M/S TRIMURTHI FRAGRANCES (P) LTD. THROUGH ITS DIRECTOR SHRI PRADEEP KUMAR AGRAWAL vs. GOVT.OF N.C.T OF DELHI THROUGH ITS PRINCIPAL SECRETARY (FINANCE)

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 8486 OF 2011 M/S TRIMURTHI FRAGRANCES (P) LTD. THROUGH ITS DIRECTOR SHRI PRADEEP KUMAR AGRAWAL                 APPELLANT (S) VERSUS GOVERNMENT OF N.C.T. OF DELHI THROUGH  ITS PRINCIPAL SECRETARY (FINANCE) & ORS.       RESPONDENT (S) WITH CIVIL APPEAL NO. 8485/2011 CIVIL APPEAL NO. 8487/2011 CIVIL APPEAL NO. 8496­8501/2011 CIVIL APPEAL NO. 8502/2011 CIVIL APPEAL NO. 8617/2014 CIVIL APPEAL NO. 10374­10379/2014 CIVIL APPEAL NO. 8488/2011 CIVIL APPEAL NO. 8491­8494/2011 CIVIL APPEAL NO. 8495/2011 SPECIAL LEAVE PETITION (C) No. 33322/2017 J U D G M E N T INDIRA BANERJEE J. 1. The main question raised in this batch of appeals is, whether, ‘Pan Signature Not Verified Digitally signed by GEETA AHUJA Date: 2022.09.19 17:17:58 IST Reason: Masala’, which contains tobacco and gutka, covered by an Entry in the First   Schedule   to   the   Additional   Duties   of   Excise   (Goods   of   Special 1 Importance) Act 1957, hereinafter referred to as the ‘ADE Act’, are taxable by the State under the Delhi Sales Tax Act 1975 and/or the Uttar Pradesh Trade Tax Act 1948 and/or the Tamil Nadu General Sales Tax Act, 1959.  1 2. In  , a Division Shanti Fragrances v. Union of India and others Bench of this Court observed:­

3. The Bench further observed:­ “13. … One other interesting feature of this case is whether, after 2 Union of India v. Raghubir Singh , SCR at pp. 335­37 : SCC pp. 777­ 78, para 27, it can be stated that Judges of this Court do not sit in 2s and 3s for mere convenience, but that a Bench which is numerically superior will prevail over a Bench of lesser 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 3 Ningappa Ramappa Kurbar v. Emperor , the position in law could be as under: (AIR p. 409 : SCC OnLine Bom)

1 (2018) 11 SCC 305 2 (1989) 2 SCC 754; (1989) 3 SCR 316 3 1941 SCC OnLine Bom 41 : AIR 1941 Bom 408 2

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4. The   two­Judge   Bench,   referred   to   the   Constitution   Bench,   the following questions: 4 i) Whether   the   Kothari   Products   Ltd.   v.   State   of   A.P.   line   of 5 judgments or the  Central Sales Tax vs. Agra Belting Work , line of judgments is correct in law; and 4 (2000) 9 SCC 263 5 (1987) 3 SCC 140 4 ii) What should be the proper guidelines for the future for overruling an earlier decision of this Court, and to what extent should the Courts   be   guided   by   the   propositions   in   Ningappa   Ramappa 6 Kurbar v. Emperor , the observations of Lokur, J. in   Supreme 7   and   the Court   Advocates­on­Record   Assn.   v   Union   of   India judgment   of   the   Court   of   Appeal   in   Harper   v.   National   Coal 8 .  Board 5. The ADE Act has been enacted to provide for the levy and collection of additional duties of excise in respect of certain goods, over and above the   duties   of   excise   levied   under   the   Central   Excise   Act   1944.     The Statement of Objects of the ADE Act reads:­ “The object of the Bill is to impose additional duties of excise in replacement of the sales taxes levied by the Union and States on sugar, tobacco and mill­made textiles and to distribute the net proceeds of these taxes, except the proceeds attributable to Union Territories, to the States.   The distribution of the proceeds of the additional duties broadly follows the pattern recommended by the Second Finance Commission.   Provision has been made that the States   which   levy   a   tax   on   the   sale   or   purchase   of   these commodities after 1.4.1958 do not participate in the distribution of the net proceeds.   Provision is also being made in the Bill for including these three goods in the category of goods declared to be of special importance in inter­State trade or commerce so that, following the imposition of uniform duties of excise on them, the rates of sales tax if levied by any State are subject from 1.4.1958 to the restrictions in Section 15 of the Central Sales Tax Act, 1956 .” 9 6. In  Mahalakshmi Oil Mills v. State of A.P. , this Court, held:­ “5 .. In short, the object of the Act was to substitute additional duties of excise in place of sales tax so far as these goods were concerned.   Since the State legislatures were at liberty, if they wished,   to   levy   taxes   on   the   sale   or   purchase   of   these 6 1941 SCC Online Bom 41 : Air m1941 Bom 408 7 (2016) 5 SCC 1 8 [1974] QB 614 9 (1989) 1 SCC 164 5 commodities, the Act provided that the additional excise duties will be distributed only among such States as did not levy a tax on the sale or purchase of these commodities.   Also, by including these goods in the category of goods declared to be of special importance in inter­State trade or commerce, the legislation ensured that, if any State levied sales tax in respect of these commodities, such levy was subject to the restrictions contained in the Central Sales Tax Act, 1956.” 7. It is well settled that once goods are chargeable under the ADE Act, the   State   cannot   levy   sales   tax   on   the   same   goods   under   a   State 10 enactment.  In  , this Court Godfrey Phillips India Ltd. v. State of U.P . held:­ “70.  So even if tobacco is an article of luxury, a tax on its supply is within the exclusive competence of the State but subject to the constitutional   curbs   prescribed   under   Article   286   read   with Sections 14 ad 15 of the Central Sales Tax Act, 1956 and most importantly the ADE Act of 1957 under which no sales tax can be levied on tobacco at all if the State was to take the benefits under that Act.” 8. In  Kothari Products Ltd.  (supra) , the question was, ‘tobacco’ being specified in the First Schedule to the ADE Act, and exempted from Sales Tax under Section 8 of the Andhra Pradesh General Sales Tax Act 1957, whether ‘gutka’ could be taxed by the State of Andhra Pradesh.  The Court found   that   “gutka”   being   tobacco,   covered   by   an   Entry   in   the   First Schedule to the ADE Act and liable to be taxed under the ADE Act, it was covered by the exemption in Section 8 of the Andhra Pradesh General Sales Tax Act .   The State Act  could not have been amended to tax “gutka”.  10 (2005) 2 SCC 515 6 9. There is a line of decisions of this Court, taking the same view as Kothari Products Ltd.   (supra)   and holding that items covered by the expression ‘tobacco’ and other items included in the First Schedule to the ADE Act are not taxable by the State.  11 10. In the   , State of Orrisa vs. Radhey Shyam Gudakhu Factory the issue was whether Gudakhu was covered by the expression ‘tobacco’ as defined in Section 2(c) of ADE Act.   Following the decision of the Calcutta   High   Court   in   Gulabchand   Harekchand   v.   State   of   West 12 Bengal ,   this Court held that Gudakhu is a product of ‘tobacco’ and hence, a product which falls within the exemption covered by S. No. 35 of the Schedule to the Orissa Sales Tax Act 1947.   13 11. In  Reliance Trading Company, Kerala v. State of Kerala , this Court took the view that cotton based tarpaulin was exempted from Sales Tax under the Kerala General Sales Tax Act, 1963, since it was exigible to Additional Excise Duty under the First Schedule of  the ADE Act.   12. In  , the question was whether any class Agra Belting Works  (supra) of goods – cotton fabrics of all kinds, to be specific, exempted from Sales Tax Act under section 4 of the Uttar Pradesh Sales Tax Act, 1948, would be  exigible  to Sales  Tax by  virtue  of a  subsequent  Notification under 11 (2018) 11 SCC 505 12 1984 SCC Online Cal 274 13 (2011) 15 SCC 762 7 Section 3­A of the said Act, specifying the rate of sales tax in respect of an item of the class of goods exempted under Section 4, without withdrawing the earlier Notification under Section 4.   While the majority held that a Notification   of   recall   of   exemption   was   not   a   condition   precedent   for imposition of tax, by a valid Notification under Section 3­A, B.C.Ray, J. dissented with the view of the majority.  13. In   Agra Belting Works   (supra) ,   the majority of the three­Judge Bench of this Court, by ratio of 2:1,  inter alia , held:­ “6 .   As   has   been   pointed   out  above,   Section   3   is  the   charging provision; Section 3­A authorises variation of the rate of tax and Section  4 provides for exemption from tax. All the three sections are parts of the taxing scheme incorporated in the Act and the power both under Section 3­A as also under Section 4 is exercisable by the State Government only. When after a notification under Section 4 granting exemption from liability, a subsequent notification under Section 3­A 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 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 3­A, we see no force in the contention of the assessee which has been 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 was in regard to a class of goods and while the exemption continues, a specific item has now been notified under Section 3­A of the Act.”

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15. In   Sales   Tax   Officer,   Sector­IX,   Kanpur   vs.     Dealing   Dairy 14 Products   and   Anr. ,   a   two   Judge   Bench   of   this   Court   followed   the majority decision in   Agra Belting Works   (supra),   and held that, even though the State of Uttar Pradesh had been issuing notifications under Section   4   of   the   U.P.   Sales   Tax   Act   1948,   exempting   milk   and   milk products from levy of sales tax, a later notification under Section 3­A notifying the rate of tax on ice­cream amongst other items, withdrew the exemption in respect of all kinds of ice­cream and made the sale of  ice­ cream exigible to sales tax at the rate specified in the Notification under Section 3A.   14 (1994) Supp. 2 SCC 639 9 16. In   State of Bihar and Others v. Krishna Kumar Kabra and 15 , a two Judge Bench of this Court referred to and followed  Another Agra (supra) and   (supra)   and held Belting Works     Dealing Dairy Products   that Sections 3­A and 4 of the U.P. Sales Tax Act were parts of a taxing scheme incorporated in that Act and therefore, where the notification was issued under Section 3­A prescribing the rate of tax on goods, which had been exempted from tax under Section 4, by an earlier notification, it had to   be   held   that   the   later   notification   was   intended   to   withdraw   the exemption and make the sale leviable to tax at the rate prescribed in the later notification. 17. In our considered opinion there is no conflict between the  Kothari Products  (supra)  line of cases and the  Agra Belting   line of cases.  The Kothari Products   (supra)   line of cases was on the question of whether “tobacco” or other goods specified in the First Schedule to the ADE Act and hence exempted from Sales Tax under State sales tax enactments, can be made exigible to tax under the State enactments by amending the Schedule thereto.  On the other hand,  Agra Belting Works  (supra)  line of cases  was  on   the   question   of   interplay   between   general  exemption   of specified goods from sales tax under Section 4 of the U.P. Sales Tax Act and specification of rates of sales tax under Section 3­A of the said Act. This Court held that goods exempted from sales tax under Section 4 would be exigible to tax by virtue of subsequent notification under Section 3­A specifying the rate of sales tax for any specific item of the class of 15 (1997) 9 SCC 763 10 goods earlier exempted under Section 4.     There being no conflict, the reference to Constitution Bench is incompetent.  The cases may be placed for decision before the regular Bench.  18. The   second   question   is   answered   by   the   judgment   of   the Constitution Bench of this Court in   Dr. Jaishri Laxmanrao Patil     v. 16 The Chief Minister and Others. .   The Constitution Bench speaking through Bhat, J. held:­ 

16 (2021) 8 SCC 1 11

and Gupta, J. (Para 227).  There was no dissent to the view.  In view of Article 145(5) of the Constitution of India concurrence of a majority of the judges at the hearing will be considered as a judgment or opinion of the Court.  It is settled that the majority decision of a Bench of larger strength 12 would prevail over the decision of a Bench of lesser strength, irrespective of the number of Judges constituting the majority. 

….……………………………………. J. [INDIRA BANERJEE]      ………..……………………………… J. [SURYA KANT]    ………..……………………………… J.          [M.M. SUNDRESH]      ………..……………………………… J. [SUDHANSHU DHULIA] NEW DELHI; SEPTEMBER 19, 2022 13 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 8486 OF 2011 M/S TRIMURTHI FRAGRANCES (P) LTD. THROUGH ITS DIRECTOR SHRI PRADEEP KUMAR AGRAWAL .....APPELLANT(S) VERSUS GOVT OF N.C.T OF DELHI THROUGH ITS PRINCIPAL SECRETARY (FINANCE) & ORS. .....RESPONDENT(S) W I T H CIVIL APPEAL NO. 8485 OF 2011 CIVIL APPEAL NO. 8487/2011 CIVIL APPEAL NOS. 8496-8501/2011 CIVIL APPEAL NO. 8502/2011 CIVIL APPEAL NO. 8617/2014 CIVIL APPEAL NOS. 10374-10379/2014 CIVIL APPEAL NO. 8488/2011 CIVIL APPEAL NOS. 8491-8494/2011 1 CIVIL APPEAL NO. 8495/2011 SLP(C) NO. 33322/2017 J U D G M E N T HEMANT GUPTA, J. A. I entirely agree with the judgment authored by Hon. Indira Banerjee J. However, in respect of Question No.2, I would like to supplement the opinion expressed. B. Mr. Gopal Sankaranarayanan, learned Senior Advocate referred to Article 145(5) of the Constitution to contend that a judgment of this Court is mandated to be delivered with the concurrence of a majority of the Judges present at the hearing of the case, but nothing in this clause shall be deemed to prevent a Judge who does not concur from delivering a dissenting judgment or opinion. Thus, the Constitution itself envisaged that the judgment is by the majority of the Judges. nd C. A reference was made to insertion of Article 144A in the Constitution by the 42 Amendment with effect from 01.02.1977. The amendment reads thus: “144-A. Special provisions as to disposal of questions relating to constitutional validity of laws – (1) The minimum number of Judges of the Supreme Court who shall sit for the purpose of determining any question as to the constitutional validity of any Central law or State law shall be seven. A. A Central law or a State law shall not be declared to be constitutionally invalid by the Supreme Court unless a majority of not less than two-thirds of the Judges sitting for the purpose of determining the question as to the constitutional validity of such law hold it to be constitutionally invalid.” 2 rd D. The said amendment was undone by 43 Amendment when Article 144-A was omitted with effect on and from 01.02.1977. Though the said insertion of Article 144-A stands repealed, but it shows that the legislature also considered majority rd of not less than 2/3 of Judges should determine the question as to the constitutional validity of law. Therefore, even such amendment contemplated dissent and a minority view. E. A similar question has been examined by a Full Bench of the High Court of Gujarat in a judgment reported as State of Gujarat v GordhandasKeshavji 17 Gandhi and Ors . . The Court was considering the binding nature of the judgments of the Bombay High Court in the successor Gujarat High Court but an ancillary question was considered in respect of numerical strength of the Bench as well. Though there is divergence of opinion amongst the judges of the Court, but the minority view was relevant for the second question arising for consideration. The minority view is expressed by N.M. Miabhoy J and P.N.Bhagwati J. We are in agreement with the said view. The order passed by learned Hon’ble Mr. Justice N.M. Miabhoy J reads thus: “44. ……………The principles which guided the latter Court in the matter of judicial precedents have been set out by that Court in (1944) 1 KB 718. All Division Benches considered themselves to be bound by the judicial precedents created by Full Benches not only on the ground of judicial comity but also on the ground that a Full Bench consisted of more number of Judges than a Division Bench. If a judicial precedent created by a Full Bench required to be reconsidered, then, the usual practice was to refer the matter to a Full Bench consisting of more number of Judges than the number which constituted the former Full Bench whose decision was sought to be revised. The practice was to regard the precedent of a larger Full Bench as having greater efficacy and binding authority than the precedent of a Full Bench consisting of a smaller number of Judges. This practice was criticised by Beaumont, C.J. in 43 Bom LR 864 at p. 868 : (AIR 1941 Bom 408 at p. 409). It is not necessary to express any opinion in this case as to whether this criticism was or was not justified. However, the observations made by the learned 17 AIR 1962 Guj 128 3

“……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 of five Judges of co- ordinate jurisdiction. There seems to be very little authority 18 (1) AIR 1960 SC 936 (2) AIR 1960 SC 1118 4

F. It may be mentioned that a Constitution Bench of this Court in a judgment reported as Central Board of Dawoodi Bohra Community and Anr. v. 19 State of Maharashtra and Anr. quoted from the earlier Constitution Bench 19 (2005) 2 SCC 673 5 judgment in Union of India and Anr. v. Raghubir Singh (Dead) By Lrs. 20 Etc. and held as under:

xxx xxx

20 (1989) 2 SCC 754 6 (3)...........................” G. The conclusion (1) is that a decision delivered by a Bench of largest strength is binding on any subsequent Bench of lesser or coequal strength. It is the strength of the Bench and not number of Judges who have taken a particular view which is said to be relevant. However, conclusion (2) makes it absolutely clear that a Bench of lesser quorum cannot disagree or dissent from the view of law taken by a Bench of larger quorum. Quorum means the bench strength which was hearing the matter. H. Thus, it has been rightly concluded that the numerical strength of the Judges taking a particular view is not relevant, but the Bench strength is determinative of the binding nature of the Judgment. .............................................J. (HEMANT GUPTA) NEW DELHI; SEPTEMBER 19, 2022. 7