This was the last week of Justice Indira Banerjee’s tenure. Of the 11 judgments which she authored and pronounced during this week, the one she delivered as the head of the Constitution bench, on Monday, clarifying the law on the strength of benches, not only broke the long dry spell on the Constitution bench judgments, but helped us understand how precious time of the Court could be saved, if only the Constitution benches were set up after due deligence. The Supreme Court’s Constitution bench, headed by her, did not find it necessary to answer the question referred to it by a two-Judge bench, on a perceived paradox over the legitimacy of the strength of benches as against the number of majority judges in a given bench, as the same has already been answered by another Constitution bench earlier.
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ON September 19, a five-judge Constitution bench of the Supreme Court, comprising Justices Indira Banerjee, Surya Kant, M.M. Sundresh, Sudhanshu Dhulia and Hemant Gupta held that the “majority decision of a Bench of larger strength would prevail over the decision of a Bench of lesser strength, irrespective of the number of Judges constituting the majority.”
The question before the bench was whether ‘pan masala’, which contains tobacco and gutka, covered by an Entry in the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (‘ADE Act’), is taxable by the state government under the Delhi Sales Tax Act, 1975, the Uttar Pradesh Trade Tax Act, 1948, and the Tamil Nadu General Sales Tax Act, 1959.
The ADE Act provides for the levy and collection of additional duties of excise in respect of certain goods, over and above the duties of excise levied under the Central Excise Act, 1944. Once goods are chargeable under the ADE Act, state governments cannot levy sales tax on the same goods under state enactments.
The case was referred to the Constitution bench by a division bench of the court comprising Justices R.F. Nariman and S.K. Kaul in M/s Shanti Fragrances versus Union of India & Ors. in 2017. The bench in Shanti Fragrances had asked the Constitution bench to decide what the correct position of law was between the court’s decisions in Kothari Products Ltd. versus State of A.P. (2000) and Commr., Sales Tax, U.P. versus Agra Belting Works, Agra (1987).
In Kothari Products Ltd., the question before the court was whether, with ‘tobacco’ being specified in the First Schedule to the ADE Act, and exempted from sales tax under Section 8 of the Andhra Pradesh General Sales Tax Act, 1957, whether gutka could be taxed by the Andhra Pradesh government. A three-judge bench of the court comprising Justices S. Bharucha, A. Mishra and N.S. Hegde had unanimously held that gutka, being tobacco, was covered in the First Schedule to the ADE Act and liable to be taxed under the ADE Act, and was therefore exempt under section 8 of the Andhra Pradesh General Sales Tax Act. The latter Act could not, therefore, have been amended to tax gutka.
A number of subsequent Supreme Court decisions took the same view as Kothari Products Ltd., holding that items covered by the expression ‘tobacco’ and other items included in the First Schedule to the ADE Act are not taxable by state governments.
On the other hand, in Agra Belting Works, the question was whether any class of goods exempted from sales tax under Section 4 of the Uttar Pradesh Sales Tax Act, 1948, would be eligible to Sales Tax by virtue of a subsequent Notification under Section 3A of the said Act, specifying the rate of sales tax in respect of an item of the class of goods exempted under section 4, without withdrawing the earlier notification under section 4. While the majority of a three judge bench, comprising then Chief Justice R.S. Pathak and Justice Rangnath Misra held that a Notification of recall of exemption was not a condition precedent for imposition of tax by a valid notification under section 3A, the third judge on the bench, Justice B.C. Ray, dissented with the view of the majority.
The five-judge Constitution bench held on Monday that there is no conflict between Kothari Products Ltd. and Agra Belting Works. This is because, the majority judgment authored by Justice Banerjee on behalf of herself and Justices Kant, Sundresh and Dhulia noted, the Kothari Products line of cases was on the question of whether ‘tobacco’ or other goods specified in the First Schedule to the ADE Act and hence exempted from sales tax under state sales tax statutes, could be made eligible to tax under the state statutes by amending the Schedule thereto.
On the other hand, the Agra Belting Works line of cases was on the question of interplay between general exemption of specified goods from sales tax under section 4 of the U.P. Sales Tax Act and the specification of rates of sales tax under section 3A of the Act. The court had held that goods exempted from sales tax under section 4 would be eligible to tax by virtue of subsequent notification under section 3A specifying the rate of sales tax for any specific item of the class of goods earlier exempted under section 4. “There being no conflict, the reference to Constitution Bench is incompetent. The cases may be placed for decision before the regular Bench”, the Constitution bench held.
The division bench in Shanti Fragrances, having erroneously assumed that there was a conflict between the judgments rendered in Kothari Products and Agra Belting Works, had framed a second question to be resolved by the Constitution bench, regarding the proper guidelines to resolve an apparent paradox relating to the overall strength of a bench against the number of majority judges in a bench.
The five-Judge Constitution bench found on Monday that this second question had already been answered by a previous Constitution bench in Dr. Jaishri Laxmanrao Patil versus The Chief Minister & Ors (2021).
In Dr. Jaishri Laxmanrao Patil, Justice S. Ravindra Bhat had held that unanimity in a given bench (termed as a “super majority”) — denoting a 5:0 unanimous decision in a Constitution Bench – cannot be construed as per se a strong or compelling reason to doubt the legitimacy of a larger bench ruling that might contain a narrow majority (say, for instance, with a 4:3 vote), resulting in overruling of a previous unanimous precedent.
In Dr. Jaishri Laxmanrao Patil, Justice Bhat reasoned thus:
“The principle of stare decisis operates both vertically — in the sense that decisions of appellate courts in the superior in vertical hierarchy, bind tribunals and courts lower in the hierarchy, and horizontally — in the sense that a larger Bench formation ruling, would be binding and prevail upon the ruling of a smaller Bench formation. The logic in this stems from the raison d’être for the doctrine of precedents i.e. stability in the law. If this rule were to be departed from and the legitimacy of a subsequent larger Bench ruling were to be doubted on the ground that it comprises of either plurality of opinions or a narrow majority as compared with a previous Bench ruling (which might be either unanimous or of a larger majority, but of lower Bench strength), there would be uncertainty and lack of clarity in the realm of precedential certainty.”
The Indira Banerjee-led bench thus unanimously held in the instant case that in view of Article 145(5) of the Constitution, the concurrence of a majority of the judges at the hearing will be considered as a judgment or opinion of the Court. The bench thus found that it need not answer the question, as the same had already been answered by a bench of similar strength in Dr. Jaishri Laxmanrao Patil.
Justice Gupta, in his separate opinion, held that it is the strength of the bench and not the number of judges, who have taken a particular view which is said to be relevant. He held that it is absolutely clear that a bench of lesser quorum cannot disagree or dissent from the view of law taken by a bench of larger quorum. ‘Quorum’ means the bench strength which was hearing the matter, he held.
Click here to view the Supreme Court’s full judgment.
(with editorial inputs)
