SC Opinion on Bill Amending Sea Customs & Excise Acts (1963)

Case Summary: In Re: The Bill To Amend S. 20 of The Sea Customs Act, 1878 and S. 3 of The Central Excises and Salt Act, 1944 (1963)

Case Stats

[Judgment Source] https://www.courtkutchehry.com/Judgement/Search/AdvancedV2?docid=280738

Facts of the Case

A Presidential Reference under Article 143(1) sought the Supreme Court’s advisory opinion on the constitutional validity of proposed amendments to (i) Section 20(2) of the Sea Customs Act, 1878 and (ii) Section 3(1A) of the Central Excises and Salt Act, 1944, to apply customs/excise duties to all goods belonging to State Governments irrespective of use. Several States contended Article 289 conferred immunity from Union taxation on State property.

Questions Referred

1) Whether Article 289 precludes Union customs duties on import/export of State property used for purposes other than those in Article 289(2).
2) Whether Article 289 precludes Union excise duties on production/manufacture of State property used for such other purposes.
3) Whether the proposed amendments to §20(2) (Sea Customs Act) and §3(1A) (Central Excises Act) would be inconsistent with Article 289.

Law Points Raised

• Scope of State immunity under Article 289(1) — confined to taxes directly on property/income vs. all Union taxes.
• Character of customs and excise — event-based transactional levies vs. taxes on property as such.
• Complementarity of Articles 285 and 289 and distribution of taxing powers.
• Meaning of “taxation” under Article 366(28) and its relation to 'property'/'income'.
• Article 289(2)-(3): taxation of State trade/business and Parliament’s power to declare what is incidental to ordinary functions of government.

Acts / Provisions / Articles Referred

• Central Excises and Salt Act, 1944 — §3(1), §3(1A)
• Sea Customs Act, 1878 — §20(1), §20(2)
• Constitution of India — Art. 143(1), Art. 289, Art. 366(28)
• Government of India Act, 1935 — §§154, 155 (background).

Judgments / Authorities Referred

Construction of Articles 285 and 289 in light of the scheme under the Government of India Act, 1935; reliance on constitutional framework allocating customs/excise exclusively to the Union.

Obiter Dicta

Articles 285 and 289 are complementary and should be read together. Customs and excise are not taxes 'on property' but are levies on the events of import/export or manufacture; their measure may refer to value/quantity, but their nature remains transactional.

Ratio Decidendi

Article 289(1) grants immunity only from taxes directly on State property or income. Customs duties (on import/export) and excise duties (on manufacture/production) are not taxes on property as such; therefore, the Union is not barred from imposing them on goods belonging to a State, irrespective of use. Article 289(2) permits Union taxation where States carry on trade/business; Article 289(3) empowers Parliament to declare what is incidental to ordinary government functions.

Final Ruling

Questions 1 & 2: Union not precluded; such duties may be imposed.
Question 3: The proposed amendments to §20(2) of the Sea Customs Act, 1878 and §3(1A) of the Central Excises and Salt Act, 1944 are not inconsistent with Article 289 and are constitutionally valid.

Summary

The Supreme Court clarified that the constitutional immunity in Article 289 is confined to direct taxes on State property and income. Since customs and excise are transactional levies on import/export and manufacture, the Union can validly levy them on State-owned goods. The proposed statutory amendments extending customs/excise to all State goods were upheld as constitutionally valid.

[Judgment Source] https://www.courtkutchehry.com/Judgement/Search/AdvancedV2?docid=280738