Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 22
CASE NO.:
Appeal (civil) 6453 of 2001
PETITIONER:
I. T. C. LTD.
Vs.
RESPONDENT:
AGRICULTURAL PRODUCE MARKET COMMITTEE & ORS.
DATE OF JUDGMENT: 24/01/2002
BENCH:
Ruma Pal
JUDGMENT:
RUMA PAL, J.
I regret my inability to concur with the conclusion
reached by my learned Brother, Pattanaik J, that because of
the enactment of the Tobacco Board Act, 1975 by
Parliament, the State Act viz., the Bihar Agricultural Produce
Markets Act, 1960 in so far as it relates to levy of fee on the
sale and purchase of tobacco, is invalid.
That the legislative power of Parliament in certain areas
is paramount under the Constitution is not in dispute. What
is in dispute is the limits of those areas as judicially defined.
Broadly speaking Parliamentary paramountcy is provided for
under Articles 246 and 254 of the Constitution. The first
three clauses of Article 246 of the Constitution relate to the
demarcation of legislative powers between the Parliament
and the State Legislatures. Under clause (1), notwithstanding
anything contained in clauses (2) and (3), Parliament has
been given the exclusive power to make laws with respect to
any of the matters enumerated in List I or the Union List in
the Seventh Schedule. Clause (2) empowers the Parliament,
and State Legislatures subject to the power of Parliament
under sub-clause (1), to make laws with respect to any of the
matters enumerated in List III in the Seventh Schedule
described in the Constitution as the ’Concurrent List’
notwithstanding anything contained in sub-clause (3). Under
clause (3) the State Legislatures have been given exclusive
powers to make laws in respect of matters enumerated in List
II in the Seventh Schedule described as the ’State List’ but
subject to clauses (1) and (2). The three lists while
enumerating in detail the legislative subjects carefully
distribute the areas of legislative authority between
Parliament (List I) and the State (List II). The supremacy of
Parliament has been provided for by the non obstante clause
in Article 246 (1) and the words ’subject to’ in Art.246 (2)
and (3). Therefore, under Article 246 (1) if any of the entries
in the three Lists overlap, the entry in List I will prevail.
Additionally some of the entries in the State List have been
made expressly subject to the power of Parliament to
legislate either under List I or under List III. Entries in the
Lists of the Seventh Schedule have been liberally interpreted,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 22
nevertheless Courts have been wary of upsetting this balance
by a process of interpretation so as to deprive any entry of its
content and reduce it to ’useless lumber’. The use of the
word ’exclusive’ in Clause (3) denotes that within the
legislative fields contained in List II, the State Legislatures
exercise authority as plenary and ample as Parliament.
"The fact that under the scheme of our Constitution, greater
power is conferred upon the Centre vis-Ã -vis the States does
not mean that States are mere appendages of the Centre.
Within the sphere allotted to them, States are supreme. The
Centre cannot tamper with their powers. More particularly,
the courts should not adopt an approach, an interpretation,
which has the effect of or tends to have the effect of whittling
down the powers reserved to the States".
Although Parliament cannot legislate on any of the
entries in the State List, it may do so incidentally while
essentially legislating within the entries under the Union List.
Conversely, the State Legislatures may encroach on the
Union List, when such an encroachment is merely ancillary
to an exercise of power intrinsically under the State List. The
fact of encroachment does not affect the vires of the law even
as regards the area of encroachment. This principle
commonly known as the doctrine of pith and substance, does
not amount to an extension of the legislative fields.
Therefore, such incidental encroachment in either event does
not deprive the State Legislature in the first case or
Parliament in the second, of their exclusive powers under the
entry so encroached upon. In the event the incidental
encroachment conflicts with legislation actually enacted by
the dominant power, the dominant legislation will prevail.
To return to the subject of Parliamentary supremacy.
The second facet of the supremacy of Parliament is to be
found in Article 254 (1) which provides:
Article 254: "Inconsistency
between laws made by Parliament
and laws made by the Legislatures of
States (1) If any provision of a law
made by the Legislature of a State is
repugnant to any provision of a law
made by Parliament which Parliament is
competent to enact, or to any provision
of an existing law with respect to one of
the matters enumerated in the
Concurrent List, then, subject to the
provisions of clause (2), the law made
by Parliament, whether passed before or
after the law made by the Legislature of
such State, or, as the case may be, the
existing law, shall prevail and the law
made by the Legislature of the State
shall, to the extent of the repugnancy, be
void."
In other words where in due exercise of legislative
powers in the Concurrent List there is an irreconcilable
conflict in the legislations enacted, the Central Legislation
will prevail. The doctrine of repugnancy has been developed
in this context. [See: M/s Hoechst Pharmaceuticals Ltd. V.
State of Bihar 1983 (4) SCC45, 89 ; Deep Chand v. The
State of Uttar Pradesh [1959] Supp. SCR 8]. The
controversy, in this case, is to be resolved keeping these
broad principles in mind.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 22
The immediate question before us is whether the
Tobacco Board Act, 1975 debars the States from levying
market fee in respect of tobacco. In the several matters
argued and heard, the main protagonists were the tobacco
traders and dealers on the one hand who argue that the States
cannot levy market fee on tobacco, and the Market
Committees on the other who contend to the contrary. The
Union of India and the Tobacco Board have supported the
former while the State Governments the latter. The details of
the several matters which were heard by us have been noted
in the opinion of Pattanaik, J. A galaxy of counsel have
made submissions in support of the opposing camps. For
the purpose of convenience and coherence, the diverse
arguments have been clubbed together and those contending
against the States competence are referred to compendiously
as the appellants and their opponents as ’ the respondents’.
One further clarification is necessary. As the order referring
the issue to this Court was passed in an appeal relating to the
Bihar Agricultural Markets Act, 1960, although several other
states have enacted substantially similar statutes, I will treat
the Bihar Statute as representative and refer to the provisions
of that Act for deciding the issues.
The Bihar Agricultural Produce Markets Act, 1960 (
referred to hereafter as the Markets Act) was enacted by the
State of Bihar and is ostensibly referable to Entry 28 of List
II which gives the State Legislature the exclusive power to
legislate on "Markets and Fairs" read with Entry 66 of List II
according to which the State Legislature may also levy fees
in respect of any matter in List II except Court fees. It is true
that in Belsund Sugar Company vs. State of Bihar the
Court proceeded on the basis that the Markets Act had been
enacted by the Bihar Legislature not only under the
legislative power vested in it by Entry 28 but also under
Entries 26 and 27 of List II of the Seventh Schedule of the
Constitution but in that case, there does not appear to have
been any controversy raised on this point. Entries 26 and 27
of List II read as under:
26. Trade and commerce within the
State subject to the provisions of
Entry 33 of List III.
27. Production, supply and
distribution of goods subject to
the provisions of Entry 33 of List
III."
It has also been argued by the respondents that the
State Act is also referable to Entry 14 of List II which
describes the permissible subject matter of legislation by
States as:
14: Agriculture, including agricultural
education and research, protection
against pests and prevention of plant
diseases.
Except for Entries 26 and 27 of List II, each of the
other entries comes within the exclusive legislative domain
of the States.
The Tobacco Board Act, 1975, on the other hand,
is claimed by the appellants to be relatable solely to Entry 52
of List I which enables Parliament to legislate on
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 22
"industries, the control of which by the Union is declared by
Parliament by law to be expedient in the public interest".
According to the appellants, the Markets Act seeks to
regulate, inter-alia, the sale of various kinds of agricultural
produce including tobacco. They contend that the
provisions of the Markets Act could not be applied to
tobacco because the Tobacco Act was enacted by Parliament
under Entry 52 of List I to control and regulate everything
relating to the tobacco industry from the growth of tobacco
to its processing, storing, sale, manufacture, export and
import.
It had been initially argued by the appellants that once a
declaration is made in terms of Entry 52 of the Union List,
the industry in respect of which the declaration is made and
the entire process relating thereto becomes part of the
legislative head itself and within the exclusive domain of the
Parliament, and the State legislature becomes incompetent to
enact any provision with regard to that industry. The
submission was somewhat watered down in the reply. It
was conceded that the argument was an extreme one and that
the true principle was that one has to examine the actual
extent of coverage by the Central enactment. The next
submission was that the word ’industry’ in Entry 52 of List I
will have to be given a wide meaning. Passages from the
Encyclopaedia Britannica were referred to, to contend that an
’industry’ could be primary, secondary or tertiary. Primary
industries would include agriculture, forestry, fishing, mining
and the extraction of minerals etc. A secondary industry
would be a manufacturing industry where raw materials
supplied by primary industries are processed to manufacture
consumer and non- consumer goods. A tertiary industry
would be one where services were rendered such as banking,
insurance, transportation, information etc. This was
contrasted with the meaning of the word as defined in the
Industries, Development and Regulation Act, 1951 which
only deals with manufacturing industries. According to the
appellants, this Court in Harakchand Ratanchand Banthia
& Ors. V. Union of India 1970 (1) SCR 479 1971 SC 479
not only accepted the wide definition of industries but also
specifically held that the word ’industry’ in Entry 52 would
also comprise production, supply and distribution of goods
referred to in Entry 27 of List II. It was, therefore,
contended that the provisions of the Tobacco Act were
clearly within the exclusive competence of Parliament and
within the field covered in Entry 52 of List I. As a corollary
to this argument, it was contended that Parliament could also
legislate with regard to the raw materials supplied to a
declared industry in keeping with the principle of ’pith and
substance’. The next submission was that even if the State
Government retained the competence to legislate on tobacco,
it could not enact any statutory provisions which would be
repugnant to the Central Act. The provisions of the Tobacco
Act and the Markets Act were referred to in some detail to
contend that they could not possibly co-exist and therefore
the Central Act would have to prevail. It was submitted that
in the circumstances the provisions of the Markets Act with
respect to tobacco were repugnant to the provisions of the
Tobacco Act and that by virtue of the provisions of Article
254(1) of the Constitution, the law made by Parliament was
to prevail and the law made by the Legislatures of the State
to the extent of the repugnancy with the Central Act, is void.
The respondents on the other hand contended that the
Tobacco Act did not and could not occupy the entire
legislative field relating to tobacco. According to them,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 22
despite the declaration in Section 2 of the Tobacco Act
under Entry 52 of List I, the word ’industry’ in the context of
the Tobacco Act could not include anything more than
processing and manufacturing of tobacco. Reliance was
placed primarily on the decision of the Constitution Bench in
Tika Ramji & Ors. Vs. State of U.P. & Others 1956 SCR
393.
It was further submitted on behalf of the respondents
that the question of repugnancy between the Markets Act and
the Tobacco Act would not arise since Parliament was not
competent to enact provisions in respect of a legislative field
specifically provided for in List II. It was submitted that the
legislative field under Entry 52 of List I was derived from
Entry 24 of List II and Entry 24 did not cover the legislative
fields otherwise specially provided for in List II. It was
stated that Entry 28 could not be rendered redundant by the
Central Government’s legislation on commodities sold at
markets and fairs by issuing a declaration under Entry 52 of
List I. It was also submitted that there may be provisions in
the Tobacco Act which may incidentally trench on the State’s
competence and as long as States have not legislated on that
topic, the Tobacco Act may prevail. It was submitted that
even if the Markets Act were enacted under Entries 26 and 27
of List II nevertheless this would not make the Market Act
invalid as far as tobacco was concerned. It was further
submitted that although Entries 26 and 27 in the State List
were subject to the provisions of Entry 33 of the Concurrent
List, there was no provision in Entry 33 of the Concurrent
List which covered tobacco. It was submitted that the issue of
repugnancy did not arise because Article 254(1) only relates
to repugnancy in actual legislations in respect of entries in
the Concurrent List. According to the respondents,
assuming that Parliament was competent to legislate in
respect of tobacco, there was in fact no repugnancy between
the Markets Act and the Tobacco Act as the Tobacco Act did
not cover post auction sales. In any event, there could be no
conflict between the Markets Act and the Central Act in
Bihar particularly having regard to the fact that Section 13,
13A and 14A of the Tobacco Act had not been made
operative in Bihar. Reliance has been placed upon the
absence of a non-obstante clause in the Tobacco Act and the
presence of Section 31 in that Act which, according to the
respondents, makes it clear that the Tobacco Act was to be
read as being in addition to and not in derogation of any other
law. Therefore according to the respondents, even if tobacco
were solely within the exclusive field of legislation by
Parliament, the State Legislature could recover fees for
services rendered in respect of markets where tobacco may
be sold.
To begin with, I do not think that this Bench should at
all go into the question of the validity of the Tobacco Board
Act, 1975 (referred to briefly hereafter as the ’Tobacco Act)
even though the issue was argued at some length by the main
protagonists before us. The dispute which originally gave
rise to this set of appeals is limited to the question whether
the Market Committees have the authority to levy market fee
under the Markets Act on the sale of tobacco and whether the
provisions in the Markets Act granting Market Committees
such right are repugnant to the provisions of the Tobacco Act
and are therefore, unconstitutional. What has been placed
before this Bench for its consideration is the correctness of
the earlier decision in ITC Ltd & Others v. State of
Karnataka 1985 (Suppl.) SCC 476. The question raised in
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 22
that case was whether the provisions of the Karnataka
Agricultural Produce Marketing (Regulation) Act, 1966
relating to the levy of market fee on tobacco were repugnant
to the Tobacco Act. The majority held that it was. The
minority view was that both Acts could co-exist. But the
validity of the Tobacco Act itself was never in dispute.
No doubt, the States have been given notice but the
focus of the arguments has been on the levy of fees on the
marketing of tobacco. As the Tobacco Act covers a much
larger field, a pronouncement on the validity of all the
provisions dealing with a variety of activities under the Act
would not be appropriate as it would perhaps pre-empt a
decision on aspects other than the marketing of tobacco
without hearing those who might be interested in the outcome
of a decision on those provisions.
The starting point in any controversy dealing with
apparently conflicting legislative jurisdictions is to see
whether the conflict can be fairly reconciled by reading the
entries to which the legislations are referable, together and
"by interpreting and, where necessary, modifying the
language of the one by that of the other". It is only when
such resolution is not possible that the Courts should be
called upon to decide the question of legislative competence.
This principle has been stressed in a number of cases by the
Privy Council, the Federal Court and more recently by this
Court. [See: The Central Provinces and Berar Sales of
Motor Spirit & Lubricants Taxation Act, 1938",
’Governor-General in Council v. Province of Madras’ ,
State of Bombay v. F.N. Balsara AIR 1951 SC 818, 822,
Accountant & Secretarial Services Pvt. Ltd. V. Union of
India AIR 1988 SC 1708; Fatehchand v. State of
Maharashtra: AIR 1977 SC 1825, 1827: Calcutta Gas
Company (Proprietary) Ltd. V. State of West Bengal AIR
1962 SC 1044).
Similarly, when there is an apparent conflict between
two statutes enacted in valid exercise of legislative powers
under the Concurrent List, reconciliation must be attempted.
Only when the differences are irreconcilable should the
Courts resort to striking down a piece of legislation.[See:
The Kannan Devan Hills Produce v. The State of Kerala:
(1972) 2 SCC 218’ M/s. Hoechst Pharmaceuticals Ltd. v.
State of Bihar: (1983) 4 SCC 45]
In my view, if therefore, the issue raised in this case
can be resolved by limiting our consideration to the question
of conflict, if any, between the two entries in the seventh
schedule of the Constitution to which the Tobacco Act and
the Market Act are respectively relatable and between the
provisions of the two statutes which have a bearing on the
marketing of tobacco, it is unnecessary to stray into those
areas which may not be necessary for the disposal of these
appeals. The discussion in this opinion is therefore limited to
the scope of the two entries and the allegedly conflicting
provisions of the two Acts with which we are concerned.
The controversy in this case to a large extent turns on
the meaning of the word "industry" as used in the three
legislative lists. Now the power to legislate in respect of all
industries has been given under Entry 24 of List II to the
State Legislatures subject to Entries 7 and 52 of List I.
Entries 7 and 52 of List I allow Parliament to legislate in
respect of particular ’industries’ namely such industries
which are declared by Parliament by law to be necessary for
the defence or for the prosecution of war (Entry 7) and
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 22
industries the control of which by the Union is declared by
Parliament by law to be expedient in the public interest
(Entry 52). Trade and commerce in, and the production
supply and distribution of the products of such controlled
industry have been provided for in Entry 33 of the
Concurrent List wherein both Parliament and the State
Legislatures are competent to legislate. A Constitution
Bench of this Court in The Calcutta Gas Company (Prop.)
Ltd. V. the State of West Bengal has held that the
expression ’industry’ in all the three lists must be given the
same meaning and that since ordinarily industry is in the
field of State Legislation the word must be construed in the
context of the other entries in List II in such a manner so that
no entry in List II is deprived of its content. In other words,
the meaning of the word ’industry’ is to be determined with
reference to Entry 24 of List II where the power to legislate
generally in respect of industries has been provided. Entries
7 and 52 are entries which specify particular industries out of
this general pool. The meaning of the word ’industry’ in
these two entries, therefore, must necessarily be derived
from the meaning which may be ascribed to the word in
Entry 24 of List II.
The seminal decision on this process of interpretation
for arriving at the definition of ’industry’ is Ch. Tika Ramji
& Others V. State of Uttar Pradesh & Ors. in which a
Constitution Bench unanimously held:
"Industry in the wide sense of the term
would be capable of comprising three
different aspects: (1) raw materials
which are an integral part of the
industrial process, (2) the process of
manufacture or production, and (3) the
distribution of the products of the
industry. The raw materials would be
goods which would be comprised in
Entry 26 of List II. The process of
manufacture or production would be
comprised in Entry 24 of List II except
where the industry was a controlled
industry when it would fall within
Entry 52 of List I and the products of
the industry would also be comprised
in Entry 27 of List II except where
they were the products of the
controlled industries when they would
fall within Entry 33 of List III."
The underlying rationale of Tika Ramji’s definition of
the word ’industry’ is that the Constitution having expressly
provided for particular fields of legislation in the three Lists,
each field must be given a meaning. Entry 24 of List II
cannot be read so as to subsume within itself the other entries
in List II. It must be given a meaning which allows the other
entries to survive and be defined to that extent with reference
to what it is not.
Thus in Calcutta Gas it was held that the word
’industry’ in entry 24 of List II and 7 and 52 of List I did not
include gas and gas works which was in terms provided for in
Entry 25. The argument in that case was that the State was
incompetent to enact the Oriental Gas Company Act, 1960
under Entry 25 of List II because Parliament had passed the
Industries (Development & Regulation) Act, 1951 by virtue
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 22
of Entry 52 of List I. The Central Act in that case had under
Section 2 declared that it was expedient in the public interest
that the Union should take under its control inter-alia
industries of " ’fuel gas’ (coal gas, natural gas and the like)".
For the purpose of promoting and regulating these industries,
the Central Act enabled the Central Government to
investigate into the affairs of an undertaking, to regulate its
production, supply and distribution, and, if necessary to take
over the management of the undertaking. The Court said
that if the word ’industry’ in Entry 24 of List II and,
therefore, 52 of List I were interpreted to include ’gas and
gas works’ which were expressly covered by entry 25 List II,
entry 25 may become redundant and it would amount to
attributing to the authors of the Constitution "ineptitude, want
of precision and tautology". As a result, the challenge to the
State Act was negatived and the Central Act, insofar as it
purported to deal with the gas industry, was held to be
beyond the legislative competence of Parliament.
Again in B. Viswanathiah and Company and others
V. State of Karnataka 1991 (3) SCC 358, writ petitions
were filed challenging the validity of the provisions of the
Mysore Silkworm Seed and Cocoon (Regulation of
Production, Supply and Distribution) Act, 1959 (Act 5 of
1960). It was contended that the impugned provisions lacked
legislative competence after the enactment by Parliament of
the Central Silk Boards Act (Act 61 of 1948) which
contained a declaration as contemplated under Entry 52 of
List I. The Court held, following Tika Ramji, that the
"control of the industry vested in Parliament was only
restricted to the aspect of production and manufacture of silk
yarn or silk. It did not obviously take in the earlier stages of
the industry, namely, the supply of raw materials".
It was also held:
"though the production and
manufacture of raw silk cannot
be legislated upon by the State
legislature in view of the
provisions of the Central Act and
the declaration in Section 2
thereof, that declaration and
Entry 52 does not in any way
limit the powers of the State
legislature to legislate in respect
of the goods produced by the silk
industry. To interpret Entry 52
otherwise would render Entry 33
in List III of the Seventh
Schedule to the Constitution
otiose and meaningless".
This process of defining ’industry’ in Entry 24 of List II
and consequently Entry 52 of List I, by eliminating from its
scope the fields specifically provided for in List II or List III
has been consistently followed. For example in State of A.P.
v. Mc Dowell & Co: 1996 3 SCC 709 it was said:
" Parliament cannot take over the control
of industries engaged in the production
and manufacture of intoxicating liquors
by making a declaration under Entry 52
of List I, since the said Entry governs
only Entry 24 in List II but not Entry 8 in
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 22
List II."
In Kanan Devan Hill Produce v. State of Kerala
1972 (2) SCC 218 it was held that a declaration under Entry
52 of the Union List in respect of the tea industry did not
debar the States from legislating to acquire land under tea
cultivation under Entry 18 of List II and Entry 42 of List III.
A Constitution Bench in Ganga Sugar Corporation
Ltd. vs. State of Uttar Pradesh and others 1980 (1) SCC
223 upheld the power of States to impose purchase tax on
sugarcane under Item 54 in the State List despite central
legislation under Entry 52 of List I in respect of the sugar
industry.
Another Constitution Bench in Fateh Chand v. State
of Maharashtra : AIR 1977 SC 1825 had to decide the
constitutional tug-of-war between the Maharashtra Debt
Relief Act, 1976 on the one hand and the Gold Control Act
on the other. It was contended that the Debt Act was void
insofar as it dealt with "gold loans" because Parliament had
occupied the field under Entry 52 of List I. It was also urged
that there was inconsistency between the Debt Act and the
Gold Control Act and that the Debt Act could not be given
effect to to the extent of such inconsistency. The Court noted
that the Debt Act came squarely within Entry 33 of List II
namely "money-lending and money-lenders; relief of
agricultural indebtedness" and it was held that despite the
fact that the Gold Act was referable to Entry 52 of List I:
". This does not mean that other
entries in the State List become
impotent even regarding ’gold’. The
State Legislature can make laws
regarding money-lending even where
gold is involved under Entry 30, List II,
even as it can regulate ’gambling in
gold’ under Entry 34, impose sales tax
on gold sales under Entry 54 regulate
by municipal laws under Entry 5 and by
trade restrictions under Entry 26, the
type of buildings for gold shops and the
kind of receipts for purchase or sale of
precious metal. To multiply instances
is easy, but the core of the matter is that
where under its power Parliament has
made a law which overrides an entry in
the State List, that area is abstracted
from the State List. Nothing more."
It is unnecessary to multiply instances of the numerous
decisions which have followed the logic of Tika Ramji and
accepted its conclusion that for the purposes of Entry 24 of
List II and consequently Entry 52 of List I, ’industry’ means
"manufacture or production" and nothing more. It is
sufficient to note that Tika Ramji’s definition of industry
has been affirmed and applied recently by a Constitution
Bench in Belsund Sugar Company v. State of Bihar
(supra) and is still good law. Harak Chand Banthia’s
case does not strike a discordant note.
Harakchand Ratanchand Banthia & Ors. v. Union Of
India: 1970 1 SCR 479, has been cited by the appellants in
support of the proposition that the negative test laid down in
Tika Ramji and developed in Calcutta Gas does not apply
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 22
to define the scope of Entry 52 of List I vis-a-viz Entry 27 of
List II. The submission is unacceptable.In Banthia’s case
the constitutional validity of the Gold (Control) Act, 1968
enacted by Parliament was questioned. Gold had been
declared to be a ’controlled’ industry under Entry 52 of List I
by the Industries (Development & Regulation ) Act, 1951.
One of the challenges raised was that the activity sought to be
controlled by the Gold Act, was not an industry and did not
come within the purview of Parliament under Entry 52 of
List I. The passage particularly relied upon by the appellants
is quoted:
"The question to be considered is
what is the meaning of the word
"industry" in Entry 52 of List I, Entry
24 of List II and Entry 33 of List III.
Whatever may be its connotation it
must bear the same meaning in all
these entries which are so
interconnected that conflicting or
different meanings given to them
would snap the connection. In the
Shorter Oxford English Dictionary the
word "industry" is defined as " a
particular branch of productive labour;
a trade or manufacture." According to
Webster’s Third New International
Dictionary (1961 edn.) the word
"industry" means "(a) systematic
labour especially for the creation of
value; (b) a department or branch of a
craft, art, business or manufacture, a
division of productive and profit
making labour especially one that
employs a large personnel and capital
especially in manufacturing; (c) a
group of productive or profit making
enterprises or organisations that have a
similar technological structure of
production and that produce or supply
technically substitutable goods,
services or sources of income." It was
said that if the word "industries" is
construed in this wide sense, Entry 27
of List II will lose all meaning and
content. It is not possible to accept
this contention for, Entry 27 is a
general Entry and it is a well-
recognised canon of construction that a
general power should not be so
interpreted as to nullify a particular
power conferred by the same
instrument. In Tika Ramji v.State of
Uttar Pradesh 1956 SCR 393 the
expression "industry" was defined to
mean the process of manufacture or
production and did not include raw
materials used in the industry or the
distribution of the products of the
industry. It was contended that the
word "industry" was a word of wide
import and should be construed as
including not only the process of
manufacture or production but also
activities antecedent thereto such as
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 22
acquisition of raw materials and
subsequent thereto such as disposal of
the finished products of that industry.
But this contention was not accepted.
It was contended by Mr. Daphtary that
if the process of production was to
constitute "industry" a process of
machinery or mechanical contrivance
was essential. But we see no reason
why such a limitation should be
imposed on the meaning of the word
"industry" in the legislative lists.
Similarly it was argued by Mr.
Palkhivala that the manufacture of
gold ornaments was not an industry
because it required application of
individual art and craftsmanship and
aesthetic skill. But mere use of skill or
art is not a decisive factor and will not
take the manufacture of gold
ornaments out of the ambit of the
relevant legislative entries. It is well
settled that the entries in the three lists
are only legislative heads or fields of
legislation and they demarcate the area
over which the appropriate legislature
can operate. The legislative entries
must be given a large and liberal
interpretation, the reason being that the
allocation of subjects to the lists is not
by way of scientific or logical
definition but is a mere enumeration of
broad and comprehensive categories.
It is not, however, necessary for the
purpose of this case to attempt to
define the expression "industry"
precisely or to state exhaustively all its
different aspects. But we are satisfied
in the present case that the
manufacture of gold ornaments by
goldsmiths in India is a "process of
systematic production" for trade or
manufacture and so falls within the
connotation of the word "industry" in
the appropriate legislative entries. It
follows, therefore, that in enacting the
impugned Act Parliament was validly
exercising its legislative power in
respect of matters covered by Entry 52
of List I and Entry 33 of List III."
(Emphasis mine)
The decision cannot be read as whittling down or
deviating from the reasoning or the definition of the word
industry in Tika Ramji. It does not seek to do so. Indeed the
Court re-affirmed the definition of industry in Tika Ramji.
The observation relating to Entry 27 of List II must be
understood in relation to the language of the entry which
reads:
"Production, supply and distribution of
goods subject to the provisions of Entry
33 of List III."
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 22
This provides for States to generally legislate on
production, supply and distribution of goods. Entry 33 of List
III deals particularly with the production, supply and
distribution of the products of industries where the control of
such industry by the Union is declared by law to be expedient
in the public interest under Entries 7 or 52 of List I. It would
not have been necessary to have especially provided for trade
and commerce in, and the production, supply and distribution
of the products of a controlled industry in Entry 33 of List III,
had the word ’industry’ in Entries 7 and 52 of List I covered
the field. Similarly had the word ’industry’ in Entry 24 of
List II been sufficient, why have a separate head under Entry
27 of the same list dealing with the production supply and
distribution of goods unless we concede that the framers of
the Constitution were guilty of ’ineptitude, want of precision
and tantology’? The concept of a ’general’ and ’particular’
term is necessarily relative depending upon the context in
which the term is considered. Entry 27 of List II is certainly
a general entry but only in relation to Entry 33 of List III
which deals with trade, commerce etc. in particular kinds of
products namely the products of a controlled industry.
Finally, it is clear from the passage quoted, that Banthia held
that the Gold Act was legislatively competent under Entry 52
of List I because it dealt with the process of manufacture or
production of gold i.e., it was within the sweep of industry as
defined in Tika Ramji.
The appellants’ submission that Tika Ramji narrowly
construed the word because the decision was rendered in the
context of the Industrial (Development & Regulation) Act,
1951 proceeds on a mis-appreciation of the decision. Merely
because Tika Ramji found that the particular Central
enactment under consideration was under Entry 33 of List III
and not Entry 52 of List I does not limit or detract from its
authoritative pronouncement on the scope of Entry 52 of List
I. The finding in fact formed the basis of the conclusion that
the provisions of the Central Act in question did not fall
within Entry 52 of List-I. What was construed was the ambit
of Entry 52 of List I and the range of a declaration under that
entry. That the declaration was contained in the Industries
(Development and Regulation) Act, 1951 was
inconsequential and could not colour the scope of the entry
itself. It is significant that Banthia’s case, which according
to the appellants accepted a wider meaning of ’industry’, was
also a case in which the relevant declaration under Entry 52
of List I was under the Industries (Development and
Regulation) Act.
Banthia’s case has been considered and explained in
the subsequent decision of the Constitution Bench in M/s
Fatehchand Himmatlal and Others V. State of
Maharashtra 1977 (2) SCC 670. With specific reference to
Banthia’s case, the Court held:
"..We see nothing in that decision
which contradicts the position that
while the Gold Control Act fell within
Entry 52 of List I the State List was
not totally suspended for that reason for
purposes of legislating on subjects
which fell within that List, but
incidentally referred also to gold
transactions."
To add to the persuasive force of their arguments, the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 22
appellants then put forward what can only be described an
argument of alarm. It was contended that if a narrow view of
industry were taken, then despite a declaration by Parliament
under Entry 7 of List I that an industry was necessary for the
purpose of defence of the country or for the prosecution of
war, Parliament would not be competent to legislate on the
supply of raw materials or distribution of the finished
product. Such an argument is hardly relevant to a question of
construction. In any case it overlooks the superior powers of
Parliament under Entry 33 of List III and the overriding
powers of Parliament during a national emergency including
those under Articles 249, 250, 251 and 252.
To sum up: the word ’Industry’ for the purposes of
Entry 52 of List I has been firmly confined by Tika Ramji to
the process of manufacture or production only. Subsequent
decisions including those of other Constitution Benches have
re-affirmed that Tika Ramji’s case authoritatively defined
the word ’industry’- to mean the process of manufacture or
production and that it does not include the raw materials used
in the industry or the distribution of the products of the
industry. Given the constitutional framework, and the weight
of judicial authority it is not possible to accept an argument
canvassing a wider meaning of the word ’industry’. Whatever
the word may mean in any other context, it must be
understood in the Constitutional context as meaning
’manufacture or production’.
Applying the negative test as evolved in Tika Ramji in
this case it would follow that the word ’industry’ in Entry 24
of List II and consequently Entry 52 of List I does not and
cannot be read to include Entries 28 and 66 of List II which
have been expressly marked out as fields within the State’s
exclusive legislative powers. As noted earlier Entry 28 deals
with markets and fairs and Entry 66 with the right to levy
fees in respect of, in the present context, markets and fairs.
Entry 52 of List I does not override Entry 28 in List II nor
has Entry 28 in List II been made subject to Entry 52 unlike
Entry 24 of List II. This Court in Belsund Sugar (supra ) has
also accepted the argument that Entry 28 of List II operated
in its own and cannot be affected by any legislation
pertaining to industry as found in Entry 52 of List I.
If ’industry’ does not include ’markets and fairs’ it is
important to define what markets and fairs connote. ’Market’
may strictly be defined as "the meeting or congregating
together of people for the purchase and sale of provisions or
livestock, publicly exposed, at a fixed time and place" . A
’fair’ has been judicially defined as meaning ’a periodical
concourse of buyers and sellers in a place generally for sale
and purchase. at times or on occasion ordained by
custom . The distinction between markets and fairs appears
to lie in the periodicity viz. while a market may be a regular
or permanent place of business, a fair is an intermittent one.
At common law, fairs and markets were also franchises or
rights to hold a concourse of buyers and sellers to dispose of
the commodities in respect of which the franchise is given.
This included the right to levy a toll or sum payable by the
buyer upon sales of articles in a market. The sense in
which the word has been used in Entry 28 appears to cover
not only such right but the market place itself including the
’concourse of buyers and sellers’ and the regulation of all
these.
The word "Markets" has also found place in Entry 48 of
List 1 which reads "Stock Exchanges and future markets". A
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 22
Constitution Bench of this Court in Waverly Jute Mills Co.
Ltd. vs- Raymon & Co. (India) Private Ltd. [1963] 3 SCR
209 rejected the submission that the word "markets" must be
restricted to "a place set apart for the meeting of the general
public of buyers and sellers, freely open to any such to
assemble together, where any seller may expose his goods for
sale and any buyer may purchase".
It was held that :
"Market no doubt ordinarily means a
place where business is being
transacted. That was probably all that it
meant at a time when trade was not
developed and when transactions took
place at specified places. But with the
development of commerce, bargains
came to be concluded more often than
not through correspondence and the
connotation of the work ’market’
underwent a corresponding expansion.
In modern parlance the work ’market’
has come to mean business as well as
the place where business is carried on."
The question then is does the Markets Act fall within
this definition of the word ’markets’? The establishment of
regulated markets had long been recognized as an imperative
requirement of any ordered plan of agricultural development
in this country. The objects and reasons for enacting the
Bihar Markets Act, 1960 has been stated as: properly
organising markets of agricultural and allied commodities to
ensure that the agriculturist gets a fair share of the price paid
by the consumer for his produce by attempting to do away or
rigidly controlling the middle man. What was originally a
source of private profit in common law, has by virtue of the
Markets Act become a matter of municipal concern namely,
setting up of regulated markets for the marketing of
agricultural produce.
The provisions of the Markets Act are briefly noted.
The Markets Act provides for the issuance of a notification
under Section 3 by the State Government declaring its
intention of regulating the purchase, sale, storage, processing
of specified agricultural produce in that area. "Agricultural
produce" has been defined in Section 2 (6) as:
" all produce whether processed or
non-processed, manufactured or not, of
Agriculture, Horticulture, Plantation,
Animal Husbandry, Forest,
Sericulture, Pisciculture, and includes
livestocks or poultry as specified in the
Schedule."
Tobacco has been mentioned at Item XI in the
Schedule. Under Section 4 the State Government declares
the area specified as a market area for the purpose of the
Markets Act. From the date of the declaration, under Section
4 no person or authority can establish or continue or be
allowed to set up any place for the purchase, sale, stores or
processing of any notified agricultural produce except in
accordance with the provisions of the Markets Act. Under
Section 5 the State Government may declare by notification
any building or locality in any market area to be the principal
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 22
market yard. Sections 6 to 15 and 17 to 27-A deal with the
setting up of Market Committees, their constitution and
functions. These Market Committees are subject to the
superintendence and control of the Bihar Agricultural
Marketing Board set up under Section 33A of the Markets
Act.
Section 15 prohibits notified agricultural produce
from being bought or sold by any person at any place in the
market area other than the relevant principal market yard or
sub- market yard or yards established therein unless it is for
retail sale, personal consumption or exempted by the
Marketing Board under Section 15(1) or (2). The mode of
purchase and sale specified under Section 15(2) is by means
of open auction or tender system. Sub-section (2) of Section
18 specifically authorises the Market Committee to issue
licences to persons engaged in the processing, storage or
processing of agricultural produce to operate in the market
area and also to control and regulate the admission of persons
into the market yard or the sub-market yards and to prosecute
persons trading without a valid licence. Section 27 empowers
the Market Committee to levy and collect market fee from
the buyer on the agricultural produce bought or sold in the
market area at specified rates. The remaining sections of the
Markets Act are omitted from consideration as they are not at
all relevant. We are really concerned with Section 15 and
more particularly Section 27. The setting up of markets areas,
markets yards and regulating use of the facilities within such
area or yards by levy of market fee is a matter of local
interest and would be covered by Entry 28 of List II and thus
within the legislative competence of the State. If any portion
of the market area or the market yards is used for the sale or
purchase of tobacco, that too will be within the State’s
competence. To hold to the contrary would be to ignore the
exclusive powers of the States to legislate in respect of
markets and fairs under Entries 28 and 66 of List II. The
Markets Act does not seek to regulate either the
"manufacture or production" of tobacco (assuming that
agricultural produce can be manufactured) and thus does not
impinge upon the Tobacco Act in so far as it is at all relatable
to Entry 52 of List I. All the provisions of the Markets Act, in
my view, are clearly relatable to Entry 28 of List II given the
scope of the entry as discussed earlier. The State in the
circumstances, was not incompetent to incidentally also
legislate with regard to tobacco and "the semantic sweep of
Entry 52 did not come in the way of the State Legislature
making laws on subjects within its sphere and not directly
going to the heart of the industry itself". In my opinion
therefore Sections 15 and 27 of the Markets Act in pith and
substance are relatable to Entries 28 and 66 of List II and
have been competently enacted by the State. Incidentally it
is nobody’s case that the fee charged under Section 27 does
not represent a quid pro quo for the services rendered and
facilities afforded in the market area. It follows that
Parliament is incompetent to legislate for the setting up or
regulation of ’markets and fairs’ within the meaning of the
phrase in entry 28 of List II, even in respect of tobacco. It
may of course incidentally trespass into the States legislative
field, provided (1) the trespass is an inseparable part of the
provisions validly passed and (2) the State has not already
fully occupied its field with conflicting statutory provisions.
Let us consider the scope of the Tobacco Act. The
Statement of Objects and Reasons of the Tobacco Act shows
that the enactment was necessary in view of the fact that
India is the third largest producer of tobacco in the world, the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 22
sixth largest among the tobacco exporting countries and the
second largest exporter of virginia tobacco. The manifest
intention of Parliament was to take measures to ensure that
the tobacco particularly virginia tobacco met the demands of
the markets in India and abroad both qualitatively and
quantitatively. The Act which extends to the whole of India
has however not been brought entirely into force in all the
States. Chapter I contains the first three Sections. Section 1,
sub-section (3) provides for the Act coming into force on
such dates as the Central Government may, by notification in
the Official Gazette, appoint; provided that different dates
may be appointed for different provisions for the Act and for
different States or different parts thereof. Section 2 contains
the necessary declaration in terms of Entry 52 List I in
relation to the tobacco industry.
Chapter II of the Act consists of Sections 4 to 8 and
deals with the establishment and functions of the Tobacco
Board. Section 8 (1) casts a ’duty on the Board to promote
the development of the tobacco industry’. Sub-section (2)
prescribes some specific measures which may be taken by the
Board. Those which are of relevance are noted:
"8(2) (a)
(b) keeping a constant watch on
the virginia tobacco market both
in India and abroad, and ensuring
that the growers get a fair and
remunerative price for the same
and that these are no wide
fluctuations in the prices of the
commodity;
(c) maintenance and
improvement of existing markets,
and development of new markets
outside India for Indian virginia
tobacco and its products and
devising of marketing strategy in
consonance with demand for the
commodity outside India,
including group marketing under
limited brand names;
(cc) establishment by the Board
of auction platform with the
previous approval of the Central
Government for the sale of
virginia tobacco by registered
grower or curers and functioning
of the Board as an auctioneer at
auction platform established by
or registered with it subject to
such conditions as may be
specified by the Central
Government.
(e) regulating in other respects
virginia tobacco marketing in
India and export of virginia
tobacco having due regard to the
interests of growers,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 22
manufacturers and dealers and
the nation;
.
(g) purchasing virginia tobacco
from growers when the same is
considered necessary or
expedient for protecting the
interests of the growers and
disposal of the same in India or
abroad as and when considered
appropriate;
..."
Sections 10 to 15 are in Chapter III which deals with
Regulation of Production and Disposal of Tobacco, for
registration/licensing not only of the growers including
nursery growers(Section 10, 10-A) but also curers (Section
11), processors and manufacturers (Section 11-A), graders
and storers (11-B), and exporters, dealers, packers or
auctioneers (Section 12).
Of particular relevance are Sections 13 and 13A which
provide for virginia tobacco to be sold at registered auction
platforms or auction platforms established by the Board, and
places a duty on registered dealers and exporters to purchase
tobacco only at such auction platforms. However, in those
States in which Section 13 is not in force, under Section 13B
dealers purchasing virginia tobacco must pay the full price
for the whole quantity and are restricted from taking recourse
to any such practice which may be specified as unfair by the
Board.
Section 14 deals with the forms for registration and
Section 15 with the power of inspection to ascertain whether
the particulars in the forms are correct. Apart from these
sections, according to the appellants, Section 14-A in
particular occupies the field with respect to levy of fees on
the sale of tobacco. It reads:
"14-A(1) Where virginia
tobacco is sold at any auction
platform established by the
Board under this Act, it shall be
competent for the Board or for
any officer of the Board
authorised by it in this behalf to
levy fees, for the services
rendered by the Board in relation
to such sale, at such rate not
exceeding two percent of the
value of such tobacco as the
Central Government may from
time to time, by notification in
the Official Gazette, specify;
(2) The fees levied under sub-
section (1) shall be collected by
the Board or such officer equally
from the seller of the Virginia
tobacco and the purchaser of
such tobacco, in such manner as
may be prescribed."
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 22
The contents of Chapter IV and V of the Act need not
detain us as they deal with aspects far removed from the
Markets Act. Of the last Chapter viz. Chapter VI, two
Sections are noteworthy viz. Section 30(1) which allows the
Central Government to suspend provisions of the Act in
respect of certain territories and Section 31 which reads:
31. The provisions of this Act
shall be in addition to, and
not in derogation of, the
provisions of any other law
for the time being in force."
The object of the Tobacco Act is to keep a control on
the quality and quantity of tobacco grown in the country with
an eye on the international markets. The location of domestic
markets for sale of tobacco can hardly be described as a
necessary concomitant to the achievement of this object.
Assuming it is, fairly read, it is possible to reconcile the
allegedly conflicting provisions of the two statutes by a
reasonable and practical construction of their provisions. The
use of the word "markets" and marketing in the Tobacco Act,
including Section 8, does not mean a market in the sense the
word has been used in the Markets Act. It is obvious from
phrases such as ’the Virginia Tobacco market", ’development
of new markets outside India’ etc. that the word has been
used in the sense of ’sale as controlled by supply and
demand; especially a demand for a commodity or service" -
in this case tobacco. The Tobacco Act is not concerned so
much with the ’where’ but with the ’how’, the tobacco is
disposed of. Even when the Tobacco Act speaks of setting
up of auction platforms it does not indeed it could not say
where the auction platforms are to be set up.
Since States are exclusively competent to decide on the
location of markets, the authorities under the Tobacco Act
would have to comply with the municipal laws and set up the
auction platforms only within the permissible areas. If the
facilities afforded under the Market Act are utilised, the
facilities will have to be paid for and the authorities
appointed to levy and collect fees for the purpose under the
Markets Act would be competent to do so. If further facilities
are offered at the Auction Platforms under the Tobacco Act,
fees may be levied under Section 14-A of that Act. The right
to levy fees under the two acts therefore may not necessarily
conflict, the levy not being in the alternative but additional.
Assuming this is not possible and there is any conflict, the
provisions of the Markets Act and not the Tobacco Act
would prevail.
Even if Sections 15 and 27 of the Markets Act are not
referable to Entries 28 and 66 of List II and are referable to
Entries 26 and 27 of List II nevertheless these Sections of
the Markets Act do not trespass on turf reserved by
Parliament under Entry 52 of List I? State legislation on the
supply and distribution of goods as well as trade and
commerce therein which are relatable to Entries 26 and 27, is
only subject to the Central enactment if any under Entry 33
of the Concurrent List and not Entry 52 of List I.
Furthermore, whether or not any portion of the Tobacco Act
relates to an "industry’ within the meaning of Entry 52 List I,
following the logic of Tika Ramji at least those provisions
relating to the disposal of tobacco are not so relatable. The
declaration under Entry 52 List I does not cover these
provisions and the States were free to legislate
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 22
under Entries 26 and 27 of List II on tobacco. I do not
propose to decide whether the provisions of the Tobacco Act
dealing with the sale of tobacco may be sustained with
reference to Entry 33 of List III. It is an unnecessary exercise
because the appellants did not argue this, and also because, as
I have said earlier, the Constitutional validity of the
provisions of the Tobacco Act has not been referred to this
Bench for scrutiny.
Assuming that Chapter III of the Tobacco Act are
covered by Entry 52 of List I, nevertheless the Parliament did
not intend to invalidate any portion of the Markets Act. It has
consciously clarified by Section 31 that it does not intend to
occupy the entire field and has ’made space’ for the State
legislation and made it clear that the provisions of the Central
Act shall be in addition to and not in derogation of any other
law. The Section assumes greater significance since most of
the Markets Acts were in place when the Tobacco Act was
enacted. There are two ways in which such a saving clause as
is contained in Section 31 of the Tobacco Act may be
understood. There is the way which found favour with this
Court in M. Karunanidhi vs. Union of India : 1979 (3) SCC
431 which held that such a section clearly evinced the
intention of the dominant legislature leaving "no room for
any argument that the State Act was in any way repugnant to
the Central Act". There is the other way of reading such a
section in the dominant legislation as incorporating or taking
under its legislative umbrella the allegedly conflicting
provisions of the subservient statute. Either way, the express
words in Section 31 coupled with the duty of Courts to
reconcile and uphold legislation, if possible, can only result
in upholding the constitutional validity of the Market fee
imposed by the State.
A further compelling circumstance to uphold the levy of
market fee is the fact that several provisions of Chapter III of
the Tobacco Act particularly those dealing with the setting up
of auction platforms namely Sections 13 and 13A, and
Section 14 A relating to the levy of fees on the sale of
tobacco have not been brought into operation in any State in
India except for the State of Karnataka. I have already stated
the reasons why the provisions relating to sale of tobacco in
the Tobacco Act do not come within the definition of
’industry’ and are not covered by the declaration under Entry
52 of List I. But granting for the sake of argument that the
sale of tobacco comes within the definition of industry until
the Central Government chooses to actually occupy the field
by effective legislation, it would remain open for the State
Legislature to cover that field under Entry 24 of List II. It is
difficult to adopt an interpretation which would debar the
States from the right to provide for the sale of tobacco only
within market Areas and levy market fees although
Parliament does not now and may never seek to bring
Sections 13, 13A and 14A into operation in those States. This
view finds support in the pronouncement of a Constitution
Bench in Ishwari Khetan Sugar Mills (P) Ltd. v. State of
Uttar Pradesh (supra) when it was construing the impact of
a declaration under Entry 52 of List I, it was said that
legislation for assuming control containing the declaration
under entry 52 of List I must spell out the limit of control so
assumed by the declaration. Therefore, the degree and extent
of control that would be acquired by Parliament pursuant to
the declaration would necessarily depend upon the legislation
enacted spelling out the degree of control assumed.
In Belsund Sugar (supra), one of the controversies
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 22
raised related to a conflict between the provisions of the
Markets Act and the Tea Act, 1953. There too, the Tea Act
envisaged that an order might be passed under Section 30
relating to the sale and purchase of tea. The contention that
the mere possibility of issuance of such a control order under
Section 30 of the Tea Act was sufficient to oust the State
Legislature from the field, was negatived in the following
words:
"mere possibility of issuance
of any future order under Section
30(1) of the Tea Act by the
Central Government in the
absence of any existing express
order to that effect, cannot be
said to have occupied the field
regarding purchase and sale of
manufactured tea and fixation of
maximum or minimum price
thereof, or the location of such
sales. These topics cannot be
said to be legitimately covered
by the Tea Act. Hence, the field
is wide open for the State
Legislature to exercise its
concurrent legislative power
under Entry 33 of List III for
effectively dealing with these
matters."
Therefore, even if one were to concede that there is a
conflict between the provision in the Markets Act prohibiting
sale of tobacco otherwise than in a market area and the
setting up of auction platforms under the Tobacco Act, and
between the States power to levy market fee under the
Markets Act and the levy of fee on the sale of tobacco under
the Tobacco Act, at least in those States where Sections 13,
13A and 14A of the Tobacco Act are not operative, the
provisions of the Markets Act must prevail.
It now remains for me to answer the question which
was referred to this Bench, namely whether ITC Ltd. V.
State of Karnataka (Supra) has been rightly decided. The
majority opinion on the issue of legislative competence of the
State Legislature was delivered by Fazal Ali, J. In striking
down that part of the Karnataka Markets Act which provided
for the power to levy market fee on tobacco and its products,
the opinion was based on six premises, each of which do not
appear to be in consonance with the law.
First The Court proceeded on the basis that the
Tobacco Act was wholly and solely relatable to Entry 52 of
List 1. I have already given my reasons for holding that the
Tobacco Act in so far as it deals with the disposal of tobacco
is not within Entry 52 of List I.
Second Article 246(4) was relied on to hold that
Parliament had overriding power "to legislate in exceptional
cases in matters appearing in the State List". Article 246(4)
has no manner of application to the present dispute. It reads :
"(4) Parliament has power to make
laws with respect to any matter for any
part of the territory of India not
included in a State notwithstanding
that such matter is a matter enumerated
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 22
in the State List."
The Sub-Article only deals with the power of
Parliament to make laws in respect of Union Territories even
in respect of matters enumerated in the State List.
Third It was held to be "well settled that where two
Acts, one passed by the Parliament and the other by State
Legislature collide and there was no question of harmonizing
them, then the Central Legislation must prevail". What is
well settled is that if the Parliament and the State Legislature
enact conflicting legislation in respect of the same subject
matter under an Entry in the Concurrent List then only will
the Central Legislation prevail. In other cases it will be a
question of whether the conflicting legislation is referable to
an exclusive entry under the State List or the Union List,
after the determination of which, the dominant legislation
will prevail.
Fourth It was said that if the minority view (expressed
by Mukharji-J) were accepted, it would "amount to robbing
the 1975 Act of its entire content and essential import by
handing over the power of legislation to the State
Government which per se has been taken over by the
Parliament under Article 246 by the 1975 Act". Mukharji-J
had in fact followed Tika Ramji and held correctly that the
Tobacco Act and Markets Act operated in their respective
fields and that there was no repugnancy if both the Acts were
considered in the light of their respective true nature and
character. Tika Ramji and the other Constitution Bench
decisions following it were not even referred to by the
majority..
Fifth- In determining the impact of Entry 52 of List I
vis a viz entry 28 of List II, the majority relied on decisions
dealing with Entry 54 of List I, and Entry 23 of List II. The
scope of the entries are different and I agree with the view
expressed in the opinion of my learned Brother Pattanaik, J
that the decisions relied upon by the majority viz the Hingir
Rampur Coal Co. Ltd. v. State of Orissa; AIR 1961 SC
459, Baijnath Kedia v. State of Bihar: 1969 (3) SCC 838;
Bharat Cooking Coal Ltd. v. State of Bihar 1990 4 SCC
557 and State of Orissa v. M.A. Tullock & Co. : 1964 (4)
SCR 461 are inapposite.
The final premise on which the majority based their
view that the States could not levy any market fee on
Tobacco, was that since the assent of the President was not
taken, the Karnataka Markets Act 1980, was wholly
incompetent. The view proceeds on a misinterpretation of
Article 254(2), which in any event has no application to this
case. Article 254(2) provides :
"(2) Where a law made by the
Legislature of a State with respect to
one of the matters enumerated in the
Concurrent List contains any
provision repugnant to the provisions
of an earlier law made by Parliament
or an existing law with respect to that
matter, then, the law so made by the
Legislature of such State shall, if it
has been reserved for the
consideration of the President and
has received his assent, prevail in that
State."
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 22
The language is clear. It only deals with the question of
supremacy and not competence. In respect of conflicting
legislation under the Concurrent List, if the State Legislation
has received the assent of the President, it will prevail over
the Central Legislation in that State. The Article does not
provide that State Legislation without the assent of the
President is incompetent.
In the circumstances I would hold that ITC vs. State of
Karnataka (Supra) was wrongly decided and would for the
reasons discussed uphold the competence of the State
Legislatures to levy market fee on tobacco.
..J
( RUMA PAL)
January 24, 2002