1959 (12) TMI 39 - SC - Central Excise

Whether the Act in question is a law with respect to the matters enumerated in item 45 of List 1 or to the matters enumerated in item 27 and 29 of List 11? Held that - The various provisions of the Act and the Rules made thereunder were, in our opinion, essentially connected with the levying & collection of excise duty and in its true nature and character the Act remains one that falls under item 45 of List 1 and the incidental trenching upon the provincial field of items 27 or 29 would not affect its constitutionality because the extent of invasion of the provincial field may be a circumstance to determine the true pith and substance but once that question is determined the Act, in our opinion, would fall on the side of Central field and not that of the provincial field. If the tribunal is to act judicially it must confirm to the principles of natural justice of audi alteram partem and there is no dispute that in the instant case there was no breach of this rule. Not only this, there is a right of appeal and a revision is also provided and both these remedies the petitioner availed himself of. The argument of unreasonable restriction because of this ground must also fail. The Collector was acting within his powers if he asked for the deposit of cash security of ₹ 10,000. This is not a matter with which we can, in the circumstances of this case, interfere. Appeal dismissed.

Issues Involved:
1. Legislative competence of the Central Legislature under the Constitution Act of 1935.
2. Alleged unreasonable restraint on the fundamental right to trade in tobacco.
3. Validity of orders passed under the Central Excises and Salt Act, 1944, and related rules.

Issue-wise Detailed Analysis:

1. Legislative Competence of the Central Legislature:
The petitioner argued that sections 6 and 8 of the Central Excises and Salt Act, 1944, and the Rules made thereunder were beyond the legislative competence of the Central Legislature under the Constitution Act of 1935. The Act was contended to encroach upon items 27 and 29 of List II, which pertain to trade and commerce within the province and the production, supply, and distribution of goods. The court examined the Act's scheme, noting that its primary purpose was to levy and collect excise duties on tobacco, which falls under item 45 of List I. The court held that the Act's provisions, including those for licensing and regulation, were incidental to the effective collection of excise duties and did not constitute an unconstitutional encroachment on provincial legislative fields. The court emphasized that legislation's pith and substance should be considered, and if it falls substantially within an item in the Central List, incidental overlap with provincial subjects does not invalidate it.

2. Alleged Unreasonable Restraint on Fundamental Right to Trade:
The petitioner contended that the Act and its rules imposed excessive and unreasonable restraints on the fundamental right to trade in tobacco, not saved by Article 19(6) of the Constitution. The court rejected this argument, stating that the Act and rules aimed to ensure effective excise duty collection and were necessary for supervising tobacco movement. The court found no violation of natural justice principles, as the petitioner had opportunities for appeal and revision, which he utilized. The court concluded that the restrictions were reasonable and in the public interest, thus saved by Article 19(6).

3. Validity of Orders Passed:
The petitioner challenged two specific orders:
- The first order involved the confiscation of tobacco bags, a fine, and a penalty under Rules 151(C) and 226 of the Central Excise Rules. The court found that the petitioner had failed to deposit the penalty, leading to the dismissal of his appeal and revision. The court upheld the order as within the Collector's powers.
- The second order involved the demand for a fresh surety or cash security of Rs. 10,000, failing which the petitioner's license was made inoperative. The court noted that the previous surety had ceased to act, justifying the Collector's demand under Rule 140 of the Excise Rules. The court found no grounds to interfere with this order.

The court also dismissed allegations of mala fide actions, noting the absence of such claims in the petition and lack of evidence.

Conclusion:
The court concluded that the Central Excises and Salt Act, 1944, and its rules were within the legislative competence of the Central Legislature, did not impose unreasonable restraints on the fundamental right to trade, and the challenged orders were valid and within the authorities' powers. The petition was dismissed with costs.

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