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TMI Blog1954 (5) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... mmittee to consider the desirability of imposing a cane cess on the lines of the U.P. or Bihar and to rccommend the procedure of fixation of sugar prices within the terms of the agreement subsisting between the Government and the factory. One Minister and three officials of the State were appointed by name as members of this committee. The committee submitted its report to the Gwalior Darbar on 23-7-1946 together with a Guzarish (Submission) from Sardar M.R. Phalke who was a member of the committee and who presided over the deliberation of the committee. Sardar Phalke was at that time also a Revenue Minister in the Government of His Highness the Maharaja Scindia. The Gujarish presented by Sardar Phalke contained the following submissions to the Darbar: 1. that following U.P. policy it is essential to levy on the factory a cane cess of one anna per mauncl on all sugar-cane purchased by the factory. 2. that the proceeds of the cess will primarily be used for cane development work and the utilization and administration of the fund will be under the Cane Development Board A recommendation was also made as to how the Board should be constituted. 3. that sugar price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made a demand for the payment of the cess in respect of the subsequent 'seasons' from 1949 to 1951 amounting to Rs. 2,79,632/14/9. The Petitioner-company says that the levy and demanded (sic) the cess is without the authority of law; that law was ever passed by the Legislature of (sic) while Gwalior State imposing the cess; that (sic) levy is repugnant to Article 14 of the Constitution (sic) infringes the Petitioner's right guaranteed (sic) Article 19(1)(g) ; and that the levy is in contraction of the terms of the agreement dated 1-5-(sic) mentioned above. 5. In the return filed by the Cane Development Officer on behalf of the State opposing the palliation (sic) it has been stated that the agreement date 1-5-1910 does not guaranty to the Petitioner company any exemption from the levy of the cess any other tax, except the export duty; that (sic) authority of the State to impose the cess cannot fettered or restricted by the terms of the agreement or a license granted thereunder; that Darbar Order dated 27-7-1946 is a law import (sic) the cess; that the operation of the cess was, (sic) municated to the company by a letter date (sic) 26-8-1946; that the Petitioner-compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Darbar order dated 1-7-1946 (sic) relied upon by the opponent State is an altercative (sic) order and not a law imposing a cess within the meaning of Article 265; (2) and that even order is regarded as a law of the former (sic) State which wan continued after the formation of Madhya Bharat it cannot be held to be altercative (sic) after the coming' into force of the Constitution (sic) as it infringes the Petitioner's foundational (sic) right under Article 19(l)(g) and is inconsised (sic) pt with the provisions of Article 14 of the Constitution (sic) inasmuch as no cess has been levied on other (sic) factories in the State and the Petitioner-company alone has been prejudicially affected. 7. Under Article 265 no tax can be levied or deducted (sic) except by authority of law. If, therefore, (sic) Darbar order dated 27-7-1946 is an executive and not a law under Article 265, it is obvious (sic) and not justify the impost of the cess. The first (sic) question that, therefore, arises for consideration is, whether the said Darbar order is an execute (sic) order or a law. The question presents some qualities (sic). It has to be determined with reference the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined by the Ruler by passing two orders, one on 24-4-1939 and another on 21-10-1940. Under these orders all measures of legislation and proposals for alteration in taxation were required to be submitted to the Ruler for orders with the opinion of the Council. 11. Before stating the contentions of the learned Counsel on the question of the nature of the Darbar Order dated 27-7-1946, it must be noted that the form and appearance of various laws enacted and Ordinances promulgated in Gwalior State in the years 1939-1948 were not different from those prevalent in the territory which was British India. 12. The argument of the learned Counsel for the applicants was that the Darbar Order dated 27-7-1946 was not a law because on the face of it, it was not in a form which was in vogue for laws in the quondam Gwalior State in 1946; that it was not enacted by the Legislature and was never published in the official Gazette; and that the proposals contained in the Guzarish submitted by Sardar Phallce, which were sanctioned by the Darbar Order of 27-7-1946 were not enforceable in any court of law. Learned Counsel relied on 'Harla v. State of Rajasthan' AIR 1951 SC 467 (A) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to consider is whether in making the order dated 27-7-1910 I he Ruler acted or purported to act in the exorcise of his legislative authority. To say that he acted in his legislative authority because the order passed by him imposed a cess, is to beg the question. To say that anything the Sovereign chooses to command is law and, therefore, the order dated 27-7-1946 is a law, is to obliterate the distinction between the exercise by the Sovereign of his legislative authority and the exercise of the executive authority. There can be no law without a legislative act and when we speak of the making of law, we mean the exercise of discretion by the competent legislative authority in the State. 15. The essence of the law is that it is enforceable in the Courts of law and is not capable of being rejected by the Courts as uncertain. It was suggested by the learned Advocate General that as the Darbar Order dated 27-7-1946 compelled the Petitioner company to pay the cess and was not passed with its consent, the order is a law and not an executive order, In this connection he referred us to Thaltan Sugar Works Ltd. v. Coinmr, of Income Tax, Phaltan' AIR 1950 Bom 61 (D). I do not thin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lished in the Gazette. This is not case here. What we are concerned with, nature of an order passed by the Ruler of Gwalior State, and as I have said above, nothing in its form or in the manner in while was made known to indicate that on the fact it, it is a law. The circumstances in which the order was ed (sic) also point to the conclusion that the order an executive order. The Guzarish submitted to Darbar on 23-7-1946 was not a piece of agency (sic) legislation put before the Ruler assent under Section 36, Gwalior Praja and Raj (sic) Regulations, Samvat 2002. It was also not a sure of legislation or a tax proposal submitted the Ruler for sanction along with the opinion the Council of Ministers in accordance with bar Orders of 24-4-1939 and 21-10-1940. Guzarish was merely a submission of the Pres (sic) of the Committee which the Ruler had appointed on 20-6-1946 to consider the question of the (sic) ability of imposing a cane cess on the sugar story (sic) of the Petitioner-company. It is noter (sic) the members of the committee who were Appellant by the Gwalior Darbar on 20-6-1946 were resignated (sic) by their names and not by their official resignation (sic) and the Guzarish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 26-1-1950. In the view I have taken of the nature of a Darbar Order dated 27-7-1946, it is strictly necessary for me to consider the contentions of learned Counsel for the Petitioners founded on (sic) and Article 14 of the Constitution of( sic) attacking the validity of the order dated (sic) on the assumption that the said order (sic) As, however, somewhat elaborate argument addressed to us on these points by the learned Counsel for the parties, I will very briefly indicate my opinion with regard to them. The first objection was that the levy of the cess interfered with the Petitioner-company's right under Article 19(1)(g) because the company is not allowed to add the amount of the cess in the costs of production of sugar and that by this levy the company is compelled to run the factory at a groet disadvantage and there is every likelihood of the Petitioner's business being crippled . To support this contention Mr. Veda Vyasa cited the case of 'Mohammad Yasin v. Town Area Committee', Jalalabad' AIR 1952 SC 115 (E). I am unable to accede to this contention. The cess in question does not put any restriction on the Petitioner's, right under Article 19( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a special benefit conferred on it and as no such benefit was made available to the other sugar factories, the discrimination between the Petitioner-company and other sugar factories in the State was based on a reasonable classification. On this point I am disposed to agree with the learned Counsel for the Petitioner. It is no doubt true that the differentiation between the Petitioner-company and the other sugar factories in the State of Madhya Bharat is not due to anything in the order dated 27-7-1946 of the Gwalior Darbar but due to extraneous causes,, i.e., the formation of Madhya Bharat and the absence of any cess on sugar factories in the covenanting States other than Gwalior. But as has been very recently pointed out by the Supreme Court in 'The State of Rajasthan v. Rao Manohar Singhji' AIR 1954 SC 297 (G) even in such cases there is an infringement of the principle of equality. In that case the Supreme Court considered the validity of an Ordinance which was in force in some of the covenanting States of Rajasthan and which was continued in those parts after the formation of Rajasthan, and the effect of which was to subject to a disability the Jagirdars of part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recommendation1 proceeds of the cess should primarily be cane development work and the utiliza administration of the fund should be under Development Board. If, therefore, as appears from the relevant of the Revenue Department of the former (sic) State put up before us, after 11-11-1946 the proceeds of the cess were not earmarked spent on cane development work and were dited (sic) into the general revenue, then it maintained that the cess was levied against Petitioner-company for a special benefit (sic) or intended to be conferred on it. The (sic) the collections went to the consolidated fund out being specified or earmarked for the put with which the cess was levied, the cess (sic) character of being a 'cess' and became, (sic) tax, and the quid pro quo element on reasonable classification was sought to be (sic) ceased to exist. I am far from suggesting that classification taxation is not permissible. It is permissible (sic) the essence of a tax is the absence of quid (sic) the classification cannot obviously be based (sic), element of quid pro quo. It may for (sic) rest on the capacity to pay. In this connect would be pertinent to refer to certain observed made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return or consideration for rendered and (sic) rendered and that. The money thus paid is set apart and appropriated specifically for the performance of such (sic) and is not merged in the public revenues(sic) benefit of the general public, it could be (sic) as fees and not a tax. Regard to the particular case before him, his (sic) observed: (sic) the material fact which negatives the theory cess in the present case is that the money (sic) by levy of the contribution is not earned or specified for defraying the expenses the Government has to incur in performing Services. All the collections go to the coned fund of the State and all the expenses (sic) to be met not out of these collections but (sic) the general revenues by a proper 'method' corpropriation (sic) as is done in case of other nent(sic) expenses. That in itself might not Inclusive, but in this case there is total of any correlation between the expenses (sic) by the Government and the amount (sic) by contribution under the provision of (sic) and in these circumstances the theory of a (sic) or counter-payment or 'quid pro quo' have any possible application to this(sic) (sic) my opinion the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout the authority of law and that the levy and the demand both are repugnant to Article 14 and Article 19 of the Constitution. 23. It is a well established proposition of law that the validity of past transactions, which took place before the commencement of the Constitution, cannot be challenged under Article 226 of the Constitution, because the Article is not .retrospective in its effect. For this reason, the counsel for the applicant has not pressed his claim for the refund of money paid before the Constitution came in force. What is left to us now is to consider whether the order dated 27-7-1946 can be treated as a law, imposing the tax on the applicant-company. 24. The short facts giving rise to the application are that in pursuance , of an agreement dated 1-5-40 between the Government of the former Gwalior State and the promoters of the Sugar Company, a sugar factory was erected at Dabra. The dispute which arose between the parties has its origin in a letter dated 26-8-1946, which the Petitioner-company received from the Economic Adviser, Gwalior Government (annexture B), which stated that with a view to extend cane area and cane yield the Gwalior Government have decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention put forth by the learned Counsel for the applicant is that these two words have not the effect of making it the law-it is a mere executive order, signifying acceptance of the recommendations of the Committee. On the other hand, the learned Advocate General urges that these two words Guzarish sanctioned convert the report into a full fledged law and that on the basis of it, the cess is leviable. As the report is brief and is an important document, I would like to produce it in full. It (sic) follows- Your Highness was graciously pleased to a committee to (sic) consider matters relating (sic) imposition of a pane cess and sugar price. In obedience to Darbar orders the (sic) very carefully went into details of these (sic) and unanimously came to the decision the (sic) order to put the industry on a sure and (sic) footing, it is absoluetly necessary to development (sic) cane area and yield in the shortest possible (sic) For this purpose the committee beg to (sic) that following U.P. policy it is essential (sic) on the factory a cane cess of one anna (sic) on all sugar cane purchased by the factor The proceeds of the cess will primary used for cane development w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossess to fix the period of the operation to (sic) the law? And before I turn to other points, I must refer (sic) one more fact, which in my opinion, finally poses (sic) of the contention that the order is a valid (sic) of legislation. The report and its approval (sic) H. H. which together constituted the alleged (sic) never saw the light of the day. I refer to the (sic) circumstance that the law imposing the cess (sic) never published nor was it otherwise promulgated (sic). 29. The learned Counsel for the Petitioner-company has referred us to AIR 1951 SC 467 (A) (sic) which it is held that (sic) the mere passing of a resolution by a Council (sic) of Ministers, purporting to enact the Jaipur (sic) Opium Act, without promulgation or publication (sic) of it in the Gazette or other means to make the (sic) Act known to the public is not sufficient to make (sic) it law. (sic) be learned Advocate General thinks that the non-publication of the law is a matter of no consenence (sic) and he has tried to distinguish the ruling (sic) the ground that it refers to the publication of (sic) law alone. It is true that the point in impute (sic) before their Lordships of the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order in question embodying the alleged law was passed on 27-7-1946. Let us determine what the law-making machinery was in force at that time. 31. It would be the task of a historian to make a general survey of the form of Government that existed in the State of Gwalior before its merger into the State of Madhya Bharat. But for our purpose it will suffice to state that as far back as year 1921, his late Highness, Sir Madhav Rao Scindia, established three councils: the first was known as Majlis A'rn (a nominated as well as, an elected body of citizens), the second was called Majlis Qanoon, and the third was styled as Majlis Khas, which was his cabinet. All the legislative measures passed through either one council or the other. On assuming the reins of Government after the termination of the council of Regency, the present His Highness by two proclamations of year 1929 and 1941, declared his intention to provide for the increasing association of his subjects with the administration and with this end in view, he established two houses of legislatures-the upper and the lower-known as Raj Sabha and Praja Sabha. In form and structure they were analogous to the Provincial Le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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