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HIGH COURT OF RAJASTHAN
WANCHOO, MODI, JJ.
Mewar Textile Mills Ltd.
Versus
Union of India
Civil Writ Appln. No.245 of 1954
Decided On : 28-03-1955
EXCISE DUTY - Dhoties (Additional Excise Duty) Act, 1953 - Retrospective operation - Validity - Discrimination - Art.14 of the Constitution - Central Excise and Salt Act (No.I) of 1944, R.10-A - Applicability.
Fact of the Case:
The petitioner, a limited company carrying on the business of the manufacture and sale of yarn and cloth at Bhilwara, challenged the validity of the Dhoties (Additional Excise Duty) Act, 1953, and the Dhoties (Additional Excise Duty) Ordinance, 1953, on the grounds that they were retrospective in operation, discriminatory, and violative of Art.14 of the Constitution. The petitioner also contended that the demand for additional excise duty made under the Act was illegal and ultra vires as it was made after the goods had been cleared from the place of manufacture.
Finding of the Court:
1. The Dhoties (Additional Excise Duty) Act, 1953, was retrospective in operation as it was made to come into force on 26-10-1953, a month and twenty three days before it was published in the gazette. However, the retrospective imposition of the tax did not deprive it of its real character as excise duty, as Parliament had the power to enact such law retrospectively. 2. The duty imposed by the Act was an excise duty as it was levied on a manufacturer in respect of the dhoties produced by it over the permissible quota and was connected with the manufacturer thereof. 3. Parliament had the authority to levy such an impost under Entry No.84 of List 1, Union List under the Seventh Schedule of the Constitution. 4. The Act was not discriminatory as it was based on a reasonable classification. The distinction between mills which carried on the business of both spinning and weaving and those which did merely weaving was justified as the former were able to produce dhoties at a cheaper cost than the latter. 5. The Act provided for suitable treatment of mills which might have expanded their machinery or equipment during or after the relevant period under sub-s.(2) of S.3. 6. The demand for additional excise duty made under the Act was not illegal or ultra vires as it was covered by R.10-A of the Central Excise and Salt Act (No.I) of 1944.
Issues: 1. Whether the Dhoties (Additional Excise Duty) Act, 1953, and the Dhoties (Additional Excise Duty) Ordinance, 1953, were retrospective in operation and, if so, whether such retrospective operation was valid. 2. Whether the Act was discriminatory and violative of Art.14 of the Constitution. 3. Whether the demand for additional excise duty made under the Act was illegal and ultra vires.
Ratio Decidendi: 1. A law imposing an excise duty can be enacted retrospectively if it is otherwise within the legislative competence of the authority passing it. The retrospective imposition of an excise duty does not deprive it of its real character as excise duty. 2. A law is not discriminatory if it is based on a reasonable classification. The distinction between mills which carried on the business of both spinning and weaving and those which did merely weaving was justified as the former were able to produce dhoties at a cheaper cost than the latter. 3. A demand for additional excise duty made under an Act is not illegal or ultra vires if it is covered by a rule like R.10-A of the Central Excise and Salt Act (No.I) of 1944.
Final Decision: The petition was dismissed with costs.
MODI, J.:-
This is a writ application by the Mewar Textile Mills Bhilwara under Art.226 of the Constitution and has arisen under the following circumstances.
2. The petitioner is a limited company carrying on business of the manufacture and sale of yarn and cloth at Bhilwara, and, inter alia manufactures Dhoties. It is admitted that the petitioner increased the number of spindles from 7812 to 10860 and the number of looms from 250 to 300 during the period, April 1952 to December, 1952. The Government of India in exercise of the powers conferred by S.3, Essential Supplies (Temporary Powers) Act (No.24) of 1946 made the Cotton Textiles (Control) Order, 1948. By Cl.20 of the Order, the Textile Commissioner was given the power to issue directions from time to time to any producer regarding the classes or specifications of cloth or yarn and the maximum or minimum quantities to be produced, and it was incumbent upon the producer to produce cloth or yarn accordingly.
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.
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 notification in the official gazette the twelve months period between April, 1951, to March, 1952, as the relevant period. By S.4 it was further laid down that where the. quantity of dhoties packed by any mill on or after the commencement of this Ordinance exceeds in any quarter the permissible quota for that quarter, there shall be levied and collected on that quantity of dhoties which is in excess of the permissible quota a duty of excise at the rate or rates which may be applicable thereto as specified in the Schedule appended to the Ordinance.
This Schedule imposed the excise duty on a graduated scale rising with the quantity of the excess over the permissible quota. The Textile Commissioner by his letter dated 31-10-1953, informed the petitioner that the permissible quota for it per quarter would be 2,92,050 yards, and, pro rata, for the unexpired portion of the quarter (that is, 26-10-1953 to 31-12-1953) it would be 2,12,688 yards. The Excise Ordinance was replaced by the Dhoties (Additional Excise Duty) Act, 1953 (hereinafter referred to as the Excise Act). This was enacted by Parliament and received the assent of the President on 16-12-1953, and was published in the Gazette of India, Extraordinary, dated 17-12-1953. It is remarkable that S.3 of the Act was different from the corresponding S.3 of the Ordinance, and the Act, instead of merely limiting the packing, now limited the issue, of dhoties and in effect it was provided that the number already fixed was the maximum quota of dhoties which might be issued out of the mill in any quarter irrespective of the consideration whether the dhoties were manufactured during that quarter or at any time previous thereto.
Section 4 was naturally cast in the same mould and it was enacted that the excise duty mentioned in the Schedule appended to the Act will
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