TMI Blog1951 (11) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... r stored a large quantity of tobacco in the said house on which excise duty had not been paid. (4) On the introduction in Parliament of Bill No. 13 of 1951 on the 28th February 1951 the petitioner paid the requisite duty on the tobacco stored by it under the declared provision read with Sections 3 and 1 of the Provisional Collection of Taxes Act, 1931 (16 of 1931.) The petitioner cleared the tobacco from the warehouse between the 1st March 1951 and the 28th April 1951 and obtained clearance certificates issued by the 3rd respondent. (5) By the Finance Act of 1951 (Act No. 23 of 1951), the rate of duty payable on unmanufactured tobacco, Item No. 5 - which is the relevant provision here - was increased to 14 annas per lb. Though the Act became law on the 28th April 1951, by Section 6(2) the rates introduced by the Act are deemed to have had effect on and from the 1st day of March 1951. (6) So Section 7 (2) directs: (a) refunds shall be made of all duties collected which would not have been collected if the amendments had come into force on that day, and (b) recoveries shall be made of all duties which have not been collected but which would have been collected if the amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that as there is a specific remedy provided in Act 1 of 1944 the petitioner could not invoke the power under Article 226 before exhausting the remedy provided under the Act. The Counsel referred to Section 35 of the Act. If the respondents were proceeding under the Act then the argument would have been proper and the petitioner could be left to the remedy given by the Act. But the demand is challenged by the petitioner as being wholly without jurisdiction. The challenge of the petitioner is directed against the validity of Section 7 (2) itself. Even if the section be valid, according to the petitioner the case is not within Section 7 (2). Further, the petitioner questions the very authority and jurisdiction of the third respondent to make the demand. According to the contention the demand is not one made under the Act but is wholly outside it. If these contentions be correct the petitioner cannot be limited to the remedy available to it for any decision or order passed under' the Act. (12) There is no substance in the argument that the duty to be collected under Section 7 (2) is not a duty of excise but is a direct tax. The learned Counsel relied upon two decisions aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but on the goods manufactured or produced. The words manufactured or produced in Entry No. 45 (List I) are descriptive of the goods and are not mentioned as the basis of incidence. To the same effect are the observations of Sulaiman, J., at page 78 of the report. (16) Under a constitutional system which permits the Union to levy a duty of excise and the units to impose a tax on the sale of goods the line between the two is drawn at the point the goods leave the producer or the manufacturer. The Union is on the right side of the line so long as the tax is on the goods with the producer or the manufacturer. The effect in law of S. 7 (2) is that the rates introduced by Schedule I in the Act are related back to a period anterior to the goods leaving the producer or the manufacturer. So, the Union Government cannot be said to be taxing the goods at a stage not warranted under the Constitution. (17) The question then is whether the Union has the power to enact a retrospective provision. (18) It is true that the Courts are averse to construe a statute so as to give it a retrospective effect unless there be no escape from such a construction either because of express word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible because of the power to impose the tax retrospectively. (24) In the 'FIRM OF RADHAKISAN JAIKISHAN v. MUNICIPAL COMMITTEE, KHANDWA', P C Appeals NOS. 3 4 Of 1931. D/- 2-3-1937 (PC), the Privy Council held that the tax on ginning and pressing of cotton imposed by the Khandwa Municipality was not valid. In 1938 the Provincial Legislature enacted C. P. Act 8 of 1938 to render the tax valid from the date of the original imposition. This Act was held by the Court to be inoperative: see 'FIRM RADHAKISHAN v. MUNICIPAL COMMITTEE, KHANDWA', 1940 Nag L J 638. Then another Act, C. P. Act 16 of 1941, was passed to give effect to the tax from the date of the original imposition and make it validly recoverable. (25) In 'DISTRICT BOARD, SIALKOT v. SULTAN MUHAMMAD KHAN', 9 Lah 340, a tax purporting to be one on professions imposed by the District Board of Sialkot was held to be invalid. After the decision the Punjab District Boards (Tax Validating) Act, 1927 (III of 1927) was enacted to give effect to the tax from the date of the original imposition. See 'GANPAT RAI v. DISTRICT BOARD, SARGODHA', AIR (19) 1932 Lah 87 and 'BUKKAN SINGH v. DISTRICT BO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the Court declared a statute 'ultra vires' on the ground of unreasonableness. (29) The contention that it is unreasonable to demand duty in respect of goods on which the duty has already been paid cannot be accepted. It is pertinent to refer to 'PATTON v. BRADY', (1902) 184 U S 608. That case was concerned with tobacco on which, excise duty had already been paid. After the payment of duty the tobacco was sold to the plaintiff. While it was in his hands the impugned Act was passed doubling the current rate of duty. The impugned Act imposed a special duty on all tobacco which had paid the excise duty in force at the date of the Act and was at the date held and intended for sale. The point raised was that the legislature having once excised an article could not excise it a second time. The contention was rejected in the following words: But why should the power of imposing an excise tax be exhausted when once exercised? It must be remembered that taxes are not debts in the sense that having once been established and paid, all further liability of the individual to the government has ceased. They are, as said in Cooley on Taxation, p. 1: 'The enforced prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxed have already been removed under a clearance certificate. The learned counsel tried to reinforce this argument by reference to R. 9A of the Central Excise Rules. Under that rule the rate of duty and the tariff valuation (if any) applicable to goods cleared on payment of duty shall be the rate and valuation (if any) in force on the date on which duty is paid, or if the goods are cleared from a factory or a warehouse, on the date of the actual removal of such goods from such factory or warehouse. (34) But the result of the enactment of S. 7(2) is that though the Finance Act increased the rates on the 28th April 1951 'they shall be deemed to have had effect from the 1st day of March 1951. The meaning of the word 'deemed' is explained by their Lordships of the Privy Council in 'COMMISSIONER OF INCOME-TAX BOMBAY PRESIDENCY v. BOMBAY TRUST CORPORATION. LTD.', 54 Bom 216 at p. 223. Though the rates in Schedule I were not in fact in force on the 1st day of March 1951, as a result of the enactment of sub-S. (2) on the 28th April 1951 the rates must in the eye of law be now considered to have been in force from the 1st day of March 1951. That being so, the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. (37) Rule 7 provides that every person who produces, cures or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty or duties leviable on such goods at such time and place and to such person as may be designated in, or under the authority of these Rules. Rule 140, so far as it is material here, provides for the licensing of private warehouses for the storage of excisable goods on which duty has not been paid. Under R. 141 goods received at a warehouse are assessed to duty prior to entry into the warehouse, and the amount of duty leviable thereon is noted in the warehouse register. Rule 144 prohibits the removal of any goods from any warehouse except on payment of duty. The scheme of the rules is that all duty is collected before the goods are removed from a warehouse except in a case falling under R. 10 or R. 160. (38) The learned counsel for the respondents relied upon R. 159. Having regard to the context and collocation that rule must be held to contemplate the continued existence of the goods in the warehouse. There is no rule at all to cover a case of the kind created by sub-s. (2) of S. 7 under which the Union Government is emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1950, D/- 25-8-1950 (Nag) and 'NEW MOTOR TRANSPORT CO. DRUG v. R. T. A., RAIPUR', Misc. Petn. No. 225 of 1951, D/- 29-5-1951 (Nag). Even executive acts are not outside the scope of the power of the Court under Article 226. See 'HIRALAL v. STATE OP M.P.', Misc. Petn. No. 30 of 1950. D/- 19-2-1951. 'AHMED HOSSAIN v. STATE OP M.P.', AIR 1951 Nag 138 at p. 141 and 'JESHINGBHAI v. EMPEROR', AIR 1950 Bom 363 F B. When a right of a citizen is infringed or his liberty or property is put in peril by the executive in disregard of the law, for the Court to refuse redress to the citizen under Article 226, merely on the ground that the order or direction is sought against an executive act is to render the power under that article largely otiose. (43) At the risk of his property being put in peril the petitioner is asked to comply with a demand in violation of a principle enshrined in the Constitution (Article 265). As the principle is considered to be of sufficient importance to merit an express provision in the Constitution it is but proper for the Court to prevent its infringement. The case therefore calls for the exercise of the undoubted power of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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