A M S Vs. UNION TERRITORY OF PONDICHERRY

JUDGEMENT

(1.) THE petitioner, A. M. S. and Brothers, is engaged in the business of importing liquors into the Union Territory of Pondicherry from other States in India. Under a resolution passed by the "general Council" in 1906, which has the force of law, the pondicherry Government was given power to levy tax called "consumption Duty" on all foreign liquors imported into the territory of Pondicherry as well as on locally manufactured liquor. After the merger of the former French Territory of pondicherry in the Indian Union, the above consumtion duty was collected in advance from importers under a scheme called "import Duty paid permits". Only after they had obtained such Import Duty paid Permits, were they allowed to import liquor from other parts of India into Pondicherry limits. In other words, advance payment of consumption duty was made as a condition precedent to the issue of the Import Duty paid Permit. The permit so issued was valid for three months from the date of issue, and the transport of the liquor mentioned in the permit should be made within the three months,

(2.) THE petitioner obtained three such Import Duty paid permits on 19-3-1966 for importing specified quantity of Brandy from a Bengalore Dealer. The rate of consumption duty which was at that time prevalent under the resolution was Rs. 675 per hectolitre. The petitioner paid this duty and obtained the permit. By a subsequent amendment called the Pondicherry Alcoholic Liquors (Consumption duty) Amendment Act, 1966, (Act No. 5 of 1966), the rate of consumption duty payable on imported liquors was increased by 100 per cent with effect from trie date when the Amending Act came into force, namely, 1-6-1966. Though the petitioner had entered into an arrangement with the Bangalore manufacturer for 'getting the consignments under the three aforesaid Import Duty paid Permits, the goods in question reached Pondicherry only after 1-6-1966. It may he mentioned that the period of three months which the party had under the above Import Duty paid Permits ended on 19-6-1966. The goods were transported before that date, but after 1-6-1966. Taking advantage of the doubling of the duty by Act 5 of 1966, in the interval, the respondent in this petition, the Union Territory of Pondicherry insisted that this extra duty should be paid in addition to the duty already paid; in other words insisted on a payment of the consumption duty which was the double of what was already paid. The petitioner demurred to the payment and he has filed this Writ Petition under Article 226 of the Constitution for a Writ of Certiorari for quashing the above demand for extra duty.

(3.) IT was urged by the learned Counsel appearing for the petitioner, Thiru Kesava iyengar, that the levy of this duty itself as a consumption duty is ultra vires, after the Indian Constitution was extended to Pondicherry territory with effect from the date of the de jure transfer of the territory to the Indian Union, in 1962. According to him, the enhancement of the levy was made by way of an amendment to the pre-Constitution Act, namely the resolution of the General Council in 1906, above mentioned. If such levy of consumption duty was beyond the competence of the state Legislature, the effect is that the amendment providing for the enhancement, will be ultra vires even though the pre-Constitution Act for levy of consumption duty at the lower rate may be intra vires. The argument proceeds thus. Entry No. 51 in the State List (List II) of the Seventh Schedule of the constitution gives power to the State Legislature to levy duties of excise on the goods specified against the entry, manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India: The entry includes "alcoholic liquors for human consumption". It is urged by the learned counsel that levy of consumption duty is permitted under this entry only if a countervailing duty for the goods in question are levied on the local manufactured product. Learned counsel also placed reliance upon the decision of the Supreme Court in Kalayani Stores v. State of Orissa, first of all for explaining the meaning of the term "countervailing duty" ; secondly for laying down the principle that the protection given under article 372 of the Constitution to a pre-Constitution Act will not protect the amendment of a pre-Constitution Act if that Act is ultra vires the Constitution if it were to be passed after the Constitution came into force. While the pre-Constitution Act might be saved under Article 372 of the Constitution, the post-Constitution amendment if it is beyond the constitutional power of the State legislature, will have pro tanto to be struck down. The Supreme Court decision is relied upon for these two principles. As against this it is pointed out by the learned govt. Pleader of Pondicherry that this is a case really where there is a countervailing duty, because alcoholic liquor is also manufacured in Pondicherry, besides import, and it also suffers consumption duty. The scope of a countervailing duty is explained in the Supreme Court decision above cited, thus :--