Summary
The appeals asked whether pan masala containing tobacco, and gutka, which are covered by the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957, could be taxed under the Delhi, U.P. and Tamil Nadu sales tax laws. In Shanti Fragrances, a two-judge bench saw a conflict between the Kothari Products line and the Agra Belting Works line. It referred two questions to a Constitution Bench: which line is correct, and what guidelines govern overruling. The Constitution Bench held there was no conflict. Kothari Products concerns whether goods under the ADE Act can be made taxable by amending a State schedule, while Agra Belting concerns a later rate notification overriding a general exemption under the U.P. Act. The reference was therefore incompetent. On the second question, the Bench's strength, not the size of the majority, governs.
Issues
- Whether there is a conflict between the Kothari Products line of decisions and the Agra Belting Works line requiring resolution by a Constitution Bench
- What principles govern the binding force of a decision of a larger Bench where its majority is numerically smaller than the Judges who took a contrary view in earlier decisions
Provisions considered
- First Schedule, Additional Duties of Excise (Goods of Special Importance) Act, 1957Once goods are chargeable under the ADE Act, which replaced sales tax on tobacco and other specified goods, a State cannot levy sales tax on them. This is the premise of the Kothari Products line, which was held not to conflict with Agra Belting. (¶¶ 5, 6, 7, 8, 9, 17)
- Sections 3-A and 4, Uttar Pradesh Sales Tax Act, 1948Agra Belting held that a later rate notification under Section 3-A for a specific item withdraws a general exemption under Section 4 for that item. This is a distinct question from taxability of goods under the ADE Act. (¶¶ 12, 13, 15, 16, 17)
- Article 145(5), Constitution of IndiaA judgment of the Court is that of the majority of the Judges at the hearing. The majority decision of a larger Bench prevails over a smaller Bench, whatever the size of that majority. (¶¶ 19, B)
Held
- There is no conflict between the two lines. The Kothari Products cases, followed in Radheshyam Gudakhu and Reliance Trading, hold that goods in the First Schedule to the ADE Act, and so exempt under State law, cannot be made taxable by amending the State schedule. The Agra Belting cases, followed in Dealing Dairy Products and Krishna Kumar Kabra, deal with the interplay between a general exemption under Section 4 and a specific rate notification under Section 3-A of the U.P. Act. The reference was incompetent, and the appeals were directed to be placed before a regular Bench. (¶¶ 8, 9, 10, 11, 12, 15, 16, 17)
- The second question is answered by the Constitution Bench in Jaishri Laxmanrao Patil. A ruling by a larger Bench binds and prevails over a smaller Bench irrespective of how many Judges form the majority, and a headcount of Judges across earlier decisions cannot detract from it. Stare decisis operates both vertically and horizontally in the interest of stability. (¶¶ 18, 19, 20)
- Concurring, Hemant Gupta J. added that the Constitution contemplates decision by majority with room for dissent. Under Dawoodi Bohra, the law laid down by a Bench of larger strength binds Benches of lesser or equal strength, and a smaller Bench cannot dissent from a larger one. What is determinative is the strength of the Bench, not the number of Judges who took a particular view. (¶¶ A, B, F, G, H)
Result
Reference disposed of. The first question was held not to arise, there being no conflict, and the cases were sent back for decision by a regular Bench. The second question was answered by the principle that the Bench's strength, not the size of the majority, governs.