Leach, C.J:-

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The government of india act, 1935, vests in the central legislature the power of imposing duties of excise on goods manufactured or produced in india, subject to certain exceptions which do not include the goods dealt in by the respondents. The power of imposing taxation on the sale of goods is given to the provincial legislatures. When the respondents first came into court their case was that a tax on the sale of goods is in all cases an excise duty and therefore the madras legislature had exceeded its power in enacting the general sales tax act. In view of the decision of the federal court in in re the central provinces and berar act xiv of 1938 ([1939] f. C. R. 18; 1 s. T. C. 1) where it was held that an act of a provincial legislature levying a tax on retail sales of motor spirit and lubricants was not ultra vires the provincial legislature, it was impossible for the respondents to maintain that the madras general sales tax act was invalid in its entirety, but the question whether a tax on the first sale of goods manufactured or produced within the province constituted an excise duty remained open to them. Consequently at the hearing the respondents confined themselves to this question in their attack on the validity of the act. The respondents also raised the question whether the assessing authority was entitled to impose the tax both on their purchases of groundnuts and their sales of groundnut oil and groundnut cake, relying here on a proviso to section 3 of the act to the effect that in respect of the same transaction the buyer and the seller shall not both be taxed, but only one of them, and that when the amount for which goods are bought by a dealer has been included in his turnover, the amount of the sale price shall be excluded. They averred that the goods which they bought and the goods which they sold were that same goods the therefore they could not be taxed both as buyers and sellers.

The district munsif held that a tax on the first sale of goods manufactured in the province was an excise duty within the meaning of the act and consequently granted a declaration to the effect that the act and the rules framed thereunder in so far as they impose a tax on such sales are ultra vires the provincial legislature. The district munsiff did not grant an injunction, because he considered that there could be no reasonable doubt that the provincial government would honour a decree of a court of law, and naturally this has been accepted to be the case. The district munsiff also accepted the respondents' plea that groundnut oil and groundnut cake were for the purposes of the act the same goods as the groundnuts out of which they were made and therefore the respondents could not, in any even, be taxed both on their purchases of groundnuts and on their sales of the goods made therefrom. The result was that the claim for a refund of rs. 163 - 11 - 0 was accepted by the district munsif.

The provincial government appealed to the district court of vizagapatam but the advocate - general of madras applied for an order transferring the appeal to this court. The application was not apposed and in view of the importance of the case this court granted the application. The appellant's contention may be summarised as follows : -

(1) an excise duty implies only a tax on the manufacture or production of goods before they leave the hands of the manufacturer or producer and as such a tax can be imposed before any sale takes place, there is no conflict of power. The federal legislature has free scope to impose an excise duty before a sale takes place, leaving the provincial legislature the power to impose a tax when a sale in fact takes place.

(2) the tax imposed by the madras general sales tax act is a tax on turnover and such a tax cannot be classified as an excise duty.

(3) the rules framed under the act are intra vires and the respondents have not been subjected to double taxation, the two sides of their business being quite distinct.

(4) while a suit will lie for a declaration that the act and the rules are ultra vires, if intra vires, the validity of an assessment can only be raised before the tribunals constituted by the act and not in a court of law.

While not disputing that the rules fall within the scope of the act, assuming the act to be intra vires, the respondents join issue on all these contentions. The most important question is the first of those just enumerated. If a tax on the first sale of goods manufactured or produced within the province is an excise duty, then the act is ultra vires to this extent, and there is a corresponding defect in the rules framed under the act, which means that the respondents cannot lawfully be taxed on their sales of groundnut oil and groundnut cake, and the third and fourth questions will not arise. The third question is bound up with the first. In the course of the hearing, mr. Venkatarama sastriar intimated that this clients were only concerned with the levy of the tax on their sales.

The entry in the federal list relating to duties of excise is entry no. 45, which reads as follows : -

"duties of excise on tobacco and other goods manufactured or produced in india except -

(a) alcoholic liquors for human consumption;

(b) opium, indian hemp and other narcotic drugs and narcotics; non - narcotic drug;

(c) medicinal and toilet preparations containing alcohol, or any substance included in sub - paragraph (b) of this entry. "

The power of imposing excise duties on the excepted goods is given to the provincial legislature by entry no. 40 of the provincial list. If such goods are manufactured or produced in the province the provincial legislature may levy "duties of excise" on them; if manufactured or produced elsewhere in india it may impose "countervailing duties" at the same or lower rate. The entry in the provincial list regarding taxes on sales is entry no. 48 and is in these words : -

"taxes on the sale of goods on advertisement. "

The question of what is meant by a duty of excise was fully discussed in the judgments of the federal court in the central provinces case ([1939] f. C. R. 18; ante p. 1). Broadly speaking, an excise is a duty imposed on goods manufactured or produced in the country as opposed to a customs duty, which is levied on goods imported from other countries, but this broad distinction will not suffice here. In the united kingdom such taxes as the entertainment tax and the dog tax are regarded as duties of excise, and so are licence fees. Therefore as tax on the sale of goods manufactured or produced within the united kingdom would undoubtedly fall within the definition of excise, but it is to be remembered that in the united kingdom there is no division of legislative powers. Parliament stands alone. According to blackstone [stephen's commentaries (1928) edn. , vol. Iv, p. 420] and economists excise duties may be imposed at any stage from manufacture to consumption, as was pointed out in the central provinces case, although gwyer, c. J. , maintained that the primary and fundamental meaning in english of the excise duty is still that of a tax on articles produced or manufactured in the taxing country and intended for home consumption and that the government of india act, 1935, did not intend to give the words 'duties of excise' an extended meaning. The learned chief justice of india observed ([1939] f. C. R. , at p. 47; ante p. 42) :

"in my opinion the power to make laws with respect to duties of excise given by the constitution act to the federal legislature is to be construed as a power to impose duties of excise upon the manufacturer or producer of the excisable articles, or at least at the stag of, or in connexion with, manufacture or production, and extends no further."

He did not, however, proceed to discuss the problem whether a tax on the first sale, that is, the sale by the manufacturer or producer, is a duty imposed in connection with the manufacture of production, because the question did not arise in that case.

Sulaiman, j. , was also of the opinion that the wider meaning given by commentators and economists and accepted in england may be inapplicable to the indian constitution and in the course of his judgment said ([1939] f. C. R. , at p. 77; ante p. 66) :

"the essence of a tax on goods manufactured or produced is that the right to levy it accrues by virtue of their manufacture or production. It is immaterial whether the goods are actually sold or consumed by the owner or even destroyed before they can be used. If a duty is imposed on the goods manufactured or produced when they issue from the manufactory, then the duty becomes leviable independently of the purpose for which they leave it and irrespective of what happens to them later. On the other hand, a duty on the sale of goods cannot be levied merely because goods have been manufactured or produced. Nor can it be levied merely because the goods have been consumed or used or even destroyed. The right to levy the duty would not at all come into existence before the time of the sale. It cannot at all be levied unless, the goods are actually sold, and may not be leviable if they are transferred in some other form. Thus a duty on goods manufactured or produced is distinct and separate from and independent of a duty on their sale and (except probably at the stage of the first sale) there seems to be no good reason why two may not co - exist without overlapping."

In excepting the first sale, sulaiman, j. , had in mind the decision of the high court of australia in the commonwealth and commonwealth oil refineries ltd. V. South australia ([1927] 38 com. L. R. 401) to which we shall refer presently.

In the opinion of jayakar, j. , a tax on the sale of goods manufactured or produced in a country is an excise duty, but he considered that by the insertion of entry no. 48 in provincial list, parliament meant to reserve to the provincial legislature the power if imposing a tax on sales for the purposes of consumption, and the only question in the central provinces case was whether a tax levied by the provincial government on the sale to the consumer was lawful. Jayakar, j. , laid great stress on entry no. 16 in schedule i of the devolution rules made under section 45 - a of the previous government of india act. The relevant portion of that entry read as follows : -

"16. Excise, that is to say, the control of production, manufacture, possession, transport, purchase and sale of alcoholic liquor and intoxicating drugs and the levying of excise duties and licence fees on or in relation to such articles."

The learned judge considered that there was no escape from the conclusion that the definition of "excise" in entry no. 16 of the devolution rules and the expression "duties of excise" in entry no. 40 of the provincial list in the present act bear a wide signification, and include all duties levied on the consumption of the excisable commodity in the province at any stage from production to sale. He expressed his conclusion in these words ([1939] f. C. R. , at p. 116 : ante p. 98) :

"on a careful review of the whole question, i am therefore inclined to hold that parliament intended : -

(1) that, as regards goods centrally excisable, taxes on their sale within the province for purposes of consumption, when such taxes are in no way connected within their production, manufacture, etc. , within the province, but the imposed on their sale in the province merely as existing articles of trade and commerce, should be exclusively within the competence of the provincial legislature.

(2) that, save as aforesaid, all duties of excise on those goods, whether levied and collected at the stage of manufacture, production or any subsequent stage up to consumption (exclusive of sale in the province, as stated above) , should remain exclusively within the competence of the centre. A corollary of this rule will be that the residuary powers, if any, of levying and collecting excise duties on those goods (save on their sales as aforesaid) will remain exclusively within the competence of the central legislature. "

As we read the judgments delivered in the central provinces case, the learned chief justice of india was of the opinion that a tax on the sale of commodity cannot be an excise duty unless it is connected with its manufacture or production, but he expressed no opinion on whether a tax on the sale by the manufacturer or producer should be classified as an excise duty. Sulaiman, j. , was substantially in agreement with the learned chief justice in his definition of excise duty, but he thought it probable that a tax on the first sale should be classified as an excise duty. Jayakar, j. , was definitely of the opinion that tax on the first sale was an excise duty and taxes on subsequent sales, excluding the last sale, should be similarly classifies. He made an exception in the case of the last sale, because entry no. 48 in the provincial list indicated that this was the intention of parliament. It cannot be disputed, in fact it has been conceded by both sides, that the judgments of the federal court in the the central provinces case leave open the question whether a tax on the sale by the manufacturer or producer constitutes an excise duty, but, of course, even when obiter the observations of the federal court must be treated with great respect.

At this stage it will be convenient to discuss the judgments delivered by the high court of australia in the commonwealth and commonwealth oil refineries ltd. V. South australia ([1927] 38 com. L. R. 408). The constitution of the australian commonwealth has been built on different lines from those of the indian constitution and in interpreting the government of india act, 1935, the court can only have regard to the provisions contained therein; but this does not mean that the court is precluded from examining the judgment in the commonwealth and commonwealth oil refineries ltd. V. South australia, in order to see whether they throw light no the meaning to be attached to the words "excise duties" used in the government of india act, 1935, and we consider that these judgments do render great assistance in solving the first of the problems with which this court is now confronted. The act of the south australian parliament imposed a tax of three pence on every gallon of motor spirit sold within the state (excluding spirit sold for delivery in or transportation to any place outside the state) and the vendor was authorised to add the amount of the tax to the price agreed to be paid. Six of the seven judges who constituted the court were of the opinion that the act was ultra vires, because it violated the power of the commonwealth parliament to impose duties of excise. With the on exception the learned judges were all of the opinion that a tax on the first sale amounted to an excise duty. The basis of their decision was that a tax on the first sale was a tax on the production of the article.

In citing this case and in an endeavour to find support for his argument that even a tax on the first sale is not an excise duty the learned advocate - general laid great stress on this passage in the judgment of isaacs, j. (page 426) : -

"licences to sell liquor or other articles may well come within an excise duty law, if they are so connected with the production of the articles sold or are otherwise so imposed as in effect to be a method of taxing the production of the article. But if in fact unconnected with production and imposed merely with respect, to the sale of the goods as existing articles of trade and commerce, independently of the fact of their local production, a licence or tax on the sale appears to me to fall into a classification of governmental power outside the true content of the words 'excise duties' as used in the constitution. Such taxing regulations are, in may opinion, not 'withdrawn' from the states, however they might stand in presence of relevant commonwealth legislation respecting foreign or inter - state trade. I agree with the reasoning in peterswald v. Bartely ([1904] 1 com. L. R. 497). Therefore, if the taxation by the state act under section 4 were simply on motor spirit as an existing substance in south australia and not subject to any foreign or inter - state operation of trade or commerce it would not be open to the challenge here made. That, however, is not the nature of the legislation"

.

These remarks do not help the learned advocate - general. The distinction which isaacs, j. , here draws is the distinction between the stage of production and the stage when the goods produced have become part of what has been described as the general stock of the province. In other words, if the tax is imposed while the goods are in the hands of the producer, it is a tax on the production and therefore an excise duty; but if the tax is imposed after the goods have left his hands it is not. This is made clear by the following passage in the judgment of a isaacs, j. , (page 430) :

"the first sale of motor spirit, after its production either by primary or later processes, is naturally and in the ordinary course of business a sale by the producer, and a sale by him is certainly included. A tax on that sale, so described, is essentially a burden and a tax on the production of the goods. Production of motor spirit is with a view to sale; and the tax, having direct reference to a sale so described as to be intimately related to production, is a matter which affects the producer as such, because it burdens the trade for which his production is the essential preparation. A tax laid expressly on the production alone of goods would affect everyone who produced them even for personal use or consumption. But it is all one in reality whether the tax is expressed to be on production followed by sale, or, as here, on the sale immediately following production."

Higgins, j. , also said that a tax on the sale of an article is a tax on the article itself and in accepting that definition in mill's political economy, 4th edition, vol. Ii, page 434, that "taxes on the sale of consumable commodities are simply taxes on those commodities". Starke, j. , said the same thing.

The learned advocate - general has accepted the proposition stated by the learned chief justice of india in the central provinces case, that a tax connected with the manufacture or production of goods within the province constitutes an excise duty, and in out opinion, the correctness of the proposition is not open to doubt. Therefore what the court has to decide, in the first place, is whether a tax on the sale of goods by the manufacturer of producer is so connected with their manufacture or production as to amount to an excise duty. The high court of australia has said that a tax imposed on the first sale of goods is so connected with their production that it is an excise duty and no reason has been advanced in the course of the arguments in this case to induce us to think otherwise. The tax operates on the goods themselves and it is imposed before they leave the hands of the manufacturer or producer. In the normal course he is certainly not going to part with his goods until a contract sale has been entered it no. This being the case it seems to us that the tax is intimately connected with the manufacture or production of the goods. We hold that a provincial legislature in india has no power to tax a sale by the manufacturer of producer as, for the reasons given, this would mean the imposition of an excise duty and the assumption of power vested only in the center.

Where an entry in the provincial list overlaps an entry in the federal list, the federal list must prevail. Where the interests can be reconciled this must be done, because obviously parliament could never have intended that should be a conflict. Entry no. 45 in the federal list and entry no. 48 in the provincial list can be reconciled by reading into entry no. 48 of the provincial list a power to tax all sales subsequent to the sale by the manufacturer or producer, that is, when the property in the goods has passed beyond the manufacturer or producer and the goods have become part of the general stock of the province. On this basis the provincial legislature can levy a tax on the sale by the person who obtains the goods from the manufacturer or producer and so on when the goods passed from hand to hand. It has been said that there is nothing to prevent the manufacturer or producer opening a shop to sell his goods retail. This is so, but it is exceptional and as pointed out by sulaiman, j. , on privy council authority it is the pith and substance of the act which is the decisive factor.

It is now necessary to decide whether the madras general sales tax act does impose a tax on first sales. The learned advocate - general has said that the tax is imposed on a dealer's turnover and that it is not in reality a tax on sales. In this connection he has pointed to an argument advanced by the advocate - general of india in the central provinces case, to the effect that the only power given to the provincial legislature by entry no. 48 is a power to impose a tax on turnover. The contention of the government of india was that the central provinces and berar sales of motor spirit and lubricants taxation act constituted an infringement of the power of the central legislature and the argument of the learned advocate - general of india was advanced in support of this contention. The federal court refused to accept the argument, but this does not mean that this decision implied that a tax on turnover does not mean a tax on sales. Under the madras general sales tax act, the tax is undoubtedly based on the dealer's turnover. "turnover" is defined by section 2 (1) as meaning the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person of agricultural or horticultural produce grown by himself or grown on land in which he has an interest, whether as owner, usufructuary mortgagee, tenant, or otherwise, is exclude from his turnover. By an amending act, which received the assent of the governor on the 4th march, 1940, the tax is now rs. 4 per month if a dealer's turnover does not exceed rs. 20,000 and one - quarter of one per cent. Of the turnover if it exceeds rs. 20,000. Any dealer whose turnover in any year is less than rs. 10,000 is not liable to pay the tax for that year.

A tax on a dealer's turnover is, in effect, a tax on purchases or sales as the case may be. Whether the legislature makes him pay a tax on each transaction or whether it makes him pay a lump sum when the sales for a particular period have been ascertained, the result is the same - a tax on his purchases or sales. The whole includes the part. And the very title given to the act implies that it is a tax on sales. Moreover it is to be remembered that a legislature cannot do indirectly that which it has no power to do directly. In fact the learned advocate - general did not appear to be pressing his second point, although he did suggest that the court should accept the contention of the learned advocate - general of india in the central provinces case that parliament merely intended to give to the provinces the power to impose a tax on turnover and not a power to tax individual transactions, but in doing so he overlooked the fact that the decision in the central provinces case makes such an argument untenable. Notwithstanding that the tax imposed by the madras general sales tax act is based on turnover, we hold that it is in fact a tax on sales and that in so far as it imposes a tax on the first sales of goods manufactured or produced within the province, it is ultra vires the provincial legislature. This means that we consider that in calculating a dealer's turnover for the purposes of the act the sale by him of goods which he has manufactured or produced must be excluded.

In view of these findings it is not necessary for us to decide the third and fourth questions stated by the learned advocate - general.

As it has not been suggested that in, ordering the refund of rs. 163 - 11 - 0 the district munsif committed any error, assuming his decision on the main issue to be correct, the decree passed by him will stand. Consequently the appeal will be dismissed with costs and a certificate for two counsel granted. A memorandum of cross - objections has been filed by the respondents, but they have not pressed it and it will also be dismissed, in this case without costs.

As this judgment involves a substantial question of law as to the interpretation of the government of india act, 1935, a certificate will issue in accordance with the provisions of section 205 of that act.

The province of madras appealed to the federal court.

Sir alladi krishnaswami ayyar, advocate - general of madras, (n. Rajagopala iyengar with him) , instructed by b. Banerji, agent, for the appellant.

T. R. Venkatarama sastri (c. Krishnaswami with him) , instructed by ganpat rai, agent, for the respondents.

Interveners :

(1) sir brojendra mitter, advocate - general of india (h. R. Kazimi with him) , instructed by k. Y. Bhandarkar, agent.

(2) sir asoka roy, advocate - general of bengal (h. K. Bose with him) , instructed by b. Banerji, agent.

(3) dr. Narain prasad asthana, advocate - general of the united provinces (sri narain sahai with him) , instructed by sumair chand jain raizada, agent.

Judgment

Gwyer, c. J. - in this case the appellants are the province of madras, who appeal against a judgment of the madras high court dated september 5, 1941, in which it was held that certain taxes which had been levied on the respondents under madras general sales tax act, 1939 (to which for convenience we refer hereafter as the madras act) were in the nature of duties of excise and therefore beyond the competence of the madras legislature to impose. In view of the importance of the question to the provinces generally, in more than one of which legislation similar to the madras act has already been enacted, we acceded to the application of the advocates - general of bengal and the united provinces to be allowed to appear at the hearing and to support the arguments of the advocate - general of madras. The advocate - general of india, to whom we had caused notice of the proceedings to be sent, also appeared and addressed arguments to us in support of the judgment of the high court. We therefore had the advantage of a very full discussion of all points which arise in the case and we are indebted to counsel for the assistance which they have afforded us.

The respondents carry on business at vizianagaram in the province of madras. Their business consists of the purchase of groundnuts for the purpose of extracting oil from the kernels of the nuts and the making of groundnut cake out of the residue. They sell this oil and cake, and, since they are themselves the manufacturers, it follows that each sale which they effect is the first sale of the commodity after its manufacture or production.

The madras act provides that, subject to the provisions of the act, every dealer, that is to say, every person who carries on the business of buying and selling goods, is to pay in each year a tax on his turnover, if that turnover is not less than rs. 10,000, the tax being at a flat rate of five rupees (afterwards reduced to four) on a turnover between rs. 10,000 and rs. 20,000 and varying with the amount of the turnover on a turnover of more than rs. 20,000. The expression "turnover" is defined as meaning the aggregate amount for which goods are either bought or sold by a dealer, whether for cash or for deferred payment or other valuable consideration, with certain exceptions not here material. The expression "goods" is defined as meaning all kinds of movable property, other than actionable claims, stocks and shares and securities, and includes all materials, commodities and articles. The act further provides that the buyer and seller are not both to be taxed in respect of the same transaction of sale, but only one of them, as determined by rules made under the act; and that, when the amount for which any goods have been bought by a dealer has been included in his turnover, the amount for which the same goods are sold by him is not to be included in his turnover for the purposes of the act. The turnover for all purposes of the act is to be determined in accordance with, and the tax is to be assessed, levied and collected in such manner and in such instalment as may be prescribed by, rules made for the purpose by the provincial government. There are various other provisions in the act, mostly dealing with the machinery of assessment and collection, but nothing turns upon them in the present appeal.

The assessing authority under the act assessed the respondents to tax both in respect of their purchase of groundnuts and of their sales of oil and cake, holding that the purchase of groundnuts was a business distinct from the business of manufacturing oil and cake. Accordingly the sum of rs. 160 - 11 - 0 was demanded from the respondents by way of tax, and was paid by them under protest. The respondents then took proceedings in the court of the district munsif at vizianagaram for a declaration that the madras act and certain rules made thereunder were ultra vires the madras legislature and for an order directing a refund of the sum of rs. 160 - 11 - 0, together with rs. 3 interest thereon. The learned munsif gave judgment in favour of the respondents on both points, holding that a tax on the first sale of goods manufactured in the province was a duty of excise which the madras government were not competent to impose. There was an appeal to the district court at vizagapatam, but, on the application of the advocate - general of madras, the appeal was transferred to the high court. A bench of the high court, composed of the chief justices and chandrasekhara ayyar, j. , upheld the judgment of the lower court; and it is from the high court's decision that the appeal now comes to us.

Under the constitution act the federal legislature has an exclusive power to impose duties of excise (list i, entry no. 45) and the provincial legislature and exclusive power to impose taxes on the sale of goods (list ii, entry no, 48). The relation of a duty of excise to a tax on sales was much discussed in the central provinces case ([1939] f. C. R. 18; ante p. 1) in which this court delivered an advisory opinion on the question whether an act imposing a tax on retail sales of petrol was within the competence of the central provinces legislature. All the members of the court were of opinion that the legislature was competent to impose such as tax, though their reasons differed, jayakar, j. , held that all taxes on the sale of goods "for purposes of consumption", by which he presumably meant taxes on retail sales, ought to be regarded as exclusively within the competence of the provincial legislature, provided that they were in no way connected with the production or manufacture of the goods within the province; but that all other taxes on the sale of goods were duties of excise and therefore exclusively within the competence of the central legislature. The other two members of the court were not prepared to go to these lengths, and in effect drew the dividing line between the central provincial spheres at the point of manufacture or production. They were of opinion that, on the true construction of entry no, 45 in list i and entry no. 48 in list ii, the power of the central legislature to impose duties of excise was a power to impose duties on the manufacturer or producer of the goods and did not extend further, the power to impose a tax upon the sales of goods after manufacture or production being reserved to the provinces. They left open however the question on which side of the line a tax upon the first sales of goods manufactured or produced in the province was to be regarded as falling. Thus one judgment would confine the power of the central legislature to the imposition of duties "on the manufacturer or producer of the excisable articles, or at least at the stage of, or in connection with, manufacture or production". In the other this sentence is to be found : "for all practical purposes, it [that is, a tax on first sales] is a tax on the manufacturer or producer, and the burden is in the first instance imposed on him, through of course, it being an indirect imposition, he could pass it on; but the essence is that the tax is imposed on a sale by the producer or manufacturer and not on a sale by any subsequent vendor. " the learned judge, the late sulaiman, j. , added that, thought it was not necessary to decide the question, there might be some difficulty in upholding a provincial tax on first sales. In the present appeal we have to answer the question which was thus left open in the earlier case.

We may here refer to a contention raised by counsel on behalf of the appellants that a turnover tax such as is imposed by the madras act is not a tax on specific goods and that therefore the expression "duty of excise" could never in any circumstances be appropriate to it. It may be conceded that a duty of excise is a duty leviable with respect to specific goods; but where a turnover tax is leviable at a specified rate on the aggregate sum produced by the sale of a number of different articles or commodities, then it seems to us that it is a tax levied at the specified rate on each sale of those goods or commodities. A system of turnover taxation if conceivable where it may not be easy, or even possible, to identify the tax on a particular sale; but no such difficulty arises in a case under the madras act, at least if the exceeds rs. 20,000 per annum, as that of the respondents does. We do not think therefore that there is any substance in the appellants' contention.

In the central provinces case (ante p. 1) the opinions expressed were advisory opinions only, but we do not think that we ought to regard them as any less binding upon us on that account. We accept therefore the general division between the central and provincial spheres of taxation which commended itself to the majority of the court in that case. They did not reach their conclusions by assigning any particular technical meaning to the expressions "duty of excise" or "tax on the sale of goods", but rather by construing the language in which the taxing powers of the centre and provinces respectively are conferred, in such a way as to give effect to what appeared to them to be the scheme of the act and to reconcile the conflict which might otherwise arise between two independent taxing authorities. They recognized that the expression 'duty of excise' is wide enough to include a tax on sales; but where power is expressly given to another authority to levy a tax on sales, it is clear that 'duty of excise' must be given a more restricted meaning than it might otherwise bear. On the other hand the fact that 'duty of excise' is itself an expression of very general import is no reason at all for refusing to given to the expression 'tax on sales' the meaning which it would ordinarily and naturally convey. In these circumstances the question at issue in the present appeal appears to us to lie within a very small compass.

The duties of excise which the constitution act assigns exclusively to the central legislature are, according to the central provinces case (ante p. 1) duties levied upon the manufacturer or producer in respect of the manufacture or production of the commodity taxed. The tax on the sale of goods, which the act assigns exclusively to the provincial legislature, is a tax levied on the occasion of the sale of the goods. Plainly a tax levied on the first sale must in the nature of things be a tax on the sale of by the manufacturer of producer; but it is levied upon him qua seller and not qua manufacturer or producer. It may well be that a manufacturer or producer is sometimes doubly hit; but so is the taxpayer in canada who has to pay income - tax levied by the province for provincial purposes and also income - tax levied by the dominion for dominion purposes : see caron v. The king ([1924] a. C. 999) : forbes v. A. G. For manitoba ([1937] a. C. 260). If the taxpayer who pays a sales tax is also a manufacturer or producer of commodities subject to a central duty of excise, there may no doubt be an over lapping in one sense; but there is no overlapping in law. The two taxes which he is called on to pay are economically two separate and distinct imposts. There is in theory nothing to prevent the central legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed or given away. A taxing authority will not ordinarily impose such a duty, because it is much more convenient administratively to collect the duty (as in the case of most of the indian excise acts) when the commodity leaves the factory for the first time, and also because the duty is intended to be an indirect duty which the manufacturer or producer is to pass on to the ultimate consumer, which he could not do if the commodity had, for example, been destroyed in the factory itself. It is the fact of manufacture which attracts the duty even thought it may be collected later; and were may draw attention to the sugar excise act in which it is specially provided that the duty is payable not only in respect of sugar which is issued from the factory but also in respect of sugar which is consumed within the factory. In the case of a sales tax, the liability to tax arises on the occasion of a sale, and a sale has no necessary connection with manufacture or production. The manufacturer or producer cannot of course sell his commodity unless he has first manufactured or produced it; but he is liable, if at all, to a sales tax because he sells and not because he manufactures or produces; and he would be free from liability if he chose to give away everything which came from his factory.

In our opinion, the power of the provincial legislatures to levy a tax on the sale of goods extends to sales of every kind, whether first sales or not; and we regret that we are unable to agree with the contrary opinion which has been expressed by the high court. The gist of the judgment of the high court is to be found in the following passage : -

"what the court has be decide, in the first instance, is whether a tax on the sale of goods by the manufacturer or producer is so connected with their manufacture or production as to amount to an excise duty. The high court of australia has said that a tax imposed on the first sale of goods is so connected with their production that it is an excise duty, and no reason has been advanced in the course of the argument in this case to induce us to think otherwise. The tax operates on the goods themselves and it is imposed before they leave the hands of the manufacturer or producer. In the normal course he is certainly not going to part with his goods until a contract of sale has been entered into. This being the case, it seems to us that the tax is intimately connected with the manufacture or production of the goods. We hold that a provincial legislature in india has no power to tax a sale by the manufacturer of producer as, for the reasons given, this would mean the imposition of an excise duty and the assumption of a power vested only in the centre"

. We do not think, for reasons which we give hereafter, that the australian case referred to has any bearing on the question which we are now called on to determine. That question is this : assuming the right of the central legislature to tax the production of commodity and the right of the provincial legislature to tax its sales, can a good reason be shown for excluding a particular category of sales on the ground only that they are sales by the producer ? according the high court a tax on the first sale of goods is so connected with their production that it is an excise duty; but, with great respect to the court, that appears to us to be hardly the question. Every tax on the sale of goods produced in india is in a sense an excise duty, whether the sale is the first, second or third, though an excise duty is not necessarily a tax on sales; and the high court should have formulated their proposition thus : a tax on the first sale of goods is so connected with their production that it cannot properly be described as, and is not in fact, a tax on sale. Stated in this way, the proposition is surely difficult to sustain. We may recall that in 1935, when the constitution act was passed, the distinction between a producer's or manufacture's sales tax and sales taxes (including retail sales taxes) of other kinds was familiar to economists and those concerned with public finance (see findlay shirras : science of public finance, vol. Ii, ch. 25) ; and it is therefore not without significance that parliament did not think fit to confine the provincial taxing power in terms to sales taxes other than taxes on first sales. It is also material, even if not necessarily conclusive, to point out that the judgment of the high court would deprive the provincial legislature of the whole yield of taxes on first sales, and not merely of the tax on the first sale of commodities which are also subject to a duty of excise; and it would do so without in practice conferring any corresponding benefit on the central fisc, since for plain reasons of convenience the number of commodities on the production of which it is administratively worth while to impose an excise duty will always be very limited.

Our attention was drawn to a number of canadian, australian and american decisions which were alleged to throw light upon the principles applicable to this appeal, and it is desirable that we should say something about them. They are not of course binding on us; but, as was said in the central provinces case (ante p. 1) such decisions, if relevant, will always be listened to in this court with attention and respect.

The canadian case which were cited do not seem to afford any assistance, since analogous problems in canada are always concerned with questions of direct and indirect taxation; and if a provincial tax is held to be an indirect tax, it is unnecessary for the court to consider whether it may not also be a duty of excise : see, for example a. - g. For british columbia v. The canadian pacific railway co. ([1927] a. C. 934) where a tax on every person purchasing within the province fuel oil for the first time after its manufacture in, or importation into, the province was held to be invalid as an indirect tax, and the question whether it might not also be bad as an excise duty was left unanswered. In contrast to the case just cited we may refer to a. - g. For british columbia v. Kingcome navigation company ([1934] a. C. 45) in which a fuel oil tax imposed by a province upon every consumer of fuel oil according tot he quantity which he had consumed was held to be valid as a direct tax, because it was demanded from the very persons who it was intended or desired should pay it.

The australian cases are rather more in point, and in particular the high court laid great stress on commonwealth oil refineries ltd. V. South australia, (1926) 38 c. L. R. 408, which was also discussed at length in the central provinces case, ([1939] f. C. R. 18; ante p. 1). In this australian case the validity of a so - called income - tax of three pence per gallon imposed by a state on vendors of motor spirit was considered, a vendor being defined as a person selling or delivering motor spirit within the the state to persons within the state for the first time after its entry into, or its manufacture in, the state. This was held to be a duty of excise and therefore not within the competence of the state legislature, the power of the commonwealth parliament to impose duties of customs and excise being an exclusive one. Some of the learned judges who decided the case, it is true, were of opinion that it was an excise duty because it was connected with the production of the commodity, but others took a wider view : see especially the judgment of higgins, j. (at p. 435) , where he says : "for the purpose of section 90 and our constitution as a whole, customs duty is a duty on importation or exportation whether by land or by sea; whereas excise duty means a duty on the manufacture, production, etc. , in the country itself; and it matters not whether the duty is imposed at the moment of actual sale or not, or sale and delivery or consumption. " in mathews v. The chicory marketing board, [1938] 60 c. L. R. 263, a levy of pound 1 on producers for every half acre of land planted with chicory was held by a majority of the court to be a duty of excise. A very full account of the history of excise duties is given by dixon, j. , in his judgment in that case, and the learned judge observes : "it should not be overlooked that so far there is no direct decision [i. E. , by the australian courts] inconsistent with the view that a tax on commodities may be an excise although it is levied not upon, or in connection with, production, manufacture or treatment of goods or the preparation of goods for sale or for consumption, but upon sale, use or consumption and is imposed independently of the place of production : (cf. The judgment of rich, j. , in the commonwealth oil refineries ltd. V. South australia, [1926] 38 c. L. R. 408; john fairfax & sons ltd. And smith's newspapers ltd. V. New south wales, [1927] 39 c. L. R. 139). What is decided is that to be an excise the tax must be imposed in respect of commodities". And then later : "the basal conception of an excise in the primary sense which the framers of the constitution are regarded as having adopted is a tax directly affecting commodities. To be an excise the tax must be levied 'upon goods', but those apparently simple words permit of much flexibility in application. The tax must bear a close relation to the production or manufacture, the sale or the consumption of goods, and must be of such a nature as to affect them as the subjects of manufacture or production or as articles of commerce" (pp. 303, 304).

Having regard to the above opinions, we find it impossible to say that the expression "duties of excise" even in australia is limited to duties imposed in connection with the production of the commodity alone. We should be disposed to say on the contrary that in australia all taxes on the sale of commodities are, or may be regard as, duties of excise; but whether this be so or not, it is clear that the commonwealth oil refineries case cannot be treated as having the conclusive authority which the high court of madras seem to have attributed to it. We should be unwilling also for another reason to adopt blindly the australian decisions. Under the australian constitution power to impose duties of excise is, as we have said, the exclusive right of the commonwealth parliament; the residuary taxing power remains in the states. In the indian constitution act the whole of the taxing power in this particular sphere is expressly apportioned between the centre and the provinces, to the one being assigned the power to impose duties of excise, to the other taxes on the sale of goods. It is natural enough, when considering the ambit of an express power in relation to an unspecified residuary power, to give a broad interpretation to the former at the expense of the latter; and this indeed is the principle upon which the judicial committee have for the most part interpreted sections 91 and 92 of the british north american act. The case however is different where, as in the indian act, there are two complementary powers, each expressed in precise and definite terms. There can be no reason in such a case for giving a broader interpretation to one power rather than to the other; and there is certainly no reason for extending the meaning of the expression "duties of excise" at the expense of the provincial power to levy taxes on the sale of goods.

Lastly, the well known american case of brown v. The state of maryland, [1827] 12 wheat. 419, was cited to us. The state of maryland has passed an act prohibiting the importers of foreign goods from selling their goods without taking out a licence, for which fifty dollars had to be paid. This act was held to be repugnant to the provision in the constitution which provides that "no state shall, without the consent of congress, allow any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws. " in the course of his judgment, marshall, c. J. , after observing that whatever might be the motive which had induced the prohibition against duties on imports or exports, side : "it is plain that the object would be as completely defeated by a power to tax the article in the hands of the importer the instant it was landed as by a power to tax it while entering the port. There is no difference, in effect, between a power to prohibit the sale of an article and a power to prohibit its introduction into the country. The one would be a necessary consequence of the other. No goods would be imported if none could be sold. No object of any description can be accomplished by laying a duty on importation, which may not be accomplished with equal certainty by laying a duty on the thing importer in the hands of the importer. " if a licence to sell is invalid for the above reasons, a tax on the first sale must be no less invalid; and it follows from the judgment of marshall c. J. , and has ever since been held to be the law of the united states, that a duty of this kind is to be regarded as so intimately connected with the act or transaction of importation as to be itself an impost or duty on imports and therefore beyond the power of any state in the union to impose. We should be temerarious indeed, if we expressed any opinion upon the reasoning of that great judge, even though we might find it easier to follow the reasoning of thompson, j. , in his dissenting judgment; but we have no occasion to do so. The provisions which were being considered in brown v. Maryland ([1827] 12 wheat. 419) were very different from those which are before us in the present appeal. There is in the first place, as in the australian constitution, a specific reservation of certain taxing powers to congress, with the residuary powers left to the states; and what we have already said on this point in connection with the australian decisions is equally applicable here. Next, it is to be observed that the american constitution also provides that congress alone has power "to regulate commerce with foreign nations, among the several states, and with the indian tribes"; and it was held that the maryland tax was no less repugnant to this provision also. Marshall, c. J. , asked : "to what purposes should the power to allow importation be given, unaccompanied with the power to authorize the sale of the thing imported ?. Congress has a right, not only to authorize importation, but to authorize the importer to sell. What does the importer purchase, if he does not purchase the privilege to sell ?" on this view of the commerce clause, it would indeed be difficult to recognize the right of the state to impose a tax upon the first sale of the commodity, at any rate so long as it remained in the importer's hands. In the indian constitution act no such question arise; and the right of the provincial legislatures to levy a tax on sales can be considered without any reference to so formidable a power vested in the central government. Lastly, the prohibition in the american constitution is againt the laying of "any imposts or duties on imports or exports"; the prohibition is not merely against the laying of duties of customs, but is expressed in what we conceive to be far wider terms; and it does not appear to us that it would necessarily follow from the principle of the maryland decision that in india the payment of customs duty on goods imported from abroad or the payment of an excise duty on goods manufactured or produced in india can be regarded as conferring some kind of licence or title on the importer or manufacturer to sell his goods to any purchaser without incurring a further liability to tax. That was the view which commended itself to the court in the maryland case and it was a view adopted and argued before us. The analogy with the american case is an attractive one; but for the reasons which we have given we are wholly unable to accept it.

I may perhaps be myself responsible for some of the confusion which seems to have arisen, by reason of the suggestion which i made in the central provinces case ([1939] f. C. R. 18; ante p. 1) that the central legislatue should be regarded as having power "to impose duties on excisable articles before they become part of the general stock of the province, that is to say, at the stage of manufacture or production, and the provincial legislature an exclusive power to impose a tax on sales thereafter. " in using these words i intended to do no more than suggest a convenient dividing line between the two spheres of jurisdiction; but i certainly did not mean to elevate the dividing line into a legal principle, the application of which might attract those numerous american authorities, of which perhaps brown v. Maryland ([1827] 12 wheat. 419) was the first, where the question has been considered at what point commerce ceases to be inter - state or foreign commerce and becomes the domestic commerce of a state and taxable by it. I should much regret if any contribution of mine to the elucidation of the problems which come before this court were thought to have included the introduction of some kind of "original - package" doctrine and all the refinements and complications which that doctrine has brought in its train in the courts of america.

We should add that neither the appellants nor the respondents desired to adduce arguments on certain issues in the case which the high court left undecided, because on the view which they (the high court) took of the matter it was unnecessary to decide them. We do not in these circumstances think it obligatory upon us to express any opinion upon those issues.

The appeal will be allowed and the case remitted to the high court of madras with directions to substitute a decree dismissing the respondents' suit. We think that the appellants are entitled to their cost in this court and in the two courts below.