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1962 Supreme(SC) 78
SUPREME COURT OF INDIA
27th February, 1962
B.P. SINHA, C.J.I., K. SUBBA RAO, N. RAJAGOPALA AYYANGAR, J.R. MUDHOLKAR AND T.L. VENKATARAMA AYYAR JJ.
(1) R. C. Jall Parsi (In C. A. No. 183 of 59) and Respondent No. 2 (In C. A. No. 184 of 59). (2) The Amalgamated Coalfields, Ltd. (In C.A. No. 184 of 59) and Respondent No. 2 (In C.A. No. 183 of 59), Appellants v. Union of India and another (In both the Appeals), Respondents.
Civil Appeals Nos. 183 and 184 of 1959.
Advocates appeared
Mr. A. V. Viswanatha Sastri, Senior Advocate, (Mr. J. B. Dadachanji, Advocate, with him) for Appellant (In C. A. No. 183 of 59) and Respondent No. 2 (In C. A. No. 184 of 59); Mr. B. Sen, Senior Advocate (Mr. I. N. Shroff, Advocate, with him) for Appellant (In C. A. No. 184 of 59) and Respondent No. 2 (In C. A. No. 183 of 59); Mr. C. K. Daphtary, Solicitor-General of India, (M/s. Y. Kumar and P. D. Menon, Advocates, with him) for Respondent No. 1 (In both the Appeals.)
A.V.VISHWANATHA SASTRI, B.SEN, C.K.DAFTARY, I.M.SHROFF, J.B.DADACHAN, P.D.MENON, Y.Kumar
Excise duty is a tax on manufacture; as an indirect tax, its ultimate incidence is on the consumer. Therefore, the government may employ any reasonable administrative machinery for collection, including recovery from the consignee, without altering the tax's essential nature.
Headnote:(A) Limitation Act - Articles 50, 120 and 149 - Recovery of statutory cess by Government - Period of limitation - Suit by Central Government for recovery of dues - For a suit filed by the government, the period of limitation is 60 years, and the starting point is determined by when the period would begin to run against a like suit by a private person - In the absence of a specific article for recovery of statutory cess by a private party, the residuary article applies, and time runs from when the right to sue accrues. (Para 5)
(B) General Clauses Act, 1897 - Section 6 - Repeal of Ordinance - Saving clause - Effect of expiry of repealing Ordinance - Where a permanent Ordinance is repealed by a temporary Ordinance that expressly applies the saving provisions of the General Clauses Act, the rights and liabilities accrued under the repealed Ordinance are not extinguished by the subsequent expiry of the repealing Ordinance - Such laws continue to be in force under Article 372 of the Constitution of India until altered or repealed by a competent legislature. (Para 6)
(C) Excise Duty - Nature and Collection - Excise duty is primarily a tax on the production or manufacture of goods within the country - Being an indirect tax, the ultimate incidence falls on the consumer - The machinery for collection, including recovery from the consignee at the destination, does not alter the essential nature of the tax as long as there is a rational connection between the tax and the person from whom it is collected; the method of collection is a matter of administrative convenience. (Paras 7, 8)
(D) Statutory Rules - Recovery of cess - Where rules provide for recovery from the consignor in case of prepaid freight and from the consignee where freight is collected at destination, the consignor cannot be held liable if the freight was payable at the destination. (Para 10)
Facts of the case:
A suit was filed by the government for the recovery of coal cess that was not collected at the time of delivery of three consignments. The freight for the consignments was payable at the destination, and while the freight was paid, the cess was missed. The defendants challenged the suit on grounds of limitation, the legality of the levy following the repeal of the governing Ordinance, and the validity of collecting excise duty from a consignee.
Findings of Court:
The suit was within the limitation period of 60 years applicable to the government. The levy remained valid despite the repeal of the original Ordinance due to the saving provisions of the General Clauses Act and the Constitution. The collection of excise duty from the consignee is a valid administrative mechanism for an indirect tax. However, the consignor is not liable when the rules specify recovery from the consignee for freight payable at destination.
Issues: Whether the suit for recovery of cess was barred by limitation; whether the repeal of the governing Ordinance extinguished the authority to recover the tax; whether an excise duty could be legally recovered from a consignee; and whether the consignor remained liable for the payment.
Ratio Decidendi: The court held that for government suits, the limitation period is 60 years from the point a private person's limitation would start. A permanent Ordinance's saved liabilities persist even after the repealing Ordinance expires. Excise duty's nature is defined by the fact of manufacture, not the stage of collection; thus, recovery from the consignee is permissible. Liability for payment is governed strictly by the collection rules based on freight payment terms.
Result: Civil Appeal No. 183 of 1959 is dismissed with costs of the first respondent, and Civil Appeal No. 184 of 1959 is allowed with costs to be paid be the first respondent.
SUBBA RAO, J. : These two appeals by certificates are filed against the judgment and decree of the High Court of Madhya Pradesh, Jabalpur, by the two defendants in Civil Suit No. 1 of 1957, a Suit filed by the Union of India, owning and representing the Central and Western Railways Administrations, New Delhi, against the said defendant, for the recovery of coal cess amounting to Rs. 81-4-0 and costs.
2. The material facts may be briefly stated. Under Ordinance No. 39 of 1944, the Central Government was authorized to levy and collect as a cess on all coal and coke despatched from collieries in British India a duty of excise at such rate, not exceeding Rs. 1-4-0 per ton. In exercise of the power conferred on the Central Government under S. 5 of the Ordinance, the said Government made rules; and under R. 3 thereof, the duty of excise imposed under the Ordinance on coal and coke shall, when such coal and coke is despatched by rail from collieries or coke plants, be collected by the Railway Administration by means of a surcharge on freight, and such duty of excise shall be recovered either from the consignor or the cosignee, as the case may be. On January 1, 1947, February 1, 1947, and February 7/9, 1947, the second defendant namely the Amalgamated Coalfields, despatched by rail to the first defendant three consignments of coal from Junnor-Deo to Indore. The freight for the three consignments was payable at the destination station i.e. Indore. The first defendant duly paid the freight and took the delivery of the coal. But by some mistake the cess payable as surcharge on the three consignments was not recovered from the first defendant at the time of delivery of the goods. Under S. 55(5) of the Indian Railways Act the Railway Administration can recover the freight or any balance thereof left unrecovered by way of suit. On April 15, 1953, the Union of India, representing the Central and Western Railways Administrations, flied Civil Suit No. 126 of 1953 in the Court of the Civil Judge, II Class, at Chhindwara, for the recovery of the said cess. The High Court withdrew the case and took it on its own file for trial on the ground that important questions of interpretation of the Government of India Act, 1935, and the Constitution were involved, and it was numbered as Civil Suit No. 1 of 1957. The defendants, inter alia pleaded that the levy was illegal and the suit was barred by limitation. The High Court held that the suit was within time under Art. 149 of the Limitation Act and that the defendants were liable to pay the cess and decreed the suit. The first defendant filed Civil Appeal No. 183 of 1959 and the second defendant filed Civil Appeal No. 184 of 1959 against the said decree.
3. At the outset we may take up two of the points, which were not mentioned in the statement of case, raised by Mr. Viswanatha Sastri, learned counsel for the appellant in Civil Appeal No. 183 of 1959. The said points are: (1) Coal cess is a fee and not a tax or duty, and (2) the first defendant i.e., the consignee, was a non-resident and, therefore, the Ordinance not having extra-territorial operation could not reach him. These two contentions do not find place in the statement of case as they should. Under Order XVIII R. 2 of the SC Rules, each party shall lodge is case within the time prescribed therein, and, under R. 3 thereof, the said case shall consist of two parts, and Part II, which is relevant now, says that it shall set out the propositions of law to be urged in support of the contentions of the party lodging the case. The object of the statement of the case is not only to enlighten the Court on the questions that would be raised before it, but also to enable the opposite party to know beforehand the arguments he would have to meet and to prepare his case. That the statement of case should be complete and full is also emphasized by the fact that, under the Schedule of Fees, a decent fee is prescribed to the junior and senior advocates fo
