1961 (1) TMI 95 - SC - Indian Laws

Summary

Issues Involved:
1. Jurisdiction to levy and collect excise duty before January 26, 1950.
2. Applicability and enforcement of the Central Excise and Salt Act, 1944, in Rajasthan before April 1, 1950.
3. Proper promulgation and authentication of the Rajasthan Excise Duties Ordinance, 1949, and the rules framed thereunder.
4. Impact of the agreement between the Government of India and the State of Rajasthan on the collection of excise duty arrears.
5. Interpretation of Articles 277, 278, 294, and 295 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Jurisdiction to Levy and Collect Excise Duty Before January 26, 1950:
The respondent contended that the Central Government had no jurisdiction to levy any tax before January 26, 1950. The appellants argued that the Rajasthan Excise Duties Ordinance, 1949, levied excise duty on cloth manufactured in Rajasthan from April 1, 1949, and that the Union of India was entitled to recover these arrears due to an agreement with the State of Rajasthan.

2. Applicability and Enforcement of the Central Excise and Salt Act, 1944, in Rajasthan Before April 1, 1950:
The respondent argued that the Central Excise and Salt Act was not in force in Rajasthan before April 1, 1950, and that without the application of rules framed under this Act, no duty could be imposed, levied, or collected. The appellants countered that the rules became applicable to Rajasthan with effect from April 1, 1950, by virtue of Section 11 of the Finance Act, 1950.

3. Proper Promulgation and Authentication of the Rajasthan Excise Duties Ordinance, 1949, and the Rules Framed Thereunder:
The High Court held that the rules under the Rajasthan Excise Duties Ordinance were not properly authenticated. However, the Supreme Court found that the authentication by the Law Secretary covered both the Ordinance and the rules, thereby satisfying the formal requirements of promulgation and authentication. The Rajasthan Gazette's publication, including the authentication by the Law Secretary, was deemed sufficient.

4. Impact of the Agreement Between the Government of India and the State of Rajasthan on the Collection of Excise Duty Arrears:
The High Court concluded that Article 277 of the Constitution was a complete answer to the Government of India's claim to collect dues for any period before April 1, 1950. However, the Supreme Court disagreed, stating that the agreement dated February 25, 1950, between the President of India and the Rajpramukh of Rajasthan, which incorporated the recommendations of the Indian States Finance Enquiry Committee, allowed the Union of India to collect all outstanding excise duties. This agreement, made under Articles 278 and 295 of the Constitution, overrode the provisions of Article 277.

5. Interpretation of Articles 277, 278, 294, and 295 of the Constitution of India:
The Supreme Court clarified that Article 278, which allows agreements between the Government of India and the State Governments, overrides Article 277. The agreement between the Government of India and the State of Rajasthan, made under Article 278, allowed the Union of India to collect arrears of excise duty. The court held that the combined operation of Articles 277 and 278, read with the agreement, vested the power of levy and collection of the duty in the Union of India, displacing the operation of Article 277.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's decision. The writ petition filed by the respondent in the High Court was dismissed, allowing the Union of India to recover the arrears of excise duty from the respondent. The appeal was allowed with costs awarded to the appellants.