9911796707
TMI Blog1961 (12) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - 140 to 142 of 1954 - - - Dated:- 11-12-1961 - S.J. Imam, J.L. Kapur, K.C. Das Gupta, Raghubar Dayal and N. Rajagopala Ayyangar, JJ. [Judgment per : Ayyangar, J.; S.J. Imam, K.C. Das Gupta and Raghubar Dayal, JJ. concurring]. - The appellants in Civil Appeal 140 of 1954 are tobacco merchants and manufacturers of biris. They own private warehouses licensed under Rule 140 of the Excise Rules, 1944 at Gondia and other places in Madhya Pradesh. 2.On the 28th of February, 1951 a Bill was introduced in the House of the People, being Bill 13 of 1951 containing the financial proposals of the Government of India for the fiscal year beginning the 1st of April, 1951. Clause 7 of the bill made provision for the amendment of the Central Excise Act (Act 1 of 1944) by way of alteration of duties on "tobacco manufactured and unmanufactured". In particular, it provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flue-cured and used in the manufacture of cigarettes) was increased to 14 annas per lb. from the rate of 8 annas per lb. in the bill. Consequential provisions were enacted in Section 7(2) of the Finance Act which read : "The amendments made in the Central Excises and Salt Act, 1944, sub-clause (1) shall be deemed to have effect on and from the 1st March, 1951 and accordingly:- (a) refund shall be made of all duties collected which would not have been collected, if the amendment had come into force on that day, and (b) recoveries shall be made of all duties which have not been collected but which would have been collected if the amendment had so come into force." 5.In pursuance of Section 7(2) a demand was made upon the appellants on June 22, 1951 for the payment of the duty payable by them, after giving credit for the refund of the duty paid on biris which had been deleted by the Act. The appellants contested the legality of this demand by a petition under Article 226 which they filed in the High Court at Nagpur urging that the retrospective operation given to Section 7(1) by sub-section (2) thereof was illegal, ultra vires and unconstitutional and besides that the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insofar as it imposed an excise duty retrospectively before the date of its enactment (April 28, 1951) was beyond the legislative competence of Parliament. The contention on this head was briefly this : The impugned tax was imposed by Parliament in purported exercise of the power to levy "a duty of excise on tobacco" within Legislative Entry 84 of the Union List which reads : "Duties of excise on tobacco and other goods manufactured or produced in India except ......" 7.An "excise" was basically an indirect tax, i.e., a tax or duty not intended by the taxing authority to be borne by the person on whom it is imposed and from whom it is collected but is intended to be passed on to those who purchased the goods on which the duty was collected; but when such a tax was imposed with retrospective effect it could not be passed on, so such a levy deprived the tax of its essential characteristic of being indirect. It therefore ceased to a "duty of excise" and became a personal tax of a category quite distinct from "excise" and so was beyond the legislative power of Parliament under that Entry. (2) That the impugned levy was unconstitutional in that it contravened the fundamental right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case, according to learned Counsel, neither condition was satisfied, the tax-levy would not fall under the category of "duty of excise". 9.The same argument was presented in slightly different form by saying that though Parliament generally speaking had the power to legislate in respect of everyone of the subjects included in the relevant legislative entries whether prospectively or retrospectively, including legislation with regard to taxation, still if the retrospective levy of a tax, altered its essential nature and identity, then the power to legislate retrospectively would be open to Parliament only if the tax in its altered form - i.e., a tax direct and personal - would be open to Parliament to impose. In the case of a "duty of excise" as the tax in the present case was, if imposed retrospectively, deprived it of its essential characteristic of being an indirect tax and a tax on goods, and so the power of Parliament to enact such retrospective legislation would depend upon whether Parliament could impose a tax on a person merely because he happened to produce goods at an antecedent date, or happened to have had in his control goods of indigenous production at a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach particular tax which it might desire to impose, at the risk of having such tax held invalid if the conclusion reached should afterwards be held to be wrong...... The imposition of taxes on property and income, of death duties and of municipal and local rates is, according to the common understanding of the term, direct taxation, just as the exaction of a customs or excise duty on commodities...... would ordinarily be regarded as indirect taxation; and although new forms of taxation may from time to time be added to one category or the other in accordance with Mill's formula as a ground for transferring a tax universally recognized as belonging to one class to a different class of taxation." Similar passages in relation to a "duty of excise" being an indirect tax occur in other judgments of the Judicial Committee to which learned Counsel drew our attention. Of these, it is sufficient to refer to one more - Attorney-General for British Columbia v. Kingcome Navigation Co. Ltd., 1934 AC 45 which raised the question as to whether a tax which was imposed upon every consumer of fuel-oil according to the quantity which he had consumed imposed by the Fuel-Oil Tax Act of 1930 of Britis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find out whether the particular tax imposed by the Province fell within the class of "indirect" taxes or not. In such a situation naturally the classification by economists of taxes as those which are "direct" as distinct from those which are "indirect" assumed a vital role in deciding whether the tax impugned is or is not within Provincial power. As pointed out by Gwyer, C.J. in the Province of Madras v. Boddu Paidanna Sons, 1942 FCR 90 at p. 103 : [1978 (2) E.L.T. (J 272) (F.C.)] : "The Canadian cases which were cited do not seem to afford any assistance since analogous problems in Canada are always concerned with questions of direct and indirect taxation; and if a Provincial tax is held to be an indirect tax, it is unnecessary for the Court to consider whether it may not also be a duty of excise : See, for example Att.-Gen. for British Columbia v. Canadian Pacific Ry. Co., 1927 AC 934, where a tax on every person purchasing within the Province fuel oil for the first time after its manufacture in, or importation into, the Province was held to be invalid as an indirect tax, and the question whether it might not also be bad as an excise duty was left unanswered. In contrast to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial nature of the tax. The ultimate incidence of an excise duty, a typical indirect tax, must always be on the consumer, who pays as he consumes or expends; and it continues to be an excise duty, that is, a duty on home-produced or home-manufactured goods, no matter at what stage it is collected." As Lord Simonds said in the decision, to which reference has already been made, after referring to the decision of the Federal Court in the C.P. Petrol case, 1939 FCR 18 : "Consistently with this decision their Lordships are of opinion that a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods not on sales or be proceeds of sale of goods." and then speaking about taxes on sale of goods the learned Lord continued : "The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separate and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an essential ingredient and pre-requisite of an excise duty. In this connection it is necessary to point out that the decisions in Canada which were relied on by Mr. Pathak as aids for understanding the import of the expression "duty of excise" in Entry 84, have been treated by the Australian Courts as not helpful to determine the meaning of "excise" in Section 90 of the Commonwealth of Australia Act. As explained by Wynes : "In Canada, the distribution of taxation is based upon the direct and indirect character thereof, the Provincial power being limited to direct taxation within the Province. Hence Canadian cases such as (1887) 12 AC 575 are of very little use in setting the question whether or not a tax is a duty of customs or excise within the meaning of the Australian Constitution." It may be pointed out that under the Australian Constitution taxes levied on commercial dealings in goods produced, such as taxes on sales, have been held to fall within the category of excises. Several of the decisions of the Australian High Court rendered before 80 Com LR 229 dealing with what constituted an excise under Section 90 of the Commonwealth of Australian Act were cited to the Feder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of refined sugar in Brisbane in the State of Queensland questioned the legality of the tax which had been demanded and paid by them in respect of the sugar produced by them between October 8, 1901, and July 26, 1902. Lord Davey delivering the judgment of the Board observed : "It is a little difficult to understand the first point taken by the appellants. The Parliament had undoubted power to impose taxation under the express words of Section 51 of the Constitution, and it is not now disputed that the Parliament could, if it thought fit, make the Act retroactive and impose the duties from the date of the resolution. That practice is (it is believed) universally followed in the Imperial Parliament and (their Lordships were told) is common in the Colonial Legislatures in Acts of this description and for obvious reasons it is convenient and almost necessary. There was nothing, therefore, in either the subject-matter of the Act, or in the mode of dealing with it, which was beyond the power of the Parliament." 18.In our opinion, the above aptly describes and covers the point raised by the appellants in the appeals now before us. 19.There is no doubt that excise duties have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a situation were the price which the producer might charge his buyer is fixed by the statute, say under the Essential Supplies Act, and a "duty of excise" is later imposed on the manufacturer, it could not be said that the duty imposed would not answer the description of an "excise duty". Learned Counsel had really no answer to the situation created by such a control of economy except to say that it would be an abnormal economic situation. It could hardly be open to argument that a tax levied on a manufacturer could be stated not to be a "duty of excise", merely because by reason of the operation of other laws the tax payer was not permitted to pass on the tax-levy. The retrospective levy of tax would be one further instance of such inability to pass on, which does not alter the real nature or true character of the duty. 22.It might further be pointed out that the submission of the learned Counsel that a tax which according to economic theory is an indirect tax or a tax on goods becomes a direct and a personal tax and a tax of a different nature or category if imposed retrospectively, because it was then incapable of being passed on, does not correctly represent the law as la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owers of a sovereign legislature and could make the law prospectively as well as retrospectively. We do not think that there is any substance in this contention." In our judgment this passage covers the argument regarding a duty of excise getting its essential nature altered and ceasing to be a duty of excise if imposed retrospectively. The submission, therefore, lacks any force and is rejected. 23.It is also necessary to refer to one further matter : Even assuming that the learned Counsel is right in his submission that to be a duty of excise within Entry 84 of the Union List the taxing authority should have expected the tax to be passed on we consider that learned Counsel is not right in submitting that that condition is not satisfied in the case of the levy now impugned. The provisions of the impugned enactment have to be read in the light of Section 64A of the Sale of Goods Act which enacts : "In the event of any duty of customs or excise on any goods being imposed, increased, decreased or remitted after the making of any contract for the sale of such goods without stipulation as to the payment of duty where duty was not chargeable at the time of the making of the contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y had been made and the price paid, was no bar to the plaintiff succeeding in his suit. 24.It will be seen that Section 64A is in two parts : the first clause (a) dealing with the case of an increase in duty and conferring on the seller the right to recover the amount of the increased duty from the buyer, and the second limb (clause b) making provision regarding the correlated case of a reduction in the duty with corresponding rights to the buyer to obtain the benefit of a reduction. Whatever argument might be raised based upon the language of the second limb of the section, it is not open to doubt that in the case of an increase in duty the seller would be entitled to recover the duty from the buyer provided : (a) there was no contract to the contrary by which he had precluded himself from claiming such enhanced duty, i.e., the contract having negatived or limited the seller's right to prefer such a claim, or was at least silent as regards what was to happen in the event of the duty being increased, (b) the change in the rate of duty was effected after the date of the contract. In these circumstances, it appears to us that there might not be even a factual basis for the complain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed from this angle it would be seen that the duty imposed by the impugned enactment was shown to be not a duty of excise. The grounds upon which the submission of learned Counsel that a duty of excise levied retrospectively was converted into a direct tax and therefore not a duty of excise have been repelled by us which ought to suffice to repel the contention in this form also. Besides, it may also be pointed out that even in strict theory there is no basis for the submission now under consideration. The duty imposed by the impugned Act being retrospective, it operates as from a previous date and admittedly on the date when by force of the enactment the duty was levied the tax-payer was the owner or was in possession and control of the goods. To deny this, would in effect deny the legal effect of the tax being retrospectively and fictionally deemed to be in force on an earlier date. 28.In dealing with the arguments of learned Counsel on the scope and content of Entry 84 of the Constitution and of the meaning of the expression "duty of excise" in that entry we have also covered the special argument questioning the right of Parliament to impose retrospectively a duty of excise. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries of the legislative list. All laws including laws imposing taxes are within Part III of the Constitution being laws under Article 13(2) thereof and unless any particular Article was inapplicable to such laws by reason of obvious irrelevance every Article in the Part would apply to them and without such a law satisfying the test of reasonableness or constitutionality laid down in the various Articles guaranteeing the several Fundamental right the statute in question could not be pronounced valid and enforceable. 31.We shall be referring to the manner in which Mr. Pathak sought to urge that the impugned provision offended Article 19(1)(f), but before doing so, it is necessary to notice the submission which Mr. Sanyal invited us to accept. 32.He raised a broad contention that no law imposing a tax could be impugned on the ground of violation of Part III of the Constitution in general and in particular of Article 19(1)(f) or Article 31. His submission was that the validity of tax laws were governed solely by Article 265 and that such laws were not governed by Part III of the Constitution and specially because the money sought to be taken by the State as tax by virtue of a fisca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not move this Court for relief under Article 32. Such a proposition would be contrary to a long catena of cases of this Court of which it is sufficient to refer to Mohammad Yasin v. Town Area Committee, Jalalabad, 1952 SCR 572, State of Bombay v. United Motors (India) Ltd., 1953 SCR 1069, Bengal Immunity Co. Ltd. v. State of Bihar, 1955 (2) SCR 603 and Tika Ramji v. State of Uttar Pradesh, 1956 (2) SCR 393. In all these cases the legislation imposing the tax or the fee which had been held not to have been within the legislative competence of the authority imposing the tax or the fee was struck down on the ground that those laws violated the freedom guaranteed by Part III of the Constitution. Learned Counsel laid some stress on the fact that in these cases the tax or fee was held to be unconstitutional as imposing an unreasonable restraint on the right to carry on a trade or business guaranteed by Article 19 (1)(g) and not as an infringement of the right to hold "property" under Article 19(1)(f). In our opinion nothing turns on this, for it is the deprivation of the freedom to hold "property" that is the direct result of the tax and the restraint on the business by reason of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to challenge under Article 19(1)(f) and the incidence of the tax or the procedure prescribed therein either for the assessment or the collection which might be open for being tested with reference to all the freedoms including that contained in Article 19(1)(f). In fact in AIR 1961 SC 552 already referred to certain provisions of the Act therein challenged which prescribed the procedure for the levy of the tax were struck down on the ground of being obnoxious to Article 19(1)(f). Having regard to the very limited controversy before us we do not consider it necessary to embark on any further or more detailed examination of this question, except to say that we cannot accept the argument of the learned Additional Solicitor General that by reason of Article 265 tax laws are outside Part III of the Constitution. 39.In support of the submission that a tax levied with retrospective effect was unconstitutional as being an unreasonable restriction on the right to hold property [Article 19(1)(f)]. Mr. Pathak relied on the decisions in Nichols v. Coolidge, (1926) 71 Law Ed. 1184. The tax in question was an estate duty on property passing on death and in the items to be included for computin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (48 Harward Law Review, p. 592) referring to White's case (1932) 287 US 577 : "It seems accurate to say that the decision marks for practical purposes the passing of `arbitrary' retroactivity in the field of the estate tax........ And the present status of Nichols v. Coolidge is not entirely clear ............ Since the Nichols case (1926) 71 Law Ed 1184 can be distinguished on its facts it may well give way ....... In any event ........ it would seem that after the White's case (1932) 287 US 577 no application of the estate tax can be successfully resisted on the score of retroactivity." For instance in Welch v. Henry, (1938) 305 US 135 at p. 146 : 83 Law Ed. 87 which related to an enactment imposing income-tax which had retrospective operation, Justice Stone delivering the judgment of the Court referring to (1926) 71 Law Ed. 1184 and other cases in which observations broadly stating that any retrospective tax legislation was obnoxious to the requirement of due process, stated : "Even a retroactive gift tax has been held valid where the donor was forewarned by the statute books of the possibility of such a levy. In each case it is necessary to consider the nature of the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The need of the Government for revenue has hitherto been deemed a sufficient justification for making a tax measure retroactive wherever the imposition seemed consonant with justice and the conditions were not such as would ordinarily involve hardship. On this broad ground rest the cases in which a special assessment has been upheld....... Liability for taxes under retroactive legislation has been `one of the notorious incidents of social life'.......... Recently this Court recognized broadly that `a tax may be imposed in respect of past benefits." 41.It would thus be seen that even under the Constitution of the United States of America the unconstitutionality of a retrospective tax is rested on what has been termed "the vague contours of the 5th Amendment." Whereas under the Indian Constitution the grounds on which infraction of the rights to property is to be tested not to the flexible rule of "due process" but on the more precise criteria set out in Article 19(5), mere retrospectivity in the imposition of the tax cannot per se render the Law unconstitutional on the ground of its infringing the right to hold property under Article 19(1)(f) or depriving the person of property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pounded by economists a duty of excise does not cease to be such, merely because it is imposed at a time or in circumstances (as pointed out earlier in conjunction with a system of price control) in which it cannot be passed on one fails to see any substance in the argument that the imposition of such a tax is an unreasonable restriction on the exercise of the fundamental rights to hold property guaranteed by Article 19(1)(f). 43.The last of the points urged was that Rule 10A was not apt to cover the recovery of the duty which was a subject of demand dated December 12, 1951. The learned Judges of the High Court rejected this submission and, in our opinion, correctly Rule 10 under which the first demand of June 22, 1951, was made ran : "10. Recovery of duties or charges short-levied or erroneously refunded. - When duties or charges have been short-levied through inadvertence, error, collusion or mis-construction on the part of an officer, or through mis-statement as to the quantity, description or value of such goods on the part of the owner, or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded, the person chargeable w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Article 226 of the Constitution, the appellants had a considerable quantity of tobacco in their licensed warehouses on February 28, 1951. On the same day the Central Bill (Bill No. 13 of 1951) was introduced in the House of the People, one of the clauses of which related to the duty of excise for the financial year beginning April 1, 1951. According to the Bill, on unmanufactured tobacco a duty of 8 As. per lb. and 6 to 9 As. (per 1000) Biris was to be imposed. This Bill was amended and by this amendment the duty on tobacco other than Biri tobacco was fixed at 6 As. per lb. on Biri tobacco 14 As. per lb. and no duty was imposed on manufactured Biris. As a result of the operation of Sections 3 and 4 of the Provisional Collection of Taxes Act (Act XVI of 1931) the duty became leviable as from the date of the introduction of the Bill. The petitioners have stated that in accordance with the provisions of the Bill that was introduced, they paid excise duty on tobacco in their possession at the rates mentioned in the Bill and obtained clearance certificates in accordance with the Rules under the Act. On April 28, 1951, the Finance Bill was passed and became Finance Act, 1951 (Act X ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the rates prevailing on the date that the goods were cleared because (a) Parliament's power to make retrospective laws is subject to constitutional limitations, namely, the language of Item 84 of List I; (b) duty of excise as defined in the Constitution and its nature and character is such that it is not capable of being exercised after the goods on which it is imposed are no longer in possession of the warehousemen and after they have passed into the common stock of the country; (2) legislation of this character imposes an unreasonable restriction under Article 19(1)(f), and (3) Rule 10A does not apply to the facts of the case and does not authorise the collection of the duty imposed. 49.The first point relates to the legislative competency of Parliament. Item 84 of List 1 provides : Item 84 "Duties of excise on tobacco and other goods manufactured or produced in India........." In the corresponding item under the Government of India Act, 1935, the same language was used so that the nature of the duties remains the same both under the Constitution and under the Government of India Act, 1935. Section 3 of the Act empowers the levying of duties specified in the First Schedule. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was held to be a direct tax; Attorney-General for British Columbia v. McDonald Murphy Lumber Co. Ltd., 1930 AC 357; 1934 AC 45; Attorney-General for Manitoba v. Attorney-General for Canada, 1925 AC 561 at p. 566; and Brewers Maltsters' Association of Ontario v. Attorney-General for Ontario, 1897 AC 231. 51.Reference was next made to an Australian case : 80 CLR 229, where two necessary qualities of the duty of Excise were stated to be that it must be levied in goods which are in existence and the taxpayer should be able to pass it on to the consumer. 52.But as was pointed out by Gwyer, C.J., in 1942 FCR 90 at p. 103 : [1978 (2) E.L.T. (J 272) (F.C.)] : "The Canadian cases which were cited do not seem to afford any assistance since analogous problems in Canada are always concerned with direct and indirect taxation.........." Dealing with the same distinction the Privy Council said in 27 Ind. App. 91 at p. 102 : [1978 (2) E.L.T. (J 280) (P.C.)] : "Little assistance is to be derived from the consideration of other federal constitutions and of their judicial interpretations. Hence there is no question of direct and indirect taxation........" The Indian Constitution is un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the time or place of their collection. Only the context in which the expression is used can tell us whether any reference to the time or manner of collection is to be implied. It is not denied that laws are to be found which impose duties of excise at stages subsequent to manufacture or production; but so far as I am aware, in none of the cases in which any question with regard to such a law has arisen was it necessary to consider the existence of a competing legislative power, such as appears in entry No. 48." But Mr. Pathak relied on the observations of the learned Chief Justice at p. 50 (of FCR) where he said :- Thus the Central Legislature will have the power to impose duties on excisable articles before they become part of the general stock of the Province, that is to say, at the stage of manufacture or production, and the Provincial Legislature an exclusive power to impose a tax on sales thereafter." But these observations only mean this that when there is a competition between the duty, imposed at the stage of manufacture or production and a tax imposed on sales thereafter, the sphere of the Central and the Provincial Legislatures comes into operation but, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion to the Sugar Excise Act in which it is specially provided that the duty is payable not only in respect of sugar which is issued from the factory but also in respect of sugar which is consumed within the factory." The Privy Council described the nature of the duty of Excise in 72 Ind. App. 91 as a duty which is primarily levied on a manufacturer or producer in respect of the commodity manufactured or produced. At p. 103 (of Ind. App.) Lord Simmonds referred to In re : Central Provinces and Berar case, 1939 FCR 18 and to Boddu Paidanna case, 1942 FCR 90 : [1978 (2) E.L.T. (J 272) (F.C.)] and said :- "The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may as is there pointed out in one sense overlap. But in law there is no overlapping. The taxes are separate and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale. But that method of collecting the tax is an accident of administration; it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground of retrospectivity alone therefore the tax is not unconstitutional. 56.In view of what has been said above the cases decided in Canada or Australia cannot have any application. 57.It was next contended that a retrospective tax purporting to be a duty on goods when the goods had been disposed of would be a tax not under item 84, List I of the Seventh Schedule but one under item 60 of List II, i.e. tax on profession, trade calling and employment - the submission being that the word "trade" would include manufacture. This contention was sought to be supported by the observations of Lord Davey in Commr. of Taxation v. Kirk, 1900 AC 588 at p. 592 :- "The word `trade' no doubt primarily means traffic by way of sale or exchange or commercial dealing, but may have a larger meaning so as to include manufactures." In National Association of Local Govt. Officers v. Bolton Corporation, 1943 AC 166 at p. 184 Lord Wright in interpreting the word "trade" in Section 11 of the Industrial Courts Act, 1919 said :- Section 11 of the Act of 1919 shows that "trade" is used as including `industry' because it refers to a trade dispute in the industry of agriculture." But this latter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lent to the amount paid in respect of such duty or increase of duty, and he shall be entitled to be paid and to sue for and recover such addition; and (b) if such decrease or remission so takes effect that the decreased duty only or no duty, as the case may be, is paid, the buyer may deduct so much from the contract price as will be equivalent to the decrease of duty or remitted duty, and he shall not be liable to pay, or be sued for or in respect of such deduction." This section provides for the recovery of the seller of the amount of increase in duty from the purchaser where the increase takes effect subsequent to the contract and for the right of the purchaser to recover from the seller the duty in cases where there is a similar decrease and this right exists both before the delivery given, taken and price received or paid as the case may be : ILR 53 Mad. 680. Counsel for the appellants attempted to counter this submission by relying upon a judgment of the Privy Council in Prabhudas v. Ganidada, 52 Ind. App. 196. In that case the Government duty had not been reduced but the buyer claimed that it had constructively been decreased because the tariff valuation had been reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes by contract. It is but a way of apportioning the cost of Government among those who in some measure are privileged to enjoy its benefits and must bear its burdens. (1938) 83 Law Ed. 87, but the constitutionality of a tax does not depend upon a showing of benefits, protection and taxation are not correlative terms. Willis, Constitutional Law, p. 224 : Tax is levied against the person and not against property. Property only serves as a basis for computing the measure of each person's liability. Weaver on Constitutional Law, p. 513 : "The power of taxation is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. It reaches to every trade or occupation to every object of industry, use, or enjoyment; to every species of possession; and it imposes a burden which, in the case of failure to discharge it, may be followed by seizure and sale or confiscation of property. No attribute of sovereignty is more pervading and at no point does the power of the government affect more constantly and intimately all the relations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise of the power of taxation either as respects the amount or the property on which it is imposed." In (1938) 83 Law Ed. 87 at p. 94 it was observed :- "The equitable distribution of the costs of Government through the medium of an income-tax is a delicate and difficult task. In its performance experience has shown the importance of reasonable opportunity for the legislative body, in the revision of tax laws to distribute increased costs of Government among its tax-payers in the light of present need for revenue and with knowledge of the sources and amounts of the various classes of taxable income during the taxable period preceding revision. Without that opportunity accommodation of the legislative purposes to the need may be seriously obstructed if not defeated." Thus according to American view (1) the power to tax is an attribute of sovereignty : (2) tax is a rateable contribution of each individual in a State towards the amount of revenue which is essential for the existence and operation of a public governing body : (3) it being essential for the very existence of an organised State, it may be exercised on objects to the utmost extent to which the legislature may choose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the descendant of the whole or a part of his interest in property. As was explained in (1938) 83 Law Ed. 87 at p. 93 : "Since in each of these cases, the donor might freely have chosen to give or not to give the taxation, after the choice was made, of a gift which he might well have refrained from making had he anticipated the tax, was thought to be so arbitrary and oppressive as to be a denial or due process. But there are other forms of taxation whose retroactive imposition cannot be said to be similarly offensive, because their incidence is not on the voluntary act of the tax-payer. And even a retroactive gift tax been held valid where the donor was forewarned by the statute books of the possibility of such a levy, (1930) 75 Law Ed. 809......." 66.In that case the retroactive operation of a tax on dividends was upheld and the objection on the ground of inconvenience in being called upon, after the customary time for levy and payment of the tax had passed, to bear a governmental burden of which he had no warning and which he did not anticipate was held to be unsustainable. The contention that the retroactive application of the Revenue Acts is a denial of the due process gua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtion is as follows : Article 19(1)(f). "All citizens shall have the right ................................ ................................ to acquire, hold and dispose of property; Article 19(5). "Nothing in sub-clauses (d), (e) and (f) of the said clause shall affect the operation of any existing law insofar as it imposes or prevent the State from making any law imposing reasonable restrictions on the exercise of any of the rights conferred by the said sub-clauses either in the interests of the general public or for the protection of the interests of any Scheduled Tribe." 70.As has already been said the power to tax is the legal capacity of the State to raise from all those subjects to its authority a certain amount of revenue essential to the existence and operation of Government. A tax is not a penalty but a contribution of monies for governmental purposes by persons who may be residents or non-residents, citizens or non-citizens, living persons or legal personae who are privileged to enjoy its benefits, but those are not co-relative. It implies an equality of burden and regular distribution of expenses of Government among the persons taxed. It is levied by authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e. the power of the State of compulsory acquisition of property). Dealing with protection against taxation he said in Subodh Gopal's case, 1954 SCR 587 at p. 652 :- "Our Constitution makers evidently considered the protection against deprivation of property in exercise of police power or of the power of eminent domain by the executive to be of greater importance than the protection against deprivation of property brought about by the exercise of the power of taxation by the executive, for they found a place for the first mentioned protection in Article 31(1) and (2) set out in Part III dealing with fundamental rights while they placed the last mentioned protection in Article 265 to be found in Part XII dealing with finance etc. So with regard to all the three sovereign powers we have complete protection against the executive organ of the State." Again at p. 653 (of SCR) he observed :- "Apart from this, what I ask is, our protection against the legislature in the matter of deprivation of property by the exercise of the power of taxation? None whatever. By exercising its power of taxation by law the State may deprive us, citizen or non-citizen of almost sixteen annas in the ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or collection of tax, and inasmuch as the right conferred by Article 265 is not a right conferred by Part III of the Constitution, it could not be enforced under Article 32". Ramjilal's case 1951 SCR 127 was quoted with approval in (1955) 2 SCR 603 at p. 619. Thus early after the establishment of this Court opinion was expressed excluding the applicability of fundamental right in Part III to taxing Statutes. But it is important to notice that the Article which was sought to be applied in those cases was Article 31(1) which deals with deprivation of property and not Article 19 which is regulatory of the rights of a citizen of personal liberty, property and avocation. 73.It was contended that the impugned tax illegally deprives the appellants of their property and was therefore unconstitutional. In support reference was made to (1955) 1 SCR 448 (under Article 14); (1955) 1 SCR 787 (under Article 14); Purshottam Govindji Halai v. B.M. Desai, (1955) 2 SCR 887 (under Articles 14 and 21); M.Ct. Muthiah v. Commr. of Income-tax, Madras, (1955) 2 SCR 1247 (under Article 14); A. Thangal Kunju Musaliar v. M. Venkatachalam Potti, (1955) 2 SCR 1196 (under Article 14); Bidi Supply Co. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infringement of the fundamental right to property under that article. It is, however, clear from Article 265 that no tax can be levied or collected except by authority of law which must mean a good and valid law. The contention of the appellant company is that the Act which authorises the assessment, levying and collection of sales tax on inter-State trade contravenes and constitutes an infringement of Article 286 and is, therefore, ultra vires, void and unenforceable. If, therefore, this contention be well founded, the remedy by way of a writ must, on principle and authority, be available to the party aggrieved." 76.The next case relied upon by Counsel for the appellants was Kailash Nath v. State of U.P. which was a case under the U.P. Sales Tax Act, the plea of the petitioners was that the goods sought to be taxed had been exported overseas and therefore not liable to sales tax. It was held that if a tax is levied without due legal authority on any trade or business then it is open to the citizen to approach this Court under Article 32 since his right to carry on trade is violated or infringed by the imposition of the tax and Article 19(1)(g) "comes into play". There again the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of property or on the ground of contravention of Article 31. 79.In the State of Bombay v. Bhanji Munji, (1955) 1 SCR 777 it was also held that the Article 19(1)(f) read with clause (5) postulates the existence of the property which can be enjoyed and over which rights can be exercised because otherwise the reasonable restriction contemplated by clause (5) cannot be brought into play. That was the uniform view held in this Court till the majority judgment in Moopil Nair's case, AIR 1961 SC 552 which relied on the second Kochuni case i.e. (1960) 3 SCR 887. But the latter was not a taxation case. It was held in that case (Kochuni case) that all laws within Article 13 are subject to Part III and that for a law to be valid it must satisfy two tests (1) of being enacted by a legislature having legislative competence and (2) it should not contravene any of the fundamental rights. 80.The above opinion is not in accord with the opinion of this Court in A.K. Gopalan's case 1950 SCR 88; Ram Singh v. State of Delhi, 1951 SCR 451 at p. 455; (1955) 1 SCR 777; The Daily Express case [Express Newspaper (Private) Ltd. v. Union of India, 1959 SCR 12 at pp. 129-132 and The Hamdard Dawakhana ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pass the test of the limitations prescribed in part III of the Constitution but it did not lay down that all Articles in Part III would be applicable to taxation laws nor did it decide contrary to Ramjilal's case 1951 SCR 769 that Article 31(1) would apply to a taxation law which is otherwise invalid. But it is difficult to hold that regulatory Article like Article 19(1) was intended to limit the powers of the Legislature to impose taxes and thus to discharge its duty in regard to country's financial needs and policies. 83.The contention of infringement of the appellant's right under Article 19(1)(f) is unsound and must be rejected and the reasons are these :- Firstly : Clause (5) of Article 19 allows the enacting of laws which impose "reasonable restrictions" in the interests of the general public. The use of the term "reasonable restrictions" is indicative of regulation of the right to the personal rights mentioned in sub-clause (f) of the first clause. It must have relation to the existence of the thing to be regulated. There can be no regulation of things not in existence. Therefore where an Act is deprivatory as the imposition of a tax is it cannot fall within Article 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s then their reasonableness will be justiciable depending upon the appreciation of established facts. How are the courts to judge? All the necessary data for determining reasonableness can never be before a Court which in the very nature of things is available only to the legislature. Can the Court say that a particular tax is excessive or unreasonable or can the Court say which particular source should be taxed and which particular income group should bear the burden of taxation or what the policy of the State as to taxation should be. It would seem therefore that the reasonableness of tax laws is not justiciable and therefore they cannot fall within clause (5) of Article 19. Article 19(1)(f) and clause (5) are part of one scheme and the former is incapable of operating where the latter is inoperative. If considerations of Article 19(5) are foreign to taxing laws Article 19(1)(f) can have no application to them. Sixthly : Applicability of Article 19(1)(f) to taxation laws will mean that laws which are otherwise valid will be inapplicable to citizens but will be applicable to non-citizens. At any rate such law will operate differentially between one set of tax-payers and another ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
