# [1961] 3 S.C.R. 524

- **Citation:** [1961] 3 S.C.R. 524
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Civil Appeal No. 252 of 1956
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1961-3-s-c-r-524-2042
- **Pages:** 13

## Headnote

I96I
524
SUPREME COURT REPORTS
UNION OF INDIA AND OTHERS
v.
(1961)
MAHARAJA KRISHNAGARH MILLS LTD.
(IN LIQUIDATION) .
. (B. P. SINHA., C.J., s. K. DAS, A. K. SARKAR,
N. RAJAGOFALAAYYANGARand J. R.MunHOLKARJJ.)
Cotton Excise Duty-Agreement between Pre>ident and· Raj
Pramukh of Part B State-Right of Union to collect arrears of such
duty payable to the State-Constitution of India, Arts. 2771 278.
The question for determination in the appeal was whether
the Union of India was entitled to levy and recover arrears of
excise duty on cotton cl.0th for the period April 1, 1949, to
March 31, 1950, payable by the respondent, a cloth mill in the
State of Rajasthan, under the Rajasthan Excise Duties Ordinance,
1949· After the coming into force of the Indian Constitution and
the extension of the Central Excise and Salt Act, 1944, and the
rules framed thereunder to the State of Rajasthan by s. II of the
Finance Act of 1950, the duty in respect of cloth manufactured
on and from April l, 1950, became payable under that Act. The
appellant Union.,however, claimed that as a result of the agreement entered into on February 25, 1950, by the President of India
with the Rajpramukh of Rajasthan 11nder Art. 278 and Art. 295
of the Constitqtion, the Union of India became entitled as from
April l, f950,lo claim and recover all arrears of excise duties
which the State of Rajasthan was entitled to recover from the
respondent before the Central Excise and Salt Act, 1944, was
extended to Rajasthan. Notice having been accordingly served
on the respondent demanding payment of the outstanding amount
of Rs. l,36,551-12 as payable by it, it moved the High Court
under Art. 226 of the Constitution. On a reference by the Division Bench which heard the matter in the first instance, the Full
Bench finding in favour of the respondent held that Art. 277 was
a complete refutation of the said claim by the Union and Art. 278
and the said agreement were overridden by it.
Held, that the provisions of Arts. 277 and 278 of the Constitution, properly construed, leave no manner of doubt that
Art. 277 was in the nature of a saving provision, subject in terms
to the provisions of. Art. 278, permitting the States to levy a tax
or duty which, after the Constitution could be levied only by the
centre. But Art. 277 had to yield place to any agreement in
respect of such taxes and duties made.between the Union Government and the Government of a Part B State under Art. 278.
Since there could not be the least doubt in the instant case
that the agreement between the President and the Rajpramukh
of Rajasthan conceded to the Union the right to levy and collect
the arrears of the cotton excise duty in Rajasthan, the High
Court was wrong in taking a contrary view of the matter.
•
;-
j
) • ' •
...
3 s.c.R.
SUPREME COURT REPORTS
525
C1v1L APPELLATE JURISDICTION: Civil Appeal No.
252 of 1956.
Appeal from the judgment and decree dated
September 29, 1953, of the Rajasthan High Court
(Jaipur Bench) in Civil Writ Application No. 28 of
1951.
.
Gopal Singh and T. M. Sen, for the appellants.
S. N. Andley, J.B. Dadachanji and P. L. Vohra, for
the respondent.
1961. January 19. The Judgment of the Court was
delivered by
SINH~, C. J.-This appeal on a certificate granted
by the Jaipur Bench of the High Court of Judicature
for Rajasthan that "the case involves a substantial
question of law as to the interpretation of Arts. 277,
278, 294 and 295 of the Constitution of India and the
case is a fit one for appeal to the Supreme Court under
Art. 132(1) and also under Art. 133(l)(c) of the Constitution of India" is directed against the judgment
dated September 29, 1953, of the High Court of
Judicature for Ra.jastha.n at Jaipur to the effect that
the appellant, the Union of India., was not entitled to
levy and recover arrears of excise duty on cotton cloth
for the period April 1, 1949, to March 31, 1950, from
the respondent, the Mahara.ja. Krishnagarh Mills Ltd.
The facts of this case, which have not been in
dispute

## Text

I96I
524
SUPREME COURT REPORTS
UNION OF INDIA AND OTHERS
v.
(1961)
MAHARAJA KRISHNAGARH MILLS LTD.
(IN LIQUIDATION) .
. (B. P. SINHA., C.J., s. K. DAS, A. K. SARKAR,
N. RAJAGOFALAAYYANGARand J. R.MunHOLKARJJ.)
Cotton Excise Duty-Agreement between Pre>ident and· Raj
Pramukh of Part B State-Right of Union to collect arrears of such
duty payable to the State-Constitution of India, Arts. 2771 278.
The question for determination in the appeal was whether
the Union of India was entitled to levy and recover arrears of
excise duty on cotton cl.0th for the period April 1, 1949, to
March 31, 1950, payable by the respondent, a cloth mill in the
State of Rajasthan, under the Rajasthan Excise Duties Ordinance,
1949· After the coming into force of the Indian Constitution and
the extension of the Central Excise and Salt Act, 1944, and the
rules framed thereunder to the State of Rajasthan by s. II of the
Finance Act of 1950, the duty in respect of cloth manufactured
on and from April l, 1950, became payable under that Act. The
appellant Union.,however, claimed that as a result of the agreement entered into on February 25, 1950, by the President of India
with the Rajpramukh of Rajasthan 11nder Art. 278 and Art. 295
of the Constitqtion, the Union of India became entitled as from
April l, f950,lo claim and recover all arrears of excise duties
which the State of Rajasthan was entitled to recover from the
respondent before the Central Excise and Salt Act, 1944, was
extended to Rajasthan. Notice having been accordingly served
on the respondent demanding payment of the outstanding amount
of Rs. l,36,551-12 as payable by it, it moved the High Court
under Art. 226 of the Constitution. On a reference by the Division Bench which heard the matter in the first instance, the Full
Bench finding in favour of the respondent held that Art. 277 was
a complete refutation of the said claim by the Union and Art. 278
and the said agreement were overridden by it.
Held, that the provisions of Arts. 277 and 278 of the Constitution, properly construed, leave no manner of doubt that
Art. 277 was in the nature of a saving provision, subject in terms
to the provisions of. Art. 278, permitting the States to levy a tax
or duty which, after the Constitution could be levied only by the
centre. But Art. 277 had to yield place to any agreement in
respect of such taxes and duties made.between the Union Government and the Government of a Part B State under Art. 278.
Since there could not be the least doubt in the instant case
that the agreement between the President and the Rajpramukh
of Rajasthan conceded to the Union the right to levy and collect
the arrears of the cotton excise duty in Rajasthan, the High
Court was wrong in taking a contrary view of the matter.
•
;-
j
) • ' •
...
3 s.c.R.
SUPREME COURT REPORTS
525
C1v1L APPELLATE JURISDICTION: Civil Appeal No.
252 of 1956.
Appeal from the judgment and decree dated
September 29, 1953, of the Rajasthan High Court
(Jaipur Bench) in Civil Writ Application No. 28 of
1951.
.
Gopal Singh and T. M. Sen, for the appellants.
S. N. Andley, J.B. Dadachanji and P. L. Vohra, for
the respondent.
1961. January 19. The Judgment of the Court was
delivered by
SINH~, C. J.-This appeal on a certificate granted
by the Jaipur Bench of the High Court of Judicature
for Rajasthan that "the case involves a substantial
question of law as to the interpretation of Arts. 277,
278, 294 and 295 of the Constitution of India and the
case is a fit one for appeal to the Supreme Court under
Art. 132(1) and also under Art. 133(l)(c) of the Constitution of India" is directed against the judgment
dated September 29, 1953, of the High Court of
Judicature for Ra.jastha.n at Jaipur to the effect that
the appellant, the Union of India., was not entitled to
levy and recover arrears of excise duty on cotton cloth
for the period April 1, 1949, to March 31, 1950, from
the respondent, the Mahara.ja. Krishnagarh Mills Ltd.
The facts of this case, which have not been in
dispute at any stage of the proceedings, may shortly
be stated as follows. The respondent is a cloth mill
located in Krishna.garb in District Jaipur in the State
of Rajasthan. It had a stock of manufactured cloth
on April I, 1949, and also manufactured cloth during
the period, April 1, 1949, and March 31, 1950. In respect of such cloth an excise duty became payable
under the Rajasthan Excise Duties Ordinance, 1949
(XXV of 1949), at rates set forth in the schedule
to the Ordinance. The sum of Rs. 1,56,291 odd became
pa.ya.hie on that account out of which only a. sum
of Rs. 19,739 odd was paid to the Government of
Ra.jasthan, thus leaving the sum of Rs. 1,36,551 odd
outstanding against the respondent. After the Indian
Constitution ca.me into effect, the Central Excise and
U nio" of I"4ia
v.
Maltaraja
Kf'iJlusagMA
Mills Lil.
Sinha C.J.
. '
'---:·
/ '/ -
[1961]
,'._:
I
-·•-
~-- -
-
', ·,;.zo6~ -
, Salt ,Act, 1944, and the rules framed thereun\ler were
u ··{1~ ·~ exierided t<l'the State ofRajasthari 'by"s.:ll 11)f·the
· "'
0
":.
-- "',_ Finance Act of 1950. ·Hence, the duty became payable
_, M'.1taraja :•'in'. respect of the. cloth'. manufactured, on 'and ~from
.. KrisAnat••A ' 'April I,' 1950;' under the provisions of th&t Act..
The
Mills Lid. ·' appellant 'Claimed' that as a.' result'. ort·oe itgneiiient
between the -Government 'of India and the State of.
Sinlta C.J.
. Rajasthan, to be noticed hereinafter in detail, a1id of
. ·_) , ,, ~ .. '
/
I
,,_;
., the Co.:.stitution, :the. Union of Indfa ·became ·entitled
_. _ to. realise_ the.arrears of the excise dutyin respect'.of
. ,the ,,cloth ;manufactured by the. respondent ,before
. April" I, 1950: ., In enforcement of that: claim. the
Superintendent of Central Excise,, Jaipur," served 'a
1• ri~tic~ ~at~d February)6;. ~~51;. on.: t~11'-;respo~fi.dent
· · demandmg '·payment of· the outstandmg ·amount of
:. Rs~· 1,36,551 cdd. The•resporident-thereupon 'filed· ·a
·,:writ petition hi the High'Court of Rajasthani Jaipur,
·under Art~'226· of·the !Constitution against '(I) tlie
Union·:of'.India;-(2) the Central Board of Revenue,
Delhi, (3) the Collector· of Central Excise .for Rajas-
.. than;' Delhi,'_ and · (4) tlie : Superintendent. 'of Central
~Excise,· Jaipur; 'who are~the :appellants' before· us,
·praying: for· a writ of prohibition.·against'.tliem pro-
. · hi~iting · them· from hnposing;' levying or collectillg
. ; any tax or dbty by way of exciBe ·as 'also ·for ·r ii.ny
·appropriate direction; order or writ.' Th'e writ petition
·'was 'founded ::on' the' contentions that· .. the notice'of .
. 'demand served· upon the respondent as aforesaid. was
·'.illegal and unauthorised on the ground.(l) that_ the
(Central·· Government had rio jurisdiction· to levy any
.tax\beforli January 26,: 11950, (2):that 'the Central
.,Excise and Salt Aot :.was not• in force in.RajasthD.n
· ·before 'April l, .1950, and· (3) that without the_ appli-
·.cation of the rules framed by· the Central. Go•ernment
• .under s. 37 .of the Central Excise arid Salt Act,"1944, tp
'Rajasthan no duty'. could be imposed, levied ·or collect-
-ed and those rules were made applicable to Raja.sthan
·only on·DecemberJ6, 1950:,; .. · .''. .· ..... :id'<.
:.: :· ":
-.
· 'On behalf of the "appellants, who, were ~he_ res'pon~-
- .en ts ';in,· t~e. High '_Court, it• was contende,d that it· was
·. not correct to _say that the: rules framed under 11~'37
.. 1'-:.~:Fl ,:,_,· '~-
;,.1~ .. r _•. ,: .... :-· ·~ '';· ··J;-.i!l ·, __ ...
,;_•;;;:-~-~:.,:~~::;')
!>:-:-f
~r_,:_~·~: r f:::' J'-~
•·.~ <•;J_-~ ~::.;_;_A
'·~j_: 01
~ ,"'"~~i.:; ~:=:~·-:r-·~)
. .
'
(
3 .S.C.R.
SUPREME COURT REPORTS
527
t·
of tile Central Excise and Salt' Act, 1944, were made
applicable to the State of Rajasthan by virtue of the
notification dated December 16, 1950, and it was
asserted. that those rules . became applicable to the
State of Ra.ja.sthan with effect from April l, 1950, as
a ·result of s. 11 of the Finance Act, 1950. It was
also contended that by virtue of s. 3 of Ra.ja.sthan
Excise Duties Ordinance (XXV of 1949) promulgated
by ilis Highness the Rajpramukh of Raja.sthan on
September 5, 1949, excise duty was levied on cloth
and •other articles produced and manufactured in
Ra.jaatha.n on and after April 1, 1949, at the rates set
forth in the first schedule of the said Ordinance. It
was also contended that in pursuance of Arts. 278
and 295 of the Constitution the President of India
hap entered into an agreement with the Rajpramukh
of, Rajasthan on February 25, 1950, whereby the
pal-ties agreed to accept the recommendations of the
Indian States Fina.nee Enquiry Committee, 1948-49,
contained in part I of its report., read with chapters I,
II .and III of part II of its report, in so far as they
applied to the State of Ra.ja.stha.n together with the
recommendations cont'ained in Chapter VIII of pa.rt
II of the said report. By virtue of the said agreement
the Union of India became entitled to claim and
recover all excise duties, whether assessed or unas110ssed, which the State ofRaja.stha.n was entitled to
recover from the respondent as from April 1, 1949,
before the Central Excise and Salt Act, 1944, was
extended to the State of Rajastha.n, as aforesaid.
The m11otter was first heard by a Bench consisting
of Ranawat and Sharma, ,JJ., which, in view of the
importance of the points involved in the case, referred
the following two points for decision by a larger
Bench by its judgment dated November 5, 1951:
" I. Whether by virtue of Articles 278, 279 and
295 of the Constitution of India and the agreement
11ntered into between the President of India and the
Rajpramukh of Raje.sthan on the 25th of February, 1950, the Uni9n Qf •Indi,:Js. entitled to. levy
and recover arr.ear11~of&xc~ dfity on cloth held in
stock or manufactured before the 1st of April, 19501
~
.
.
.
z961
Union of India
v.
Maharaja
K,islusagiirll
Mills L<d.
Sinha C.].
1961
Union of India
v.
Maharaja
Krishnagark
Mills Ltd.
Sinha C.J.
528
SUPREME COURT REPORTS
[1961]
in case excise duty thereon was payable to the
State of Rajasthan under the provisions of the
Rajasthan Excise Duties Ordinance No. 25 of 1949?
2. Whether the publication of the Government
notification by which the Jaipur ExciAe Rules
were adopted under the provisions of the Rajasthan
Excise Ordinance was sufficient publication within
the meaning of s. 28 of the Rajasthan Excise Duties
Ordinance No. 25 of 1949, and whether the publication of the aforesaid notification should be deemed
to have been properly authenticated by authentication of the publication of the Ordinance. If not,
whether want of authentication would have the
effect of invalidating the said Excise Rules ? "
The case was then heard by a Full Bench consisting
of Wanchoo, C.J., Ranawat and Dave, JJ. The judgment of the Court was delivered by the learned Chief
Justice on November 24, 1952, in substance upholding
the contentions raised on behalf of the petitioner
before the High Court, now respondent. The High
Court came to the conclusion that Art. 277 of the
Constitution was a complete answer to the claim of
the Government of India to collect the dues in question for any period anterior to April 1, 1950. This
conclusion was based on the reasoning that the agreement aforesaid betrween the Government of India and
the Government of Rajasthan was in effect overridden
·by Art. 277 and that the agreement contemplated by
Art. 278 was in respect of a duty which was leviable
by the Government of India. By virtue of Art. 277
of the Constitution cotton excise duty was actually
leviable by the State of Rajasthan up to March 31,
1950, because Parliament made the contrary provision
only from April 1, 1950. Therefore, it was further
observed by the High Court that the effect of Art. 277
on Art. 278 of the Constitution was that cotton excise
duty could not be said to be leviable by the Government of India so far as the State of Rajasthan was
concerned up to March 31, 1950. In view of that
conclusion it was further held that the right to collect
the arrears of excise duty in question could not b0
held to have bee11 transferred to the Union of Indi&
3S.C.R.
SUPREME COURT REPOR'fS
529
·' f'
by virtue of the agreement aforesaid of February 25,
1950. The first question referred to the Full Bench
was thus an~wered in favour of the petitioner in the
High Court. The second question relating to the
publication and authentication of the Excise Rules
was also answered in favour of the petitioner, now
respondent. The High Court held that the Hindi
Gazette relied upon on behalf of the Government gid
not contain any authentication of the Rules and did
not show by whose authority they had been published. This conclusion wa& based on the ground that
the contention raised on behalf of the Government
that the publication in the Gazette and the authentication therein did not only apply to the Ordinance
but covered the Rules also, was not correct. The
answers given by the Full Bench to the questions
referred to it by the Divi3ion Bench were returned to
the Bench concerned anrl. the Bench, in pursuance of
the opinion of the Full Bench, ordered by its iudgment
dated September 29, 1953, that "a direct.ion be issued
against the opposite party not to recover from the
petitioner the amount of RA- 1,36,551-12 as per their
notice of demand of the 16th of February, 1950. The
petitioner shall get costs of this petition from the respondents."
The Union of India applied for and
obtained the necessary certificate, as quoted above,
from the High Court of Ra.jasthan. That is how the
matter is before this Court.
It is manifest that if the opinion of the Full Bench
on the second question referred to as to the publication and authentication of the Rules is correct, then
no other question will arise for determination by this
Court. If the Rules under the Rajasthan Excise
Duties Ordinance, XXV of 1949, had not been properly promulgated and authenticated, then the Ordinance by itself could not be sufficient for the levy and
collection of the tax sought to be i'mposed. It is,
therefore, necessary for us first.to determine that con-.,
t.roversy. At the outset, it may be mentioned that
the writ petition filed by the respondent in the High
Court under Art. 226 of t•he Constitution did not allege
any facts bearing on this part of the controversy.
Union of India
v.
J.'v!.aharaja
Krishnagarh
A-Iit:s Ltd.
Sinha C.J.
1961
Union of India
v.
,'!fr•h1ir·aja
I~rishnagarh
Mills Ltd.
Sinha( •. ].
530
I
'[1961]
SUP:i;tEME COURT REPORTS
Thus, there was no foundation laid in the pleadings
for a contention that the Rules aforesaid had not been
promulgated on a. proper authentication. As already
indicated, the petition was founded only on the la.ck
of power in the Union Government to levy and collect
the excise duty with reference to the provisions of the
Central Excise and Sa.It Act of 1944 and the Rules framed thereunder. There is no reference to the provisions
of Ordinance XXV of 1949 promulgated by the Ra.jastha.n Government. It was only in the reply to the
writ petition ma.de by the respondent in the High
Court that reliance was placed upon the said Ordinance
and the Rules framed thereunder. We do'not.find any
plea.dings, or any petition by way of amendment of
the plea.dings, in the record of this case raising the
contention that the Rules framed under the Ordinance
a.fores1•id had not been promulgated on' a proper
authentication. The High Court, therefore, on the
face of the plea.dings, was not justified ·in permitting
the petitioner before it to raise this contention, but
our decision need not be rested on the, lack of plea.dings only. We have examined .the Ra.ja.sthan Gazette,
the Hindi version of which is entitled Rajaatha11
Raj Patra published by authority of the Ra.jasthan '
Goverament dated Ma.rgashii'sa. Krishna. 7, Saturday,
Samvat 2006, containing the notification dated Jaipur,
September 15, 1949, the preamble of which states that
Shrin.an Rajpramukh had made and promulgated the
following Ordinance which was being published for the
information of the public and it purports to have been
authenticated by the Law Secretary, Sanyukta. Rajas.
than Sarkar. Under that authentication follows the
Ordinance, XXV of 1949, dated September 5, 1949.
The Ordinance goes to the end of page 169 and from
the next page 170 ending with page 172 appear the
Rules. They begin with the declaration which may
be translated as follows :
" In exercise of the powers conferred under ss. 5
and 26 of the Raja.stha.n Excise Duties Ordinance ·
of 1949 the Raja.sthan Government orders that till
new Rules a.re framed under the aaid Ordinance, 'the
;Rules framed under the Jaipur Exe~ -Duties Aot ·
I
3 S.C.R.
SUPREME COURT REPORTS
.531
of 1945 known as the Jaipur Excise Duty Rules of
1945 will be in force throughout the whole of Rajas.
than with necessary modifications and for this purpose will be treated as made under the 'Rajasthan
Ordinance."
It would thus appear that the authentication by the
L;i.w Secretary appearing on t,he first page of the
Gazette as aforesaid was intended to govern not only
the Ordinance in question but also the Rules which
had been promulgated thereunder. Apparently, s. 28
of the Ordinance which ran-
" All rules made and notificatiow1 issued under
this Ordinance shall be made and issued by publication in the Rajasthan Gazette. All such Htles and
notifications shall thereupon have effect as if enacted
in this Ordinance"-
was understood to au.thorise such a . mode of pr9.
mμlgation and authentication. The- authority that
promulgated the rule having intended the signature
of the Law Secretary appearing at the beginning of
the publication as an authentication of thtl rules,
we are of opinion that the formal requirements of
s. 8 (2) of the Ordinance V of 1949 were satisfied.
Whether the authentication appears in the beginning of the notification or at the end of it is not
material so long as it is clear .on a reference to
the·· publication in the Gazette that ~he matter is
substantially covered by the authentication, whether
appearing at the beginning or the end of the notification. The High -Court, therefore, was in error in
coming to the conclusion that the authentication
covered- the Ordinance proper without the Rules
framed thereunder. The correct conclusion from the
record as it stands is that the authentication covers
the entire notificat!on including both the Ordinance
proper arid the R1iii)s framed thereunder which
became partii of the Statute.
·· In· view of this concltlsion it becomes neoessary now
to examine the ratio of the decision of the High Court
on the first ·question referred to it, namely, th-e authority of the Union of India to realise the arrears of the
duty in question. · It is clear in view of our conclusion
v.
Mahan•h
J{risht1a.1;.,,"
J1l rl/s J,td.
Sinha C.].
Union of India
v.
Maharaja
Krishnagarh
Mills Lid.
Sinha C.J.
1i32
SUPREME COURT REPORTS
[1961]
that the Ordinance and the Rules framed thereunder
have been properly promulgated in the Official Gazette,
that the Government of Hajasthan was entitled to
levy and collect the duty of excise in respect of cotton
cloth from the respondent. As a matter of fact, the
respondent appears to ha.ve paid about Rs. 19,739 odd
out of the duty payable by it to t,hat Government.
The remaining amount for which the notice of demand
had been issued by the official of the Government of
India. was certainly payable to the Government of
Rajasthan. We have, therefore, to consider whethar
the Government of India by any process of law stepped
into the shoes of the Rajas than Government in respect
of the arrears aforesaid.
In this connection reliance
was placed on the agreement between the President of
India ar.d the Rajpramukh of Rajasthan dated
February 25, 1950. The relevant provisions of the
agreement are these:
" Whereas provision is made by Articles 278,
291, 295 and 306 of the Constitution of Jnrlia for
certain matters to be governed by agreements b11tween the Government of India and the Government
of a State specified in Part B of the First Schedule
to the Constitution .......... ..
Now, the~efore, the President of India and the
Rajpramukh of P.ajasthan have entered into the
following agreement, namely:-
The recommendations of the Indian States
Finance Enquiry Committee, 1948-49 (hereafter
referred to as the Committee) contained in Part I of
its Report read with Chapters I, II and III of
Part 11 of its Report in so far as they apply to the
State of Rajasthan (hereafter referred to as the
State) together with the recommendations contained
in Chapter VIII of Part II of the Report, are accepted by the Parties hereto, subject to the following
modifications, namely, ......... "
The modific<'tions are not material to this case. The
agreemenl, thus incorporates as terms of the agreement the report of the Cummittee, the relevant portion
of which is in these terms:-
1
l
t
3 S.C.R.
SUPREME COURT REPORTS
533
" With effect from the prescribed date, the
Centre will take over all ' federal ' sources of
Revenue and all ' federal' items of expenditure in
State together with the administration of the
Departments concerned. The Centre must also.take
over all current outstandings (including pending
assessments, refunds, and arrears), liabilities, claims,
etc., and all productive and unproductive capital
assets connected with these Departments."
It is common ground that "federal sources of revenue"
include the duty of excise in question. It is also clear
that all outstanding dues from assessees including
pending assessments and arrears have been by the
terms of the agreement made over to the Centre. This
agreement, as the preamble itself indicates, has been
tnade in accordiJ,nce with the. provisions of Arts. 278
anrl 295 of the Constitution. The relevant portions of
Art. 278 are aB 'under:-
.
"278. (1) Notwithstanding
anything in this
Constitution, the Government of India may, subject
to the provisions of clause (2), enter into an agreement with the Government of a State specified in
Part B of the First Schedule with respect to-
( a) the levy and collection of any tax or· duty
ieviable by the Government of India in such State
an.d for the distribution of the proceeds thereof
otherwise than .in accordance with the provisions of .
this Chapter;......
.
·
·
and, when an agreement is so entered into, the
provisions of this Chapter shall in relation to such
State have effect subject to the terms of such
agreement."
It is noteworthy that the provisions of Art. 278 over.
ride pro tanto other provisions of the Constitution
including Art. 277 and the ter.ms of the agreement
override the provisions of the Chapter, namely,
Chapter I of Part XII. In this Chapter are contained
Arts. 264 to 291.
Thus, on a oonst,,ruction of the provisions of Arts. 277 and 278, it is clear that in the
absence of any agreement between the Government of
India and the Government of a State specified in
Part B, duties of customs which immediately before
1961
Uaion of India
v.
,Mallaraja
Krishnagarh
Mills Ltd.
Sinha C.J,
Union of India
v.
Maharaja
Krishnagarh
Mills Ltd.
Sinha C.].
534
SUPREME COURT HEI UE1'S
(1961]
the commencement of the Constitution were being
lawfully levied by the Government of such a State
continue to be levied by that State until provision to
the contrary is made by Parliament by law, notwithstanding that such a duty is mentioned in the Union
List. Article 277, therefore, is in the nature of a
saving provision permitting the States to levy a tax or
a duty which, after the Constitution, could be levied
only by the Centre. But Art. 277 must yield to
any agreement made between the Government of
India and the Government of a State in Part B
in r~spect of such taxes or duties, etc. The provision to the contrary contemplated by Art. 277
was made by the Finance Act, XXV of 1950, s. 11,
which extended the Central Excise and Salt Act, 1944,
along with other Acts to ·the whole of India except
the State of Jammu and Kashmir. But that section
has effect only from April 1, 1950, and therefore does
not apply to th'e arrears of duty of excise now in
controversy. The agreement envisaged by Art. 278
was entered into as aforesaid on February 25, 1950.
That agreement conceded to the Centre the right to
levy and collect the arrears of the d•.tty in question.
The reasons given by the High Court for the conclusion that in spite of Art. 278 read with the agreement
aforesaid, the Union Government was not entitled to
realise the arrears are-(1) that the agreement does
not contain any specific provision about levy and
collectiqn of cotton excise duty in Rajasthan, (2)
that the mere approval in the agreement of the principles set out in the report is not enough in view of
Art. 277 which made a distinctly different provision
from that contemplated in the report and (3) that the
agreement co,uld be only with respect to a duty which
was leviable by the Government of India. In our
opinion, none of these reasons afortisaid can stand in
the way of the Union of India. Though the agreement
does not in terms refer to levy and collection of cotton
excise duty in Rajasthan, it is clear that the agreement
has to be read with the relevant portions of the report
quoted above. So read, there cannot be the least doubt
that cotton exois~ duty in Rajasthan, as a " federal
l
t
3 S.C.R.
SUPREME COURT REfORTS
535
'
source of revenue," is also covered'by the agreement.
Nor is it correct to say that the agreement read with
the report is not enough to override the provisions of
Art. 277. The agreement read with Art. 278, as already
indicated, in terms, overrides the provisions of
Art. 277. The only other reason which weighed with
the High Court in getting over the terms of Art. 278
cannot al~o hold good. That a duty of the kind now
in controversy on the date of the agreement after
coming into force of the Constitution is leviable only
by the Government of India even in respect of the
State of Rajasthan is clear beyond all doubt. The
Union ·List only, namely, entry 84, in the Seventh
Schedule, authorises the levy and collection of the duty
in question.
Neither the State List, List II, nor the
Concurrent List, List III, contains any such authorisation. It is true that Art. 277 has saved, for the
time being, until Parliament made a provision to the
contrary, the power of the State of Rajasthan to levy
such a duty, but that is only a saving provision, in
terms subject to the provisions of Art. 278. Thus,
the combined operation of Arts. 277 and 278 read
with the agreement vests the power of levy and collection of the duty in the Union of India. It is only in
the absence of an agreement like the one we have in
this case that the Rajasthan Government could
continue to levy and collect the duty in quedtion. The
agreement between the two Governments completely
displaced the operation of Art. 277 in regard inter alia
to the levy of this duty so far as the State of Rajasthan is concerned. It is clear, therefore, that the
High Court was in error in holding that Art. 277 was
any answer to the claim of the Government of India
and should override the provisions of Art. 278 read
with the agreement. On a proper construction of
these provisions, in our opinion, the result is just to
the contrary. In this view of the matter, it is not
necessary to consider the other arguments advanced
on behalf of the appellants, whether Art. 295 should
prevail over Art. 277.
For the reasons aforesaid, this appeal is allowed and
the decision of the High Court set aside. The result
~
'
Union of India
v.
Maharaja
Krishnagarh
Mills Ltd.
Sinha C.j.
Union of India
v.
MaharaJa
Krishnagarh
i-. Mills Ltd.
Sinha C.J.
January 20.
536
SUPREME COURT REPORTS
[1961]
is that the writ petition filed by the respondent in the
High Court stands dismissed with costs here and in
the High Court.
Appeal allowed.
STANDARD VACUUM REFINING CO. OF INDIA
v.
ITS WORKMEN AND ANOTHER.
(P. B. GAJENDRAGADKAR, K. N. WANCHoo and
K. c. DAS GUPTA, JJ .. )
Industrial dispute-Bonus-Living Wage, determination of.
The workmen claimed bonus for the year 1956 equivalent to
nine months' total earnings on the ground that the employers
had admitted their capacity to pay and that there was a big gap
between the wage actually received and the living wage. The
employers contended that they were paying the workmen a living
wage and they were not entitled to any bonus. The employers
relying mainly on the Report of the Textile Labour Committee,
1940, contended that if the living wage in 1940, i.e., R,s. 55/· was
multiplied by 3·5 (due to rise in prices) it gave Rs. 192·50 as the
living wage in 1956 and they were paying their workmen at a
higher rate. The workmen relied on the recommendations of the
Indian Labour Conference, 1957, to show that Rs. 209·70 approximat.ed to the standard of the need-based minimum wage and that
the average. wag:e paid by the employers was nothing more than
this. The Tribunal held that the wages paid were fair but that
there was still a gap between the actual wage and the living
wage and awarded bonus equivalent to five months' basic wages.
Held, that the employers had failed to establish that they
were paying a living wage to the workmen. In construing wage
structure the considerations of right and wrong, propriety and
impropriety, fairness and unfairness are also taken into account
to some extent. As the social conscience of the general community becomes more alive and active, as the welfare policy of the
State takes a more dynamic form, as the national economy progresses from stage to stage, and as under the growing strength
of the trade union movement collective bargaining enters the field,
wage structure ceases to be a purely arithmetical problem.
Wages are usually divided into three broad categories: the basic
rninin1um wage, the falr wage and the living \vage.
The concept
of these three wages cannot be described in definite words as
their contents are elastic and vary from time to time and fro111
place to place. The concept. of a living wage js not a static concept; it is expanding and the numb·er of its constituents and their