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TMI Blog1958 (9) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, for the supply of which the factory has its own power house. For feeding the power house, coal is required. The appellant has provided itself with a source for getting the coal by taking a lease of a colliery which is situated within the boundaries of the factory. Thus, the factory, the power house and the colliery are all situated within the same compound and all are owned by the appellant as parts of a single industrial unit. 3. The colliery has an average annual output of 55,000 to 70,000 tons of coal. Of that quantity, the bulk is consumed in the power house for generation of the electricity used in the factory for the production of aluminium. The small remainder is sold to railway and other parties. A tabular statement filed by the appellant for five years shows that, on the average, about 50000 tons of coal were consumed in the power house and about 13000 tons were sold to third parties. 4. The distance between the pithead of the appellant's colliery and its power house is about one furlong. The coal consumed in the power house is carried to it from the pithead by means of hand trolleys belonging to the appellant. 5. In March, 1952, Parliament passed an Act, called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erbook. Indeed, it would seem that there was no separate notification but the date on which the rules laying down the method of assessing and collecting the duty were published in the Gazette was taken to be the date with effect from which the duty became chargeable. 8. Section 17 of the Act empowers the Central Government to frame rules for inter alia "the levy, collection and payment of the duties of excise.'' In exercise of that power, the Central Government framed Rules 24 to 32 and incorporated them in Chapter V of the body of the Rules, called the Coal Mines Conservation and Safety Rules, which were published on 25-9-1954. Rule 24 which prescribe the method of recovering the duty imposed by Section 8(1)(a) of the Act, makes a distinction between coal despatched by rail and coal despatched by other means, namely, by road, river or tramway. In the former case, the duty is to be recovered by means of a surcharge on the freight from the consignor or the consignee according as the freight charges are paid by the one or the other. In the latter case, it is to be recovered in the manner provided for in Rules 29 to 31. Broadly stated, the method prescribed by Rules 29 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section are not attracted to so much of the coal raised from its colliery as is consumed in its own power house. It is also contended that even assuming that the impost is valid and that it is valid even as an impost on the coal consumed by the owner of the mine from which it is raised, it can be collected only by Government themselves and, therefore, the provision for its collection by the Coal Board is bad. The last contention docs not appear to have been urged before the learned trial Judge. 11. The argument about the invalidity of Section (1)(a), as I understood it, had two branches which I think I may put correctly in the following form: (1) The section is altogether void, because no entry in the Legislative Lists authorises Parliament to impose an excise duty or indeed any duty on coal raised from mines; and (2) that assuming that Parliament could validly impose an excise duty on coal, still the duty being a duty of excise, it could be imposed only on coal sold to third parties and despatched to them, but there could be no excise duty on coal which the owner of a mine himself consumed and, therefore, the section providing for the levy of such duty is bad. It is to be noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in order to uphold the impost it is not necessary to draw upon entry No. 54 which, if it at all authorises the levy of a tax, authorises a levy of a very different kind. The entry empowers Parliament to make laws on "regulation of mines and mineral development to the extent to which such regulation and development under the Control of the Union is declared by Parliament by law to be expedient in public interest." To the extent that there is no such declaration, "Regulation of mines and mineral development" belongs to the State List and has been provided for in entry No. 23 contained there. There can be no doubt that in enacting the Coal Mines (Conservation and Safety) Act, Parliament purported basically to proceed under entry No. 54 of the Union List, because it declared by Section 3 that it was expedient in public interest that the Central Government should take under its control regulation of coal mines to the extent specified in the subsequent provisions of the Act. The implied reference to entry No. 54 is thus clear. It will be noticed, however, that the Act is concerned only with a part of the matter provided for in entry No. 54, because Section 3 makes n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed for the purpose of regulation. In my opinion, where under a particular constitution, a legislature is given power to make laws for the regulation of a certain thing but no independent power of taxation with respect to that thing, it may be possible to read into the power to regulate a power to raise by taxation the funds necessary for furthering the object by any law that may be made. The legitimacy of such construction of the power even in such circumstances has been doubted, but it cannot certainly be legitimate in a case where the power to levy a tax for the object concerned has been separately granted. It is true that a constitution is not a statute but is an authority for the making of statutes and, therefore a head of power in a legislative list contained in a constitution is only an expression of a purpose with respect to which laws may be made. Such a head is not to be rigidly construed but on the other hand, as has been said, a construction most beneficial to the widest possible amplitude of the power conferred must be adopted. Yet in construing a head of power in a legislative list and determining the content of the power granted, one must consider it by reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Act imposing a levy which is not a tax raised as a contribution to the revenue, but really a tax designed to regulate in an indirect manner the matter which could not be directly regulated, is ultra vires. In the present case, there is no conflict from this point of view between the Parliament and the State Legislatures, because Regulation of Mines belongs to Parliament as well, subject to a condition which has been fulfilled in the present case. Indeed, it is the State Legislatures which have no jurisdiction, because under the words of entry No. 23 of the State List, the power of the State) Legislature is subject to the provisions of List I, so that when Parliament has taken over the matter by making the necessary declaration, the State Legislatures are deprived of jurisdiction to the extent that the matter has been taken over. The case cited, therefore, has no application where the legislature concerned has both the plenary power of taxation and the regulatory power with respect to a particular matter and where the question is whether a particular levy can be said to be authorised by the regulatory power rather than the power of taxation. In such a case, the answer must depend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of human skill and labour in bringing the goods concerned into tile condition which would attract the duty. It is not required that the goods should be manufactured in the sense that raw material should be used to turn out something altogether different, but it is still required that they should be produced in the sense that some human activity should be spent on them and they should be subject to some processes in order that they may be brought to the state in which they may become fit for consumption. As the learned Judge has pointed out, coal has to be raised from the bowels of the earth, broken, sifted and graded before it can be offered to consumers. To speak of coal as produced in the sense to its being made a material of consumption by human skill and labour is thus entirely correct and has a sanction of approved usage. The Judicial Committee, for example, observed in the case of The King v. Caledonian Collieries, Limited, 1928 A. C. 358 that the respondents before them were ''producers of coal." The appellant's contention that coal is not covered by entry No. 84, because it is not something which can be said to be produced, must, therefore, be overruled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t;Excise," as the Judicial Committee observed in the case of Atlantic Smoke Shops, Ltd. v. Conlon and Attorney-General for Canada, 1943 A. C. 550 "is a word of vague and somewhat ambiguous meaning." It seems to have received different interpretations under different constitutions but one characteristic of it which has been accepted as common is that it is a tax on goods and not on consumption or manufacture or sale and, as the Privy Council observed in the case of Attorney-General for British Columbia v. Kingcome Navigation Co. Ltd., (1934) AC 45, "it may be said to be more concerned with the commodity in respect of which the taxation is imposed than with the particular person from whom the tax is exacted." Both the above decisions were under the British North America Act and Lord Simon's statement in the former case that "the word 'excise' is usually (though by no means always) employed to indicate a duty imposed on home-manufactured articles in the course of manufacture before they reach the consumer." And Lord Thankerton's statement in the latter case that excise duties are in their essence "trading taxes" would seem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended. The question on which side of the line a tax on the first sale in a State of the goods manufactured or produced would fall was expressly left open in the first case but it was answered in the Second where it was held that such a tax, although imposed on the manufacturer or producer, would be a sales-tax, being imposed on him qua seller and not a duty of excise imposed on him qua manufacturer or producer. In the second case, Gwyer, C. J., in delivering the unanimous judgment of the Court, observed that a manufacturer or producer might in a case be subject to a double duty, a duty of excise imposed on the goods manufactured or produced and also a sales-tax imposed on the first sales of the goods. In explaining the possible liability to an excise tax in such a case, the learned Chief Justice made inter alia the following observation. "There is in theory nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed or given away," and again : "It is the fact of manufacture which attracts the duty, even though it may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that such a tax was not a duty of excise, the Court explained what a duty of excise was and pointed out that it was a duty on goods manufactured or produced, attaching solely on their manufacture or production and, therefore, for the purposes of the duty, what happened to be goods afterwards, whether they were sold to third parties or consumed by the manufacturer or producer himself was immaterial and, irrelevant. The Privy Council endorsed that view and said more tersely and definitely that a duty of excise was a duty on the commodities themselves and not a duty on their sale or sale proceeds. The true meaning of the observations of the Federal Court is that the characteristic which marks a duty of excise is that it is A duty on goods and manufacture or production within the country being the sole and sufficient basis for imposing the duty on the goods concerned, where that basis is present and the duty is imposed on that basis, it is a duty of excise, irrespective of whether the goods are subsequently sold to others or consumed by the owner or producer. This observation contemplates a duty imposed on the goods simpliciter upon their manufacture or production. The Federal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut, as I have pointed out, it is not a difficulty peculiar to the case where the despatch is to the producer himself, but arisen equally in the case where the despatch is to third parties. I shall, therefore, deal with the general question. The argument against the validity of the section from this aspect of the case must be that since the duty imposed by the Act is not imposed on the goods, as produced or manufactured but is a duty imposed on them upon their despatch, it cannot be a duty of excise. I think, however, that the argument is answered by another observation of the Federal Court in the second of the cases which also was endorsed by the Privy Council. After pointing out that, in theory the legislature could impose a duty of excise on a commodity as soon as it came into existence, Gwyer C. J. proceeded to observe as follows: "A taxing authority will not ordinarily impose such a duty, because it is much more convenient administratively to collect the duty (as in the case of most of the Indian Excise Acts) when the commodity leaves the factory for the first time, and also because the duty is intended to be an indirect duty which the manufacturer or producer is to pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the rest, the duty, although imposed, would not be collected. In my view, the problem is capable of a simpler answer. The answer is that, under the section, despatch of the coal is not a condition precedent to the imposition of the tax, but is intended only to indicate a point of time at which the tax is intended to be imposed and collected. The addition of the word "despatched" does not, therefore, make the duty any the less a duty of excise. 25. Even this, however, does not solve the whole problem. The appellant's next contention was that although the duty imposed by Section 8 (1) (a) of the Act might be a duty of excise in spite of the fact that it was to be levied not on coal raised but on coal "raised and despatched", it was still not chargeable on coal which the appellant might itself consume, because the section did not intend such coal to be charged. This argument was put forward on a textual basis. It was contended that, as a matter of construction, coal "raised and despatched from collieries" ought to be given the meaning "despatched to third parties' first, because one could not despatch something to oneself at the same plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concern from which goods are sent and the concern to which they are sent would not therefore, by itself make the word 'despatched' inapplicable. But the position in the present case is not exactly the position in the hypothetical case just mentioned. This is not a case where two different concerns, whether situated closely to each other or far apart, are owned by the same person and goods were sent from one to the other. This is a case where the establishment from which the goods were sent and the establishment to which they were sent are all parts of one and the same concern, necessarily owned by the same person as parts of the same property; and goods of one kind produced in one part of the concern were moved to another part, situated close by, for use in the production of goods of another kind. To cite two analogous cases, it is as if in a spinning and weaving mill, a quantity of yarn was sent from the spinning department to the weaving department to be used there in the production of cloth by the mill or as if in a book-binding establishment making its own glue, a quantity of glue was sent from the section where it was made to the section where books were actually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence. The same language, viz., "raised and despatched from the collieries in India," has been used in the two clauses to describe and particularise the same thing, viz., "coking coal" mentioned directly in Clause (b) and as included in "all coal" in Clause (a) and, indeed, the description in Clause (b) is a repetition of the description in Clause (a) intended to mark the identity of the thing described in order to the making of provision for an additional duty thereon. Out of "all coal raised and despatched from the collieries in India", which is dealt with generally in Clause (a) and laid under a duty of excise by that clause, a further provision with respect to "coking coal raised and despatched from the collieries in India" is made in Clause (b) by way of prescribing the levy of an additional duty on such coal. There can thus be no question that the words "raised and despatched" have been used in Clauses (a) and (b) of Section 8 (1) of the Act in the same sense. 29. As to what 'coking coal raised and despatched from the collieries in India' is contemplated by Clause (b), Section 8 (2) gives a clear indication. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board to order under Clause (b) despatch of coking coal to the owner of the colliery himself. These clauses thus clearly contemplate despatch by the owner to another person. In the case of Clause (a) it may at first sight appear that the clause may reasonably apply even to a case of despatch by the owner to himself, because the initial levy of the additional duty is to be made on the whole quantity of the coking coal despatched, while the refund is to be of only the duty collected on so much of the coal as is actually received and used. It may appear that since the latter quantity may be less, there would be no oddity, even in a case of des-patch by the owner to himself, in first taking from him the duty on the whole quantity despatched and then giving back to him the portion found refundable by reference to the actual consumption. In my view, the clause might properly be taken to comprehend that meaning if the latter part of it contained only the word 'used' and not also the word 'received'. One cannot receive something from oneself and I do not think it can properly be said that the word 'received' has been used, because a part of the coking coal despatche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e despatch contemplated to be despatch to a person other than the owner, as in my view it does, the same must be the contemplation of Section 8 (1) (b) as well and for reasons I have given earlier, the contemplation of Section 8 (1) (a). This meaning of Section 8 in both of its sub-sections, which is suggested by its language, receives further support from the fact that the duty imposed by the section is a duty of excise and that duty, in its common form, is a duty which can be passed on to another person. All these reasons, in my opinion, converge to suggest that the true meaning of Section 8 (1) (a) is that it imposes a duty of excise on all coal despatched from collieries in India to third parties. Even if the true meaning of the section be doubtful, which in my view it is not, the benefit of the doubt should go to the appellant. 31. To sum up my conclusions on this part of the case; A duty of excise can be imposed on goods immediately on their manufacture or production in the country, regardless of whether they are sold to third parties or consumed by the manufacturer or producer himself. If Section 8 (1) (a) of the Act had imposed the duty on "all coal raised from the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act empowering the Coal Board to collect the duty was ultra vires the Constitution. It was pointed out that under Article 272 of the Constitution, Union duties of excise were to be levied and collected by the Government of India and it was contended that collection by any other agency or party was clearly unauthorised. This argument was based upon a misreading of both the Constitution and the Act concerned. The Act by itself does not say who will collect the duty but only says that it shall be collected "by such agencies and in such manner as may be prescribed". It need hardly be pointed out that any tax collected by the Government of India may be collected by their agents and need not be collected by their servants alone. Specific provision for the collection of the duty is made in Chapter V of the Rules and, under Rule 24 of these Rules, the duty on coal or coke, despatched by rail is to be collected by the railway officials as a surcharge on the freight. I do not think it will be disputed that such collection is collection by Government. As to the duty on coal despatched by means other than rail, Rule 29 requires the owner to record in a register the quantity of coa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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