1988 (7) TMI 70 - HC - Central Excise

Issues Involved:
1. Validity of the application of the Taxation Laws (Application to Jammu & Kashmir) Act, 1954.
2. Validity of the Central Excises and Salt Act, 1944, in the State of Jammu & Kashmir.
3. The competence of the Union Parliament to legislate and extend laws to the State of Jammu & Kashmir.
4. The petitioner's obligation to pay excise duty collected from consumers.

Detailed Analysis:

1. Validity of the application of the Taxation Laws (Application to Jammu & Kashmir) Act, 1954:
The petitioner challenged the validity of the Taxation Laws (Application to Jammu & Kashmir) Act, 1954, arguing that it violated the Instrument of Accession and could not be applied to the State. The court rejected this argument, stating that the Instrument of Accession allowed for the extension of legislative powers and that the Constitution (Application to Jammu & Kashmir) Order, 1954, was validly issued by the President of India under Article 370. The court cited previous judgments, including the Supreme Court's decisions, to support the constitutionality and validity of Article 370 and the Taxation Laws Act of 1954.

2. Validity of the Central Excises and Salt Act, 1944, in the State of Jammu & Kashmir:
The petitioner contended that the Central Excises and Salt Act, 1944, was a "dead law" for Jammu & Kashmir and could not be extended to the State. The court refuted this, stating that the Act was validly extended through the Taxation Laws Act of 1954. The court emphasized that the legislative competence of the Union Parliament, under Article 246 and the Constitution Order of 1954, included the power to legislate on excise duties. The court also noted that the State's own Tobacco Excise Duty Ordinance ceased to be valid once the Union Parliament legislated in the same field.

3. The competence of the Union Parliament to legislate and extend laws to the State of Jammu & Kashmir:
The petitioner argued that the Union Parliament could not extend existing laws to Jammu & Kashmir but could only enact new laws. The court dismissed this argument, clarifying that the power to "make laws" included the power to "extend laws." The court held that the extension of the Central Excises and Salt Act, 1944, to Jammu & Kashmir was constitutionally valid and that the Parliament's legislative competence over the State was well established under Article 370 and the Constitution Order of 1954.

4. The petitioner's obligation to pay excise duty collected from consumers:
The court addressed the petitioner's obligation to pay the excise duty collected from consumers. It emphasized that the petitioner, having collected the excise duty as an agent of the government, could not retain the amount and must pay it to the department. The court underscored the principle of equity, stating that the petitioner could not enrich itself by withholding the excise duty collected on behalf of the government.

Conclusion:
The court dismissed the writ petition, upholding the validity and applicability of the Taxation Laws (Application to Jammu & Kashmir) Act, 1954, and the Central Excises and Salt Act, 1944, to the State of Jammu & Kashmir. It directed the petitioner to pay the excise duty collected from consumers and allowed the encashment of bank guarantees furnished by the petitioner. The court also expressed concern over the delay caused by the petitioner's conduct and emphasized the importance of public revenue for developmental works.

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