HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
In re. The Bill to Amend Section 20 of the Sea Customs Act, 1878, and Section 3 of the Central Excises and Salt Act, 1944
Special Reference No. 1 of 1962, under Article 143(1)
[1964] 3 SCR 787 ·
Constitution of India: Articles 143(1), 245, 246, 285, 289(1)-(3), 366(28) · Seventh Schedule: List I entries 82, 83 and 84 · Sea Customs Act, 1878: section 20(2), proposed amendment · Central Excises and Salt Act, 1944: section 3(1A), proposed amendment
Sources & disclosures includedDownload original judgment / order
Nine-judge Bench; 5:4 majority. Sinha C.J. for four judges; Rajagopala Ayyangar J. separately concurring; S.K. Das J. for three dissenting judges; Hidayatullah J. separately dissenting. · B. P. Sinha C.J. · S. K. Das J. · P. B. Gajendragadkar J. · A. K. Sarkar J. · K. N. Wanchoo J. · M. Hidayatullah J. · K. C. Das Gupta J. · J. C. Shah J. · N. Rajagopala Ayyangar J.
Assessment years: No taxpayer assessment year adjudicated
01 · Facts of the case
The existing customs and excise provisions expressly extended the duties to State-owned goods used for trade or business. A proposed Bill would remove that limitation and apply the duties also to State goods used for ordinary governmental purposes. On 19 April 1962, the President referred three questions under Article 143(1): whether Article 289 prevented customs on import/export of such non-trading State property, whether it prevented excise on its production/manufacture, and whether the proposed amendments were inconsistent with Article 289. The Union and several States presented opposing constitutional constructions. No taxpayer's assessment, income computation or refund was before the Court.
02 · Discussion by the Hon’ble Court
Sinha C.J., speaking for four judges, construed Articles 285 and 289 within the legislative lists and federal financial scheme. The income limb of Article 289 was expressly linked to List I entry 82, taxes on income other than agricultural income; the opinion recorded that this point was not seriously disputed. From the juxtaposition of property and income it reasoned that the property limb likewise concerned direct taxation of property, not every levy economically affecting it. Clause (2)'s treatment of income from State trade or business and associated property reinforced the analysis; clause (3) preserves Parliament's role in declaring qualifying activities incidental to ordinary governmental functions. Customs and excise were characterised by import/export or manufacture/production events rather than bare ownership. Ayyangar J. expressly agreed with the Chief Justice's answers and reasoning, adding historical analysis and caution about using clause (2) to enlarge clause (1). Das J., for three judges, preferred the wider text read with Article 366(28); Hidayatullah J. also dissented, distinguishing revenue taxation from external-trade regulation. Neither dissent supplies the majority rule.
Source: Direct State-income and property-tax reasoning: PDF 25-30; Ayyangar concurrence: PDF 130-143
03 · Judicial decision
By five votes to four, the Court answered all three questions in the negative. Article 289 did not preclude the Union from imposing the customs and excise duties described in the reference, and the proposed amendments were not inconsistent with that article on the referred grounds. The majority adopted the distinction between a direct tax on State property or income and a duty on a separate taxable event affecting State-owned goods. This was an advisory answer to the President, not dismissal of an assessee's appeal or an order levying a specified amount of income tax.
Source: Chief Justice's negative answers: PDF 40; Final majority answer: PDF 143
04 · Outcome / in whose favour
The Union's position on the proposed customs/excise amendments prevailed. For Income-tax research, the opinion supplies an express constitutional explanation of direct State-income immunity, subject to the Article 289 structure, rather than a general escape from all taxes connected with State assets. The Court did not identify an assessment year, settle a particular entity's ownership of income, decide a statutory corporation's entitlement, calculate liability, grant exemption under the Income-tax Act or award any refund. The income-tax discussion must therefore retain its supporting constitutional context.
Source: Income-tax premise and scope: PDF 25-30; Advisory result: PDF 143
05 · AKHB REVIEW POINT
AKHB analysis: distinguish the legal owner of income, the nature of the challenged levy and the relevant Article 289 clause. A tax directly on State income is not the same as customs or excise affecting State goods. Conversely, State control of a separate entity should not be assumed to establish State ownership of that entity's income; this reference does not answer that threshold question. Keep constitutional immunity separate from any statutory exemption, and test State business activity against clauses (2) and(3) and applicable legislation. For present advice, independently verify later treatment, current law and the facts. The historical Income-tax premise in this advisory opinion should not be turned into a universal exemption or an assessment-specific holding.
Source: State trade/business and direct-tax distinction: PDF 27-30; Concurrence on clause (2) and its history: PDF 138-143
Source & verification
Download original judgment / order · Open cited source rendition
All 143 pages and all four opinions read: Sinha (SCR 791–826), Das dissent (826–868), Hidayatullah dissent (868–916), Ayyangar concurrence (916–929), and final answer (929). Judicial text is unnumbered.
- Decision: 10 May 1963; 1964 is the report year. The opening fragment belongs to the preceding Madan Thathiah report and is excluded.
- The rendered reference at SCR 795 confirms clause (2), despite OCR showing clause (1); the operative text identifies section 3(1A), despite the editorial docket’s subsection 1(a).
- Exact source hash verified. Related Article 289 notes concern distinct decisions, not duplicate renditions.
Statutory scope
The questions concern proposed customs/excise amendments. Article 289's income limb and Entry 82 are expressly discussed as constitutional reasoning, but no charging or computation provision of the Income-tax Act is applied to an assessee. References to the Indian Income-tax Act, 1922 in Ayyangar J.'s opinion explain the Government Trading Taxation Act, 1926 antecedent, not an assessment determination.
Later treatment
Source checked 2026-10-18. Opinion as delivered on 10 May 1963; reported in 1964. Subsequent treatment and the current statutory and constitutional position have not been comprehensively verified.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
Identified source links
- reported advisory opinion — PDF 143 pages
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AI disclosure & professional disclaimer
This AKHB research note was prepared with AI assistance from an identified primary report. Independent human review is not represented.
General legal and tax research only; not legal or tax advice. Verify the complete opinion, applicable statutory version and subsequent treatment before reliance. The AKHB REVIEW POINT is editorial analysis, not the Court's holding. No current-law clearance is claimed.