Case Briefing: M/S Trimurthi Fragrances (P) Ltd. v. Government of N.C.T. of Delhi
Case Title and Citation
M/S Trimurthi Fragrances (P) Ltd. Through Its Director Shri Pradeep Kumar Agrawal Versus Government of N.C.T. of Delhi Through Its Principal Secretary (Finance) & Ors..
Civil Appeal No. 8486 of 2011 (with a batch of associated appeals and a Special Leave Petition). In the Supreme Court of India, Civil Appellate Jurisdiction.
Date of Judgment: September 19, 2022.
Factual Background
The underlying appeals involved a challenge to the taxability of goods such as ‘Pan Masala’, which contains tobacco and gutka. These goods were covered by an Entry in the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act 1957 (ADE Act). The ADE Act was enacted to levy and collect additional duties of excise in replacement of the sales taxes levied by the Union and States on specific goods, including tobacco. It is well settled that once goods are chargeable under the ADE Act, the State cannot levy sales tax on the same goods under a State enactment, provided the State takes the benefits under that Act.
The central dispute arose because there appeared to be a direct conflict between two lines of judgments from the Supreme Court: the Kothari Products line and the Agra Belting Works line, both involving three-Judge Bench decisions. The present matter was referred to a larger bench to resolve this perceived conflict.
Issue(s)
- Whether the line of judgments represented by Kothari Products Ltd. or the line of judgments represented by Central Sales Tax v. Agra Belting Work is correct in law. (This referred to the question of whether State governments could tax goods like gutka/pan masala, which are covered by the ADE Act.)
- What should be the proper guidelines for the future for overruling an earlier decision of the Supreme Court, and to what extent courts should be guided by principles related to the numerical strength of the overruling and overruled Benches?
Decision of the Supreme Court
The Supreme Court determined that there was no conflict between the two lines of cases raised in Question (i). Consequently, the reference to the Constitution Bench on the first question was held incompetent. The second question regarding judicial precedent was held to have been answered previously by a Constitution Bench, making it unnecessary for this bench to provide new guidelines. The cases were directed to be placed for decision before the regular Bench.
Reason for the decision
- Absence of Conflict (Question 1): The Court held that the Kothari Products line of cases and the Agra Belting line of cases dealt with distinct legal issues.
- The Kothari Products line addressed whether goods specified in the ADE Act (e.g., tobacco, gutka), and thus exempted from sales tax under State enactments, could be made exigible to tax by simply amending the State Schedule. This affirmed that once goods are chargeable under the ADE Act, the State cannot levy sales tax on them.
- The Agra Belting Works line of cases addressed the interplay between a general exemption under Section 4 of the U.P. Sales Tax Act and a subsequent notification under Section 3-A of the same Act specifying the rate of sales tax for a specific item within the exempted class. The majority in Agra Belting held that the later notification prescribing the rate of tax was intended to withdraw the earlier general exemption.
- Since the subject matter and statutory context were different (ADE Act related exemptions vs. Internal State Act exemptions/notifications), the alleged conflict necessitating a reference did not exist.
- Guidelines for Overruling Precedents (Question 2): The Court relied on the five-Judge Constitution Bench decision in Dr. Jaishri Laxmanrao Patil v. The Chief Minister and Others.
- The doctrine of stare decisis dictates that a larger Bench formation ruling would be binding and prevail upon the ruling of a smaller Bench formation (horizontal operation).
- The established rule is 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.
- A Bench of lesser quorum cannot disagree or dissent from the view taken by a Bench of larger quorum. Quorum refers to the bench strength hearing the matter. The numerical strength of judges taking a particular view is irrelevant; the bench strength is determinative of the binding nature of the judgment.
Conclusion
The Supreme Court concluded that the reference of the matter to a Constitution Bench was unwarranted because there was no actual conflict between the line of judgments concerning State taxability on ADE Act goods (Kothari Products) and the line of judgments concerning the withdrawal of general exemptions via subsequent tax rate notifications (Agra Belting Works). The principles governing the overruling of precedents based on numerical strength were confirmed to be settled by prior Constitution Bench rulings, reinforcing that the opinion of a larger bench binds smaller benches.
