines and the development
of minerals. Parliament's policy is clearly discernible from the provisions
of the Act. It is the conservation and the prudent and discriminating .
E exploitation of minerals, with a view to secure maximum benefit to the
community. There are clear sign posts to lead and guide the subordinate
legislating authority in the matter of the making of rules." We are, there-
fore, of the opinion that Section 5 cannot be faulted either on the ground
that it delegates essential legislative functions to the State Government or
on the ground that it confers rule-making power upon the State Govern-
F
ment without furnishing any guidence and without laying down any policy
in that behalf. In this view of the matter, it is not possible to agree with the
decision of the Allahabad High Court in Mis Rameshwar Prasad Kishan
Gopa/.

G For' the above reason, the appeals fail and are dismissed with costs.
Advocate's fee quantified at Rs. 10,000.

V.M. Appeals dismissed.