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Issues Involved:
1. Entitlement of the Union of India to levy and recover arrears of excise duty on cloth held in stock or manufactured before 1-4-1950. 2. Validity and authentication of the Government notification adopting Jaipur Excise Rules under the Rajasthan Excise Duties Ordinance. Issue-wise Detailed Analysis: 1. Entitlement of the Union of India to Levy and Recover Arrears of Excise Duty: The primary issue was whether the Union of India could levy and recover excise duty on cloth manufactured or in stock before 1-4-1950, based on Articles 278, 279, and 295 of the Constitution of India and an agreement between the President of India and the Raj Pramukh of Rajasthan dated 25-2-1950. The court clarified that the relevant articles were Articles 277, 278, and 295, not Article 279. The court examined the provisions of Article 277, which allowed states to continue levying taxes, duties, cesses, or fees that were lawfully levied before the commencement of the Constitution until Parliament provided otherwise. Since Parliament made provisions only from 1-4-1950, the State of Rajasthan was entitled to levy and collect excise duties on cotton cloth until 31-3-1950. The court also analyzed Article 295, which dealt with the vesting of property and assets in the Union. The court concluded that arrears of excise duties for the period before 1-4-1950 could not be considered assets vested in the Union Government because they were for the purposes of the State of Rajasthan until 31-3-1950. Consequently, Article 295 did not apply to these arrears. Furthermore, the court addressed the argument based on Article 278 and the agreement of 25-2-1950. It was noted that the agreement did not specifically refer to cotton excise duties, and Article 278 could not apply to duties leviable by the State of Rajasthan until 31-3-1950. The court emphasized that Article 277 was a complete answer to the Union of India's claim to collect these arrears. The court also contrasted the provisions of Section 173(4) of the Government of India Act, 1935, which explicitly provided for the recovery of arrears by the Federal or Provincial Government, with the absence of a similar provision in the Constitution. The court concluded that the absence of such a provision and the presence of Article 277 indicated that the arrears did not vest in the Union Government. 2. Validity and Authentication of the Government Notification: The second issue concerned the validity and authentication of the Government notification adopting the Jaipur Excise Rules under the Rajasthan Excise Duties Ordinance. The court observed that the rules were published in the Hindi Rajasthan Gazette on 12-11-1949, but there was no authentication of these rules in the Gazette. The authentication dated 15-9-1949, related only to the Ordinance and not to the rules published on 12-11-1949. The court noted that the opposite parties did not provide any evidence to show that the rules were considered and passed by the Rajpramukh of Rajasthan before their publication. Consequently, the presumption under Section 3(2) of the Rajasthan Administration (Amendment) Ordinance No. 5 of 1949 did not apply to these rules. The court concluded that the rules published in the Gazette were not duly framed by the authority authorized to frame them under Sections 5 and 26 of the Rajasthan Excise Duties Ordinance No. 25 of 1949. Therefore, the rules were held to be invalid and of no effect due to the lack of authentication and proof of proper framing by the authorized authority. Conclusion: The court answered the first question by stating that the Union of India was not entitled to levy and recover arrears of excise duty on cotton cloth held in stock or manufactured before 1-4-1950. The court's decision was based on the interpretation of Articles 277, 278, and 295 of the Constitution and the agreement between the President of India and the Rajpramukh of Rajasthan. The court also addressed the second question by declaring the rules published in the Hindi Rajasthan Gazette on 12-11-1949, invalid due to the lack of proper authentication and proof of framing by the authorized authority.
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