1961 (12) TMI 1 - SC - Central Excise

Whether the terms of Rule 10A of the Excise Rules, 1944 were insufficient to cover the cases of the appellants and that in consequence the demand made on them and the attempt to recover the sums by resort to the coercive process provided for by Section 11 of the Central Excise Act was illegal and without statutory authority? Held that - a duty of excise is a tax-levy on home-produced goods of a specified class or description, the duty being calculated according to the quantity or value of the goods and which is levied because of the mere fact of the goods having been produced or manufactured and unrelated to and not dependent on any commercial transaction in them. The duty in the present case satisfies this test and therefore it is unnecessary to seek other grounds for sustaining the validity of the tax. The words deficiency in duty if the duty has for any reason been short-levied are, in our opinion, wide enough to include cases of deficiency arising like those in the circumstances of the present case, viz., where 8 annas out of the 14 annas of the duty has been collected in the first instance but 6 annas remains to be collected. We consider, therefore, that there is no substance in the objection that Rule 10A is not wide enough to cover the recovery of the duty from the appellants. Appeal dismissed.

Summary

Issues Involved:
1. Legislative competence of Parliament to impose retrospective excise duty.
2. Constitutionality of the retrospective excise duty under Article 19(1)(f) and Article 31 of the Constitution.
3. Adequacy of Rule 10A of the Excise Rules for the collection of the excise duty.

Issue-wise Detailed Analysis:

1. Legislative Competence of Parliament to Impose Retrospective Excise Duty:
The appellants argued that the retrospective imposition of excise duty under Section 7(2) of the Finance Act, 1951, was beyond the legislative competence of Parliament. They contended that an excise duty, being an indirect tax, must be capable of being passed on to the consumer. When imposed retrospectively, it cannot be passed on, thus altering its essential nature and making it a direct tax, which Parliament is not empowered to impose under Entry 84 of the Union List.

The judgment clarified that a duty of excise is a tax on home-produced goods, levied on the activity of production or manufacture. It is not a personal tax but a tax on goods. The retrospective imposition does not alter its nature as a duty of excise. The Court relied on previous judgments and legislative practices to conclude that the retrospective levy of excise duty is within the legislative competence of Parliament.

2. Constitutionality of the Retrospective Excise Duty under Article 19(1)(f) and Article 31:
The appellants argued that the retrospective levy of excise duty violated their fundamental right to hold property under Article 19(1)(f) and constituted a deprivation of property without authority of law under Article 31(1) and (2).

The judgment held that the power to tax is an attribute of sovereignty and is essential for the existence and operation of the government. Taxation laws are subject to constitutional limitations but are not inherently unreasonable or unconstitutional. The Court emphasized that the needs of the revenue and the discretion of the legislature in selecting objects for taxation are beyond judicial scrutiny. Therefore, the retrospective imposition of excise duty did not violate Article 19(1)(f) or Article 31.

3. Adequacy of Rule 10A of the Excise Rules for the Collection of the Excise Duty:
The appellants contended that Rule 10A of the Excise Rules was not adequate to cover the recovery of the duty in question. They argued that the rule did not specifically provide for the collection of duty imposed retrospectively.

The judgment found that Rule 10A, which provides for the recovery of any deficiency in duty if the duty has been short-levied for any reason, was broad enough to cover the circumstances of the present case. The rule was deemed sufficient to authorize the collection of the additional duty imposed retrospectively.

Conclusion:
The Supreme Court dismissed the appeals, holding that the retrospective imposition of excise duty was within the legislative competence of Parliament, did not violate the fundamental rights under Articles 19(1)(f) and 31, and that Rule 10A of the Excise Rules was adequate for the recovery of the duty. The judgment emphasized the broad discretion of the legislature in matters of taxation and the limited scope of judicial review in such cases.