TMI Blog1955 (3) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... . In pursuance of Cl. 20 referred to above, the Textile Commissioner, Bombay, issued a notification dated 9-12-1952, by which he directed that no producer shall, during December, 1952, and every subsequent month thereafter produce quantity of dhoties more than 60 per cent, of the average quantity packed for sale by such producer per month during April, 1951, to March 1952, and the petitioner was also informed accordingly. On 24-12-1952, the Textile Commissioner directed the petitioner not to produce more than 97,350 yards of dhoties per month. Then came into force the Dhoties (Additional Excise Duty) Ordinance (No. 6) of 1953 (hereinafter referred to as the Excise Ordinance), and this provided for the levy of additional excise duty on the quantity of dhoties packed by a mill (as defined under the Ordinance) in excess of the permissible quota from 26-10-1953. 3. By S. 3 of the Ordinance, it was laid down that the permissible quota of dhoties which may be packed by any mill during any quarter shall be one-fourth of 60 per cent, of the total quantity of dhoties packed by that mill during the relevant period, and under explanation (1) of S. 3, the Central Government declared by a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards of dhoties lying with it at the commencement of 26-10-1953, and these had already been issued from 26-10-1953, to 17-12-1953, which was the date on which the Act had first been published. In addition, the mill states to have packed 1,62,430 yards of dhoties from the 26th October to the 16th December, 1953, out of which 1,28,990 yards were issued up to 16-12-1953. 6. The mill further packed 47,956 yards of dhoties from 17-12-1953, up to 31-12-1953, and issued thereout 59,744 yards up to the end of the quarter; with the result that its total clearance came to 2,91,754 yards, that is, 79,066 yards over the prescribed figure of 2,12,683 for the unexpired period of the quarter under the Act. Consequently, the Resident Inspector of Central Excise sent a notice on 8-6-1954, to the petitioner to pay a sum of ₹ 25,179/8/- as what was erroneously called penal excise duty . This was later corrected by a subsequent letter from the Superintendent, Central Excise, Udaipur, dated 1-7-1954, and the amount of demand was reduced to ₹ 14,781/12/- as being the additional excise duty on 79,066 yards of dhoties cleared in excess of the permissible quota fixed under Section 3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Constitution) and was outside its legislative competence. 10. Secondly, it was contended that the Excise Ordinance as well as the Act violated the provisions of Article 14 of the Constitution as they made discrimination between mills which carried on the business of both weaving and spinning and those which merely did weaving. This discrimination was stated to have arisen as a result of the definition of the expression mill as contained in both the Ordinance and the Act. Section 2(b) of the Excise Act, defines a mill as any building or place in which cotton yarn is spun and dhoties are manufactured by machinery moved otherwise than by manual labour, and includes every part of such building or place. 11. Another ground of attack under the same head was that both the Ordinance and the Act discriminated between mills which had commenced business after or during the relevant period, and mills which had expanded their machinery or equipment during or after the relevant period. It was contended that the petitioner had increased the number of spindles and looms during the period between April to December, 1952 (and this fact is not controverted) but this factor coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustry of handloom dhoties, which was in difficulties and was unable to compete with dhoties produced at cheaper cost of production by mills run by machinery; but we are not concerned with the motives of Parliament in judging the character of a piece of legislation enacted by it but with what it has actually enacted. 15. It is true that the duty has been levied retrospectively but we think that the retrospective imposition of a tax cannot have the effect of depriving it of its real character as excise duty, if Parliament has the power to enact such law retrospectively. It would be convenient to consider the meaning of the term excise duty and its true character at this place. Now the term excise duty has not been precisely nor authoritatively defined anywhere so far as we know. It is generally used in contradistinction to the term customs duty . Customs duties or duties of custom are levied on goods going abroad or imported from abroad; while duties of excise, on the other hand, are levied on home-made goods or goods made in the taxing country. The juxtaposition of these terms in the legislative lists appended to the Constitution appears to lend strength to the same view. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a stage subsequent to production or manufacture, and, concluded the learned Chief Justice, that, in his view, the definition of excise duties was, therefore, of little assisance in determining the extent of the legislative power to impose them; for the duty imposed by a restricted legislative power does not differ in essence from the duty imposed by an extended one. We respectfully agree and would add that nothing has been pointed out to us to show that the meaning of the term excise duties is different under the present Constitution from that placed on that expression in Entry No. 45 in the Federal list of the Government of India Act, 1935. 19. Now learned counsel for the appellant laid considerable emphasis on certain observations in the judgment of Jayakar J. in this very case at p. 35 where while dealing with a contention that the excise duty was on manufacture or production, the learned Judge observed that he found some difficulty in accepting that contention and that looking at the words of item 45, the duty was on the goods, and the words manufactured or produced in India were descriptive of the goods only, and that the legislature had not used the words in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, fully approved of the decision of the Federal Court in the earlier case and observed that: the term duty of excise is a somewhat flexible one; it may no doubt cover a tax on first and perhaps on other sales. . Their Lordships are of opinion that a duty of excise is primarily a duty levied upon a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax upon goods, not upon sales or the proceeds of the sale of goods. 22. In view of what we have stated above, we hold that the duty in the present case is an excise duty inasmuch as it is imposed on a manufacturer in respect of the dhoties produced by it over the permissible quota and is connected with the manufacturer thereof. 23. We further hold that Parliament undoubtedly possesses the authority to levy such an impost. Entry No. 84 of List 1, Union List under the Seventh Schedule is in these terms: 84. Duties of excise on tobacco and other goods manufactured or produced in India except . (We are not concerned with the remaining part of this entry). 24. It is clear that the levy of an excise duty on goods manufactured and produced in India is a subject which falls w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he producer; but in the present case the petitioner had already issued certain bales which had been lying packed with it when such issue was perfectly in order and it was only on 17-12-1953, that the Excise Act had limited the issue of bales with back effect from 26-10-1953, and put additional excise duty on the quantity issued in excess and thereby the result was that it was impossible for the petitioner to take this new factor into consideration in fixing the sale price of the bales sold before 17-12-1953. It was strenuously contended, therefore, that in such circumstances the imposition of the excise duty as a retrospective measure was unjust and illegal, and ultra vires of the Constitution. 28. We may at once point out that the question so far as we are concerned is of the legal efficacy of the measure or the legal competency of the authority passing it and not of its ethical or economic justification. It is a fundamental principle of Indian, as of English, law that no statute shall be construed to have a retrospective operation, as a general rule, and laws should, broadly speaking, receive prospective operation only. It also appears to us that normally an indirect tax shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might otherwise appear to be. In other words if there be admissible in any statute what is called an equitable construction, certainly such a construction is not admissible in a taxing statute. 31. Again, in the language of an eminent English Judge: In a taxing Act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. (In - Cape Brandy Syndicate v. Inland Revenue Commrs.. , (1921) 1 KB 64 (F)). 32. Another principle which is equally well established is that a retrospective operation is not to be given to a statute which impairs existing rights or imposes additional obligations otherwise than as respects matters of procedure. But if the language is plainly retrospective it must be so interpreted. Applying these principles to the case before us, we find that the Excise Act here clearly says that it I shall be deemed to have come into force on 26-10-11953. The Act is, therefore, clearly retrospective. We further consider that such effect it must receive according to its express lang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral for Quebec v. Reed , (1884) 10 AC 141 (G), the question was whether a duty of ten cents imposed by the Quebec Act upon every exhibit filed in Court in any action pending therein was ultra vires of the provincial legislature. It was held by the Privy Council that the Act was ultra vires of the provincial legislature. The decision mainly depended upon whether it was a case of direct taxation within the meaning of sub-s. (2) of Section 92 of the British North America Act, 1867, because if it was, then the provincial legislature was competent to pass it. The terms of this clause were these: Direct taxation within the province in order to the raising of revenue for provincial purposes. 36. Their Lordships generally approved of the definition, of James Stuart Mill that a direct tax is one which is demanded from the very persons who it is intended or desired should pay it , 37. and that indirect taxes are those which are demanded from one person under the expectation and intention that he shall indemnify himself at the expense of another , and came to the conclusion that the tax in question was not direct and, therefore, was outside the legislative competence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that decisions on matters like taxation, depending for their answer upon the constitutional provisions of a certain country may indeed be and often are very dangerous precedents for the answering of similar questions arising under the constitution of another country. 41. It is plain that the majority decision depended largely on certain considerations which are wholly inapplicable to the case before us. One such consideration is that the power of taxation primarily vests in the States in Australia and not in the Commonwealth Parliament. The scheme of the Indian Constitution is entirely in the reverse direction. Again, as we have already pointed out above, even if we were to hold that the Excise Act before us was an Act to regulate trade in cotton textiles (just as in the Australian case it was held that it was an Act to regulate the manufacture of agricultural implements) nothing turns on this ground of attack because Article 369 of our Constitution would be a complete answer to the objection as it vests authority in the Indian Parliament to make laws relating to the production, supply and distribution of cotton textiles throughout India for a period of five years from the comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as invalid. It was further held that the presumption is always in favour of the constitutionality of an enactment since it must be assumed that the legislature understands and correctly appreciates the needs of its people. 46. These principles were reiterated by Fazl Ali J. in - State of Bombay v. F.N Balsara , AIR 1951 SC 318 (L). In - Kathi Raning Rawat v. State of Saurashtra , AIR 1952 SC 123 (M), it was laid down that while Article 14 forbids class legislation it does not forbid reasonable classification for the purposes of legislation. Mukherjea J. as he then was, laid down that the legislature was given the utmost latitude in making the classification and it was only when there was a palpable abuse of power and the differences made had no rational relation to the objectives of the regulation, that necessity of judicial interference arise. We would next refer to - Kedar Nath Bajoria v. State Of West Bengal , AIR 1933 SC 404 (N). 47. Patanjali Sastri C.J in that case obesrved as follows: It is well settled that the equal protection of the laws guaranteed by Article 14 of the Constitution does not mean that all laws must be general in character and universal in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question for decision is whether the impugned legislation satisfies the test of reasonable classification; because, if it does, then it could not be condemned on the ground of class legislation. It is true that the Act does not expressly specify any principle of classification as to why mills which merely carried on the business of weaving were left outside the purview of the Act. The matter, however, does not rest there and the law is well settled that we must start with a presumption in favour of the constitutionality of the Act and further we are also called upon to conceive a rational basis of classification if such a course can be conceived as justifying the measure. On a consideration of the background of this legislation, it appears to us clear that at the time it was resorted, to, mill-made dhoties abounded in the market and they were selling very cheap with the result that hand-made dhoties with their higher cost of production could find no market. 51. It was obviously with the object of affording protection to those employed in the small industry of hand-made dhoties that the Parliament enacted the law in question whereby it restricted the production of mill-made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 3 of the Act which is in these terms: Notwithstanding anything contained in sub-s. (1), if in the case of any mill or class of mills, the Central Government is of opinion that due to economic reasons connected with the nature of the machinery or other equipment installed therein a higher percentage than that specified in sub-s. (1) should be fixed in respect thereof, it may, by notification in the Official Gazette, fix the permissible quota for a quarter for the mill or class of mills as one-fourth of such higher percentage as it may think fit, and where any such notification has been issued, the quota so fixed shall be deemed to be the permissible quota for the mill or class of mills within the meaning of this Act. 55. The important words which we would emphasise are due to economic reasons connected with the nature of the machinery or other equipment installed therein. It seems to us that the word nature in the context in which it has been used must be given a comprehensive meaning and that it really includes not merely nature strictly so called, but also extent of the machinery involved. In view of the meaning of this sub-section which has commended ..... X X X X Extracts X X X X X X X X Extracts X X X X
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