Holding

A State may levy a tax on the sale or purchase of industrial alcohol under Entry 54 of List II, and such power is not curtailed by Central price‑control orders, rendering the High Court's striking down of the tax invalid.

Summary

The Uttar Pradesh legislature amended its 1939 Motor Spirit, Diesel Oil and Alcohol Taxation Act to levy a purchase tax on industrial alcohol, which was challenged as unconstitutional because industrial alcohol is regulated by the Central Government under the Industries (Development and Regulation) Act, 1951. The respondents argued that the State could not tax industrial alcohol under Entry 54 of List II since the Central Price Control Orders under section 18G of the IDR Act occupied the field. The Supreme Court examined whether the State's taxing power under Entry 54 is curtailed by the Central government's regulatory control and whether the High Court's reliance on a per incuriam observation in Synthetics (1990) 1 SCC 109 was valid. The Court held that the State's power to levy taxes on the sale or purchase of goods under Entry 54 is plenary and not fettered by the Central price‑control regime, and that the High Court’s decision was erroneous. Consequently, the amendment imposing the purchase tax was upheld. The appeal was allowed, restoring the State's taxing power over industrial alcohol.

Issues considered

The constitutional competence of the Uttar Pradesh legislature to levy a purchase tax on industrial alcohol under Entry 54 of List II.
Whether the Ethyl Alcohol (Price Control) Orders made under section 18G of the Industries (Development and Regulation) Act, 1951, preclude the State from exercising its taxing power.
The binding effect of the observation in Synthetics and Chemicals Ltd. v. State of U.P. (1990) 1 SCC 109 regarding sales tax on industrial alcohol.
The applicability of Article 141 and the doctrine of precedent to a per incuriam statement lacking reasoning.

Legislation cited

Central Sales Tax Act, 1956s. 4, s. sections 3
Constitution of Indias. Article 141, s. Article 246(1), s. Article 246(3), s. Article 286, s. Article 298, s. Article 47
Essential Commodities Acts. section 3
Industries (Development and Regulation) Act, 1951s. section 18G
Mines and Minerals (Regulation and Development) Act, 1957s. section 9
United Provinces Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939s. section 3
Uttar Pradesh Sales of Motor Spirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976s. section 3(1)

Subjects

industrial alcoholpurchase taxEntry 54 List IIprice control ordersIDR Actfederalismtaxation vs regulationArticle 141per incuriumprecedent

Judgment

STATE OF U.P. AND ANR.
A
v.
M/S. SYNTHETICS AND CHEMICALS LTD. AND ANR.

JULY 18, 1991

B [T. KOCHU THOMMEN AND R.M. SAHA!, JJ.]

Constitution of India, 1950-Article 141-Declaration of Law-
Binding effect of-Precedent-Principle and purpose of-Supreme
Court decision in ( 1990) 1 SCC 109-Effect and consequences of.

Constitution of India, 1950-Vl/th Schedule, List 11, Entry 54-
c lndustrial alcohol-Whether State can levy tax on sale or purchase
thereof-Ceritral Government controlling price under Ethyl Alcohol
(Price Control) Orders-Effect and consequences of.

Industries (Development and Regulation) Act, 1951-Section
D !BG-Ethyl Alcohol (Price Control) Orders-Enactment of by Central
Government-Whether restricts the powers of the State to levy tax on
industrial alcohol-United Provinces Sales of Motor Spirit, Diesel Oil and
_J
Alcohol Taxation Act, 1939-Section 3( 1) as amended by the Uttar
Pradesh Sales of Motor Spirit, Diesel and Alcohol Taxation (Amend-
ment) Act, 1976---Validity of.
E
The Uttar Pradesh Sales of Motor Spirit, Diesel Oil and Alcohol
Taxation (Amendment) Act, 1976 amended sub-section (I) of section 3
of the United Provinces Sales of Motor Spirit, Diesel Oil and Alcohol
Taxation Act, 1939 purporting to levy purchase tax on industrial
alcohol, which was challenged in a writ application before the High
F Court by the respondents.

The respondents contended before the High Court that the State
Legislature was incompetent to levy tax with reference to Entry 54 of List
II in respect of industrial alcohol in so far as that article was the subject of
regulation by the Central Government in exercise of its power under
G section ISG of the Industries (Development and Regulation) Act, 1951;
that the price of that article was regulated by the relevant Price Control
Orders made by the Central Government under the IDR Act and any -4- .
levy of sales tax or purchase tax by the State by recourse to Entry 54 of
List II would come into direct conflict with the law made by Parliament
and the control exercised by the Central Government under that law in
H regard to an industry falling under Entry 52 of List I read with Entry 33
of List III.
64
STATE OF U.P. v. SYNTHETICS AND CHEMICALS 65

Relying upon the decision of a Constitution Bench of this Court in
A
Synthetics and Chemicals Ltd. & Others v. State of U.P. & Others,
[1990] 1 sec 109 the respondents further contended that, in so far as
industrial alcohol was concerned, the State was incompetent to levy
sales tax, by reason of the operation of the Ethyl Alcohol (Price Control)
Orders made by the Central Government under section lSG of the !DR
Act. B

The appellants-Opposite parties contended that the decisiod of
this Court in (1990) l SCC 109 did not deal with the question of levy of
tax falling under Entry 54 of List II and that the power of the State to
levy taxes on, the sale or purchase of goods was not the subject of
consideration in that decision.
c
The High Court allowing the writ petition and declaring the U .P.
Act 8 of 1976 to be null and void held that the levy of purchase tax on
industrial alcohol was, during the operation of the Price Control Orders
of the Central Government beyond the legislative competence of the
State, against which the State filed the present Appeal. D

,. The appellant submitted that the reference to sales t~x in the
judgment of this Court in (1990) l SCC 109, which the High Court in
the present case thought was binding upon it, was accidental and per
incurium and did not arise from the judgment; that the levy of sales tax
was not in question at any stage of the arguments, nor was the question E
considered as it was not in issue; that the Court gave no reason what-
ever for abruptly stating that sales tax was not leviahle by the State by
reason of the Ethyl Alcohol (Price Control) Orders.

The respondents contended that the prices strictly controlled by
the Central Government in exercise of its power under the IDR Act; F
that the State Law cannot be allowed to disturb such prices; that any
attempt to raise the prices, despite the strict contml exercised by the
Central Government by means of statutory orders, was an invalid exer-
cise of power.

On the question, whether or notthe power of the State to levy tax G
on the sale or purchase of goods falling under Entry 54 of List II will
' l,.·
comprehend industrial alcohol, allowing the appeal of the State, this
Court,

HELD: Per T. Kochu Thommen & R.M. Sahai, JJ.
H
66 SUPREME CQlJB.T REPORTS [1991] 3 S.C.R.

1.01. The High Court was clearly in error in striking down the
A
impugned provision in sub-section (l) of section 3 of the United Pro-
vinces Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939
as amended by the U.P. Act 8 of 1976, undoubtedly falls within the
legislative competence of the State being referrable to Entry 54 of List
II. [91A)
B
l.02. The decision of this Court in Synthetics (1990) l SCC 109 is
not an authority for the proposition canv~ssed by .the assessee. This
Court has not, and could not have, intended to say lhat the Price Con-
trol Orders made by the Central Government under the !DR Act
imposed a fetter on the legislative power of the State under Entry 54 of
List II to levy taxes on the sale or purchase of goods. The reference to
c sales tax in paragraph 86 of that judgment was merely accidental or per
incuriam and has therefore, no effect on the impugned levy. So far as
industrial alcohol was concerned, the State was incompetent to levy
sales tax by reason of the operation of the Ethyl Alcohol (Price Control)
Orders made by the Central Government in exercise of its power under
D section l8G of the !DR Act. [91A-C, 73E-F]

Per T. Kochu Thommen, J.

2.01. This Court in Synthetics & Chemicals Ltd. & Others v.
State of U.P. & Others, [1990] l SCC 109 was concerned with only one
E question, and that was whether the States could levy excise duty or vend
fee or transport fee and the like by recourse to Entries 51 or 8 in List II
in respect of industrial alcohol and it did not deal with the taxing power
of the State under 54 of List II, although there is a reference to sales
tax. "The State may charge excise duty on potable alcohol and sales tax
under Entry 52 of List II". Entry 52 of List II is mentioned in connection
F with Excise duty and sales tax, but neither of them falls under Entry 52.
Reference to Entry 51 of List II ought to have been made, if it was excise
duty that the Court had in mind. Entry 54 of List II would have been
referred to, and not Entry 52, if the Court had in mind sales tax. On the
other hand, Entry 52 had any application to the fees or charges in
question. [80B-F]
G
The abrupt observation of this Court in (1990) l SCC 109 was
without a preceding discussion, and inconsistent with the reasoning
adopted by thjs Court in earlier decisions from which no dissent was
expressed on the point. [SOG-H]

H 2.02. The question .in the instant case is whether or not the
STATE OF U. P. v. SYNTHETICS AND CHEMICALS 67

impugned legislation falls in pith and substance within Entry 54 of List A
II, and not whether the industry (Producing goods the sale of which is
leviable to tax under the impugned legislation) is controlled within the
ambit of Entry 52ofListlwasnotconsidered w(1990) 1SCC109. [87H-88B]

Synthetics and Chemicals Ltd. & Others v. State of U.P. 1 & B
Others, [1990] I SCC 109, Distinguished.

State of Uttar Prades~ & Others v. M/s. Synthetics & Chemcials
Ltd. & Others, [1980] 2 SCC 441, overruled in (1990) I SCC 109,
Referred to.

Per R.M. Sahai, J. (Concurring) c
2.03. A decision which is not express and is not founded on
reasons nor it proceeds on consideration of issue cannot be deemed to be
a law declared to have a binding effect as is contemplated lly Article
141. Uniformity and consistency are core of judicial discipline. But that
0
which escapes in the judgment without any occasion is not ratio
decedendi. [93B-C]

2.04. Any declaration or conclusion arrived without application
of mind or preceded without any reason cannot be deemed to be decla-
ration of law or authority of a general nature binding as a precedent. E
Restraint in dissenting or overruling is for sake of stability and
uniformity !Jut rigidity beyond reasonable limits is inimical to the
growth oflaw. [930-E]

2.05. Law declared is not that can be culled out but that which is
> stated as law to be accepted and applied. A conclusion without refe- F
rence to relevant provision of law is weaker t:ban even casual
observation. [93E-F]

2.06. In absence of any discussion or any argument the order was
founded on a mistake of fact, and, therefore, it could not be held to be
law declared. [94B-C]
G
2.07. The conclusion of law by the Constitution Bench in (1990) 1
,• t- SCC 109 that no sales or purchase tax Could be levied on industrial
alcohol with utmost respect fell in both the exceptions, namely, rule of
sub-silentio. and being ill per incurii;m. to the binding authority of the
pre.cedents. [94C-D] H
68 SUPREME COURT REPORTS [ 1991] 3 S.C.R.

Young v. Bistol Aeroplane Ltd .. [1944] I KB 718; Jaisri Sahu v.
A
Rajdewan Dubey, [fl.162] 2 SCR 558; Lancaster Mo'tor Company
(London) Ltd. v. Bremith Ltd., [1941] IKB 675; Municipal Corpora-
tion ofDe/hi v. Gurrram Kaur, [i989] 1 SCC 101 and Shama Rao v.
State of Pondicherry, AIR 1967 SC 1680, Referred to.

B Per T. Kochu Thommen. J.

3.0 I. The power of regulation and control is separate and distinct
from the power of taxation. Legislative exercise o.f regulation or contnil
referrable to Entry 52 of List I or Entry 8 of List II is distinct and
different from a taxing power attributable to Entry 54 of List II or Entry
92A or 92B of List I. The power to levy taxes on sale or purchase or
c consignment is referrable to these Entries, and subject to the other
provisions of the Constitution, the taxing power of the State is not cut
down by the general legislative control vested in Parliament and referr-
able to the general topics of legislation. [86G-87H]

D 3.02. Any exercise of power by the State which transgresses upon
the power of Parliament or of the Central Govenment, as its delegate, is
to the extent of such transgression null and void. [SSC]

3.03. None of the entries in the Concurrent List deals with tax but
general subjects of legislation. No conflict can, therefore, arise between
E the taxing powers of the Union and the States. Parliament has the power
to legislate in respect of a 'controlled' industry falling under Entry 52 of
List I, and both Parliament and the States have the power to legislate in
respect of the trade and commer.ce in, and the production, supply and
distribution of, the products of a 'controlled' industry (Entry 33 of List
III). These are not taxing entries and do not, therefore, relate to taxes,
F but powers of regulation and 'Control. The power to control industry
being thus vested in Parliament (Entry 52 of List I) and the legislative
power in respect of trade and commerce in such industry being concur-
rently vested in the Union and the States (Entry 33 of List III) any
exercise of control by the State must be subject to the legislative power
of Parliam.ent. [84H-8SC]
G
3.04. The taxing pow.er of the State on a matter falling within its
competence.under Entry 54 of List II, namely, sale or purchase of goods ..; ·-
(other than newspapers) is, subject to the taxing power of Parliament
under Entry 92A of List I and other provisions of the Constitution,
plenary and unlimited, and untrammelled by the supervisory or
H regulatorv power of Parliament under Entry 52 of List I read with its
STATE OF U.P. v. .SYNTHETICS AND CHEMICALS 69

concurrent power under Entry 33 of List ill. This js the crucial distinc-
A
tion between the wide taxing power of the State under Entry 54 of List II
and its conditional or restricted taxing power, for e:<ample, over
mineral rights mentioned in Entry 50 of that List. [82E-G I

3.05. Similarly, the power of the State in respect of potable
alcohol (as distinguished from industrial alcohol) falling under Entry 8 B
of List II is significantly unfettered, unlike, for example; mines and
mineral development over which the regufatory power of the State .is
specifically stated. to be subject to the regulatory power of Parliament
(see Entry 23 of List II read with Entry 54 of List I). The legislative
competence of the State in respect of mines and minerals was held to be
denuded to the extent that the field was covered by section 9 of the C
Central Act, namely, Mines and Minerals (Regulations and Develop-
ment Act), 1957. [82G-83A)

3.06. Unlike mines and minerals, alcohol stands on a different
footing, and is dealt with differently, dependent on whether it is potable
or not. What is significant is that legislation falling in pith and subs- D
tance under Entry 8 or Entry SI of List II in relation to alcohoiic liquor
for human consumption (as distinguished from industrial alcohol)
whether for the purpose of levying vend fee or transport fee or excise
duty, strictly confined to such articles, is not subject to challenge on the
ground of legislative incompetence or repugnancy by reason of the
power vested in Parliament under Entry 52 or Entry 84 of List I or E
Entry 33 of List III. Incompetence or repugnancy arises only when
the impact of the legislation falls, not incidentally, but substantially
on industrial alcohol so as to transgress on a field occupied by
Parliament. [83A-C)

3.07. The matters concerning intoxicating liquors are included F
within the legislative competence of the States. In respect of any such
matter, the States are competent to levy fees (Entry 66 of List II). Entry
51 of List II relating to excise duty on alcoholic liquors for human
consumption clearly refers to liquor for human consumption, the same
meaning ha~ been judicially ascribed in (1990) l sec 109 to 'intoxicat-
ing liquors' in Entry 8 of the same List, the legislative competence of the G
State in respect of 'intoxicating liquors' referred to in Entries 8 and 66
> ~ of List II as a subject of legislation and fee respectively and the power of
the State to levy excise duty on "alcoholic liquors for human consump-
tion" falling under- Entry 51 of the same List must necessarily l>e con-
fined to potable alcohol, and cannot include industrial alcohol or medici-
nal and toilet preparations containing alcohol (see Entry 84 of List I). 1-l
70 SUPREME COURT REPORTS [1991] 3 S.C.R.

Any transgression by the _State on industrial alcohol will be invalid for
A
want of power by reason of the limitation of Entries 8 and SI of List II
(being confined to potable alcohol) and consequent transgression on
areas covered by Entries S2 and 84 of List I respectively relating to
declared industry and excise duty on industrial alcohol and medicinal .,...
and toilet preparations containing alcohol, and also for repugnancy
B arising from a clash with the centrally occupied field falling under
Entry 33 of List III. [SSE, 8SH-86D]

3.08. The power to tax under Entry S4 of List II being a specific
power, it cannot be cut down or in any manner fettered by the general
power of control exercised by Parliament, by legislation on a matter ).-
falling under Entry S2 of List I relating to an industry, the control of
c which by the Union is declared by Parliament by law to be expedient in
the public interest, read with Entry 33 of List III dealing with trade and
commerce in, and the production, supply abd distribution of the pro-
ducts of any snch controlled industry, and imported goods of the same
kind as such products, and other articles mentioned in Entry 33. [89F-H)
D
3.09. The impugned provision of the Uttar Pradesh Sales of
Motor Spirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976
levying tax at the point of first purchase of alcohol in the State is '
undoubtedly an impost falling in pith and substance under Entry S4 of
List II. In the absence of any fetter on the legislative power and in the
E absence of any valid challenge against the provision as a colourable
piece of legislation, the impugned legislative enactment remains
unimpeachable. [89H-90B]

3.10. The control exercised by the Central Government by virtue
of secttion ISG of the IDR Act is in a field far removed from the taxing
power of the State under Entry S4 of List ll. So long as the impugned
"
F
legislation falls in pith and substance within the taxing field of the State,
the control of the Central Government in exercise of its power under the
IDR Act in respect of a controlled industry falling under Entry 52 of List
I cannot in any manner prevent the State from imposing taxes on the
sale or purchase of goods which are the products of such industry and
G which are referrable to Entry 33 of List III. The taxing power of the
State under Entry S4 of List II cannot be cut down by the general
legislative power of control of the Centre. [90B-D I .'
. 3.11. The levy of fee, whether called vend fee or transport fee or
duty or charge, whether levied by Rules purportedly made under the
l:I Excise Act or the Prohibition Act or any other statute, otherwise than as
STATE OF U.P. '· SYNTHETICS AND CHEMICALS 7J

a proper levy falling in pith and substance under a taxing Entry, was A
not valid, to the extent that it lacked quid pro quo and applied to
industrial alcohol. Any such fee or charge can he justified as a mode of
control falling in pith and substance under Entry 8 read with Entry 66
of List II only to the extent tha! it remains within the bounds of the
concerned subject matter, namely, 'intoxicating liquors', which must
necessarily exclnde industrial alcohol. [90D-F] B

3.12. Taxes on sale or purchase are not governed, by the Price
Control Orders, made under the IDR Act, the purpose of which is to
prevent the seller from pricing his goods beyond the limit prescribed by
the Orders. That is a fetter on the free play of demand and supply.
When supply is scarce, the prices are bound to rise and it is that vice C
which is controlled by fixing the maximum price. But that does not in
any manner curtail the power of the State to levy taxes on the sale or
·purchase of goods. It is no doubt true that the consumer of the article
must, hi addition to the price, pay purchase tax due in respect of them.
But that is by reason of a valid levy which is within the constitutional
power of every State, and is dehors the price, though often referrable to D
it. [90F-H]

State of Bombay & Anr. v. F.N. Balsara, [1951] SCR 682; India
Cement Ltd. & Ors. v. State of Tamil Nadu & Ors., [1990] 1 SCC 12;
M.P. V. Sundararamier & Co. v. The State of Andhra Pradesh & Anr.,I
[1958] SCR 1422 at 1479; M/s. R.M.D.C. (Mysore) Private Limited v. E
The State of Mysore, [1962] 3 SCR 230; Ganga Sugar Corporation Ltd.
v. State of Uttar Pradesh & Others, [1980] 1 SCC 223: [1980] 1 SCR
769; Ch. Tika Ramji & Others etc. v. The State of Uttar Pradesh &
Ors., [1956] SCR 393; Kannan Devan Hills Produce Company Ltd. v.
The State of Kera/a & Another, [1973] 1 SCR 356 and Hoechst
Pharmaceuticals Ltd. & Anr. v. The State of Bihar & Others., [1983] 3 F
SCR 130: AIR 1983 S.C. 1019, referred to.

Per.R. M. Sahai, J. (Concurring)

3.l3.. P!Jwer to tax is a sovereign power. In federal system of
governance it is exercised by distribution of power between the Union G
and the Siate.·.Both.are supreme in their sphere. That is brought out
>- clearly by Article 246(1) and Article 246(3) of the Constitution. The
legislative field for levying tax by Union is set out in Entries 82 to 92 in
List I and·State in Entries 45 to 63 in List llofthe Vllth Schedule. There
.is no overlapping. Fields are clearly demarcated. Limitations and rest-
rictions are also mentioned. Unlike general entries power to levy tax H
72 SUPREME COURT REPORTS [ 1991] 3 S.C.R.

cannot be deducted from another Entry as anciUary exercise of power.
A
Since the Concurrent List does not contain any Entry relating to taxing'
power the concept of occupied field or repugnancy cannot arise. If there
is clash between exercise of power under List II and List I then the State
legislation may be invalid due to Article 246(1) But since there can be no·
clash or invalidity in relation to taxing power the question of invalidity
B cannot arise. ]94G-95C]

3.14. Price fixation of ethyl alcohol is an exercise of power for
regulating distribution and supply of the general entry for regulating
distribution and supply is different from exercise of taxing power. The two
do not even remot~ly touch each other. Therefore if the price goes up in
exercise of taxing power the subject to its being arbitrary or confisca-
c tory it could not be struck down as intruding in forbidden field. [95C-D I

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2722
(NT) of 1991.

D From the Judgment and Order dated 12. 7 .1990 of the Allahabad
High Court in Civil Misc. W.P. No. 361of1976.

Umesh Chandra, Rakesh Srivastava, A.K. Srivastava and K.D.
Misra for the Appellants.

E M.H. Baig, P.S. Shroff, R. Sasiprabhu, S.S. Shroff, Suresh
A. Shroff and Rajan Mahapatra for the Respondents.

The Judgment of the Court was delivered by

THOMMEN, J. Leave granted.
F
This appeal is brought by the State of Uttar Pradesh against the
judgment of the Allahabad High Court in Civil Miscellaneous Writ
Petition No. 361 of 1976. The High Court, allowing the writ petition,
declared the Uttar Pradesh Sales of Motor Spirit, Diesel Oil and
Alcohol Taxation {Amendment) Act, 1976 (Act No. 8 of 1976) to be
G null and' void in so far as it purported to levy purchase tax on industrial
alcohol. By this Act, sub-section ( 1) of section 3 of the United Pro-
vinces Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act,
1939 was amended, so as to substitute the following clause:

"3( 1) There shall be levied with effect from May 2, 1914·
H
(a)
. . ............................. '·' ., ..... •·•'•' ....... .
STATE OF U.P. v. SYNTHETICS AND CHEMICALS [THOMMEN, J.J 73

(b) at the point of first purchase of alcohol in.the State,. a A
tax at the rate of 40 paise per litre for the first million litres
and at the rate of 20 paise per litre for the remainder,
payable by the Pt1rchaser, and which shall be collected and
paid in the prescribed manner to the State Government.
"

This levy was sought to be_ justified by the state, when challenged in
the writ proceeding, as a valid exercise of its legislative power on a
matter falling under Entry 54 of List II of the Seventh Schedule of the
---;
Constitution. The writ petitioners, challenging the levy, contended
that the State Legislature was incompetent to levy tax with reference
to Entry 54 of List II in respect of industrial alcohol in so far as that C
article was the subject of regulation by the Central Government in
exercise of its power under section lSG of the Industries (Develop-
ment and Regulation) Act, 1951 (Act No. 65 of 1951) (hereinafter
referred to as 'the IDR Act') and that the price of that article was
regulated by the relevant Price Control Orders made by the Central
Government under the said Act. Any levy of sales tax or purchase tax D
by the State by recourse to El)try 54 of List II, it was contended, would
come into direct conflict witti the law made by Parliament and the
control exercised by the Central Government under that law in regard
to an industry falling under Entry 52 of List I read with Entry 33 of List
Ill. The writ petitioners, relying upon the decision of a Constitution
Bench of this Court in Synthetics and Chemicals Ltd. & Others v. State E
of U.P. & Others, [1990] 1 SCC 109, contended before the High Court
that, in so far as industrial alcohol was concerned, the State was
incompetent to levy sales tax by reason of the operation of the Ethyl
Alcohol (Price Control) Orders made by the Central Government in
exercise of its power under section lSG of the !DR Act.

The State contended before the High Court that the aforesaid
decision of this Court did not deal with any levy of ta)f falling under
Entry 54 of List II. The power of the State to levy taxes on the sale or
purchase of goods was not the subject of consideration in that deci-
sion. What was considered was the power of the State to collect vend
fee or transport fee or the like by recourse to Entry 8 or 51 of List II G
with reference to the production, manufacture, possession, transport,
purchase and sale of industrial alcohol during the operation of the !DR
Act and the rules made thereunder.

The High Court accepted the contention of the writ petitioners
and held that the impugned purchase tax, if allow_ed to be levied on -i-1
74 SUPREME COURT REPORTS [1991] 3 S.C.R.

industrial alcohol, wquld have the effect of raising its price beyond the
A
limit prescribed under the Price Control Orders made by the Central
Government in relation to industrial alcohol in exercise of its power
under the IDR Act. The High Court accordingly declared that the
impugned levy of purchase tax on industrial alcohol was, during the
operation of the Price Control Orders of the Central Government,
B beyond the legislative competence of the State.

In Synthetics, [1990] 1 SCC 109 this Court held that vend fee,
transport fee and the like levied by Uttar Pradesh, Maharashtra and
certain other States by recourse to Entry 8 or Entry 51 of List II wer.e
null and void in so far as such impost came into direct conflict with the
exercise of power by the Centre for the control of supply, distribution,
c price, etc. of industrial alcohol under section 18G of the !DR Act and
the rules or orders made thereunder. That case was apparently not
concerned with the exercise of legis!ative power with reference to
Entry 54 of List II which reads:

D "Taxes on the sale or purchase of goods other than news-
papers, subject to the provisions of Entry 92-A of List I".

Significantly, this Entry shows that, subject to Entry 92A of List I,
taxes on the sale or purchase of goods (other than newspapers) taking
place within the State are the exclusive preserve of the State. The only
E restriction on this legislative power is what is stated in Article 286.
Nevertheless, in the concluding portion of the judgment, Sabyasachi
Mukharji, J. (as he then was) stated:

"The position with regard to the control of alcohol industry
has undergone material and significant change after the
F amendment of 1956 fo'~he !DR Act. After the amendment,
the State is left with only the following powers to legislate
in respect of alcohol: (a) It may pass any legislation in the
nature of prohibition of potable liquor referable to Entry 6
of List II and regulating powers. (b) It may lay down regu-
lations to ensure that non-potable alcohol is not diverted
G and misused as a substitute for potable alcohol. (c) The
State may charge excise duty on potable alcohol and sales
tax under Entry 52 of List II. However, sales tax cannot be
charged on industrial alcohol in the present case, because
under the Ethyl Alcohol (Price Control) Orders, sales tax
cannot be charged by the State on industrial alcohol.
H (d) However, in· case State is rendering any service, as
STATE OF U.P. v. SYNTHETICS AND CHEMICALS [THOMMEN, J.) 75

distinct from its.claim of so-called.
. grant of privilege, it may A
charge fees based on quid pro quo." ( 1990) lSCC 109, 158
(emphasis supplied)

So· stating, the earlier decision of this Coutt in State of Uttar
Pradesh & Others v. M/s. Synthetics & Chernicals Ltd. & Others,.
I1980] 2 sec 441 so far as it related to industrial alcohol, was over- 13
ruled, but only prospectively, so as not to affect collecti6n uf taxes
already .made, Whiie invalidating the fees levied under various enact-
. ..., ments challenged in Synthetics, ( 1990) 1 SCC 109 (including the trans-.
pDrt fe:e levied under the Bombay Prohibition Act, 1949 and the vend
fee· levied by the State of Uttar Pradesh in respect of industrial
alcohol) t6 the extent 'that such levies were unsupported by quid pro C
quo, this Court also held, as seen above, that sales tax could not be
charged on industrial alcohol because of the Ethyl Alcohol (Price Con-
trol) Orders.

Vend fee or transport fee was collected by various States pur-
portedly in exercise of the power referrable to Entry 8 of List II. The O
fee was at times sought to be levied under the Excise Rules made
under the Excise Act and extended to potable alcohol and industrial
alcohol alike. Though the fee was collected supposedly in return for
service rendered, it was more often than not the price of licence to deal
in what is otherwise the exclusive privilege of the State.

No citizen has a fundamental right to deal in intoxicating liquors
and it is the right of the State to control production, manufacture, sale.
etc. of such liquors with a view to even prohibiting the trade. 1he term
'intoxicating liquors' was so widely interpreted in decisions like Syn-
thetics (1980) 2 SCC 441 that,State interference by way of control-
albeit as vend fee or transport fee--of trade in non-potable alcohol was F
challenged as a transgression on the area reserved for Parliament in
respect of a controlled industry (see Entry 52 List I) and as repugnant
to the control exercised by the Centre as regards the products of such a
controlled industry (see Entry 33 List III). The challenge was specially
on the ground that the levy of fees could not be justified except within
the bounds of Entry 8 of List II which is a subject of legislation limited G
to potable alcohol, but not a taxing Entry, and·of Entry 51 of List II
whjch relates to duties of excise on alcoholic liquors for human con-
sumption, but excluding medicinal and toilet preparations containing
alcohol. The contention was that no fee or duty could be levied by the
States in respect of industrial alcohol. This contention was accepted by
this Court in Synthetics ( 1990) I SCC 109 as correct provided the levy H
76 SUPREME COURT REPORTS [1991] 3 S.C.R.

of fees in respect of industrial alcohol was unsupported by quid pro
A
quo. In other words, although Entry 66 of List II justified collection of
fees in respect of matters falling in that List, levy of an·y such fee, by "f'-
reason of the limitation of the entries in that List concerning alcohol,
had to be confined to potable liquor and could not be extended to
industrial alcohol unless there was quid pro quo. This was the rationale
B of the challenge in Synthetics ( 1990) 1 SCC 109 and the crux of the ratio
decidendi of that decision. It was never contended by the States that the
vend fee was a tax referrable to Entry 54 of List II or the transport fee
imposed by the Prohibition Act and the Rules was a levy under Entry
).-
56 of List II. The Bombay Rectified Spirit (Transport in Bond) Second
Amendment Rules, 1981 (made under the Bombay Prohibition Act,
1949) was challenged precisely for the reason that it was an invalid
c collection of fee amounting to an impermissible interference with the
Central control of industrial alcohol. This Court; as seen above,
upheld the challenge in so far as industrial alcohol was concerned,
unless there was quid pro quo.

D The Advocate General, appearing for the appellant-State of
J
U.P. (respondent in the High Court), submits that the reference to
sales tax in the judgment of this Court in Synthetics ( 1990) 1 SCC 109
which the High Omrt in the present case thought was binding upon it,
was accidental and did not arise from the judgment. The levy of sales
tax was not in question at any stage of the arguments. Nor was the
E question considered as it was not in issue. The Court gave no reason
whatever for abruptly stating that sales tax was not leviable by the
State by reason of the Ethyl Alcohol (Price Control) Orders. The
question which arose for consideration was in regard to the validity of f
vend fee and other fees charged by the States. The argument was that
such impost, to the extent that it fell on industrial alcohol, encroached
F upon the legislative field reserved for Parliament in respect of a con-
trolled industry coming under Entry 52 of List I (read with Entry 33 of
List III). Vend fee or transport fee and similar fees, unless supported
by quid pro quo, this Court held, interfered with the control exercised
by. the Central Government under the !DR Act, 1951 and the various
orders made thereunder with respect to prices, licences, permits, diso
' G tribution, transport, disposal, acquisition, possession, u~e. consump-
tion, etc., of articles related to a controlled industry, industrial alcohol
., .f

being one of them. But none of the observations in the judgment
warranted the abrupt conclusion, to which the Court came, that the
power to levy taxes on sale or purchase of goods referrable to Entry.54
of List II was curtailed by the control exercised by the Central Govern-
H ment under the !DR Act. The casual reference to sales tax in the
STATE OF U.P. v. SYNTHETICS AND CHEMICALS [THOMMEN, l.I 77

concluding portion of the judgment, the Advocate General points out.
A
was accidental and per incurium.

Counsel for the respondents-writ petitioners, however, submits
_,, that the prices are strictly controlled by the Central Government in
exercise of its power undeF the IDR Act. The State law cannot be
allowed io disturb such prices. Any attempt to raise the prices, despite B
the strict control exercise9 by the Central Government by means of
statutory orders, is an invalid exercise of power. Levy of sales or
purchase tax affects the price, for the incidents of tax fall on the
customer. The customer will have to pay the amount of tax levied at
the point of first purchase which would be in addition to the price
determined by the Central Government under the Price Control
Orders. This is a transgression on the legislative control exercised by
c
Parliament and by the Central Government acting as its delegate.

The Government of U.P. charged fee under the U.P. Excise Act,
1910 (as amended in 1972 and 1976); the Government of Maharashtra
charged transport fee under the Bombay Rectified Spirit (Transport in D
Bond) Rules, 1951 made under the Bombay Prohibition Act, 1949,
and the Andhra Pradesh Government extended the Excise Act, 1968
' and the Distillery Rules, 1970 and the Rectified Spirit Rules, 1971 to
all alcohol plants. The applicability of these Acts and the Rules, so far
as industrial alcohol was concerned, was challenged in Synthetics
( 1990) 1 sec 109 principally on the ground that the legislative power E
of the. State to levy excise duty under Entry 51 of List II did not extend
to industrial alcohol; and, in respect of that article no fee in the nature
of a regulation or control or licence could be charged by reference to
Entry 51 or 8 of List II which had no application to industrial alcohol,
and also by reason of the control exercised by Parliament and the
Central Government under the IDR Act, 1951 which is a law re- F
ferrable to Entry 52 of List I and Entry 33 of List III. Dealing with that
contention, this Court states:

"The main question that falls for consideration in these
matters is whether the vend fee in respect of the industrial
alcohol under different legislations and rules in different G
States is valid. The question is-is the vend fee an impost
> ... leviable or extractable by the States under different Acts
......... The questions with which we are mainly con-
cerned are the following:

(i) whether the power to levy excise duty in case of indust' fl
78 SUPREME COURT REPORTS [19911 3 S.C.R.

rial alcohol was with the State legislature or the Central
A
legislature?

(ii) what is the scope and ambit of Entry 8 Lis( ll of the
Seventh Schedule of the Constitution'! ~

B (iii) whether, the State Government has exclusive right or
privilege of manufacturing, selling, distributing, etc. of
alcohols including.industrial alcohol ..... , ... ". (Para 2).

This Court further says-

" ....... In these matters, this Court is concerned with the
c taxing power of the States to impose and levy excise duty on
industrial alcohol and/or imposts as vend fees ....... ".
(Para4).

After elaborately discussing the increasing use of industrial
o alcohol, as distinct from potable alcohol, this Court says:.

"The only question which h;is to be determined is whether
intoxicating liquor in Entry 8 in List II is confined to potable
liquor or includes all liquors ...... ". (Para 41).
(emphasis supplied)
E
Answering that question, which is characterised as the orily question.
this Court categorically states that intoxicating liquor within the mear: ·
ing of Entry 8 of List II is confined to potable liquor and does not
include industrial liquor.

F Referring to the Constitutional obligations of the State, this
Court says:

"Article 47 of the Constitution imposes upon the State the
duty to endeavour to bring about prohibition of the con-
sumption except for medicinal purpose of intoxicating
G drinks and products which are injurious to health .... : .
Does Article 47 oblige the State to prohibit even such
industries as are licensed under the IDR Act but which
manufacture industrial alcohol ...... ? (Para 77).

In that view of the matter, it appears to us that the relevant
H provisions of the U.P. Act, A.P. Act, Tamil Nadu Act,
. \\-
. - ---......-..
l
STAIB OF U.P. v. SYNTHETICS AND CHEMICALS [THOMMEN, J.) /79 .....

Bombay Prohibition Act, as mentioned hereinbefore; are
unconstitutional insofar as these pul-port to levy a taX or A
charge imposts upon industrial alcohol, namely, alcohol
_,, used and usable for industrial purposes ...... (Para 82).
'
Furthermore, in view of the occupation of the field by the
IDR Act, it was not possible to levy this impost. (Para 84) .. B

After the 1956 amendment to the IDR Act bringing alcohol
industries (under fermentation industries) as Item 26 of the
First Schedule to IDR Act, the control of this industry has
... vested exclusively in the Union. Thereafter, licences to ·
manufacture both potable and non-potable· alcohol is
vested in the Central Government. Distilleries are mitnu- c
facturing alcohol under the central licences under IDR
Act. No privilege for manufacture even if one existed, has
been transferred to the distilleries by the State. The State
cannot itself manufacture industrial alcohol without the
permission of the Central Govenment. The States cannot D
claim to pass a right which they do not possess. Nor can the
\. States claim exclusive right to produce and manufacture
_industrial alcohol which are manufactured under the grant
of licence from the Central Government. Industrial alcohol
cannot upon coming into existence under such grant be
amenable to .States' claim of exclusive possession of pri- E
vilege. The State can neither rely on Entry 8 of List II nor
Entry 33 of List III as a basis for such a claim. The State
cannot calim that under Entry 33 of List III, it can regulate
industrial alcohol as a product of the scheduled industry;
)'
because the Union, under Section 18-0 of the IDR Act,
has evinced clear intention to occupy the whole field. Even F
otherwise sections like Sections 24A and 24B of the U .P.
Act do not constitute any. regulation in respect of the
industrial alcohol as product of the scheduled industry. On
the contrary, these purport to deal with the so-called trans-
fer· of privilege regarding manufacturing and sale. This
power, admittedly, has been exercised by the State pur- G
.. y
porting to act under Entry 8 of List II and not under Entry
33 of List III". (Para 85).

Summing up in paragraph 86 of the judgment, this Court stated what
we have already set out above.• However, for continuity, we will repeat
clause (c) of that paragraph: __, H
. ·suPREME COURT REPORTS [1991] 3 S.C.R .

"(c) The State may charge excise duty on potable alcohql
and sales tax under Entry 52 of List II. However, sales ta.it
cannot be charged on industrial alcohol in the present case,
because under the-Etl:iyl Alcohol (Price Control).Orders, ·
sales iax cannot be charged. by the Sfate on .:fodustiial . f-
alcohol" - ·
. . ' . .
. We have extensively quoted from the judgment of the Constitu-
iion Bench in Synthetics & ChemiCals Lid_. & Others v. State of.U.P: & ..
Others, [1990) 1 SCC 109; with a view to showing that the Court was .
concerned with only one question, and ·that was wheth~r the·States:·
could levy excise duty or vend.fee or transport fee ai1d the like by
recourse to Entries 51 or8 iit List II in respect of industrial .alcohol.
c This Court ..held, .as ·seen above,. that the States had no. such power
tinder either Entry in respect of nrin-potable or industrial alcohol. ·This
Court did not deal with the taxing power of the State under Ent'ry 54 of
List Ilwhich deals with 'taxes on the sale or purchase of goods other
ihan newspapers, subject to the provisions of Entry 92A of Lht I'. The
D power of the Staie to levy taxes on sale or purchase of goods under that
Entry was not the subject matter of discussion by this Court,, although
in paragraph 86 of the leading Judgment of Sabyasachi Mukharji, J. as
he then was, there is. a reference to sales tax. He says -''The State may
charge excise duty on potable alcohol and sales tax under Entry 52 of
List 11','. Entry 52 of List II is_ mentioned in connection with excise duty
·E and sales tax, b1Jt neitlier of them falls under Entry 52. Reference to
Entry 51 of List Il ought to have been made if it was excise duty that
the Court had in mind. Entry 54 of Lisi ii would have been referred to,
and not Entry 52, if the Court had in.mind sales tax. On the other
hand, Entry 52 refers to "Taxes on the entry of goods into a local area
for consumption, use or sale therein". None had a case that this Entry
F had any application to the fees or charges in question. The Court
further says:

"However, sales tax cannot be charged on industrial
alcohol in the present case, because under thee Ethyl
Alcohol (Price Control Orders) sales tax cannot be charged
G by the State on industrial alcohol";

That was art a.brupi observation without a preceding discussion, and y •
inconsistent with the reas-0ning adopted by this Court in earlier ded" ·
sions from which no dissent was expressed on the point. Coming, asit
does; immediately after a reference· to Entry 52 of List II in connection
i1 with excise duty and sales
. - tax when neither falls.und;fr
... -
that Entry, the
STATE OF U.P. v. SYNTHETICS AND CHEMICALS [THOMMEN, J.j 81

submission of the ~dv,ocate General that the observation regarding
sales tax in para 86 of the judgment was per incurium assumes great A
significance.
-"
The genesis of the problem dealt with in Synthetii:s.(1990) 1 SCC
109 is traceable to the decision in the State of Bombay & Anr. v. F.N.
Balsara, [ 1951] SCR 682, where this Court stated that the word 'liquor' B
as understood in tnis country at the time of the Government of India
Act, [935 comprehended not only alcoholic liquors which were gener-
ally used· as beverages and which produced intoxication, but also all
.... liquors containing alcohol. Section 2(24) of the Bombay Prohibition
Act, 1949 was b.eld to be intra vires. However, so far as medicinal and
toilet preparations containing alcohol were concerned, sections 12 and
13 of the Act were held to be invalid, being an unreasonable restriction c
on the fundamental right, to the extent that they prohibited posses-
sion, sale use and consumption of liquors for medicine and toilet prep-
arations, but were .held to be valid to the eli\ent that they applied to
other categories of alcoholic liquors, namely, spirits of wine, methy-
lated spirit, wine, beer and toddy, as these items were distinctly separ- D
able and easily severable from the other category, namely, all liquors
' containing alcohol.

It was this principle which was followed by this Court in Synthe-
tics, [1980] 2 sec 441, where it was held that there was no fundamental
right for a citizen to carry on trade or business in liquor and that the E
State had the power to enforce absolute prohibition on manufacture or
sale of intoxicating liquor by reason of Article 47 of-the Constitution
and that the State had exclusive right or privilege to manufacture or
sell liquor. This Court also held that the expression 'intoxicating
' liquor' was not confined to potable liquor, but would also include all
liquors which contained alcohol. The State Government had the power F
to levy a fee for parting with its exclusive right in respect of intoxicat-
ing liquor. This Court stated that 'alcohol' included both ordinary as
well as specially denatured spirit. Denatured spirit contains ethyl
alcohol. The specially denatured spirit for industrial purposes is diffe-
rent from denatured spirit only because of the difference in the
quantity and quality of the denaturants. Specially denatured spirit and G
__;,;) y ordinary denatured spirit were classified according to their use and
denaturants used. This Court rejected the distinction sought to be
drawn between denatured spirit for industrial purposes and ordinary
dena.tured spirit.

It was this wider understanding of 'intoxicating liquor' so a~ to H
82 SUPREME COURT REPORTS [19911 3 S.C.R.

A comprehend not oniy potable alcohol, but also industrial alcohol, that
was disapproved in Synthetics, [19901 1 SCC 109. In drawing the dis-
tinction between potable and non-potable alcohol, this Court had in
mind the tremendous changes which have taken place in science and
technology and industry and commerce and the increasing use of
industrial alcohol in various industries. Drawing a distinction between
B potable and non-potable alcohol and, confining the doctrine of Article
47 to the former, this Court came to the conclusion that the impugned
statutory provisions purportedly levying fees or enforcing restrictions
in respect of industrial alcohol were impermissible in view of the con-
trol assumed by the Central Government in exercise of its power under
section lSG of the !DR Act in respect of a declared industry falling
under Entry 52 of List I, read with Entry 33 of List III. Alcohol as an
c industry being one of the industries brought within the purview of the
!DR Act and thus under the regulatory control of the Union, the
power to grant licence for the manufacture of alcohol is vested in the
Central Government. Distilleries manufacturing alcohol-are necessa-
rily licensed under the !DR Act for such distilleries can maaufacture
D alcohol of all types and, therefore, are necessarily brought under the
control of the Central Government.

It is in this background that the cardinal question has to be
examined, that is, whether or not the power of the State to levy tax on
the sale or purchase of goods falling under Entry 54 of List II will
E comprehend industrial alcohol. It is significant that the taxing power of
the State on a matter falling within its competence under this Entry,
namely, sale or purchase of goods (other than newspapers) is, subject
to the taxing power of Parliament under Entry 92A of List I, and other
provisions of the Constitution, plenary and unlimited, and untrammel-
led by the supervisory or regulatory power of Parliament under Entry
F 52 of List I read with its concurrent power under Entry 33 of List III.
This is the crucial distinction between the wide taxing power of the
State under Entry 54 of List II and its conditional or restricted taxing
power, for example, over mineral rights mentioned in Entry 50 of that
List which was considered in India Cement Ltd. & Ors. v. State of
Tamil Nadu & Ors., [199011SCC12. Similarly, the powerof the State
G in respect of potable alcohol (as distinguished from industrial alcohol)
falling under Entry 8 of List II is significantly unfettered, unlike, for y
example, mines and mineral development over which the regulatory
power of the State is specifically stated to be subject to the regulatory
power of Parliament (see entry 23 of List II read with Entry 54 of List
I). The legislative competence of the State in respect of mines and
H minerals was accordingly held to be denuded to the extent that the
STATE OF U.P. v. SYNTHETICS AND CHEMICALS [THOMMEN, l.] 83

field was covered by section 9 of the Central Act, namely, M,ines and
A
Minerals (Regulation and Development Act), 1957 see India Cement
(supra). Unlike mines and minerals, alcohol stands on a different foot-
~
ing, and is dealt with differently, dependant on whether it is potable or
not. What is significant is that legislation falling in pith and S\Jbstance
under Entry 8 or Entry 51 of List II in relation to alcoholic liquor for
human consumption (as distinguished from industrial alcohol) whether B
for the purpose of levying vend fee or transport fee or excise duty,
strictly confined to such articles, is not subject to challenge on the
ground of legislative incompetence or repugnancy by reason of the
-< power vested in Parliament under Entry 52 or Entry 84 of List I or
Entry 33 of List Ill. Incompetence or repugnancy arises only when the
impact of the legislation falls, not incidentally, but substantially on
industrial alcohol so as to transgress on a field occupied by Parliament.
c

In M.P. V. Sundararamier & Co. v. The State of Andhra Pradesh
& Anr., [1958) SCR 1422 at 1479 Venkatarama Aiyar, J., speaking for
the Constitution Bench, referred to the Entries in the three lists of the
Seventh Schedule of the Constitution and drew a distinction between D
the main subjects of legislation forming one group and taxes forming
another group. Entries 1 to 81 of List I are the main subjects of legisla-
ti on within the competence of Parliament. Entries 82 to 92 of that List
~
- (92A and B have since been added) enumerate the taxes which Parlia-
ment is competent to impose. Likewise, Entries 1 to 44 forming one
group in List II relate to the main subjects within the legislative com- E
petence of the States, while Entries 45 to 63 of that List deal specifi-
cally with the taxes leviable by the States. The general power of legis-
....." lation vested in the States regarding trade and commerce, production,
" supply, etc. is referrable to Entries 26 and 27 of List II. The power of
the State to levy taxes on the sale or purchase of goods other than
newspapers is mentioned in Entry 54 of List II. This power is, how- F
ever, subject to certain restrictions imposed under Article 286. Clause
( 1) of Articl"'286 prohibits a State from imposing, or authorising the
imposition of,\ tax on the sale or purchase of goods taking place
outside the State or in the course of import into or export out of the
territory of India. Parliament is empowered under clause (2) of this
Article to formulate by law principles for determining when a sale or G
I y purchase takes place outside a State or in the course of import into or
export out of the territory of India. Clause (3) of this Article empo-
wers Parliament to impose certain restrictions and conditions on the
taxing power of the State in respect of goods declared by Parliament to
be of special importance in inter-State trade or commerce and certain
other goods falling under clause (29-A) of Article 366. The legislative H
84 SUPREME COURT REPORTS I 1991] 3 S.C.R.

A power of Parliament in respect of inter-State trade or commer(:e and
its taxing power in regard to it are respectively mentioned in Entries
42, 92A and 92B of List I.

Taxes levied and collected by the Union on the sale or purchase
of goods other than newspapers, where such sale or purchase
B takes place in the course of inter-State trade or. commerce, are
assigned to the Stal!' in the manner provided- in clause (2) of Article
269. Clause (3) of that Article says that Parliament may by law formu-
fate principles for determining when a sale or purchas~ or consignment
of goods takes place in the course of inter-State trade or commerce. It v
was by virtue of this power that Parliament enacted the Central Sales
Tax Act, 1956, sections 3 and 4 of which formulate principles for
c ..
determmmg when a sale or purchase of goods has taken place in the
course of inter-State trade or commerce or outside a State. In all other
respects the State enjoys legislative power to levy taxes on the sale or
purchase of goods. ·

D Industry as a subject of legislation falls under Entry 24 of List II.
But this provison is subject to Entries 7 and 52 of List I dealing respec-
tively with "Industries declared by Parliament by law to be necessary
for the purpose of defence or for the prosecution of the war" and
"Industries the control of which by the Union is declared by Parlia-
ment by law to be expedient in the public interest". It is Entry 52 of
£ List I that is relevant for the present purpose for it is in respect of that
Entry that Parliament enacted the !DR Act, 1951 to provide for the
development and regulation of certain industries. This Act contains a
declaration by Parliament that 'it is expedient in the public interest
that the Union should take under its control the industries specified in
the First Schedule'. 'Fermentation Industries' i.e. Alcohol and Other
F products of fermentation industries is Item 26 of the First Schedule.
Section 18G of the !DR Act confers upon the Central Government the
power of control of supply, distribution, price, etc. of the articles ,__
mentioned in the First Schedule of the Act. All powers vested in the
Central Government under section 18G of .the !DR Act are referrable
to Entry 52 of List I dealing with 'controlled' industries, read with
G Entry 33 of List III which pertains to 'Trade and commerce in, and
production, supply and distribution of' the products of controlled
industries.

None of the entries in the Concurrent List deals with .tax but
general subjects of legislation. No conflict can, therefore, arise bet-
H ween the taxing powers of the Union and the States. Parliament has

'1'.
STATE OF U.P. v. SYNTHETICS AND CHEMICALS [THOMMEN, J.] 85

the power to legislate in re_spect of a 'controlled' industry falling under
A
Eptry 52 of List I, and both Parliament and the States have the power
to leg;slate in respect of the trade and commerce in, and the produc-
tion, supply and distribution of, the products of a 'controlled' industry
(Entry 33 of List III). These are llot taxing entries and do not, there-
fore, relate to taxes, but powers of regulation and control. The power
to control industry being thus vested in Parliament (Entry 52 of List I) B
and the legi,Jative power in respect of trade and commerce in such
industry being concurrently vested in the Union and the States (Entry
33 of List III) any exercise of control by the State must be subject to
the legislative power of Parliament and the power conferred on the
Central Government by such legislation (Article 246). Any exercise of
power by the State which transgresses upon the power of Parliament or
of the Central Government, as its delegate, is to the extent of such
c
transgression null and void.

Entry 8 of List II reads-

"Intoxicating liquors, that is to say, the production, b
manufacture, possession, transport, purchase and sale of
intoxicating liquors".

These matters concerning intoxicating liquors are thus included within
the legislative competence of the States. In respect of any such matter.
the States are competent td levy fees (Entry 66 of List I!). Entry 51 of E
List lI relating to excise duty on alcoholic liquors for human consump-
tion reads-

"Duties of excise on the following goods manufactured dt
produced in the State and countervailing duties at the same
or lower rates on similar goods manufactured or produced F
elsewhere in India:

(a) alcoholic liquors for human consumption;

(b) opium, Indian hemp and other narcotic drugs and
narcotics;

but not including medicinal and toilet prepartions contain-
ing alcohol or any substance included in sub-paragraph (b)
of this entry".

While this Entry dearly refers to liquor for human consumption, the H
86 SUPREME COURT REPORTS I1991] 3 S.C.R.
same meaning has been judicially ascribed in Synthetics, I 1990] 1 SCC
A
109 to 'intoxicating liquors' in Entry 8 of the same List. The legislative
competence of the State in respect of 'intoxicaiing liquors' referred to
in Entries.8 and 66 of List II as a subject of legislation and fee respec·
tively and the power of the State to levy excise duty on "alcoholic
liquors for human consumption" falling under Entry 51 of the same
B List must necessarily be confined to potable alcohol, and cannot
include industrial alcohol or medicinal and toilet preparations contain-
ing alcohol (see Entry 84 of List!). Any transgression by the State on
industrial alcohol will be invalid for want of power by reason of the
limitation of Entries 8 and 5 I of List II (being confined to potable
alcohol) and consequent transgression on areas covered by Entries 52
and 84 of List I respectively relating to declared industry and excise
c duty on industrial alcohol and medicinal and toilet preparations con-
taining alcohol, and also for repugnancy arising from a clash with the
centrally occupied field falling under Entry 33 of List Ill. This is why
this Court in Synthetics [ 1990) 1 SCC 109 held that the State should not
impose any fee, whether called vend fee, transport fee, excise duty and
D the like, on industrial alcohol as such impost would trespass upon the
statutory orders made by the Central Government in exercise of its
power of control under section 18G of the !DR Act as regards ethyl
alcohol and other non-potable products of fermentation industries.

Article 298 of the Constitution says that the executive power of
E the State, within the area of its legislative competence, or, subject to
legislation by Parliament, in areas falling outside its legisaltive compe·
tence, shall include the conduct of any trade or business, the acquisi-
tion, holding and disposal of property and the making of any contract
for such purpose. The regulatory powers of the State extend to every
form of activity concerning intoxicating liquor for hu:nan consump·
F tion. The production, manufacture, possession, transport, purchase
and sale, of such articles fall within the regulatory power of the State.
The State is entitled to levy fees in respect of any such matter (Entry
66 List II).

The power of regulation and control is separate and distinct from
G the power of taxation. Legislative exercise of regulation or control
referrable to Entry 52 of List I or Entry 8 of List II is distinct and
different from a taxing power attributable to Entry 54 of List II or
Entry 92A or 928 of List I. The power to levy taxes on sale or purchase
or consignment in referrable to these Entries, and subject to the other
provisions of the Constitution, the taxing power of the State is not cut
H down by the general legislative control vested in Parliament and
STATE OF U.P. v. SYNTHETICS AND CHEMICALS [THOMMEN, l.] 87

referrable to the general topics of legislation.
A
In M/s. R.M.D.C. (Mysore) Private Limited v. The State of My-
sore, [1962] 3 SCR 230, a Constitution Bench of this Court held:

"that the subject of "betting and gambling" in entry 34 of
List II of the Seventh Schedule to the Constitution of India B
and that of "taxes on betting and gambling" in entry 62 of
List II have to be read separately as separate powers, and.
therefore, when control and regulation of prize competi-
tions was surrendered to Parliament by the resolution
dated February 23, 1956, the power to tax could not be said
to have been surrendered.
c

Therefore, if the Mysore Legislature had the power, which
in our opinion, it had and it had not surrendered its power
to Parliament which, in our opinion, it had not, then it D
cannot be said that the imposition of the tax is a piece of
colourable legislation and is on that ground unconstitutional"

In Ganga Sugar Corporation Ltd. v, State of Uttar Pradesh &
Others, [1980] l SCC 223, Krishna Iyer, J., speaking for the Constitu-
tion Bench, dealt with a challenge against the levy of purchase tax on E
the raw material consumed by a controlled industry, namely, the Sugar
Industry, and stated:

"Is the legislation ultra vires because the State enters the
forbidden grounds by enacting on controlled industry? It is
undisputed that sugar industry is a controlled industry. F
within the meaning of Entry 52, List I of Seventh Schedule
and, therefore, the legislative power of Parliament ·covers
enactments with respect to industries having regard to Arti-
cle 246(!) of the Constitution. If the impugned legislation
invades Entry 52 it must be repulsed by this Court. But
Entry 54 in List II of the Seventh Schedule empower the G
State to legislate for taxes on purchase of goods and so if
the Act under consideration. is attracted, in pith and subs-
tance, by this enrry legislative incompetence cannot void
the Act ...... ".

This 1s precisely the question in the instant case, n_amely, H
88 SUPREME COURT REPORTS I 1991] 3 S.C.R.

whether or not the impugned legislation falls in pith and substance
A
with in Entry 54 of List II, and not whether the industry (producing
goods the sale of which is leviable to tax under the impugned legisla-
tion) is controlled within the ambit of Entry 52 of List I. This question
was not considered in Synthetics, [1990] 1SCC109.

B A like question arose in a different form in Ch. Tika Ramji &
Others etc. v. The State of Uttar Pradesh & Ors., [ 1956] SCR 393. This
Court rejected the challenge in that case against the constitutional
validity of the U.P. Sugarcane (Regulation of Supply and Purchase)
Act, 1953 and the notifications issued thereunder. It was held that the
impugned Act and the notifications were intra vires the State Legisla-
ture as they were concerned with the regulation of the supply and
c purchase of sugarcane which in no way trenched upon the exclusive
. jurisdiction of the Centre with regard to sugar. No question of
repugnancy under Article 254 of the Constitution could arise because
Parliament and the State legislated in different fields and dealt with
separate and distinct matters even though of a cognate and allied
D character. There is no inconsistency between the two enactments. The
provisions of section 18G of the !DR Act, 1951 did not cover.
sugarcane m indicate any intention on the part of Parliament to cover
the entire field of such legislation. Raw material did not come within
the ambit of ·any article or class of articles relatable to any scheduled
industry within the meaning of that Act'. The Court further pointed
E out that even if sugarcane was an article which fell within the purview
of section 18G of the Act, no order having been issued by the Central
Government under that provision, no repugnancy could arise, for
repugnancy had to exist as a fact and not as a mere possibility. The
existence of an order covering the entire field was an essential pre-
requisite to give rise to repugnancy.
F
Similarly, in Kannan Devan Hills Produce Company Ltd. v. The
State of Kera/a & Another, [1973[ l SCR 356 a Constitution Bench of
this Court stated:

"It seems to us clear that the State has legislative compe-
G tence to legislate on entry 18 List II and entry 42 List III.
This power cannot be denied on the ground that it has some y
effect on an industry controlled under entry 52 List I.
Effect is not the same thing as subject-matter. If a State
Act, otherwise, va.Jid, has effect on a matter in List I it does
not cease .to be a legislation with respect to an entry in List
11 II or List Ill ..... ".
STATE OF U.P. v. SYNTHETICS AND CHEMICALS [THOMMEN, J.J 89

In Hdechst Pharmaceuticals Ltd. & Anr. v. State of Bihar & A
Others, [ 1983 3 SCR 130 this Court, reiterating the observations of the
Constitution Bench in Sundararamier's case [1958] SCR 1422 as regards
the Jistinction between general subjects of legislation and taxes in List
I and List I! and the absence of any entry in List Ill relating to taxes
(apart from lev 1 of fees stated:
B
'· ...... Thus, in our Constitution, a conflict of the taxing
power' of the Union and of the States cannot arise. That
being so, it is difficult to comprehend the submission that
there can be intrusion by a law made by Parliament under
Entry 33 of List lII into a forbidden field viz. the State's
exclusive power to make a law with respect to the levy and C
imposition of a tax on sale or purchase of goods relatable to
Entry 54 of List II of the Seventh Schedule. It follows that
the two laws viz. sub-s. (3) of s. 5 (of the Bihar Finance
Act, 1981) and paragraph 21 of the Control Order issued by
the Central Government under sub-s. (I) of s. 3 of the
Essential Commodities Act, operate on two separate and D
distinct fields and both are capable of being obeyed. There
is no question of any clash between the two laws and the
question of repugnancy does not come into play".

These decisions unmistakably demonstrate the power of the
State to levy taxes on the sale or purchase of goods other than news- E
papers. but subject to Entry 92A of Lisi I which deals with the legisla-
tive power of Parliament to levy taxes on the sale or purchase of goods
other than newspapers where such sale or purchase takes place in the
course of inter-State trade or commerce. Subject to the overriding
power of Parliament in respect of what falls under Entry 92A and the
provisions of Article 286, the State has full legislative competence in F
levying taxes on the sale or purchase of goods other than newspapers.
The power to tax under Entry 54 of List II being a specific power, it
cannot be cut down or in any manner fettered by the general power of
control exercised by Parliament by legislation on a matter falling under
Entry 52 of List I relating to an industry, the control of which by the
Union is declared by Parliament by law to be expedient in the public G
interest, read with Entry 33 of List III dealing with trade and com-
merce in. and the production, supply and distribution of the products
of any such controlled industry, and imported goods of the same kind
as such products, and other articles mentioned in Entry 33. The
impugned provision of the Uttar Pradesh Sales of Motor Spirit, Diesel
Oil and Alcohol Taxation (Amendment) Act, 1976 levying tax at the H
90 SUPREME COURT REPORTS I 1991] 3 S.C.R.
point of first purchase of alcohol in the State is undoubtedly an impost
A
falling in pith and substance under Entry 54 of List II. In the absence
of any fetter on the legislative power and in the absence of any valid
challenge against the provision as a colourable piece of legislation, the
,_
impugned legislative enactment remains unimpeachable.

B The control exercised by the Central Government by virtue of
section 18G of the !DR Act is in a field far ren10ved from the taxing
power of the State under En!ry 54 of List 11. So long as the impugned
legislation falls in pith and substance within the taxing field of the
State, the control of the Central Government in exercise of its power
under the !DR Act in respect of a controlled industry falling under
C Entry 52 of List I cannot in any manner prevent the State from impos-
ing taxes on the sale or purchase of goods which are the products of
such industry and which are referrable to Entry 33 of List III. As seen
above, the taxing power of the State under Entry 54 of List II cannot
be cut down by the general legislative power of control of the Centre.

D The levy of fee, whether called vend fee or transport fee or duty
or charge, whether levied by Rules purportedly made under the Excise )
Act or Prohibit,ion Act or any other statute. otherwise than as a proper
levy falling in pith and substance under a taxing Entry, was not valid,
to the extent that it lacked quid pro quo and applied to industrial
alcohol. Any such fee or charge can be justified as a mode of control
E falling in pith and substance under Entry 8 read with Entry 66 of List II
only to the extent that it remains within the bounds of the concerned
subject matter, namely ·intoxicating liquors', which must necessarily
exclude industrial alcohol.

We see no substance in the contention that the Price Control
F Orders made by the Central Government in exercise of its power
under the JDR Act fettered the legislative power of the State on a
matter falling under Entry 54 of List II. Taxes on sale or purchase are
not eoverned by the Price Control Orders: for the purpose of the latter
is to prevent the seller from pricing his goods beyond the limit pre-
scribed by the orders. That is a fetter on the free play of demand and
G supply. When supply is scarce, the price are hound to rise and it is that
vice which is controlled by fixing the maximum price. But that does not
in any manner curtail the power of the State to levy taxes on the sale or
purchase 0 1 goods. It is no doubt true that the consumer of the article
must. in addition to the price, pay purchase tax due in respect of them.
But that is by reason of a valid levy which is within the constitutional
H power of e\ery State, and is dehors the price, though often referrable
to it.
STATE OF U.P. v. SYNTHETICS AND CHEMICALS [SAHA!, J.l 91

The High Court. in our view. was clearly in error in striking
A
down the impugned provision which undoubtedly falls within the
legislative competence of the State, being referrable to Entry 54 of List
II. We are firmly of the view that the decision of this Court in Synthe-
tics, I 1990] 1 SCC 109 is not an authority for the proposition canvassed
by the assessee in challenging the provision. This Court has not, and
could not have, intended to say that the Price Control Orders made by B
the Central Government under the !DR Act imposed a fetter on the
legislative power· of th~ State under Entry 54 of List II to levy taxes on
the sale or purchase of goods. The reference to sales tax in paragraph
86 of that judgment was merely accidental or per incurium and has.
therefore. no effect on the impugned levy.

R.M. SAHAI, J. I have, carefully, gone through the judgment of
c
brother Thommen, J. I agree with every word that has been said by
him. But considering the importance of issues involved I would like to
add few words of my own.

The dispute is about levy of purchase tax on industrial alcohol. P
, The High Court held that the State legislature was competent to enact
a law imposing purchase tax on it in exercise of power under Entry 54
of List II. But it struck down the levy as it would disturb price structure
regulated by Central Government. It was held that control of alcohol
industry having been taken over by the Parliament, for purpose of
regulation and development the State stood denuded of its taxing E
power under Entry 54 of List II to the extent the field of price fixation
was covered by the price control order issued by the Government. And
the purchase price being component of price fixation which squarely
fell within the power of Central Government the imposition of pur-
chase tax amounted to intrusion into the forbidden area of price fixa-
tion by Central Government. Support for this was drawn, principally, F
from the two Constitution Bench decision in Indian Cement Ltd. v.
State of Tamil Nadu, [1990] 1 SCC 12 and Synthetic and Chemicals v.
State of U.P., [1990] 1 SCC 1091. The first was relied for the principle
that even a taxing legislation by the State could be invalid to the extent
it trenched on Central legislation on the same subject. And the latter
for the conclusion that, 'however, sales tax cannot be charged on G
industrial alcohol in the present case, because under the Ethyl Alcohol
(Price Control) Orders sales tax cannot be charged by the State on
industrial alcohol'. Reliance on Indian Cement Ltd. (supra) was under
complete misapprehension. The State in that case attempted to levy
cess on royalty. It was held to be invalid. To save it the State
attempted to justify it as a tax in exercise of power under E.ntry 50 of H
92 SUPREME COURT REPORTS I 1991] 3 S.C.R.

List IL The submission was negatived as the legislative power of Staie
A
under Entry 50 of List II was 'subject to any limitation imp.osed by the
Parliament by law relating to mineral development'. The Bench held·
that in view of the Parliainentary legislation under Entry 54 of List I
and the declaration made under Section 2 and provisions of Section 9
of the Act the State legislation was overridden to that extent. No such
B restriction or limitation is placed under Entry 54 of List II except that
the exercise of power has been made subject to the provisions of Entry
92 of List I.

But the problem has arisen due to the conclusion. in the case of
Synthetic Gfld Chemi.cals (supra). The question was if the State ·1egisla-
C ture could levy vend fee or excise duty on indudrial alcohol. The
Bench answered the question in the negative as industrial alcohol
being unfit for human consumption the State legislation was incompe-
tent to levy any duty of excise either under Entry 51 or Entry 8 of List
II of the Vllth Schedule. While doing so the Bench recorded the
conclusion extracted earlier. It was not preceded by any discussion. No
D reason or rationale could be found in the order. Thi.s gives rise to an
important question if the conclusion is law declared under Article 141
of the Constitution or it is per incurium and is liable to be ignored,

'Incuria' literally means 'carelessness'. In practice per incurium
appears to mean per ignoratium.' English Courts have developed this
E principle in relaxation of the rule of stare decisis. The 'quotable in law'
is avoided and ignored if it is rendered, 'in ignoratium of a statute or
other binding authority'. (1944 IKB 718 Young v. Bistol Aeroplane
Ltd.'. Same has been accepted, approved and adopted by this Court
while interpreting Article 141 of the Constitution which embodies the
doctrine of precedents as a matter of law. In Jaisri Sahu v. Rajdewan
F Dubey, [ 1962] 2 SCR 558 this Court while pointing out the procedure
to be followed when conflicting decisions are placed before a Bench
extracted a passage from Halsbury Laws of England incorprating one
of the exceptions when the decision of an Appellate Court is not
binding.

G Does this principle extend and apply to a conclusion of law,
which was neither raised nor preceded by any consideration. Jn other
words can such conclusions be considered as declaration of law? Here
again the English Courts and jurists have carved out an exceptioo to
the rule of precedents. It has been explained as rule ofsub-silentio. A
decision passed sub-silentio, in the technical sense that has come to be
H attached to that phrase; when the pa_rticular point of law inv9Jv~d in
STATE OF U.P. v. SYNTHETICS AND CHEMICALS [SAHA!, J.[ 93

the decision is not perceived by the Court or present to its mind'
(Salmond 12th Edition). In Lancaster Motor Company (London) Ltd. A
v. Bremith Ltd., [1941] IKB 675 the Court did notfeel bound by earlier
decision as it was rendered 'without any argument, without reference
to the crucial words of the rule and without any citation of the autho-
rity'. It was approved by this Court in Municipal Corporation of Delhi
v. Gurnam Kaur, [1989] 1 SCC 101. The Bench held that, 'precedents B
sub-silentio and without argument-are of no moment'. The Courts thus
have taken recourse . to this principle for relieving from injustice
perperated by unjust precedents. A decision which is not express and
is not founded on reasons nor it proceeds on consideration of issue
cannot be deemed to be a law declared. to have a binding effect as is
contemplated by Article 141. Uniformity and consistency are core of
judicial discipline. But that which escapes in the judgment without any c
occasion is not ratio decedendi. Jn Shama Rao v. State of Pondicherry,
AIR 1967 SC 1680 it was observed, 'it is trite to say that a decision is
binding not because of its conclusions but in regard to its ratio and the
principles, laid down therein'. Any declaration or conclusion arrived
without application of mind or preceded without any reason cannot be D
deemed to be declaration of law or authority of a general nature bind-
ing as a precedent. Restraint in dissenting or overruling is for sake of
stability and uniformity but rigidity beyond reasonable limits is inimi-
cal to the growth of law.

Effort was made to support the conclusion, indirectly, by'U.rging E
that the State having raised same objections by way of review peti-
tion and the same having been rejected it amounted impliedly aspro·
viding reason for conclusion. Law declared is not that can be culled out
but that which is stated as law to be accepted and applied. A conclu-
sion without reference to relevant provision of law is weaker than even
casual observation. In the order of brother Thommen, the extracts F
from the judgment of the Constitution Bench quoted in extenso
demonstrate that the question of validity of levy of sales and purchase
tax was neith~.r in issue nor was it raised nor is there any discussion in
the judgment except of course the stray argument advanced by the
learned Attorney General to the following effect.
G
"But alcohol not fit for human consumption are not luxury
and as such the State Legislatures according to Atiorney
General will have no power to levy tax on such alcohol."

Sales tax or purchase tax under Entry 54 is levied on sale 'Of purchase
of goods. It does not co.otemplate any distinction between luxury and H
94 SUPREME COURT REPORTS [1991] 3 S.C.R.

A
necessity. Luxuries are separately taxable under Entry 62. But that has
nothing to do with Entry 54. What prompted this submission is not
clear. Neither there was any occasion nor there is any constitutional
inhibition or statutory restriction under the legislative Entry nor does
the taxing statute make any distinction between luxuries and neces-
sities for levying tax. In any case the Bench did not examine it nor did
B it base its conclusions on it. In absence of any discussion or any argu-
ment the order was founded on a mistake of fact and, therefore, it
could not be held to be law declared. The Bench further was not
apprised of earlier Constitution Bench decisions in Hoechest Chemi-
cals v. State of Bihar, AIR 1983 SC 1019 and Ganga Sugar Mill v. State
of U.P., [1980] ·1 SCR 769 which specifically dealt with the legislative
competence of levying sales tax in respect of any industry which had
c been declared to be of public importance. Therefore, the conclusion of
law by the Constitution Bench that no sales or purchase tax could be
levied on industrial alcohol with utmost respect fell in both the excep-
tions, namely, rule of sub-silentio and being in per incurium, to the
binding authority of the precedents.
D
Ethyl alcohol is not fit for human consumption. It is principally
used as raw material for manufacture of rubber etc. Since it was of all
India importance the activities of which affected the country as a
whole, it was declared as of public importance by adding it as item no.
( 1) under Entry 26 of the first Schedule appended to the Industrial
E (Development and Regulation) Act, 1951, (hereinafter referred as
IDRA). The effect of this declaration was that it stood removed from
Entry 24 of List II and allocated to the Central legislatur~ The control
thus vested in the Parliament. But Entry 33 in Concurrent List permits
both the Parliament and the State Legislature to deal with trade and
commerce in it and also regulate production, supply and distribution
F of goods declared to be of public importance. The State could, there-
fore, enact law under Entry 33 subject to it that the State legislation
could not be repugnant to central legislation. That is if the field is
already occupied by a Central enactment then the State legislation to
that extent shall be invalid. (See Tika Ramji v. State of U. P., AIR 1956
SC 676 and Hoechest Pharmaceuticals Ltd. v. State of Bihar, AIR 1983
G SC 1019).

Can this principle apply to levy of purchase tax by an enactment
made in exercise of legislative power under Entry 54 of List II? Power
to tax is a sovereign power. In federal system of governance it is
exercised by distribution of power between the Union and the State.
H Both are supreme in their sphere. That is brought out clearly by Arti-
STATE OF U.P. v. SYNTHETICS AND CHEMICALS [SAHA!, J.] 95

cle 246(1) and Article 246(3) of the Constitution. Tl;ie legislative field A
for levying tax by Union is set out in Entries 82 to 92 in List I and of
State in Entries 45 to 63 in List II of the Vllth Schedule. There is no
overlapping. Fields are clearly demarcated. Limitations and restric-
tions are also mentioned. Unlike genera) entries power to levy tax
cannot be deduced from another En try as ancillary exercise of power.
B
Since the Concurrent List does not contain any Entry relating to taxing
power the concept of occupied field or repugnancy cannot arise. If
there is clash between exercise of power under List II and List I then
the State legislation may be invalid due to Article 246(1). But since
there can be no clash or invalidity in relation to taxing power the
question of invalidity can not arise.
c
Price fixation of ethyl alcohol is an exercise of power for regulat-
ing distribution and supply of it. The general entry for regulating dis-
tribution and supply is different from exercise of taxing power. The
two do not even remotely touch each other. Therefore, if the price
goes up in exercise of taxing power then subject to its being arbitrary
D
or confiscatory it could not be struck down as intruding in forbidden
field. In Hoechest Pharmaceuticals (supra) this Court while examining
the ambit of Entry 54 of List II observed, 'Entry 54 of List lJ of the
Seventh Schedule is only subject to Entry 92A of List I and there can
be no further curtailment of the status of power of taxation.' There-
fore_ the entire basis for striking down the levy that even though the
State had plenary power to impose tax on sales/purchase of goods can E
exercise taxing power under Entry 54 of List II so long as it does not
militate against the legislative field occupied by the Central Govern-
ment under the IDR Act or any other enactment made under Entry 52
of List I proceeded on complete misconception of taxing powers of
State. In fact as stated earlier the entire theory of occupied field or
State legislation being repugnant to Central legislation is available F
when the two legislatures exercise their powers under Concurrent List.
Therefore, the order of the High Court striking down the levy cannot
be upheld.

V.P.R. Appeal allowed.