1951 (11) TMI 25 - HC - Central Excise

Issues Involved:
1. Suppression of facts by the petitioner.
2. Jurisdiction to invoke Article 226.
3. Nature of the duty under Section 7(2).
4. Retrospective application of tax laws.
5. Validity of Section 7(2) of the Finance Act, 1951.
6. Authority to collect duty after goods have been removed from the warehouse.
7. Executive authority to make the demand.

Issue-wise Detailed Analysis:

1. Suppression of Facts by the Petitioner:
The respondents argued that the petitioner materially suppressed facts by asserting that the second respondent failed to reply to the petitioner's request for a hearing before any demand was made. The court clarified that the petitioner's complaint was not about the refusal to give a hearing but about the refusal to give a hearing before making the demand. As the demand was made on 4th June 1951 without a prior hearing, the court found no deliberate suppression of material facts by the petitioner.

2. Jurisdiction to Invoke Article 226:
The respondents contended that the petitioner should not invoke Article 226 without exhausting the remedies under the Central Excise Act, 1944. The court noted that the petitioner's challenge was against the validity of Section 7(2) itself and the jurisdiction of the third respondent to make the demand. As the demand was not made under the Act but was wholly outside it, the petitioner was not limited to the remedies available under the Act.

3. Nature of the Duty under Section 7(2):
The court rejected the argument that the duty under Section 7(2) was a direct tax and not an excise duty. The court referenced previous decisions and held that the duty of excise is levied on the manufacturer or producer in respect of the commodity. The retrospective increase in the rate of duty did not alter the nature of the tax.

4. Retrospective Application of Tax Laws:
The court affirmed that Parliament has the competence to enact laws retrospectively unless it infringes some provision in the Constitution. The court cited various cases to support the validity of retrospective fiscal legislation and rejected the argument that completed transactions could not be affected by retrospective laws. The court emphasized that the obligation to pay taxes is continuous and proportionate to public needs.

5. Validity of Section 7(2) of the Finance Act, 1951:
The court held that Section 7(2) of the Finance Act, 1951, is valid. The court rejected the contention that the tax levied under Section 7(2) could only apply to tobacco produced or manufactured after 1st March 1951. The court clarified that the excise duty is a tax on goods in existence, not on the process of production or manufacture.

6. Authority to Collect Duty After Goods Have Been Removed from the Warehouse:
The court found that there was no rule under the Central Excise Rules to cover the collection of duty on goods that had already been removed from the warehouse, except under Rule 10 or Rule 160. The court held that the third respondent was not authorized under law to make the demand for duty on goods that had been cleared and removed from the warehouse.

7. Executive Authority to Make the Demand:
The court emphasized that the power under Article 226 is not restricted by technical limitations and can be used to issue orders or directions for the enforcement of fundamental rights or for any other purpose. The court held that even executive acts are not outside the scope of the court's power under Article 226. The court quashed the demand made by the third respondent on 4th June 1951, as it was not authorized by law.

Conclusion:
The court concluded that the demand made by the third respondent on 4th June 1951 was unauthorized and quashed it. The court upheld the validity of Section 7(2) of the Finance Act, 1951, and allowed the respondents to collect the tax in accordance with the law. The respondents were ordered to pay the costs of the paper book and the costs of the petitioner.

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