# ASSOCIATION v. UNION OF INDIA & ANR

- **Citation:** [1970] 2 S.C.R. 68
- **Court:** Supreme Court of India
- **Decided:** 1970
- **Bench:** J. C. Shah, V. Ramaswami, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/association-v-union-of-india-anr-4938
- **Pages:** 12

## Headnote

Rubber Act (24 of 1947), s. 12 and Rules 33, 33A and 33D-Duty
Jeviable from users of rubber-If violative of Art. 14 and. Entry "84 of List
I of VII Schedule of the Constitution.
The, appellants, an association of rubber chappal manufacturers who
B
were using rubber in their manufacturing process, filed a petition in the
C
High Court challenging the levy and collection from the manufacturers of
chappals, of a duty under s. 12 of the Rubber Act, 1947 as amended by
Rubber Amendment Act, 1960. The grounds of challenge were : ( 1) that
the imposition on the appellants was outside the ambit of Entry 84 of List
I of VII Schedule of the Constitution, which deals with the duties which
can be levied on goods manufactured or produced in India; (2) Section
12(2) which provides the machinery for levy and collection has given uncontrolled and unbridled discretion to the Rubber Board and no guiding
D
principle or policy was laid down in the Act to enable the Board to choose
between the owners of estates of rubber or the users of the rubber; and
(3) the rules framed under the section do not indicate with sufficient
clarity and precision on whom the levy was to be made. The High Court
dismissed the petition.
In appeal to this Court,
HELD : (1) (a) The excise duty could be imposed at the stage which
Was found to be most convenient and lucrative as that is a matter relating
to the machinery of collection and did not affect the essential nature of
the tax. Therefore, merely because the incidence of tax is shifted to the
users of rubber under s. 12(2) which provides for the method of collection, the tax would not cease to be one falling within Entry 84. [73 B-C;
F-GJ
R, C. Jail v. Union of India, [1962] Supp. 3 S.C.R. 436, followed.
Re: the Central Provinces and Berar Act, 14 of 1938, [1939] F.C.R.
18, applied.
(b) If the duty is not excise duty because it is imposed .on the user
Parliament would even then have legislative competence to provide for ih
collection from users, whatever be its nature, under Entry 97 of List I
E
F
read with Art. 248 of the Constitution. [73 H; 74 A-BJ
G
(2) The task of subordinate legislativil necessary for im_plementing the
purpose and objects of an enactmer.: can be delegated, so long as the law
has provided the method by which the delegate can be controlled, there
is a g-Jidance fer fixirig rates of tax and there is a provision to see th'at
reasonable rates are fixed. [74 J>-.F]
Municipal Corporation oj Delhi v. Birla Cf:!tlon, Spinning and Weaving
Mills, [1%8] 3 S.C.R. 251, followed.
In the present case, the Act was enacted for the purpose of develop1J1ent of rubber industry under the control of the. Union. Parliament has
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RUBBER MANUFACTURERS v. UNION (Grover, J.)
69.
onacted that the Rubber Board san levy and collect the duty either from
the owner of the rubber estate or the user of the rubber. But the Board
is enjoined to do so in accordance with the Rules made by Central Govern.
meiit under s. 25 ( 1) (a) of the Act and which are placed before each
House of Parliament for approval.
The Board itself is a high powered
body and all interests are represented among its members and all its acts
are subject to the control of the Central Government under s. 22. [74 H;
75 H; 78 CJ
Further. the Board is vitally interested in the collection of the duty
and it has to see that such duty is collected without undlle delay and proper
expedition. The objects and reasons of the Amending Act (which can be
taken into consideration for the purpose of seeing if there is any a11eged
infringement of Art. 14) show that the Board was finding it difficult to
levy and collect the duty from the owners and it was considered that it
would be much more easy to collect it from the users, in accordance with
the rules. Thus it is necessary that it should be left to the rule making
authority to indicate the cases and the circumstances in which the duty
was to be collected from the owner or user. [15 C; 77 H; 78 A-Bl
Since the polic · of t

## Text

JULLUNDUR RUBBER GOODS MANUFACTURERS'
A
ASSOCIATION
v.
UNION OF INDIA & ANR.
August ZS, 1969
[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.]
Rubber Act (24 of 1947), s. 12 and Rules 33, 33A and 33D-Duty
Jeviable from users of rubber-If violative of Art. 14 and. Entry "84 of List
I of VII Schedule of the Constitution.
The, appellants, an association of rubber chappal manufacturers who
B
were using rubber in their manufacturing process, filed a petition in the
C
High Court challenging the levy and collection from the manufacturers of
chappals, of a duty under s. 12 of the Rubber Act, 1947 as amended by
Rubber Amendment Act, 1960. The grounds of challenge were : ( 1) that
the imposition on the appellants was outside the ambit of Entry 84 of List
I of VII Schedule of the Constitution, which deals with the duties which
can be levied on goods manufactured or produced in India; (2) Section
12(2) which provides the machinery for levy and collection has given uncontrolled and unbridled discretion to the Rubber Board and no guiding
D
principle or policy was laid down in the Act to enable the Board to choose
between the owners of estates of rubber or the users of the rubber; and
(3) the rules framed under the section do not indicate with sufficient
clarity and precision on whom the levy was to be made. The High Court
dismissed the petition.
In appeal to this Court,
HELD : (1) (a) The excise duty could be imposed at the stage which
Was found to be most convenient and lucrative as that is a matter relating
to the machinery of collection and did not affect the essential nature of
the tax. Therefore, merely because the incidence of tax is shifted to the
users of rubber under s. 12(2) which provides for the method of collection, the tax would not cease to be one falling within Entry 84. [73 B-C;
F-GJ
R, C. Jail v. Union of India, [1962] Supp. 3 S.C.R. 436, followed.
Re: the Central Provinces and Berar Act, 14 of 1938, [1939] F.C.R.
18, applied.
(b) If the duty is not excise duty because it is imposed .on the user
Parliament would even then have legislative competence to provide for ih
collection from users, whatever be its nature, under Entry 97 of List I
E
F
read with Art. 248 of the Constitution. [73 H; 74 A-BJ
G
(2) The task of subordinate legislativil necessary for im_plementing the
purpose and objects of an enactmer.: can be delegated, so long as the law
has provided the method by which the delegate can be controlled, there
is a g-Jidance fer fixirig rates of tax and there is a provision to see th'at
reasonable rates are fixed. [74 J>-.F]
Municipal Corporation oj Delhi v. Birla Cf:!tlon, Spinning and Weaving
Mills, [1%8] 3 S.C.R. 251, followed.
In the present case, the Act was enacted for the purpose of develop1J1ent of rubber industry under the control of the. Union. Parliament has
H
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RUBBER MANUFACTURERS v. UNION (Grover, J.)
69.
onacted that the Rubber Board san levy and collect the duty either from
the owner of the rubber estate or the user of the rubber. But the Board
is enjoined to do so in accordance with the Rules made by Central Govern.
meiit under s. 25 ( 1) (a) of the Act and which are placed before each
House of Parliament for approval.
The Board itself is a high powered
body and all interests are represented among its members and all its acts
are subject to the control of the Central Government under s. 22. [74 H;
75 H; 78 CJ
Further. the Board is vitally interested in the collection of the duty
and it has to see that such duty is collected without undlle delay and proper
expedition. The objects and reasons of the Amending Act (which can be
taken into consideration for the purpose of seeing if there is any a11eged
infringement of Art. 14) show that the Board was finding it difficult to
levy and collect the duty from the owners and it was considered that it
would be much more easy to collect it from the users, in accordance with
the rules. Thus it is necessary that it should be left to the rule making
authority to indicate the cases and the circumstances in which the duty
was to be collected from the owner or user. [15 C; 77 H; 78 A-Bl
Since the polic · of the Act has b~n enunciated with sufficient clarity,
and 1Uidance has been furnished as to how the Board should exercise its
powe•s in the matter of levy, there is no discrimination and Art.
14 is
GO! Vk>lated.
D
Jpoh v. C.J.T. Madras, [19681 1 S.C.R. 65 ~nd Raghubar Dayal Jal
E
Prakash v. 1."nion of India, [19621 3 S.C.R. 547, referred to.
( 3) A
imbined roading of rr. 33, 33A and 330 indicates that a deli·
nite prov> m is made with regard to the category of person~ on whom the
coll'!ction of the dutv is to be made, namely, the u!:ers of rQhber.
CIVIL APPELLATE JURISDICTION : Civil Appeal N~. 1220 of
1966.
Appeal by special leave from the judgment and order dated
April 6, 1965 of the Punjab High Court, Circuit Bench at Delhi
in Letters Patent Appeal No. 58-D of 1966.
M. C. Chagla, B. Datta and J. B. Dadach1mji, for the appel·
F
!ant.
Niren De, Attorney-Genera/, V. A. Seyid Muhammad, R. H.
Dhebar and S. P. Nayar, for respondent No. 1.
Niren De, Attorney-General, V. A. Seyid Muhammad, R. H.
Dhebar, S. P. Nayar and Joy Joseph, for respondent No. 2.
G
S. J. Sorabji, A. J. Rana, K. L. Hathiand K. N. Bhat, for the
H
interveners.
The Judgment of the Court was delivered by
Grover, J.
This is an appeal by special leave from a
j11dgment of the Punjab High Court (Circuit Bench) Delhi in
which the validity and legality of the levy of cess by way of excise
duty on the rubber used by manufacturers of chappals under the
provision~ of the Rubber Act 1947, (Act XXN of 1947) as
amended, hereinafter called tlie Act, have been assailed.
70
SUPREME COURT REPORTS
[1970] 2 S.C.R.
M/s. Jullundur Rubber Goods Maimfacturers' Association _is
an association of rubber chappal manufacturers at Jullundur m
the State of Punjab. Its members, who manufacture chappals,
are stated to use about 15 to 20% of rubber in the process of
their manufacture while the rest of the material used by them
consists of v::rious other articles.
A petition was
filed under
Arts. 226 & 227 on behalf of the aforesaid Association, the se£Ond
petitioner being its Secretary, challenging the levy and collection
from the manufacturers of chappals under the provisions of the
Act, the Rules framed and the relevant notification issued thereunder of a duty as a result of the amendment made in s. 12 of
the Act by the Rubber Amendr.ient Act of
1.960.
A learned
Single Judge dismissed the writ petition and his judgment was
affirmed by a division bench of the High Court.
The contentions which have been raised are : ( 1) the duty
sought to be imposed under s. 12 as amended being outside the
ambit of Entry 84 of List I in the Seventh Schedule to the
Constitution is beyond the legislative competence of the Parl[a·
ment; (2) Section 12(2) suffers from the vice of excessive delegation.
It confers uncontrolled and unrestricted discretion upon
the Rubber Board to levy upon and collect duty of excise from
either the owners of the rubber producing· estates or the users· so
called manufacturers (of rubber) without specifying the circumstances under which it should be imposed upon the one or the
other nor has any guiding policy or principle been laid down
in the Act for making a choice. ( 3) In any case; the Rules which
have been framed do not satisfy the provisions of s. 12(2) of
the Act and do not indicate with sufficient clarity and precision
on whom the levy is to be made and from whom the duty is to
be collected as between the owners of the estates and the manufacturers.
The relevant statutory provisions -may first be noticed. In
194 7 the Central legislature enacted The Rubber
(Production
and Marketing) Aci, 194 7. Its name was changed to Rubber Act
1947 by the Rubber (Production and Marketing)
Amendment
Act, 1954. The Act was enacted to provide for the development
under the control of the Union of the rubber industry.
Under
s. 4 the Rubber Board was to be constituted.
The functions of
the Board were enumerated in s. 8.
It was to be its duty fo
promote by such measure as it thought fit development
of the
rubber industry.
Under s. 10 it was obligatory on every person
owning land planted with rubber plants to get himself registered
as an owner by applying to the Board. Section 12 provided for
thtl imposition of rubber cess. Under s. 14 no person could
sell or otherwise dispose of or buy or otherwise acquire rubber
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RUBBER MANUFACTURERS v. UNION (Grover. J.)
71
except in accordance with the terms of general or special license
issued by the Board.
The Central Government was given the
over-all control over the acts of the Board by s. 22.
Section 25
empowered the Central Government to make Rules.
Prior to
the amendment made by the Rubber Amendment Act of 1960
(Act XXI of 1960) the duty of excise was payable under ... 12(2)
by the owners of the estates on which rubber was produced and
it was to be paid by them to the Board within one month from the
date on which they received a notice of demand.
By Act XXI of
1960 an important change was made whkh affected the manufacturers and the duty could be collected by the Board either from
the owners of the estates or from the man·ufacturers by whom the
rubber is' used.
At this stage the relevant provisions of the Act with which we
are concerned may be reproduced :-
S. 3(e) "manufacturer" means any person engaged
in the manufacture of any article in the making of
which rubber is used;"
(h) "rubber" means-
(i)
(ii)
(iii) latex, (dry rubber content) in any state of
concentration, and includes scrap rubber,
sheet rubber, rubber in powder and
all
forms and varieties of crepe rubber, but
does not include rubber contained in any
manufactured article;"
S. 4(3) "The Boan.I shall consist of-
( a) a Chairman to be appointed
by
the Central
Government;
(b) two members lo represent lh~ State of Madras,
one of whom shall be a person
representing
rubber producing interests;
( c) eight members to represent the State of Kerala
six of whom shall be perso:.s representing th~
rubber producing interests, three of
rnch
six
being persons representing the small growers;
( d) ten members to be nominated by the
Central
Government of whom two shall represent the
manufacturers and four labour; and
(e) three members of Parliament of whom two shall
be elected by the House of the People and one
by the Council of States; and
72
. SUPREME COURT REPORTS
[1970] 2 S.C.R .
,
(fl the
Rubber
Production
Commissioner, exofjicio."
s. 12( 4) "For the purpose of en~bling. the
Board
to assess the amount of duty of excise levied under the
section--
( a) the Board shall, by notification in the Official
Gazette, fix a period in respect of which assessments shall be made; and
(b) without prejudice to the provisions of section
20, every manufacturer shall furnish
to
the
Board a return not later than fifteen days after
the expiry of the period to which the return
relates, stating-
( i) in the case of an owner, the total quantity
of rubber produced on the estate in each
such period;
Provided that in respect
ot an
estate
situated only partly in India,
the
owner
shall in the said return
show
separately
the quantity of rubber
produced
within
and outside India;
(ii) in the case of a manufacturer, the total
quantity of rubber used by him in such
period out of the
rubber
produced
in
India."
The contention raised on behalf of the appellant-association
is
that under Entry 84 of List I in the Seventh Schedule to the
Constitution the duties can be levied on goods manufactured or
produced in India.
Excise duty, it is pointed out, can be levied
only on the actual producers and manufacturers of rubber but
in the very nature of such duty it could not be imposed on users
or consumers of that commodity. It is suggested th:lt sub-s. (1)
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of s. 12 is the charging section and sub-s. (2) provides for the
machinery for levy and collection of tax.
But sub-section (2)
cannot alter the substantive provision in the charging sub-section
(l) and since the Parliament has employed the words "duty of
excise" which have a well understood meaning the incidence of G
tax would fall only- on the actual producers.
Once the incidence
of tax was shifted to the users the tax wouid cease to be one
which would fall within Entry 84.
In re the Central Provinces
and Berar Act No. XIV of 1938 (1) Gwyer, C.J. described "excise
duty" thus :
"!:Jut _its ~rimary and
fundamental
meaning in
Enghsh 1s strll that of a tax on articles produced or
(1) [1939] F. C.R. 18, 40-41.
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RUBBER MANUFACTURERS v. UNION (Grover, J.)
73
manufactured in the taxing country and intended for
home . consumption".
The learned Chief Justice, however, proceeded to add that there
could be no reason in theory why such duty should not be imposed
even on the retail sale of an article if the taxing Act so provided.
It could obviously be imposed at the stage which was found to
be most convenient and lucrative as that was a matter of
the
machinery of collection aud did not affect the essential nature of
the tax.
Referring to this decision of the Federal Court and
several other cases it was observed in R. C. Jail v.
Union of
India(') at page 451 :
"Excise duty is primarily a duty on the production
or manufacture of goods produced or manufactured
within the country.
It is l!P indirect duty which the
manufacturer or producer passes on to the ultimate
consumer, that is, its ultimate incidence will always be
on the consumer.
Therefore, subject always to the
legislative competence of the taxing authority, the said
tax can be levied at a convenient stage so long as the
character of the impost, that is, it is a duty on the manufacture or production, is not lost.
The method of collection does not affect the essence of the duty, but only
telates to the machinc:ry of collection for administrative
convenience. Whether in a particular ease the tax
ceases to be in essence an excise duty, and the rational
connection between the duty and the person on whom it
is imposed ceased to exist, is to be decided on a fair
construction of the provisions of a particular Act".
The above statement of law in no way supports the argument
F
that the excise duty cannot be collected from persons who are
neithe~ producers nor manufacturers.
Its
incidence
certainly
falls duectly on the pr.:>duction or manufacture of goods but the
method of co!iecfr:m will :iot affect the essence of the duty.
In
our opinion ;ub-s. (2) of s. 12 provides for the method of collection as the exci:,e duty can be collected either from
the
produci:rs or from the manufacturers as defined by the Act which
G
would mclude members of the appellant association who use
rubber in the manufacture of chappals.
It seems to us that if the provisions of Entry 97 in· List I in
the Seventh Schedule as also the provisions of Art. 248 of the
~onstitution are kept in view the Parliament would have legislaH
live competence even with regard to the imposition of a tax which
does not fall within Entry 84. It will be a kind of non-descripts
tax which has been given the nomenclature of a duty of excise.
(I) [1962! Supp. 3 S.C.R. 436.
LI Sup. CI/70-6
74
SUPREME COURT REPORTS
[1970] 2 S.C.R.
Counsel for the appellant-association quite
properly
has . not
challenged this position but has merely sought to lay emphasis on
sub-s. (1) being the charging section.
We find it
diffi~ul.t to
endorse the reading of sub-s. (1) and sub-s. (2) of s. 12 m JSolation.
Not only the statute but also the section have to be read
as a whole and together, and in our judgment whatever be the
nature of duty, Parliament would undoubtedly have legislative
competence under Entry 97 of List I in the Seventh Schedule read
With Art. 248 of the Constitution.
We may next deal with the question whether s. 12(2) liUffers
from the vice of excessive delegation and whether there has been
violation of Art. 14 as uncontrolled and unbridled discretion has
been conferred on the Board to levy and collect the tax from either
the producer or the manufacturer (the user of rubber).
It is
pointed out that there is no guiding principle orpolicy laid down
in the Act to enable the Board to make a choice between the two
categories.
The principles governing such questions have been
laid down in several decisions of this Court. It is we!l established that essential legislative functions consist of the determination
of the legislative policy and its formulation a~ a binding rule of
conduct and cannot be delegated by the legislature.
What can
be delegated is the task of subordinate legislation necessary for
implementing the purpose and objects of an enactment.
Where
legislative policy is enunc'ated with sufficient clearness
or a
standard is laid down the courts will not interfere.
It will depend
on consideration of the provisions of a particular Act including
its preamble as to the guidance which has been given and the
legislative policy which has been laid down in the matter.
In a
taxing statute the guidance may take the form subjecting the rate
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to be fixed by the local body to the approval of the Government
which acts as a watch-dog on the actions of the local body in
this matter on behalf of the legislature.
The reasonableness of
the rates may be ensured by providing safeguards laying down the
procedure for consulting the wishes of the local inhabitants.
So
long as the law has provided the method by which the local body
can be controJled and there is a provision to see that reasonable
rates are fixed it can be said that there is guidance in the matter
G
of fixing the rates for local taxation; vide Wanchoo, C;J. in.
Municipal Corporation of Delhi v. Bir/a Cotton, Spinning and
Weaving Mills, Delhi & Anr.( 1)
In s. 12(2) the Parliament has made it quite clear that the
Board can levy and collect the duty of excise either from the
owner of a rubber estate on which the ·rubber is produced or from
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the manufacturer by whom such rubber is used. The Board has
(I) [1968] 3 S.C.R. 251 ·at pp. 269-270.
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RUBBER MANUF.ACTURERS V. UNION (Grover, J.)
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further been enjqined to do so in accordance with Rules made in
this behalf.
The Board, as constituted under s. 4, has tO be a
high powered body and among its members those representing the
rubber producing interests, the small growers, the ma.nuf~cturers
and the labour are included.
It can, therefore, keep m view the
interests of all concerned.
Ac~ording to the preamble of the Act
it was meant for the development of the rubber industry under
the control of the Union.
That is the main purpose for which
the Board has to function.
All amounts paid to the Board by
the Central Government under s. 12(7) of the Act have to go
to the general fund of the Board under s. 9A.
Section 12(7)
provides that the proceeds of the duty of excise collected has
first to be credite.d fo the Consolidated Fund of India reduced by
the cost of collection and then it has to be paid over
by the
Central Government to the Board.
The Board is thus vitally
interested in the collection of the duty and it has to see that such
duty is collected without undue delay and proper expedition.
It has also to look to the best possible method of realization. In
the light of this scheme as embodied in the Act it is difficult to
sustain the challenge on the ground of excessive delegation.
The
policy of the Act has been enunciated with sufficient clarity and
the guidance has been furnished by the provisions to which reference has been made as to how the Board should exercise its
powers in the matter of levy and collection of tax.
There is also
another important safeguard which is contained in s. 22 of the
Act.
All acts of the Board by virtue of that section shall be
subject to the control of the Central Government which may·
cancel, suspend or modify any action taken by the Board.
The provision in s. 12 ( 2) that the Board shall levy and collect
the duty in accordance with the Rules is another important safeguard against the Board acting arbitrarily in the matter of collection of duty from the owners of the rubber estates or the manufacturers.
These Rules are to be framed by the Central Government under s. 25(1) (xx a) which is to the following effect:
. "the cases an.d circumstanr,es in which the duty of
excise under sect10n 12 shall be payable by the owner
and the manufacturers respectively, the manner in which
the duty may be assessed, paid or collected, the regulation of the production, manufacture, transport or sale
of rubber in so far as such regulation is necessary for
the proper levy, payment or collection of duty;"
Section· 25 ( 3) makes it obligatory on -the Central Government to
pla~e every rule before each House of Parliament for a specified
penod of 30 days and those Rules can be subject to criticism
and can be modified or even be abrogated.
Thus it is not possible
76
SUPREME COURT REPORTS
[1970] 2 S.C.R.
to hold that the Parliament has abdicated its functions in enacting
s. 12(2) of the Act.
Learned Attorney General has relied on certain decisions of
this Conrt according to which it can be left to the anthonty which
has to levy and collect the tax to decide whether to collect from
one category of persons or the other category where persons in
both categories can be snbjected to tax.
In M. M. lpoh & Ors.
v. Commissioner of Income-tax Madras(') the validity of s. 3
of the Income-tax Act, 1922 was challenged on the gronnd that
it was violative of Art. 14 of the Constitntion.
That section
invested the taxing anthority with an optiov to assess to tax the
income collectively of the association of pe_rsons.
The argument
raised was that that Act set no principles and disclosed no
guidance to the Income-tax Officer in exercising the option.
The
scheme of the Income-tax Act was considered and it was observed
that the dnty of the Income-tax Officer was to
administer its·
provisions in the interest of public revenne and to prevent evasion
of tax and his function was mainly qnasi-judicial.
The decision
of bringing to tax either the income of the association collectively
or the shares of ·the members of the association separately was not
final and was subject to appeal. It was held that the very nature
of the anthority exercised by the Income-tax Officer and his dnty
to prevent evasion or escapement of liability constitnted adequate
enunciation of principles and policy for his gnidance.
In Raghu·
·bar Dayal Jal Prakash v. The Union of lndia( 2 ) the validity of
certain provisions of the Forward Contracts (Regulathn) Act,
1952 was assailed.
In regard to s. 15 of that Act the argument
was that it conferred unguided and arbitrary power
upon the
Cet.tral Government to choose any commodity it liked and bring
the Act into operation in respect of the commodity which the
Government chose at any time it pleased.
Jn this manner the
interest of the traders coold be vitally affected by rendering illegal
a contract which was perfectly legal when it was entered into.
This Court referred to the Report of the Expert Committee on the
/ Bill which became an Act, dealing with the economi~ implications
of forward trading and for the necessity of regulating such contracts in particular goods.
It was observed that tl:>.e suitability
of a commodity for forward trading depended on factors which
were far from static and which were snbject to varhtions over a
period of time.
A continnons assessment was required of all
elements which would necessitate regulation. All this conld not
be specified in a statnte. It was for that reason that a Forward
Markets Commission had been constitnted on wh'lm the daty had
been cast of advising the Government on the sitnation as it existed
from time to time. The following observations •re pertinent and
may be reprodnced :
(1) [1968] 1 S.C.R. 65.
(2) [1962] 3 S.CR. 547.
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A
"In our opinion, the selection of the commoditv for
the regulation of forward trading in it or of prohibition
of such trading can only be left to the Government and
the purpose for which the power is to be used and. tho
machinery created for the investigation furnish sufficient
guidance as to preclude any challenge on the ground of
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a violat:on of Art. 14."
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Jn the statement of objects and reasons appencLed to Bill No.
32 of 1960 when amendments were made in s. 12 of the Act by
the Rubber Amendment Act, 1960, it was stated inter alia :
"This method of collection of the cess provided
under the Act has led to considerable evasion of cess by
the owners of the estates, either by evasion of registration or by failure to submit correct returns or any
returns at all.
There are about 26,000 estates under
production in the country and most of them are small
holdings.
Many of them do not render returns cf
production to the Rubber Board and thus evade payment of duty.
From October, 1947 to Der.ember 1954,
it was found that 20,608 tons of rubber escaped assessment and the Board suffered during the period a loss
of Rs. 2,30,805.
The Rubber Board estimates that
under the present system there is no likelihood of more
than 65 per cent of the potential reve.me being realbed
each year.
With a view to improving the efficiency of collection, it is proposed to amend section 12 of the Act so
.s to enable the cess to be collected eithe.r from the
owners or the manufacturer who '.l\timatelv consumes
the rubber produced in the estates.
·
There are at present 347 registered rubber manufacturers in the country. It is felt that it would be far more
easy to collect the cess from a small number of manufacturers than from about 26,000 prod:1cers whoEe
number will increase year by year.
The proposed
amen~ment of section 12 in the amending BiB is an
enabhng measure for the administrative change in the
method of collection being contemplated."
Al!11ough it may not be permissible to take the statement of
o_b1ects and reasons into consideration for construing 1he provisions_ of an Act the facts contained in such a statemer,t can
~ertamly be looked at for ~e p~rpose of seeing any
alleged
mfrlngement of Art. 14. It 1s qmte clear from the data given
that the Rubber Board was finding it difficult to levy and, collect
78
SUPREME COURT REPORTS
[ 1970] 2 S.C.R.
the duty from the owners of rubber estates and it was con;idered
that it would be much easier to collect the same from the manufacturers.
The Board was, therefore, to collect the
duty
in
accordance with the rules made in this behalf by the Central
Government.
Thus it was necessary, in view of the entire facts
and circumstances stated before, that it should be left to the
rule-making authority to indicate the cases and the circumstances
in which the duty of excise was to be collected from the owner
or the manufacturer respectively.
It was open to the rule rnaking
authority to vary the rules according to the changing. circumstances and conditions.
The Board which was a high powered
body was mainly responsible for collection of the duty and the
rules would naturally be made in consultation with it from time
to time.
We are unable to see how the challenge on the ground
of discrimination under Art. 14 can be sustained in view ot all
these reasons.
It does not appear that the Board can discriminate
in an arbitrary manner between owners of rubber estates and the
manufacturers or between persons inter se of the same ~ategory.
The Central Government has framed rules pursaant to the
power confeued by s. 25 of the Act. Unfortunately the rules
relating to furnishing of returns and collection of duties are not
properly worded and suffer from lack of clarity.
Under Rule 33
the Board can call for information and documents from owners
of rubber estates or any licensed dealer or manufacturer relating
to the stock of rubber held and sale of rubber etc.
Under cl. ( e)
all manufacturers have to submit half yearly returns in form M
showing the total quantity of all rubber p11rchased or othenvise
acquired and consumed or used in the process of manufacture.
Rule 33A provides for production of accounts by an owner if
he fails to furnish in time the return referred to in sub-s. ( 4) of
s. 12 or if he furnishes a
defective return.
The Board can,
after checking the amounts and after, making such further enquiry
as it may deem fit assess the amount payable under sub-s.(2) of
s. 12.
Similar provision is made with regard to manufacturers
by Rule 33B.
Rule 33D, however, is material and may be
reproduced :
(I ) "Every manufacturer shall by
demand notice
sent through registered post or in such
other
manner as the Board may direct be intimated of
the amount assessed on the quantity of rubber
acquired during the periods specified in rule
33(e).
On receipt of such notice, the manufacturer shall pay to the Board the amount
specified therein either in cash at the Board's
office at Kottayam or by money order or by
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RUBBER MANUFACTURERS v. UNION (Grover, J.)
79
(2)
bank draft or cheque duly crossed and payable
at Kottayam to the Secretary of the Board within 30 days of the receipt of the said notice.
On such demand being made, if a manufacturer
fails to pay the amount within the due date, the
Board may take steps to report the fact to the
Central Government or the State Government
concerned for
recovery
of
th~ outstanding
amount as an arrear of land revenue."
Now the above rule seems to contemplate the filing of return
both by the owners of rubber estates and manufacturers.
But
under Rule 330 the demand notice can be sent only to a manufacturer on receipt of which he must make payment to the Board
of the amounts specified therein.
On his failure to make snch
payment the Board can take steps for recovery of the amounts
due as arrears of land revenue by reporting to the Central Government or the State Government as the case may be.
There is
no such procedure prescribed with regard to owners of estates.
It would follow that under the rules the demand notice is to be
sent only to the manufacturers and the amounts of duty are . to
be realised from them alone.
The substantive provisions of
aub-ss. (4), (5) and (6) of s. 12 also contemplate assessment
being made with regard to the returns to be furnished by owners
and manufacturers.
Any person aggrieved by
an assessment
has been given the right of appeal to the District Judge.
But as pointed out before, there is no provision either in the
statute or in the rules for a demand to be made and a coercive
process to be employed in the event of failure to make the payment.
That is done by Rule 330 alone from which it would
be reasonable to conclude that under the rules it is only the
manufacturers who are liable to pay the amount of duty.
The
rules can, therefore, be said to make a definite provision with
regard to the category of persons from whom the collection of
the duty is to be made, namely, the manufacturers.
For all the reasons given above the appeal fails and it is dismissed with costs.
Y.P.
Appeal dismissed.