Article 268 of the Costitution of India with Case law
🔷 Article 268 of the Constitution of India – Distribution of Revenues: Duties Levied by the Union but Collected and Appropriated by the States
🔹 Text of Article 268:
"268. Duties levied by the Union but collected and appropriated by the States
(1) Such stamp duties and such duties of excise on medicinal and toilet preparations as are mentioned in the Union List shall be levied by the Government of India but shall be collected —
(a) in the case where such duties are leviable within any Union territory, by the Government of India, and
(b) in other cases, by the States within which such duties are respectively leviable.
(2) The proceeds in any financial year of any such duty leviable within any State shall not form part of the Consolidated Fund of India, but shall be assigned to that State."*
🔹 Key Features of Article 268:
| Feature | Description |
|---|---|
| Type of Duties | Stamp duties and excise duties on medicinal and toilet preparations |
| Levying Authority | Union Government (i.e. Government of India) |
| Collecting Authority | States, except in Union Territories (collected by Centre) |
| Revenue Ownership | The proceeds go to the State Governments, not the Centre |
| Not in CFI | Revenue from such duties does not go into the Consolidated Fund of India |
🔹 Purpose of Article 268:
To balance fiscal powers between Union and States.
Though the Union levies the duties (for uniformity), the States collect and retain the revenues, ensuring they benefit directly.
🔹 Examples of Duties under Article 268:
Stamp duties on:
Bills of exchange
Cheques
Promissory notes
Transfer of shares
Letters of credit
Duties of excise on:
Medicinal preparations containing alcohol or narcotics
Toilet preparations with alcohol (e.g., perfumes)
These are listed in Entries 84 and 91 of the Union List (Schedule VII).
🔹 Case Law on Article 268:
✅ State of Madhya Pradesh v. Bhailal Bhai, AIR 1964 SC 1006
Issue: Refund of excise duties levied unlawfully.
Held:
Excise duty, even under Article 268, must be validly levied.
If ultra vires (beyond the powers), such duties are refundable.
Article 268 does not authorize illegal taxation.
✅ Shubh Timb Steel Ltd. v. Union of India, (2010) 11 SCC 450
Relevance: Interpretation of levy vs collection.
Held:
The levy of duty is a central power, while collection and appropriation can be assigned differently, including to States under Article 268.
✅ Bharat Sanchar Nigam Ltd. (BSNL) v. Union of India, (2006) 3 SCC 1
Context: Taxation of telecom services – interaction between Union and State taxation powers.
Though not directly on Article 268, it emphasizes:
Clear demarcation of taxing powers is crucial.
Collection rights do not override levy jurisdiction.
✅ Avinder Singh v. State of Punjab, (1979) 1 SCC 137
Discusses constitutional validity of taxes and federal structure.
Reiterated that States can collect and appropriate duties assigned to them under Article 268, provided the levy is constitutional.
🔹 Comparison: Article 268 vs 269 vs 270
| Article | Levied by | Collected by | Revenue Goes To |
|---|---|---|---|
| 268 | Union | States | States |
| 269 | Union | Union | States (assigned) |
| 270 | Union | Union | Centre and States (shared) |
🔹 Summary Table:
| Aspect | Details |
|---|---|
| Article | 268 |
| Subject | Union duties collected & appropriated by States |
| Duties Covered | Stamp duties, excise on medicinal & toilet preparations |
| Levy Power | Union Government |
| Collection | States (except Union Territories) |
| Revenue Usage | Assigned to States – not part of CFI |
| Key Cases | Bhailal Bhai, BSNL v. UOI, Avinder Singh |
🔹 Conclusion:
Article 268 is a unique fiscal provision that reflects India’s quasi-federal structure — allowing the Union to levy, but States to collect and retain certain taxes. It ensures centralized uniformity in taxation while preserving state revenue autonomy.
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