PETITIONER: <NAME> & <ORG> Vs. RESPONDENT: STATE OF KERALA DATE OF JUDGMENT12/11/1975 BENCH: <NAME>, HANS RAJ BENCH: <NAME>, HANS RAJ BHAGWATI, P.N. FAZALALI, SYED MURTAZA CITATION: 1976 AIR 182 1976 SCR (2) 690 1976 SCC (3) 219 CITATOR INFO : R 1977 SC1459 (7) R 1980 SC 614 (40) D 1985 SC1211 (41) RF 1986 SC 649 (29) F 1989 SC1949 (7,8A) R 1990 SC1637 (33) ACT: Kerala Luxury Tax on Tobacco (Validation) Act, 1964 (9 of 1964) <ORG>-if competent to enact-if could enact a taxation law retrospectivly. Constitution of India- Art. 304(b)- reasonable restriction-public interest-colourable legislation tests to decide. Entry 84 of List I and Entry 62 of List II Luxury- meaning of HEADNOTE: The Finance Act 1950 extended the Central Excise and Salt Act , 1944 to the Part <ORG> of' Travancore Cochin and repealed the Cochin Tobacco Act, 1909 and the Tobacco Act (Travancore Act I of 1087). Thereafter a system of licensing was introduced by which the licensees were required to pay a specified fee in respect of tobacco imported into the <ORG>. The appellants challenged unsuccessfully in <ORG> the collection of the licence fee for the period between August 1950 and December 1957. The Act and rules having been declared by this Court as invalid ab initio, the <ORG> refunded a portion of the licence fee collected. but the appellants filed writ petitions claiming refund of the remainder of the licence fee paid by them. During the pendency of the writ petitions the Kerala Luxury Tax on Tobacco (Validation) Act of 1964 (Act 9 of 1964) was passed by the <ORG> legislature to provide for the levy of a luxury tax on tobacco and validate the levy and collection of fees for licences for the vend and stocking of tobacco for the period between August 17, 1950 and December 31, 1957 and it received the assent of the President. The appellants then challenged the validity of the 1964 Act, but the <ORG> on the other hand demanded payment of the part of the fee earlier refunded to the parties The validity of the demand notice was questioned by the appellants on the question of validity of the 1964 Act, <ORG> held that (1) the levy being in respect of goods produced outside the <ORG>, was not an excise duty falling within Entry 84 of the Union List; (2) the tax clearly answers the description of luxury tax falling within entry 62 of <ORG>, List; (3) however, the payment of the tax being a condition precedent to the bringing of the goods into the taxing territory, it was a direct impediment on the free flow of goods, and (4) even so, it is saved by Article 304(b) being n reason able tax levied in public interest. Dismissing the appeals, ^ HELD. (1) The judgment of this Court in <CITATION> .  Supp. 2 S.C.R. 741 does not operate as res. judicata regarding the points in controversy in these appeals. What was held in that case was that the Cochin Tobacco Act and the similar Travancore Act taken along with the rules framed under those Acts were in substance law corresponding to the Central Excise and Salt Act . The Cochin Tobacco Act and the similar Travancore Act stood repealed on April 1, 1950 and there would be no power in the <ORG> Government thereafter to frame new rules in August 1950 and January 1951 for there would be no law to support the new rules. In the instant case what is questioned is the constitutional validity of Act 9 of 1964 which was enacted subsequent to the above decision of this Court. [698 C-G] (2)(a) The argument that the provisions of the Act fell under Entry 84 of List I of the Seventh Schedule is bereft of force. The liability to pay the tax is on stocking and vending of tobacco. There is no provision in the Act which is concerned with production or manufacture of tobacco or which links the tax under its provisions with the manufacture or production of tobacco. [699-D-E] 691 (b) Excise duty is a tax on articles produced or manufactured in the taxing country. Generally speaking, the tax is on the manufacturer or producer, yet laws are to be found which impose a duty of excise at stages subsequent to the manufacture or production. [698H, 699A] <CITATION> .  Supp. 2 S.C.R. 741 referred to. (c) Where, however, the levy imposed or tax has no nexus with the manufacture or production of an article, the impost or tax cannot be regarded to be B one in the nature of excise duty. [699-B-C] (3) The word `luxury' has not been used in the sense of something pertaining to the exclusive preserve of' the rich. The connotation of the word `luxury' is something which conduces enjoyment over and above the necessaries of life. There is nothing static about what constitutes an article of luxury. The luxuries of yesterday could well become the necessities of today. Likewise, what constitutes necessity for citizens of one country or for those living in a particular climate may well be looked upon as an items of luxury for the nationals of another country or for those living in a different climate. A number of factors may have to be taken into account in adjudging the commodity as an article of luxury. [699 G, 701B] (4) (a) <ORG> was right in its view that the levy of tax was violative of Article 301 of the Constitution. But while the <ORG> can impose restrictions on the freedom of trade, commerce or intercourse between one <ORG> and another or within any part of the territory of India as may be required in the public interest, so far as the <ORG> legislatures are concerned, restrictions must satisfy two requirements, firstly they must be in public interest, and secondly, the restrictions should be reasonable. [701, F, 702DE] <CITATION>  3 S.C.R. 829 referred to, (b) To some extent every tax imposes an economic impediment to the activity taxed as compared with others not taxed. But that fact by itself would, not make it unreasonable. The law of taxation in the ultimate analysis is the result of' the balancing of several complex considerations. The legislatures have a wide discretion in the matter. [702G, 703-AB] (c) In considering the question whether the restriction is reasonable in public interest the Court will have to balance the importance of freedom of trade as against the requirement of public interest. [703- <CITATION>  S S.C.R. 975 referred to. (d) The onus of showing that the restrictions on the freedom of trade, commerce or intercourse in the public interest are reasonable is upon the <ORG>. [703D] In the present case the levy of luxury tax relates to tobacco the consumption of which is a health hazard. Regulation of the sale and stocking of such an article and treating it as an article of luxury by imposing a licence fee is a permissible restriction in public interest within Art. 304(b) of the Constition. [703-F] (e) The fact that the operation of the Act was confined to a particular area, and did not extend to the entire <ORG> was due to historical reasons. The object of the Act was to validate the recoveries already made. [704-B] <ORG> etc. v. <ORG> of Andhra Pradesh JUDGMENT:

(f) The levy of tax is protected by Article 304(b) of the Constitution as the requirement of the proviso regarding the sanction of the President has been satisfied. Though the assent of the President was given subsequent to the passing or the Bill by <ORG>, that fact would not affect the validity of the impugned Act in view of the provisions of Article 255 of the Constitution. [702 AB] (5)(a) Where a topic is not included within the relevant List dealing with the legislative competence of <ORG>, <ORG>, by making a law cannot attempt to confer such legislative competence on the State legislatures This principle would, however, have no application where what is sought to be done is to validate the recovery of licence fee for stocking and vending of tobacco. The impugned provisions have nothing to do with the production and manufacture of tobacco. The levy is sought to be made as luxury to which is within the competence of State legislature and not as excise duty which is beyond the legislative competence of the State legislature. If the levy in question could be justified under a provision which is within the legislative competent of the State legislature, the levy shall be held to be validly imposed and cannot be considered to be impermissible. [705-B-D]

(b) The impugned Act cannot be said to be a colourable piece of legislation. Where a challenge to the validity of a legal enactment is made on the ground that it is a colourable piece of legislation what is to be proved is that though the Act ostensibly is within the legislative competence of the legislature in substance and reality it covers a field which is outside its legislative competence. In the present case, in enacting the impugned provisions the <ORG> legislature has exercised power of levying luxury tax in the shape of licence fee on the vend and stocking of tobacco. The enactment of a law for levying luxury tax is unquestionably within the legislative competence of the State legislature in view of Entry 62 in List II of the Seventh Schedule to the Constitution. [705- <CITATION> .  1 S.C.R. 523 and <CITATION> .  3 S.C.R. 242 distinguished.

(c) The State legislature has sought to validate the recovery of the amounts already made by treating those amounts as luxury tax. The fact that the validation of the levy entailed converting the character of the collection from an impermissible excise duty into permissible luxury tax would not make it an Inconstitutional. The only conditions are that the levy should be of a nature which can answer to the description of luxury tax and that the State legislature should be competent to enact a law for recovery of luxury tax. Both these conditions are satisfied. [706-FG] (6)(a) Where the State legislature can make valid law it can provide not only for the prospective operation of the material provisions of the law but can also provide for the retrospective operation of the provisions. [706-G]

(b) In judging the reasonableness of the retrospective operation of law for the purpose of Article 304(b ), the test of length of time covered by the retrospective operation could not by itself be treated as decisive. [706H, 707A]

(c) It is not correct to say that the legislation should be held to be invalid because its retrospective operation might operate harshly in some cases. [707A] <CITATION>  1 S.C.R. 897 and <NAME>, Proprietor, Epari Chinna Moorthy & Sons. <CITATION>  7 S.C.R. 185 applied.

(d) If a provision regarding the levy of luxury tax is within the competence of the State legislature, the said legislature would be well within its competence to enact a law for recovery of an amount which though already refunded to a party, partakes of the nature of a luxury tax in the light of that law. [707-C] & CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1689- 1690 and 1692-1705 of 1972.

From the Judgment and order dated the 15th October, 1970 of <ORG> at Ernakulam in O.P. Nos. 934 and 944 and W.A.

Nos. 15, 17, 18, 20, 22, 24, 27, 31, 32, 51-55 of 1965 and W.A. No. 170 of 1965 respectively.

<NAME>, <NAME> and <NAME> for the Appellants in C.As. Nos. 1689, 1962 and in C.As. 1694 to 1705 of 1972 <NAME> and <NAME> for the appellants in C.As. Nos. 1690 and 1693.

<NAME> and <NAME> for Respondents in all the appeals.

The Judgment of the Court was delivered by <NAME>, J. Whether the provisions of the Luxury Tax on Tobacco (Validation) Act, 1964 (Act 9 of 1964) (hereinafter referred to as the Act) enacted by <ORG> are void on the grounds that (1) <ORG> lacked the legislative competence to enac that Act, and (2) the provisions of the Act contravened article 301 of the Constitution and were not protected by article 304 is the main question which arises for determination in these 16 civil appeals Nos. 1689, 1690 and 1692 to 1705 filed on certificate against the judgment of <ORG>. A Division Bench of <ORG> has up held the validity of the Act.

We may set out the chequered history giving rise to civil appeals 1689 and 1692. Learned counsel for the parties are agreed that it is not necessary to set out the facts of the other cases and that the decision in the above two appeals would also govern those other cases. The appellants were dealers in tobacco and tobacco preparations in Mattancherry in erstwhile Cochin State. In 1909 Cochin Tobacco Act (Act 7 of 1084 M.E.) was enacted by the Maharaja of Cochin. Section 4 p of that Act prohibited the transport, import or export, sale and cultivation of tobacco, except as permitted by the Act and the rules framed thereunder. In pursuance of the power given by that Act the Diwan of Cochin made rules relating to matters specified in the Act. Under the rules it became necessary to obtain a licence for cultivation of tobacco plant. Drying, curing, manufacturing and the storing of tobacco cultivated in the State was to be done under the supervision of an <ORG> officer in licenced manufacturing yards and store houses. The system which was in force for the collection of tobacco revenue up to August 1950 was to auction what were called A class and class shops. In addition, there were class shops, the licence for which was granted either on the recommendation of or in consultation with class licensees. A somewhat similar law was in operation in the erstwhile Travancore State. On April 1, 1950 after the Constitution had come in force and Travancore-Cochin had become a Part State Finance Act (No. 25 of 1950) extended the Central <ORG>s and Salt Act (No. 1 of 1944) to Part State of Travancore-Cochin by section 11 thereof. Section p 13 (2) of the Finance Act provided that "if immediately before the 1st lay of April 1950, there is in force in any State other than Jammu and Kashmir a law corresponding to, but other than, an Act referred to in r sub-sections (1) or (2) of section 11 , such law is hereby repealed with effect from the said date. . . ". In consequence of this provision in 3-L 159SCI/176  Finance Act , 1950, the rules which were in force on April 1, 1950 were changed in the Cochin area by notification dated August 3, 1950 and the system of auction sales of A class and class shops was done away with and instead graded licence fees were introduced for various classes of licensees, including class licensees. Similar change was made for the Travancore area. Notification dated January 25, 1951 was issued in this context. A class licensees under the new rules were called stockists, class licensees were wholesale sellers and class licensees were retailers. A class licensees were to pay a specified minimum fee for a fixed maximum quantity of tobacco and tobacco goods possessed by them and an additional fee for an additional quantity. The fee was to be levied only in respect of the tobacco imported into the State <ORG> collected licence fee from the appellants for the period from August 17, 1950 to December 31, 1957. In 1956 the appellants, who were A class licensees, filed writ petitions in <ORG> for refund of the licence fee collected from them on the ground that the Cochin and Travancore Tobacco Acts stood repealed by the Finance Act of 1950 because of the extension of the Central <ORG>s and Salt Act to Part State of Travancore-Cochin. The petitions were opposed on behalf of the State and it was contended that the Cochin Act or the similar Travancore Act did not stand repealed from April 1, 1950. It was urged that the State was competent to frame new rules under the Cochin Tobacco Act and the corresponding Travancore Act. It was further stated that the tax in question could be validly levied under entry 60 or 62 of List II of the Seventh Schedule to the Constitution. <ORG> dismissed the petitions holding that the laws under which the new rules were framed were in force and were valid under entry 62 of List II of the Seventh Schedule. The 13: appellants then came up in appeal to this Court. It was held by this Court in its judgment dated January 24, 1962 reported in (1962) Supp. 2 SCR 741 that the Cochin Tobacco Act of 1084 and the rules framed thereunder as also similar provisions in Travancore, requiring licences to be taken out for storage and sale of tobacco and for payment of licence fee in respect thereof were law corresponding to the provisions of the Central <ORG>s and Salt Act , 1944 and hence stood repealed on April 1, 1950 by virtue of section 13(2) of the Finance Act, 1950. It was further held that as the parent Acts, namely, the Cochin Tobacco Act and corresponding Travancore Act had stood repealed, the new rules framed in August 1950 and January 1951 under those Acts for the respective areas of Cochin and Travancore for the issue of licences and payment of fee therefore for storage of tobacco were invalid ab initio.

After the above decision of this Court the appellants made a demand to the respondent-State that the amounts of Rs. 1,14,750 collected by the State from them by way of licence fee under the invalid rules might be refunded to them. The respondent-State refunded. 73,500 to the appellants on April 29, 1963. On July 10, 1963 the appellants filed original petition No. 1268 of 1963 in <ORG> for issue of a writ to the respondent State to pay the balance amount of Rs 41.250 which along with interest came to Rs. 52,800 to the appellants. During the pendency of the above petition on December 16, 1963 the Governor of Kerala promulgated ordinance No. 1 of 1963 which was later replaced by Kerala Luxury Tax on Tobacco (Validation) Act of 1964 (Act of 1964). This Act received the assent of the President on March 3, 1964. Original petition No. 1268 of 1963 was thereupon amended with a view to challenge the validity of the above mentioned Act. In the meanwhile, on January 21, 1964 demand was made in view of the ordinance by <ORG> calling upon the appellants to pay the amount of Rs. 73,500 which had been refunded to them by <ORG>. Original petition No. 934 of 1964 was filed by the appellants in <ORG> to challenge the validity of demand notice dated January 21, 1964 as also the vires of the Act.

At this stage it may be appropriate to refer to the relevant provisions of the Act. The preamble of the Act reads as under:

"PREAMBLE: WHEREAS it is expedient to provide for the levy of a luxury tax on tobacco for the period beginning with the 17th day of August, 1950 and ending on the 31st day of December 1957, and the validation of the levy and collection of fees for licences for the vend and stocking of tobacco for the aforesaid period: BE it enacted in the Fifteenth Year of the Republic of India as follows:-"

Section 2(ii) of the Act defines tobacco to include leaf of the tobacco plant, snuff, cigars, cigarettes, beedies, beedi tobacco, tobacco powder and other preparations or admixtures of tobacco. Section 3 is the charging section and provides that "for the period beginning with the 17th day of August 1950 and ending on the 31st day of December, 1957, every person vending or stocking tobacco within any area to which this Act extends shall be liable and shall be deemed always to have been liable to pay a luxury tax on such tobacco in the form of a fee for licence for the vend and stocking of the tobacco, at such rates as may be prescribed, not exceeding the rates specified in the Schedule". Section 4(1) of the Act gives power to <ORG> to make rules by publication in the gazette to carry out the purposes of the Act. According to sub-section (3) of section 4 of the Act, 'the rules and notifications specified below purported to have been issued under the Tobacco Act of 1087 (Travancor Act 1 of 1087) or the Cochin Tobacco Act, VII of 1084, as the case may be, in so far as they relate or purport to relate to the levy and collection of fees for licences for the vend and stocking of tobacco, shall be deemed to be rules issued under this section and shall be deemed to have been in force at all material times." Along the rules and notifications specified in subsection (3) of section 4 are rules published on August 3, 1950 and January 25, 1951. Sections 5 and 6 read as under:

"5. Validation-Notwithstanding any judgment, decree or order of any court, all fees for licences for the vend or stocking of tobacco levied or collected or purported to have been levied or collected under any of the rules or notifications specified in sub-section (3) or s. 4 for the period beginning with the 17th day of August, 1950 and ending on the 31st day of December, 1957, shall be deemed to have been validly levied or collected in accordance with law as if this Act were in force on and from the 17th day of August, 1950 and the fees for licences were a luxury tax on tobacco levied under the provisions of this Act, and accordingly,-

(a) no suit or other proceeding shall be maintained or continued in any court for the refund of any fees paid or purported to have been paid under any of the said rules or notifications; and

(b) no court small enforce a decree or order directing the refund of any fees paid or purported to have been paid under any of the said rules or notifications.

6. Recovery of licence fees refunded- Where any amount paid or purported to have been paid as a fee for licence under any of the rules or notifications specified in sub-section (3) of s. 4 has been refunded after the 24th day of January, 1962, and such amount would not have been liable to be refunded if this Act had been in force on date of the refund, the person to whom the refund was made shall pay the amount so refunded to the credit of the <ORG> in any <ORG> treasury on or before the 16th day of April, 1964, and, where such amount is not so paid, the amount may be recovered from him as an arrear of land revenue under the Revenue Recovery Act for the time being in force."

According to the appellants, the label given to the tax imposed by the charging section was only a cloak to disguise its real nature of being an excise duty. <ORG>, as such, was stated to be in competent to levey excise duty on tobacco. It was also stated that the provisions of the Act were violative of the provisions of article 301 of the Constitution. In the meanwhile, a single Judge of <ORG> dismissed on July 20, 1964 original petition No. 1268 of 1963 which had been filed by the appellants. The appellants thereupon filed appeal before <ORG> of <ORG> against the judgment of the learned single Judge. The learned Judges of <ORG> allowed original petition No. 963 of 1964 and quashed demand notice dated January 21 1964 issued by the <ORG> asking for refund of Rs.73,500. <ORG> relied upon a decision of this Court in the case of <ORG> v. state of Orissa(1) and held that in the absence of any production or manufacture of tobacco inside the appellant- <ORG> it was not competent for the <ORG> Legislature to impose a take on tobacco imported from outside the <ORG>. The provisions of Act 9 of 1964 were held to violate article 301 of the Constitution and not protected by article 304. The learned Judges also set aside the judgment (1)  1 S.C.R. 865.

Of the single Judge and allowed the appeals against that judgment in original petition No. 1268 of 1963.

The State of Kerala thereafter came up in appeal to this <ORG>. As per judgment dated July 30, 1969 reported in (1970)1 SCR 700 this <ORG> held that <ORG> had not correctly appreciated the import of the decision in Kalyani Stores (supra). It was held that only such restrictions or impediments which directly and immediately impeded the free flow of trade, commerce and intercourse fell within the prohibition imposed by article 301. This <ORG> further observed that unless <ORG> first came to the finding whether or not there was the infringement of the guarantee under article 301 of the Constitution, the further question as to whether the statute was saved under article 304 (b) did not arise. The case was accordingly sent back to <ORG> with the direction to take further affidavits in the matter. The <ORG> left it open to the parties to argue as to whether the levy in question was in substance a duty of excise and as such whether it was not competent for <ORG> to enact the provisions in question.

After remand affidavits were filed on behalf of the appellants and the respondent-State. The learned Judges of <ORG> as per judgment under appeal gave the following findings:

"(1) The levy being in respect of goods produced out side the State, it cannot be, and is not, an excise duty falling within entry 84 of the Union List. (2) The tax is on tobacco, an article of luxury, consumed within the taxing territory, levied on the occasion of its stocking and vending by the importers into the taxing territory. It clearly answers the description of luxury tax falling within entry 62 of the State List.

(3) There being no competing internal goods, the mere fact that the levy is only on imported goods can only have, like any other tax, the economic effect of reducing the demand by reason of increasing the price. The consequent diminution in the quantity of goods imported into the taxing territory is too remote an effect to be a direct impediment to the free flow of trade offending article 301 of the constitution. (4) However, the payment of the tax in the shape of a licence fee being a condition precedent to bringing the goods into the taxing territory, there would appear to be a direct impediment on the free flow of goods and therefore of trade into that territory notwithstanding that the taxable event is not the movement of the goods but the stocking after completing their journey and reaching their destination, the levy in advance being only for convenience of collection. (5) Even assuming that the levy offends article 301 , it is saved by article 304(b) being a reasonable tax levied in the public interest, the condition in the proviso thereto being satisfied by the assent of the President in view of article 255.

(6) The guarantee in article 301 and the saving in article 304(b) being in respect of both inter-<ORG> and inter <ORG> trade, the fact that the taxing territory is only a part of the <ORG> is of no consequence."

On behalf of the appellants, their learned counsel Mr. <NAME> has at the outset contended that the question as to whether the levy of the licence fee upon the appellants constitutes excise duty is concluded by the decision of this Court of January 24, 1962 and the same operates as res judicata. As against that, Mr. <NAME> on behalf of the respondent-State submits that the question decided by this Court on January 24, 1962 was different from that which arises in these appeals and that the said decision does not operate as res judicata. The above submission of Mr. <NAME>, in our opinion, is wellfounded. What was decided by this Court in its judgment dated January 24, 1962 was that the Cochin Tobacco Act r and the similar Travancore Act taken along with the rules framed under those Acts by the respective <ORG> were in substance law corresponding to the Central Excises and Salt Act . The Cochin Tobacco Act and the similar Travancore Act, it was further held, stood repealed on April 1, 1950 by virtue of section 13(2) of the Finance Act, 1950. So far as the rules are concerned which were issued on August 3, 1950 and January 25, 1951, this Court held that as the parent Acts under which those rules were issued stood repealed on April 1, 1950, there would be no power in the State Government thereafter to frame new rules in August 1950 and January 1951 for there would be no law to support the new rules. The above question does not arise for determination in these appeals before us. What we are concerned with is the constitutional validity of the Kerala Act 9 of 1964. This Act was enacted subsequent to the above decision of this Court rendered on January 24, 1962. No question relating to the validity of the above mentioned Act in the very nature of things could arise at the time of the earlier decision in 1962. We, therefore, are of the view that the judgment dated January 24, 1962 of this Court does not operate as res judicate regarding the points of controversy with which we are concerned in these appeals.

It has next been argued on behalf of the appellants that the levy for the licence fee for stocking and vending of tobacco, even though described as luxury tax in charging section 3 of the Act, is in reality and substance an excise duty on tobacco. Excise duty on tobacco under entry 84 of List I of the Seventh Schedule to the Constitution can only be levied by <ORG> and, as such, according to the learned counsel for the appellants, <ORG> was not competent to enact the impugned Act 9 of 1964. This; contention. in our opinion, is equally devoid of force. Excise duty, it is now well-settled, is a tax on articles produced or manufactured in the taxing country. Generally speaking, the tax is on the manufacturer or the producer, yet laws are to be found which impose a duty of excise at stages subsequent to the manufacture or production [see p. 750-51 of the judgment of this Court delivered on January 24, 1962 in the case between these very parties, reported in (1962) Supp. 2 SCR 741].

The fact that the levy of excise duty is in the form of licence fee would not detract from the fact that the levy relates to excise duty. It is, however, essential that such levy should be linked with production or manufacture of the excisable article. The recovery of licence fee in such an event would be one of the modes of levy of the excise duty. Where, however, the levy imposed or tax has no nexus with the manufacture or production of an article, the impost or tax cannot be regarded to be one in the nature of excise duty.

In the light of what has been stated above, we may now turn to the provisions of the impugned Act 9 of 1964. The charging section 3 of this Act creates a liability for payment of luxury tax on the stocking and vending of tobacco. There is no provision of this Act which is concerned with production or manufacture of tobacco or which links the tax under its provisions with the manufacture or production of tobacco. The same is the position of the rules issued on August 3, 1950 and January 25, 1951 and Mr. <NAME> on behalf of the appellants has frankly conceded that those rules are in no way concerned with the production or manufacture of tobacco. It would, therefore follow that the levy of tax contemplated by the provisions of section 3 of the Act has nothing to do with the manufacture or production of tobacco and, as such, cannot be deemed to be in the nature of excise duty. Argument that the provisions of the Act fall under entry 84 of List I of the Seventh Schedule to the Constitution must, therefore, be held to be bereft of force.

The next argument which has been advanced on behalf of the appellants is that the tax on the vending and stocking of tobacco cannot be considered to be luxury tax, as contemplated by entry 62 of List II of the Seventh Schedule to the Constitution. According to that entry, <ORG> can make laws in respect of "taxes on luxuries, including taxes on entertainments, amusements, betting and gambling". Question, therefore, arises as to whether tobacco can be considered to be an article of luxury. The word "luxury" in the above context has not been used in the sense of something pertaining to the exclusive preserve of the rich. The fact that the use of an article is popular among the poor sections of the population would not detract from its description or nature of being an article of luxury. The connotation of the word "luxury" is something which conduces enjoyment over and above the necessaries of life. It denotes something which is superfluous and not indispensable and to which we take with a view to enjoy, amuse or entertain ourselves. An expenditure on something which is in excess of what is required for economic and personal well-being would be expenditure on Luxury although the expenditure may be of a nature which is incurred by a large number of people, including those not economically well off. According to <ORG>, luxury tax is "a tax on commodities or services that are considered to be luxuries rather than necessities. Modern examples are taxes levied on the purchase of jewellery, perfume and tobacco". It has further been n said:

"In the 19th and 20th centuries increased taxes have been placed on private expenditure upon alcohol, tobacco, entertainment and automobiles. Such expenditure is superfluous in the sense that a large part of it may be said to be in excess of what is required for economic efficiency and personal well- being, although the expenditure affects large numbers of people."

In Re The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938(1) <ORG> while dealing with excise duty described spirits, beer and tobacco as articles of luxuries.

It is no doubt true that for those who have been lured by the charms and blandishments of Lady Nicotine there are few things which are so soothing to the distraught nerves and so entertaining as tobacco and its manifold preparations. One of them has gone to the extent of saying that he who doth not smoke hath either known no great griefs, or refuseth himself the softest consolation, next to that which comes from heaven (<ORG> He do with It ?). <NAME> in "A Farewell to Tobacco" observes: "For thy sake, tobacco, I would do anything but die". The fact all the same remains that the use of tobacco has been found to have deleterious effect upon health and a tax on tobacco has been recognized as a tax in the nature of a luxury tax. One of the earliest indictments of tobacco is in <NAME> Anatomy of Melancholy wherein he says:

"It's a plague, a mischief, a violent purger of goods, lands, health, hellish, devilish, and damned tobacco, the ruin and overthrow of body and soul."

Another indictment is from <NAME> of England (Counterblaste to Tobacco) when it is said:

"A custom (smoking) loathsome to the eye, harmful to the brain, dangerous to the lungs, and in the black stinking fume thereof, nearest resembling the horrible Stygian smoke of the pit that is bottomless."

The taxation of the objects or procedures of luxurious consumption has aimed at two purposes, on the surface contradictory: the suppressing or limiting of this consumption and the deriving of a public (1) [1939] F. C. R. 18.

income from it. On closer inspection a good deal of this contradiction vanishes when it is seen that prohibition and taxation of luxury tend equally to fix certain levels and standards of living, as against economic and social progress, which is tending to "level" such differences (see page 634 of the Encyclopaedia of the Social Sciences Volumes IX-X, 14th Printing).

It may be added that there is nothing static about what constitutes an article of luxury. The Luxuries of yesterday can well become the necessities of today. Likewise, what constitutes necessity for citizens of one country or for those living in a particular climate may well be looked upon as an item of luxury for the nationals of another country or for those living in a different climate. A number of factors may have to be taken into account in adjudging a commodity as an article of luxury. Any difficulty which may arise-in borderline case would not be faced when we are dealing with an article like tobacco, which has been recognised to be an article of luxury and is harmful to health.

The learned Judges of <ORG> were of the opinion that the levy of tax in question was violative of article 301 of the constitution, according to which subject to the provisions of Part XIII, trade, commerce and intercourse throughout the territory of India shall be free. The learned Judges in this connection took the view that the levy of tax as a condition preceding to the entry of goods into a place directly impeded the flow of trade to that place. The conclusion arrived at by <ORG> in this respect, in our opinion, was correct and sound. The appellants were A class licensees. According to rule 16 of the rules issued on January 25, 1951, A class licensees shall be entitled to purchase tobacco from any dealer within or without the <ORG> without any quantitative restriction. This class of licensees could sell only to other A class licensees or class licensees. It was also mentioned in that rule that the licence fee would be realised only for the quantities brought in from outside. Perusal of the rules shows that it was imperative for the A class licensees to pay the licence fee in advance before they could bring tobacco within the taxable territory. We agree with the learned Judges of <ORG> that such levy directly impedes the free flow of trade and as such is violative of article 301 of the Constitution.

The next question which arises for consideration is whether the levy of tax is protected by article 304(b) of the Constitution. Article 3041b ) reads as under `"304. Notwithstanding anything in article 301 or article 303 , the Legislature of a State may by law-

(a) .... .... ....

(b) impose such reasonable restrictions on the freedom of trade. commerce or intercourse with or within that State as may be required in the public interest;

Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the <ORG> of a State without the previous sanction of the President."

We may observe that the requirement of the proviso regarding the sanction of the President has been satisfied. It is no doubt true that the assent of the President was given subsequent to the passing of the Bill by the legislature but that fact would not affect the validity of the impugned Act in view of the provisions of article 255 of the Constitution.

Clause (b) of article 304 empowers the <ORG> of a State notwithstanding anything in article 301 or article 303 but subject to the sanction of the President to impose reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest. Article 302 confers power upon <ORG> to impose by law such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest. Perusal of article 302 and article 304 shows that while <ORG> can impose restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest, so far as the State <ORG>s are concerned, restrictions must satisfy two requirements, firstly, they must be in the public interest and, secondly the restrictions should be reasonable. Shall <NAME> speaking for the majority of <ORG> in the case of <CITATION> (1) observed that the exercise of the power to tax may normally be presumed to be in the public interest. The above observations though made in the context of article 302 have equal relevance under article 304. Not much argument is needed to show that the power to tax is essential for the maintenance of any governmental system. Taxes are levied usually for the obvious purpose of raising revenue. Taxation is also resorted to as a form of regulation. In the words of Justice <NAME>, "every tax is in some measure regulatory" <NAME> v. <ORG>. According to <NAME>, the taxing power "becomes an instrument available to government for accomplishing objectives other than raising revenues" [The Federal Taxing Process, page 410 (Quoted on page 263 of American Constitutional Law by <NAME> and <NAME>, 3rd Ed.]. To some extent every tax imposes an economic impediment to the activity taxed as compared with others not taxed, but that fact by itself would not make it unreasonable. It is well-settled that when power is conferred upon the legislature to levy tax, that power must be widely construed; it must include the power to impose a tax and select the articles or commodities for the exercise of such power; it must likewise include the power to fix the rate and prescribe the machinery for the recovery of tax. This power also gives jurisdiction to the legislature to make such provisions as, in its (1)  3 S.C.R. 829. (2) 300 US 506 (1937) Opinion, would be necessary to prevent the evasion of the tax. As observed by Chief Justice <NAME> in <NAME> v. Maryland (1), "the power of taxing the people and their property is essential to the very existence of Government, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the Government may choose to carry it". There can also be no doubt that the law of taxation in the ultimate analysis is the result of the balancing of several complex considerations. The legislatures have a wide discretion in the matter.

In considering the question as to whether the restriction is reasonable in public interest, the court will have to balance the importance of freedom of trade as against the requirement of public interest. Article 304(b) necessarily postulates that considerations of public interest may require and justify the imposition of restrictions C` on the freedom of trade provided they are reasonable. In determining the reasonableness of the restriction, we shall have to bear in mind the importance of freedom of trade and the requirement of public interest. It is a question of weighing one relevant consideration against another in the context of the larger public interest [see <CITATION> (2)].

We agree with Mr. <NAME> that the onus of showing that the restrictions on the freedom of trade, commerce or intercourse in the public interest are reasonable, is upon the <ORG>. It is also true that no effort was made in the affidavit filed on behalf of the <ORG> in this case to show as to how the restrictions were reasonable, but that fact would not necessarily lead the court to hold that the restrictions are unreasonable. If the court on consideration of the totality of facts finds that the restrictions are reasonable, the court would uphold the same in spite of lack of details in the affidavit filed on behalf of the <ORG>. In judging the question of reasonableness of restriction in the present case, we must bear in mind that the levy of luxury tax relates to tobacco, the consumption of which involves health hazard. Regulation of the sale and stocking of an article like tobacco which has a health hazard and is considered to be an article of luxury by imposing a licence fee for the same, in our opinion, is a permissible restriction in public interest within article 304(b) of the Constitution. The material on record shows that except for cultivation of tobacco on experimental basis, no tobacco is grown in the area with which we are concerned. The levy of luxury tax is bound to result in raising the price of tobacco in the area of erstwhile <ORG>s of Travancore and Cochin. Once of the likely effects of the enhancement of the price of a commodity entailing health hazards is to lower its consumption.

The fact that there is no commercial production of tobacco in the area with which we are concerned would show that there is no discrimination between tobacco brought from outside that area and the locally grown tobacco because in fact there is no tobacco of the latter category, except that grown on experimental basis.

4 Ed.579, 607. (2) [1964] 5 S.C.R.9 75.

Argument has been advanced on behalf of the appellants that the provisions of the Act do not apply to the entire State of Kerala but apply only to those areas which were parts of erstwhile States of Travancore and Cochin. The restriction of the operation of the Act to only a part of the area of the State would show, it is urged, that the restriction is unreasonable. This contention, in our opinion, is not well founded. The fact that the operation of the Act is confined to a particular area and does not extend to the entire State is due to historical reasons. The object of the Act was to validate the recoveries already made. In the case of <ORG> etc. v. <ORG> & Anr.(1), the appellants, who were motor transport operators, challenged the increase in surcharge of the fares and freights imposed by the Andhra Pradesh Motor Vehicles (Taxation of Passengers and Goods) Amendment and Validation S Act, 1961. It was urged that the Act fell within the mischief of article 301 of the Constitution and was not protected by article 304(b) and article 19(1)(f) of the Constitution. Contention was also advanced that the provisions of the said Act were violative of article 14 of the Constitution. In support of the above contentions, reference was made to the fact that the Act had been made applicable to the Andhra area and had not been made applicable to the Telengana area. Some other grounds were also relied upon to challenge the validity of the Act. This Court upheld the validity of the Act and repelled the contentions. No doubt this Court referred to the circumstance that the levy of tax was confined only to the Andhra area and was not operative in the Telengana area in the context of the argument that the Act was violative of article 14 of the Constitution, the fact all the same remains that one of the grounds advanced with a view to assail the validity of the Act was that its provisions were not applicable to the Telengana area. We are unable to accede to the submission that this Court lost sight of the fact that the Act was not applicable to the Telengana area in holding that its provisions were protected by article 304(b) of the Constitution.

It is also true that the levy of tax relates only to the period from August 17, 1950 to December 31, 1957, but that too was due to the historical reason that the licence fee had been realised only during that period and the object of the impugned Act was to validate the recovery already made.

Argument has also been advanced by Mr. <NAME> that the impugned Act is a colourable piece of legislation because what is sought to be done is to validate the levy made under provisions of law which were found to have been repealed. It is further pointed out that those provisions of law were found by this Court to be similar to the provisions of the Central Execises and Salt Act and as such, those provisions were beyond the competence of <ORG>. Any levy made under those provisions cannot, according to the learned counsel, be validated by <ORG>. The above argument has a seeming plausibility, but, on deeper examination, we find it to be not tenable. It is no doubt true, as stated by (1)  2 S.C.R. 52 this Court in the case of <CITATION> ..(1) that when an Act passed by <ORG> is invalid on the ground that <ORG> did not have legislative competence to deal with the topics covered by it, in that event even <ORG> cannot validate such an Act, because the effect of such attempted validation, in substance, would be to confer legislative competence on <ORG> in regard to a field or topic which, by the relevant provisions of the schedules to the Constitution, is outside its jurisdiction. Where a topic is not included within the relevant List dealing with the legislative competence of <ORG>, <ORG>, by making a law cannot attempt to confer such legislative competence on <ORG>s. The above principle would, however, have no application where, as in the present case, what is sought to be done is to validate the recovery of licence fee for stocking and vending of tobacco. The impugned provisions under which that levy is sought to be made with a retrospective effect have nothing to do, as already pointed out above, with production and manufacture of tobacco. The levy is sought to be made as luxury tax which is within the competence of <ORG> and not as excise duty which is beyond the legislative competence of <ORG>. If the levy in question can be justified under a provision which is within the legislative competence of <ORG>, the levy shall be held to be validly imposed and cannot be considered to be impermissible.

Where a challenge to the validity of a legal enactment is made on the ground that it is a colourable piece of legislation, what has to be proved to the satisfaction of the court is that though the Act ostensibly is within the legislative competence of the legislature in question, in substance and reality it covers field which is outside its legislative competence. In the present case we find that in enacting the impugned provisions, <ORG>, as already pointed out above, has exercised a power of levying luxury tax in the shape of licence fee on the vend and stocking of tobacco. The enactment of a law for levying luxury tax is unquestionably within the legislative competence of <ORG> in view of entry 62 in List II of the Seventh Schedule to the Constitution. As such, it cannot be said that the impugned Act is a colourable piece of legislation. In the case of <ORG> access was levied under the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act , 1958 on sugarcane. This Court in the earlier case of <ORG>) had held that such a levy was not valid. Following the above decision <ORG> struck down section 23 which was the charging section of the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act , 1958. There were similar Acts in- several other States which suffered from the same infirmity and to meet that situation, <ORG> passed the Sugarcane Cess (Validation) Act , 1961. The Act made valid by section 3 all the assessments and collections made before its commencement under the various State Act s and laid down that all the provisions of the (1)  1 S.C.R 523. (2)  3 S.C.R 242.

State Act s as well as the relevant notifications, rules, etc., made under the State Act s would be treated as part of section 3 . It was further provided that the said section shall be deemed to have existed at all material times when the cess was imposed, assessed and collected under the State Act s. The appellant, a sugar factory, was asked to pay the cess for the years 1959-60 and 1960-61. The appellant challenged the levy. <ORG> having dismissed the petition, the appellant came to this Court. Among the various contentions which were advanced on behalf of the appellant in the case were: (1) What the validation of the Act had done was to attempt to cure the legislative incompetence of <ORG>s by validating State Act s which were invalid on the ground of absence of legislative competence in the respective State Legislatures; (2) <ORG> lrad passed the Act in question not for the purpose of levying a cess of its own, but for the purpose of enabling the respective States to retain the amounts which they had illegally collected. The Act was, therefore, a colourable piece of legislation; and (3) The Act had not been passed for the purposes of the Union of India and the recoveries of cesses which were retrospectively authorised by it were not likely to go into <ORG>. The <ORG> of this Court speaking through <NAME> CJ. repelled all the above contentions. It was held by this Court that if collections are made under statutory provision which are invalid because they deal with a topic outside the legislative competence of <ORG>, the <ORG> can in exercise of its undoubted legislative competence, pass a law retrospectively validating the said collections by converting their character into collections made under its own statute operating retrospectively. So far as the present case is concerned, we have already pointed out above that it was within the competence of <ORG> to make a law in respect of luxury tax and to recover that tax in the shape of licence fee for vend and stocking of tobacco. <ORG> has sought to validate the recovery of the amounts already made by treating those amounts as luxury tax. The fact that the validation of the levy entailed converting the character of the collection from an impermissible excise duty into permissible luxury tax would not render it unconstitutional. The only conditions are that the levy should be of a nature which can answer to the description of luxury tax and that <ORG> should be competent to enact a law for recovery of luxury tax. Both these conditions as stated above are satisfied.

As regards the power of the legislature to give retrospective operation to a tax legislation, we may also refer to the case of <CITATION> (1) wherein it was held that where the legislature can make a valid law, it can provide not only for the prospective operation of the material provisions of the said law but can also provide for the retrospective operation of the said provisions. The legislative power was held to include the subsidiary or the auxiliary power to validate law which had been found to be `H invalid. It was also observed that in judging the reasonableness of the retrospective operation of law for the purpose of article 304(b ), (1) [1964] 1 S.C.R 897.

The test of length of time covered by the retrospective operation could nob by itself be treated as decisive. Again, in the case of <CITATION> (1) <ORG> of this Court repelled the argument that a legislation should be held to be invalid because its retrospective operation might operate harshly in some cases.

As a result of the above, we would hold that the impugned provisions are protected by article 304(b) of the Constitution.

Lastly, it has been argued that section 6 of the impugned Act is invalid because it provides for payment of an amount which had been refunded in pursuance of the order of this Court. Section 6 is thus stated to be an encroachment by the legislature upon a judicial field. This contention, in our opinion, is bereft of force. If a provision regarding the levy of luxury tax is within the competence of <ORG>, the said <ORG> would be well within its competence to enact a law for recovery of an amount which, though already refunded to a party, partakes of the nature of luxury tax in the light of that law. If an amount can answer to the description of luxury tax, there would be no legal impediment to recovering the same as luxury tax, even though initially it was recovered or sought to be recovered as something different from luxury tax.

As a result of the above, we dismiss these appeals, but, in the circumstances, leave the parties to bear their own costs.

P.B.R Appeals dismissed. (1) [1964] 7 S.C.R. 185.


JUDGMENT <NAME>

(1) Sri <NAME>, Sri <NAME>, Sri <NAME> and Sri <NAME> have brought this appeal against the order of Sri <NAME>, Sub-Divisional Officer, Sadar and Magistrate First Class, Manipur dated 12-10-1953 sentencing the convict appellants to 6 months' rigorous imprisonment each, on each of the charges Under Sections 124A and 153A, IPC But the sentences have been ordered to run concurrently. The appellants had also been charged Under Section 120-B , IPC but they were acquitted under the aforesaid charge.

This appeal should, under the provisions of the Code of Crimnial Procedure, 1898, have been filed in <ORG>, Manipur, but as the Code of Criminal Procedure has not been enforced in Manipur under the Merged States (Laws) Act , 1949 and Part C States (Laws) Act, 1950, the provisions of Manipur State Courts' Act, 1947, are applicable where they are against the provisions of the Code of Criminal Procedure and as Under Section 15 of the Manipur State Courts' Act, 1947, which has been amended by Manipur State Courts (Amendment) Order, 1950, it has been provided that when any person is convicted by a Magistrate of an offence Under Section 124A of the Indian Penal Code, the appeal shall lie to <ORG> (now <ORG>, Manipur), the present appeal has been filed under this exception provided in Section 15 of the Manipur State Courts' Act, 1947, enabling the appellants to come to this Court instead of filing their appeal in <ORG>, Manipur.

(2) The facts of the case are practically admitted that a public meeting was organised at the Polo-ground, Imphal at 3 p.m. on Sunday 19-4-1958 and the appellants published and circulated among the Manipuri public 3 leaflets Exs. P/A, P/B and P/C and according to the prosecution these leaflets were distributed with a view to exciting disaffection towards the Government established by law in India, and also in order to promote feelings of enmity or hatred between Manipuri and non-Manipuri citizens of the Indian Republic residing in Manipur. The resolution Ex. P/T was passed in this meeting in which about 3,000 people had assembled and according to the prosecution no reasonable demands were put forward by means of this resolution and a threat of launching 'Satyagraha' movement and formation of independent buffer State in Manipur under the <ORG>, was held out if the demands mentioned in the resolution were not met within 15 days of the meeting.

The appellant No. 4 read out the written speech of the appellant No. 3 in the meeting as the latter was suffering from some throat trouble. The speeches of the appellant No. 1 were recorded in a reel and notes were taken from the speeches of the appellants by Sri <NAME> P.W. 2 vide Ex. P/F. The complaint Ex. P/G was lodged against the appellants by Sri <NAME>, Officer of <ORG>, P.W. 1 on 6-5-1953.

On 22-6-1953 the 4 appellants moved a transfer application No. 4 of 1953 in this Court, and the case was transferred from the Court of the District Magistrate, Manipur, to the Court of some other competent Magistrate on 26-6-1953 and so the former got the Sub-Divisional Officer, <NAME>, invested with powers to try cases Under Section 124A , IPC and then this case was transferred to that Court.

(3) Besides Sri <NAME> and Sri <NAME> the procesution examined <NAME> and Pandit <NAME> as the former was present in the meeting on 19-4-1953 at the Pologround, Imphal, and the latter searched the <ORG> premises on 24-4-1953 on the basis of a search warrant Ex. P/H and he recovered the speeches Exs. P/J, P/K and P/L along with the printed leaflets Exs. P/O, P/Q and P/R, vide recovery list Ex. P/S. The leaflets Exs. P/D and P/E were published by the appellants Nos. 1, 2 and 3 in the paper "<ORG>" on 17th and 19th April 1953.

(4) The appellants denied that they ever, in any way, excited or attempted to excite disaffection against the Government and they further denied that they ever promoted or attempted to promote class hatred among different classes of people residing in Manipur. The appellants produced no witness in defence, but they filed written statements Exs. D/B, D/D and D/E and the written speech of the appellant No. 2 was also filed by Ex. D/C, while the chit Ex. D/A has been produced to show that Sri <NAME> 2 could not properly write out the speeches swiftly as he writes by left hand and he wrote out the words "Action for that was taken properly" in <ORG> probably very slowly.

(5) It has been contended on behalf of the appellants that the present proceedings were void because no prosecution Under Section 124A or Section 153-A , IPC could be taken cognisance of by any Court unless a complaint with regard to these allegations had been made by an order or under authority from <ORG> or some officers empowered by <ORG> in this behalf. Section 196 , Criminal P. C, clearly lays down:

No Court shall take cognizance of any offence punishable under Chapter VI (or IX-A) of the Indian Penal Code (except Section 127 ), or punishable Under Section 108A , or Section 153A , cr Section 294A for Section 295A or Section 505 of the same Code, unless upon complaint made by order of, or under authority from <ORG> or some officer empowered by <ORG> in this behalf.

(6) The intention of the <ORG> is to ensure that no prosecution for an offence specified in Section 196 , Criminal P. C, should be lodged except on a complaint authorised by the <ORG>. Section 196 , Criminal P. C, is a disenabling section and must be construed strictly vide 'In to, Varadarajulu Naidu' AIR 1919 Mad 968 (A). The object of this section is to prevent unauthorised persons from intruding in matters of a State by instituting State prosecution and to ensure that such prosecution shall only be instituted under the authority of the <ORG> vide 'Queen Empress v. <NAME>', 22 Bom 112 at p. 125 (B).

The ruling reported in ' <CITATION> ' AIR 1922 Cal 298 (C), lays down that sanction must be signed by the Chief Secretary to the Government and order signed by the Deputy Secretary on behalf of the Chief Secretary in this connection is not legal. In the present appeal the learned Government Advocate has frankly admitted that no sanction Under Section 196 , Criminal P. C, was obtained from the Central Government, as required by law under Clause 60 of <CITATION> of the General Clauses Act, 1897, which clearly provides that as respects anything done or to be done after the commencement of the Constitution, the "State Government" shall mean in a Part C State the Central Government.

It has been held in 'Barjndra Kumaj v. Emperor', 37 Cal 467 at p. 493 (D) that absence of sanction Under Section 196 , Criminal P. C, vitiates the whole proceedings. In 'Varada Rajalu v. Emperor' AIR 1920 Mad 928 at p. 929 (SB) (E) and 'In re, Venkataramiah' AIR 1938 Mad 138 (P), it was laid down that even a subsequent sanction given for filing the complaint does not fulfill the requirements of Section 196 , Criminal P. C, as the law clearly says that it is a condition precedent to the prosecution that sanction shall be obtained from the local Government and it is not open to any subordinate authority to override the provisions of law by saying that the offence falls in any section of the Indian Penal Code and that no sanction is necessary for prosecution under that section, vide ' <CITATION> ' AIR 1925 All 230 (G).

The object of sanction Under Section 196 , Criminal P. C, is to ensure prosecution only when after due consideration, the appropriate sanctioning authority is satisfied that there is a proper case to put the party on trial, and also to save time of the criminal Court being wasted by needless prosecution without conviction, vide 'Tuck Saw v. Hain Kee', 4 Low Bur Rul 234 (H), 'In re, Parameswara Nambudri' AIR 1916 Mad 72 (I). As already pointed out above, no attempt was made in the present case to obtain sanction of the appropriate authority for launching the present prosecution and the proceedings were started by an officer of <ORG>, P. W, 1.

(7) The learned Government Advocate has urged that it was held on 19-11-1951 by this Court in 'State v. <NAME> (J)' that in Manipur obtaining of previous sanction under Section 196 , Criminal P. C, from <ORG> was not necessary and so no sanction was obtained in this case. I find trom the judgment in 'the State v. <NAME>' (Manipur) (J) that no reasons were given for this view, but it was mentioned in passing judgment that it was not necessary to obtain sanction from <ORG> Under Section 196 , Criminal P. C. It can be presumed that this order has been supported on the ground that the Code of Criminal Procedure  had not been extended to Manipur and so tile question of sanction was, therefore, to be governed by the provisions of the corresponding Jaw in force in Manipur State.

The word 'corresponding' has been given a meaning in the Universal English Dictionary by <NAME> as-, "standing in a similar relation, agreeing with, being equivalent to". <ORG>, 1947, does not lay down detailed provisions regarding procedure in criminal cases and so practically all the provisions of the Code of Criminal Procedure  are applied here in criminal cases except when there is a special provision in the <ORG>, 1947, which goes clearly against some provisions in the Code of Criminal Procedure on any particular subject. I have already pointed out above that there is only one provision in the <ORG>, 1947, in connection with the trial of cases under S; 124-A, IPC and it is with regard to the filing of appeal in <ORG> instead of in the Court of the Sessions Judge and as no special provision has been made in the <ORG> regarding sanction, it becomes clear that the provision of Section 196 , Criminal P. C, should govern cases like the present. For these reasons I respectfully disagree with the observation referred to above in 'State v. <NAME> (Manipur) (J)' by Hon. <NAME>, Judicial Commissioner.

The prosecution in this case arrested the present appellants on 24-4-1953 under the provisions of the Code of Criminal Procedure and later on the complaint Ex. P/G was filed against them on 6-5-1953. Searches were made in this case under the provisions of the Code of Criminal Procedure and In all these stages of the case provisions of the Code of Criminal Procedure have been followed. Once the prosecution elected to follow provisions of the Code of Criminal Procedure even though this Code was not extended to Manipur and it exercised all the powers which were conferred on various officers by the Code , it seems very unjust to allow the prosecution to urge that any particular provision which was meant to safeguard the legitimate rights and interests of the accused, could be circumvented simply because special provisions of the Manipur State <ORG>' Act would be applicable where such provisions were at variance with the provisions of the Code of Criminal Procedure, The law of sanction though it forms part of procedure, in reality contains the provision of substantive law and crimes, vide ' <CITATION> ' AIR 1927 Sind 10 at pp. 15, 16 (K), and so I think the contention put forward by the prosecution that the prosecution was not bound to obtain sanction in the present case, because no provision for obtaining sanction is to be found in the Manipur State <ORG>, Act, 1947, cannot be accepted, as by not obtaining sanction under 8. 196, Criminal P. C, the appellants were seriously prejudiced, as their case was not examined by the appropriate sanctioning authority and it was not held to be a fit case for being sent to any Court for trial. The result must be unfortunate for the-prosecution, but it is essential that the rules of procedure designed to secure to ensure justice should be scrupulously followed and all <ORG> should be jealous in seeing that there is no breach. of them. I am, therefore, clearly of opinion that the present appeal should succeed on the ground that no sanction was obtained Under Section 196 , Criminal P. C, before the launching of the present prosecution.

(8) The next contention put forward by the-learned Counsel for the appellants is that the prosecution Under Section 124A is void and ultra vires. as being repugnant to Article 19(1) of the Constitution and they are not saved by Clause (2) of Article 19.  Section 124-A runs as follows:

Whoever by words, either spoken or written, or by signs, or by visible representation, or otherwise, brings or attempts to bring into hatred or contempt, or excites or attempts to excite disaffection towards Government established by law in British India, shall be punished with transportation for life or any shorter term, to which fine may be added, or with imprisonment which may extend to 3 years, to which fine may be added, or with fine."

Explanation (1): The expression 'disaffection" includes disloyalty and all feelings of enmity.

Explanation (2): Comments expressing disapprobation of the measures of the <ORG> with a view to obtain their alteration by lawful means, without exciting or attempting to excite hatred, contempt or disaffection, do not constitute an offence under this section.

Explanation (3): Comments expressing disapprobation of the administrative or, other action of the Government without exciting or attempting to excite hatred, contempt or disaffection, do not constitute an offence under this section.

(9) Sedition thus embraces all those practices whether by word, deed or writing which are calculated to disturb the tranquillity of State and lead ignorant persons to endeavour to subvert the Government and the laws of the country. In '22 Bom 112 (B)', it was pointed out that an offence of sedition consisted in exciting or attempting to excite in others certain bad feelings towards the Government & not exciting or attempting to excite mutiny or rebellion or any sort of actual disturbance great or small. Similarly in ' <CITATION> ' AIR 1918 PC 31 (L), it was held that Section 4 of the Indian Press Act, 1910, was similar in language to Section 124A , IPC which had been subject to careful consideration in '<NAME>'s case (B)'.

In 'Wallace-Johnson v. King', 1940 AC 231 (M) "seditious intention" was defined as an inten- tion "to bring into hatred or excite disaffection against...<ORG> as by law established". <ORG> in ' <CITATION> ' AIR 1942 FC 22 (N) held that in order to constitute seditious acts, words complained of must either incite to disorder or must be such as to satisfy a reasonable man that those were the intentions or tendency.

Section 124-A , Penal Code , thus clearly shows that sedition does not necessarily involve any crea-ition of disorder. <ORG> overruled the decision in '<NAME>'s case (N) in ' <CITATION> ' AIR 1947 PC 82 (O) and it was held that the law laid down in '<NAME>'s case (B)' relating sedition was good law; vide also ' <CITATION> ' AIR 1S40 Cal 244 (PB) (Sic); ' <CITATION> ' AIR 1936 Cal 524 (P & Q).

(10) It is now to be seen whether Article 19(a) of the Constitution renders Section 124A , Penal Code , void on account of its being inconsistent with the aforesaid provisions of the Constitution. Article 19 of the Constitution runs as follows:

19(1) All citizens shall have the right

(a) to freedom of speech and expression;

(b) to assemble peaceably and without arms;

(c) to form associations or unions;

(d) to move freely throughout the territory of India;

(e) to reside and settle in any part of the territory of India;

(f) to acquire, hold and dispose of property; and ;

(g) to practice any profession or to carry on any occupation, trade or business.

(2) Nothing in Sub-clause (a) of Clause (1) shall affect the operation of any existing law, or prevent the <ORG> from making any law, in so far as such law imposes reasonable restrictions on the exercise of the right conferred by the said sub-clause in the interest of the security of the <ORG>, friendly relations with foreign <ORG>s, public order, decency or morality, or in relation to contempt of Court, defamation or incitement to an offence....

(11) The present Clause (2) is substituted by Constitution (First Amendment) Act of 1951, Section 3(1) (a). The said clause is to be deemed always to have been enacted in the form given above and therefore its substitution the clause was as follows:

(2) Nothing in Sub-clause (a) of Clause (1) shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to libel, as well as defamation, contempt of <ORG> or any matter which offends against decency or morality or to undermine security or tends to overthrow the State.

(12) It has been held in ' <CITATION> ' AIR 1951 Punj 27 (R) that Section 124A , Penal Code , has become void as contravening the right of freedom of speech and expression guaranteed by Article 19(a) of the Constitution. The section is not saved by Article 19(2) as the limitation placed by Article 19(2) interferes with freedom of speech, which is a real & substantial right in a democracy. The offence Under Section 124A consists in exciting or attempting to excite in others certain bad feelings 'towards the Government and in some instances at least the unsuccessful attempt to excite, will not| undermine or attempt to overthrow the State.

(13) <CITATION> ' AIR 1950 EC 124 (S), it was also held that the Constitution in formulating varying criteria for permissible legislation imposing restrictions on the fundamental rights enumerated in Article 19(1) has placed in a distinct category those offences against public order, which aim at undermining the security of the <ORG> or overthrowing it, and made their prevention the sole justification for legislative abridgment of freedom of speech and expression. Thus, nothing less than endangering the foundation of the <ORG> or threatening its overthrow could justify curtailment of the rights of freedom of speech and expression. It has further been held that the deletion of the word sedition from the draft Article 13(2 ), before the Article was passed as Article 19(2) shows that criticism of Government exciting disaffection or bad feelings towards it is not to be regarded as a justifying ground for restricting freedom of expression and of the press unless it is such as to undermine the security or tend to overthrow the <ORG>.

(14) <CITATION> ' , which was a case under the East Bengal Public Safety Act, 1949, it was laid down that the imposition of precensorship on the journal the "Organiser" of Delhi was undoubtedly a restriction on the liberty of the press which is essential part of the right to freedom of speech and expression declared by Article 19(1)(a) and for reasons indicated in the <ORG> judgment in ' <CITATION> )', such a restriction fell outside the reservation of Article 19(2) and as such was void.

(15) These rulings no doubt support the contention of the present appellants, but as has already been stated above, Article 19 of the Constitution was amended in 1951 and the amended clause is to be deemed always to be enacted in the form in which it now is. It is, therefore, to be seen very carefully whether Section 124A , Penal Code , is void under the amended Clause (2) of Article 19 of the Constitution. In the former Clause (2) the <ORG> could make any law relating to any matter which undermines the security or tends to overthrow the <ORG>. But under the amended para. 2 the <ORG> can make any law imposing reasonable restriction on the exercise of right conferred by Clause (1), Sub-clause (a) of Article 19 of the Constitution "in the interest of the security of the <ORG>, public order, incitement to an offence...".

(16) The words used in the amendment are no; doubt wider in scope, but it will have to be seen whether Section 124A , Penal Code , would be operative and binding in view of the amendment. It is for the State to show how the provisions of Section 124A , Penal Code , are reasonable and otherwise satisfy the conditions which would make it valid under Clause (2) of Article 19 of the Constitution; vide ' <CITATION> ' .

(17) Under Clause (2) of Article 19 of the Constitution reasonable restriction may be imposed by law in the interest of the security of the <ORG>, friendly relation with foreign <ORG>s, public order, decency or morality or in relation to contempt of Court defamation or incitement to an offence. Unless the restriction is for one of the purposes mentioned in the clause and is also reasonable, it would be ultra vires.

(18) A careful perusal of Article 19(2) of the Constitution makes it clear that reasonable restriction on freedom of speech and expression can be imposed in the interest of the security of the State and so it is to be considered whether if by mere spoken or written words or signs or visible representation or otherwise disaffection towards the Government is brought about or attempted to be brought about, any restriction can be placed under Clause (2) of Article 19 of the Constitution. The question would come to this whether any attempt to excite disaffection would amount to working against the interest of the security of the State. Even though "Public order" has been added it can hardly be expected that mere criticism of Government without inciting to any offence would be punishable in the interest of "Public order".

<CITATION> )', it was held that mere criticism or even ridicule of the Government is no offence unless it is calculated "to undermine respect for the Government In such a way as to make people to cease to obey it and obey the law, so that anarchy can follow...

Public order or the reasonable consequence of likelihood of public disorder, was held to be the gist of the offence. I am, therefore of opinion that the restriction of the right of freedom and expression of speech in so far as a speech merely tends to excite disaffection towards the Government would not be reasonable and to this extent Section 124A , Penal Code , must be held to be ultra vires and inoperative as being repugnant to Article 19(1) (a) and (2) of the Constitution.

But so far as the question of imposing restriction on speeches or other representations which tend to bring the <ORG> into hatred or contempt as distinct from mere criticism or even ridicule the position appears to be different. Even honest criticism can sometimes cause disaffection, but by bringing the <ORG> into hatred or contempt the interests of the securtiy of the <ORG> are likely to be jeopardised. As the restriction of freedom of speech or expression on a person who brings or tends to bring into hatred or contempt the <ORG> established by law in India is for one of the purposes mentioned in the amended Clause (2); of Article 19 of the Constitution and it is also reasonable, it cannot, in my opinion, be held ultra vires. I, therefore, hold that the entire Section 124A cannot be deemed to be ultra vires. Only the portion which seeks to impose restriction on exciting mere disaffection or attempts to cause disaffection is ultra vires, (19) I now proceed to see whether Section 153A , Penal Cod, has been rendered inoperative by Article 19(2) of the Constitution. Section 153A runs as follows:

Whoever by words, either spoken or written, or by signs, or by visible representations, or otherwise, promotes, or attempts to promote feelings of enmity or hatred, between different classes of the citizens of India, shall be punished with imprisonment which may extend to two years, or with fine, or with both.

Explanation: It does not amount to an offence-within the meanings of this section to point out, without malicious intention and with an honest view to their removal, matters which are producing, or have a tendency to produce, feelings of enmity or hatred between different classes of citizens of India.

(20) A careful reading of the section shows that a reasonable restriction has been imposed in this section for whosoever promotes or attempts to promote the feelings of enmity or hatred between different classes of citizens of India to the extent of endangering public order cannot be protected by Clause (2) of Article 19 and so this section can also be deemed not to be wholly ultra vires in view of the amended Clause (2) of Article 19 of the Constitution. I hold that the rulings mentioned above which were given before the Amendment Act of 1951 came into force, cannot render Sections 124A and 153A , Penal Code , ultra vires.

(21-22) (The Judicial Commissioner after examing & holding that the evidence produced by the prosecution did not go to establish that the appellants committed any offence Under Sections 124A and 153A , Penal Code , proceeds to state:) Now the question remains whether the three leaflets Exs. P/A, P/B and P/C are sufficient for conviction of the present appellants and whether the resolution published in the 'Mother Manipur' on 21-4-1953 Ex. P/T is sufficient to establish the case against the appellants Under Section 124A , Penal Code .

The following extracts from pamphlets Exs. P/A to P/C have been objected to:

1. Today many Mayangs of all ranks and file have come into Manipur one after another. Not only pieces of earthen pots are shown again and again but enmity is caused among those persons who do not see save their interest and thereby causing disunity among the people, (from Ex. P/A)

2. Today not only the outsiders are trying to suppress us but also some of our country men are trying to produce washermen, barbers and coolies, (from Ex. P/C)

3. But unfortunately today we have been kept in such miserable condition as if putting in a frying pan in the hands of one or two refugees who have been turned out by the Mohammadans.

4. Every State has its own self-government while we have been entrusted in the hands of two or three refugees. The price of rice rises upto Rs. 40/- or Rs. 50/-. It is not yet 10 months from that time that the price was reduced to Rs. 20/- or Rs, 22/- per maund." (from the reel Ex. P/P held to be not proved.) (23) I have been taken through these 3 pamphlets at the time of arguments and various translations have been given of these pamphlets and the main controversy centres round the word 'Mayang'. On behalf of the prosecution it has been urged that the word 'Mayang' means non-Manipuri and so by using this word in the context referred to above the appellants sought to promote feelings of enmity or hatred between different classes of citizens of India. The learned Counsel for the appellants has urged that the word 'Mayang' only means an inhabitant of thickly populated part of our country, i.e. (West Bengal or U. P.) and it is not synonymous to non-Mani-puri. As such it has been contended that the word 'Mayang' does not form any class, and simply because the appellants felt that Manipuris should have a hand in the Government of their State, it cannot be inferred that the present appellants intended to excite feelings as between Manipuris and non-Manipuris, It has been laid down in 'Jang-I-Azad, Lahore, in the matter of AIR 1948 Lah 6 (SB) (V) that a general criticism of certain officer or officers cannot be deemed to be a criticism of Government established by law and order in British India, and as it has not been shown to me by the prosecution conclusively that the word 'Mayang' defines any particular class of people, I think the present appellants cannot be deemed to be guilty Under Sections 124A and 153A , IPC simply because they used the word 'Mayang' in the leaflets Exs. P/A to P/C.

In 'Newspaper "Daily Pratap" an Urdu Daily of New Delhi, in the matter of AIR 1950 East Punj 150 (SB) (W), it was held that the similarity of phraseology employed in Section 124A , I.P.C ., Rule 34(6) (e), Defence of India Rules, and Clause (d) of Section 4(1) , Press (Emergency Powers) Act, shows that the offence of sedition described in the Penal Code has for its ingredients the same elements which constitute a prejudicial act within the meaning of the Rule 34(6), Defence of India Rules, and these ingredients are also common to the mischief envisaged by Clause (d) of Section 4(1) of the Press Act. The first section taken and read as a whole is not to be regarded as intended to minister to the mere vanity or susceptibilities of <ORG> or its officers, but permits reasonable criticism, comments and ventilation of grievances although the same may generate and excite some amount of resentment or disapprobation against the <ORG> provided that such resentment or disapprobation does not generate or excite mere passion or hatred or contempt or disaffection.

In 'Sodhi Pindi Das v. Emperor' AIR 1938 Lah 629 (X), it was held that the speeches which amounted to exhortation to the hearers to join Communist or Bolshevik party is not in itself seditious within the meaning of Section 124A , IPC vide also ' <CITATION> ' AIR 1935 Cal 636 (Y). In view of these rulings and also in view of the fact that on taking into consideration the reasonable and natural effect of Exs. P/A to P/C as contemplated in 'AIR 1936 Cal 524 ( <CITATION> ' AIR 1927 Cal 215 (Z), I think these pamphlets do not show that the present appellants ever brought or attempted to bring the Government established by law in India into hatred or contempt, and that they did anything to disturb the security of the <ORG> or public order.

(24) Regarding the question whether the present appellants preached creation of independent buffer State under <ORG> in Manipur, a glance at the paper 'Mother Manipur' dated 21-4-1963 shows that this contention is not well founded and all that they mentioned in the paper was that some peace and democracy loving sections of the people were on the verge of launching movement to establish an independent buffer State. This clearly does not mean that the present appellants wanted anybody to establish any Independent buffer State.

This paper clearly shows that the following 4-resolutions Ex. P-i were passed at the meeting:

1. To immediately take all necessary actions to- prevent the threat of famine and to reduce the prices of rice and paddy to Rs. 8/- and Rs. 5/- per maund respectively.

2. To announce to the effect that the full responsible form of Government based on adult franchise should be immediately established in Manipur by a declaration within 15 days from this day (19-4-1953). Further this meeting strongly protests against the setting up of a nominated <ORG>.

3. As a step to responsible Government a popular Ministry elected by the members of <ORG> be transformed into a <ORG>, may be suggested. Along with this, <ORG> is strongly demanded to immediately replace non-Manipuri officers holding the key posts of heads of Departments, by the local talents.

4. To cause an immediate completion of the pavment of the compensation of the war damaged people of Manipur.

(25) Even if any non-violent movement was to be started by other groups and it was to be started by some members of the public, the present appellants could not legally be deemed to be guilty either Under Section 124A or Under Section 153A , IPC in view of what I have said above.

(26) Even if it be believed for a moment that the present appellants criticised some of the officers in a strong language and they could not appreciate that for running of administration, able and experienced officers are required, the appellants could not be deemed to have intentionally attempted to bring the <ORG> established by law into hatred or contempt nor they can be held to have promoted enmity between different classes of citizens of the Indian Republic.

(27) The offence Under Section 120B was held to be not proved against any of the appellants and so they were acquitted by the learned Magistrate under that section. The prosecution should have proved in the present case specifically which particular appellant committed offence Under Sections 124A and 153A by laying stress on particular passages or words, but this also had not been done.

(28) In view of my findings above the charges Under Sections 124A and 153A , IPC were not established against the present appellants beyond all reasonable doubts, and so I allow this appeal and I set aside the conviction of the appellants and as well as the sentences which have been imposed ou them under these sections. The appellants are already on bail. They need not surrender as their bail bonds are discharged.