# • R. c. Jail v. Union

- **Citation:** [1962] Supp. 3 S.C.R. 436
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/r-c-jail-v-union-2390
- **Pages:** 19

## Headnote

1962
8, S. Jfunno 1..~l
v.
8. 8. Rajk.,..,
Slid. J,
IY~2
Fth1uary 21.
436 SUPREME COURT REPORTS [1002] SUPP·
as property. The High Court was therefore, in our
judgment, in error in holding that the right dccla·
rc<l in favour of Khilonahai was not possessed by
her, nor are we able to agree with the submission
of the learned ·counsel for Raj Kumar th·1t it was
not property within the meaning of s. 14 of the Act.
On that view of the case, by virtue of ss. 15
and l6 of the Act, the interest deolared in favour
of Khilonabai devolved upon her sons Munnalal
and Ra.mchand to the exclusion of her grandson
Rajkumar. The decree passed hy the High Cuurt
is therefore modifie<l in this respect and the decree
passed by the trial Court restored. Having regard
to the p11rtial success of the parties, there will
be no order as to costs in this appeal and in the
High Court.
Appeal partl,y allowed.
R. C. JALL
v.
UNION OF INDIA
(B. P. SI:SIIA, c. J., K.
SUBBA RAO, N. RAJAGO·
PALA AYYA~GAH, J. R. '.\TuDHOLKAR and T. L.
VENKATARAMA AIYAR, JJ.)
Railu•a.y -- ,'\1litfo1 recorer.rJ of CP&.r1-limitation-Jlaint ..
n.inrzbilit11 -- Co11signee
~f !iable--l1ulirtn
Limitation Act,
mos (LY of 1908), Art.;, 149, no;;o --
Con•litution of l11dia,
Arts 265, .)72 - Ordinance Yo. 39 or 1944 -- Ordinance 6 of
1947, .•.. 1-•;oal Production Fund Ritl,., /!144, rr.6, .1, 3(a), 3(b)
-Supreme Court Rule.•, 19W, as amended, 0. XI' lll, r.2.
•
3 S.d.R.
SUPREME COURT REPORTS
431
The appellant, Amalgamated Coalfields, despatched by
rail three consignments of coal to appellant R. C. Jail from
Junner-Deo to Indore. The appellant R. C. Jail took delivery of the coal after paying the freight, but by mistake the
ccss payable as surcharge was not recovered from him at the
time of delivery of goods. On April 15, 1953, the Union of
India representing the Central and Western Railways filed a
suit before the Civil Judge Chhindwara, for the recovery of
the said cess. Since important questions of interpretation of
'the Government of India Act, 1935 and the Constitution were
involved, the High Court withdrew the case to its own file for
trial. The appellants inter alia, pleaded that the
levy was
illegal and the suit was barred by limitation. The High Court
decreed the suit and held that it was within time and the
appellants were liable to pay the cess against which the present appeals were preferred. It was urged by the appellants
(1) that art. 149 of the Indian Limitation Act did not apply
and the suit was governed by art. 120 of the Limitation Act;
(2) that the tax could not be sustained under Art. 265 of the
Constitution; ( 3) that the excise duty could not be levied on
the consignee; ( 4) that the purpose of the Ordinance had
exhausted and the Central Government could no longer levy
the tax; (5) that under the statutory rules only the consignee
was liable to pay.
Held, that art. 149 of the Indian Limitation Act read with
art. 120 of the said Act applied to the present case and the
suit was within time.
Kirpa Sanker v. Janki Prasad, A.I.R. 1942 Pat. 87,
Secre,tary of State for India v. GuruProshad Dhur, (1893) I.L.R.
20 Cal 51; Inderchand v. Secretary of St,atefor India (194l)
9 I.T.R. 673 and Government of India v. Taylor, (1955) 27
l.T.R. 356, held inapplicable,
The repealing Ordinance, being a temporary one, expir·
ed after it fulfilled its purpose. · As it had continued the life
of the original Ordinance which was a permanent one, in respect of past transaction, the expiry of its life could not have
any effect on that law to the extent saved. The repealed to
ordinance, to the extent saved, continued to have force under
Art. 372 of the Constitution and it could not be said that the
coal cess was levied without authority of law within the meaning of Art. 265 of the Constitution.
·
Hansraj Moolji v. The State of Bombay, (1957) S.C.R.
634, relied on.
The Excise duty is primarily a duty on the production
or manufacture of goods produced or manufactured within
1962
•
R. c. Jail
v.
Union

## Text

1962
8, S. Jfunno 1..~l
v.
8. 8. Rajk.,..,
Slid. J,
IY~2
Fth1uary 21.
436 SUPREME COURT REPORTS [1002] SUPP·
as property. The High Court was therefore, in our
judgment, in error in holding that the right dccla·
rc<l in favour of Khilonahai was not possessed by
her, nor are we able to agree with the submission
of the learned ·counsel for Raj Kumar th·1t it was
not property within the meaning of s. 14 of the Act.
On that view of the case, by virtue of ss. 15
and l6 of the Act, the interest deolared in favour
of Khilonabai devolved upon her sons Munnalal
and Ra.mchand to the exclusion of her grandson
Rajkumar. The decree passed hy the High Cuurt
is therefore modifie<l in this respect and the decree
passed by the trial Court restored. Having regard
to the p11rtial success of the parties, there will
be no order as to costs in this appeal and in the
High Court.
Appeal partl,y allowed.
R. C. JALL
v.
UNION OF INDIA
(B. P. SI:SIIA, c. J., K.
SUBBA RAO, N. RAJAGO·
PALA AYYA~GAH, J. R. '.\TuDHOLKAR and T. L.
VENKATARAMA AIYAR, JJ.)
Railu•a.y -- ,'\1litfo1 recorer.rJ of CP&.r1-limitation-Jlaint ..
n.inrzbilit11 -- Co11signee
~f !iable--l1ulirtn
Limitation Act,
mos (LY of 1908), Art.;, 149, no;;o --
Con•litution of l11dia,
Arts 265, .)72 - Ordinance Yo. 39 or 1944 -- Ordinance 6 of
1947, .•.. 1-•;oal Production Fund Ritl,., /!144, rr.6, .1, 3(a), 3(b)
-Supreme Court Rule.•, 19W, as amended, 0. XI' lll, r.2.
•
3 S.d.R.
SUPREME COURT REPORTS
431
The appellant, Amalgamated Coalfields, despatched by
rail three consignments of coal to appellant R. C. Jail from
Junner-Deo to Indore. The appellant R. C. Jail took delivery of the coal after paying the freight, but by mistake the
ccss payable as surcharge was not recovered from him at the
time of delivery of goods. On April 15, 1953, the Union of
India representing the Central and Western Railways filed a
suit before the Civil Judge Chhindwara, for the recovery of
the said cess. Since important questions of interpretation of
'the Government of India Act, 1935 and the Constitution were
involved, the High Court withdrew the case to its own file for
trial. The appellants inter alia, pleaded that the
levy was
illegal and the suit was barred by limitation. The High Court
decreed the suit and held that it was within time and the
appellants were liable to pay the cess against which the present appeals were preferred. It was urged by the appellants
(1) that art. 149 of the Indian Limitation Act did not apply
and the suit was governed by art. 120 of the Limitation Act;
(2) that the tax could not be sustained under Art. 265 of the
Constitution; ( 3) that the excise duty could not be levied on
the consignee; ( 4) that the purpose of the Ordinance had
exhausted and the Central Government could no longer levy
the tax; (5) that under the statutory rules only the consignee
was liable to pay.
Held, that art. 149 of the Indian Limitation Act read with
art. 120 of the said Act applied to the present case and the
suit was within time.
Kirpa Sanker v. Janki Prasad, A.I.R. 1942 Pat. 87,
Secre,tary of State for India v. GuruProshad Dhur, (1893) I.L.R.
20 Cal 51; Inderchand v. Secretary of St,atefor India (194l)
9 I.T.R. 673 and Government of India v. Taylor, (1955) 27
l.T.R. 356, held inapplicable,
The repealing Ordinance, being a temporary one, expir·
ed after it fulfilled its purpose. · As it had continued the life
of the original Ordinance which was a permanent one, in respect of past transaction, the expiry of its life could not have
any effect on that law to the extent saved. The repealed to
ordinance, to the extent saved, continued to have force under
Art. 372 of the Constitution and it could not be said that the
coal cess was levied without authority of law within the meaning of Art. 265 of the Constitution.
·
Hansraj Moolji v. The State of Bombay, (1957) S.C.R.
634, relied on.
The Excise duty is primarily a duty on the production
or manufacture of goods produced or manufactured within
1962
•
R. c. Jail
v.
Union of IntlU.
1962
R.C. Jail
••
llnion of India
4S8 SUPHEME COURT REPORTS [1962] SUPP.
the country.
Sulijcct ahvays to the legislath·e cornpctencc of
the taxi11g authority, the said tax can be levied at a convenient stage so long as the character of the impost, is not lost .
The method of collection does not affect the essence of the
duty Out only relates to the n1achincry of collection for administrative convenience,
\vhethcr in a particular case the tax
ceases to be in essence an excise duty and the rational connection bet\\'Ccn the duty and the person on \vhom it is imposed
ceased to exist is to be decided on a fair construction of the
provisions of a particular act.
In re th' Cenlm/ Proi·i>!ce.1· and
IJerar Acl. No. XIV of
1938, (1939) F.C.R. 18, The Pro1:ince of Afodra" v. Boddu Paidanna and Sons, ( 1942) F.C.R. 90 •nd Goi:ernor General in Council v. Province of Madra~, ( 1945) L:R. 72 I. A. 91 applied.
In vir:\v of!'. 3 of the repcali11g Ordinance it could not
be said that the purpose of the Ordinance had been exhausted.
In the present case r. 3(a) of the Coal Production Fund
Rules 1944, had no applic•tion and the only rules applicable
was r. 3 (b). Ruic 6 does not say that if the consignee docs
not pay the consignor is liable to pay and it d·oes not purport
to enlarge the statutory liability of the consignor or the consignee, as the case may be.
Held, further, that a point of law not taken in the statement of case cannot ordinarily be allowed to be urged at the
time of hearing of the appeal.
CrvIL APPELi.AT~; .Jumsu1C'rION: Civil Appeals
Nos. 183, 184 of 1959.
Appeals from the judgment and decree dated
September 5, 1954, of the .llaclhya Pradesh High
Court in M.C. Case ~o. 214 of 1!154.
A. V. Visu-anatha Sa,stri
and J.B. Dadachanji
for the app<ellant (in C. A. No. 183 of 1959) and
respondent No. 2 (in C. A. No. 184 of 1959).
B. Se:n and .J. N. Shroff for the appellant (in
C.A. Xo. 184 of 1959) and Respondent No. (In C. A
No. 183 of 1959).
C. K. Daphtary, Solicitor·Gtneral of India.
Y. Kumar and[>. D. Mown for respondent No.I. (in
both the appeals).
-
•
3 S.d.R.
SUPREME COURT REPORTS
439
1962. February 27.
'Ihe Judgment of the
Court was delivered by
SUllBA RAO, J.-These two appeals by certificates are filed against the judgment and decree of
the High Court of Madhya Pradesh, Jabalpur, by·
the two defendants in Civil Suit No. 1 of 1957, a
suit filed by the Union of India, owlng and representing the Central and Western Railways Administrations, New Delhi; against tlie said defendants
for the recovery of coal
cess amounting to
Rs. 81-4-0 and costs.
The material facts may be briefly stated.
Under Ordinance No. 39 of 1944, the Central
Government was authorised to levy and collect as
a cess on all coal and coke despatched from collieries in British India a dutv of excise at such rate,
not exceeding Rs. 1-4-0 per 'ton. In exercise of the
power conferred on the Central Government under
s. 5 of the Ordinance, the said Government made
rules ; and r. 3 thereof, the duty of excise imposed
under the Ordinance on coal and coke shall, when
such coal and coke is despatched by rail from collieries or coke plants, be collected by the Railway
Administration by means of a surcharge on freight,
and such duty of excise shall be recovered either
from the consignor or the consignee, as the case
may be. On January 1, 1947, February l, 1947 and
February 7/9, 1947, the second defendant, namely
the Amalgamated Coalfields, despatched by rail to
the first defendant three consignments of coal from
Junner-Deo to Indore. The freight for the three
consignments was payable at the destination station
i. e, Indore. The first defendant duly paid the
freight and
took delivery of the coal but by
some mistake the cess payable as surcharge on the
three consignments was not recovered from the first
defendant at the time of delivery of the goods. Under
1962
R.C. Ja •l
...
Union of India
Subba Rao J.
1116%
11.C .• Jail
Y,
Um.on o/ /nJ,a
Subba Rao J.
440
SlJPRE;\lE COURT REPORTS [Hl6:!] SUPP.
s. 55( 5) of the Indiau Hail ways Act the H.ailway
Administration can rcco\'er tho freight or any
balance thereof left umecuverc<l by way of 8Uit. Ou
April 15, HJ53, the L:nion of Iudia, rcprcscntiJJg the
Central and We~tem Hail'ways A<lministratiunB,
filed Civil Suit No. UG of l!J53 in the Court ufthc
Civil Ju<lgc, II Ciaos, at Chhindwam, for the
recovery of the said ccso. The High Court w ith<lrcw
the case and took it on its owu file for trial ou the
ground that important-qu cstions of m t{)r prctation of
the Government of India Act, l!i35, and the Comtitution were involved, an<l it was numbered us Civil
Suit :\ o. I of HJ5i. The dcfeudants i11ter alia
pleaded that the levy was illegal and the suit was bar·
red by limitation. The High Court held that the suit
was within time unclt r Art. U!J of the Limitation ~.\ct and that the Jefendants were liable to pay
the cess and decreed the suit. The first defendant
filed Civil Appeal Xu. 183 of HJ5!J and the second
defendant filed Civil App<;al ~o.184 of l!J59 against
the said decree.
At the outset we may take up two 0f the
pointll, which were not mentioned iu the statement
of case, raised by Mr. Viswanatha Sastri, foamed
counsel for the appellant in Civil Appeal No. I 8il of
l!J59.
The sai<I points are : (I) Coal ceas is a foe
and not a tax or duty and(~) the first defcnda11t i.e.,
•
the consignco, was a non-resident and, therefore,
the Ordinance uot having extra-territorial operation
could not reach him. '.l'heso two cont.,ntious do
not find place in the statement of case U8 they
should. llndcr Order X \:III r. :! of the Supreme
Court ltules, each party shall lodge his case within
the time prcscri bed therein, and,
under r. 3
thereof, the said case shall consist of two parts, and
Part II, which is relevant now, says that it shall
1et out the propositions of law to be urged in
...
3 s.c.H..
.
.
.
SUPREME COURT REPORTS
441
support of the contentions of the party lodging the
case. The object of the statement of case is not only
to enlighten the Court on the questions that would
be raised before it, but also to enable the opposite
party to know before hand the arguments he would
have to meet and to prepare his case that the statement of case should be complete and full is also
emphasized by the fact that, under the Schedule
of Fees, a decent fee is prescribed to the junior and
senior advocates for preparing the samt. But we
regret to observe that sufficient care is not being
taken in the preparation of the statement of case
as contemplated by the said Rules. If the rules
should serve the purpose they were intended for, it
is necessary that counsel should, at the time of preparing the case, read their brief tlwroughly, decide
for themselves the questions that will be raised
and express them clearly therein. Any dereliction
of this obvious duty cannot easily be overlooked.
This Court, therefore, ordinarily will not allow
counsel at the time of hearing an appeal to raise
questions not disclosed in the statement of case.
There are no exceptional circumstances in this case
for us to depart from that saluta1·y practice and
we, therefore, cannot allow the appellant to raise
these two questions before us.
\
The first question is whether the suit is barred
by limitation. The coal cess should have been
collected at the time of the delivery of the three
consignments, namely, January 9, 194 7, February 8,
1\)47, and February 18, 1947, respectively. The
suit was filed on April 24, 1953, that is, more than
six years from the date of amount was payable. It
is contended that the suit was, therefore, barred
under Art, 120 of the Limitation Act.
The High
Court held the suit was within time under Art. 149,
1962,
R. C. Jall
v.
Union of lndi J
S ubba Bao J ,
lHJ
R. 0. J•/l
••
Union •!India
S.hb• Rao J.
442 SUPHEME COURT REPoRTS [1962) SUPP.
read with Art. t)O, of the Limitation Act.
'fhe said
Artioles rrad :
----------·----------------
Period Time from which
Description of suit
of Iimi- period Logins to
tation. run.
149. Any suit by or on
behalf of the Central
Government or any
8tate
Government
oxcopt a suit before
the Supreme Court
in the exorcise of ita
original
jurisdic--
tion.
50.
For the hire of animals, vehicles, boats
or house-hold furniture.
Sixty When tho period
yearn
of
limitation
would begin to
run under
this
Act against
a
like suit by a
private person.
Three Whon the hire
yoars
becomes payable.
120. Suit for which no
Six
period of limitation years
is
provided
elseWhen the right
to sue accrues.
where in this schedule.
The High Court held that the suit was of the character of a suit contemplated by Art. 50 and therefore the Contra) Government could file the suit within
60 years from the date the freight beoa.me payable.
Mr. Sastri contend~ that a private person cannot file
a suit like the suit filed by tho Central Government
to recover a statutory ces3 and, therefore, Art. 149
does not avail the Government and that in the circumstances the suit is governed only by Art. 120 of
the Limitation Act, which prescribes a period of six
years from the date tho right to sue accrues.
The argument of the learned counsel appears
to be plausible, but, in our view, has no merits. It
3 s.c.R.
SUPREME COURT REPORTS
443
mixes up the question of maintainability of the suit
with that of limitation prescribed under the Act.
For a suit described in Art. 149 a period of limitation
of 60 years is prescribed and the period would begin
to run as it would "against a like suit by a priv11.te
person". The article does not posit that such a suit
should have been maintainable at the instance of a
private party: it assumes its maintainability and, on
that basis, refers to the appropriate article of the
Limitation Act for the limited purpose of ascertaining the starting point of limitation. The statute of
limitation assumes the existence of a cause of action
and does not define it or create one. To state it
differently, if a private party had filed a suit for the
recovery of a statutory duty, what would be the
artfole of the Limitation Act applicable to suoh a suit?
Article 50, which prescribes the period of limitation
for a suit to recover the hire . of animals, vehicles,
boats or household furniture,
cannot obviously
apply to a suit for the recovery of a statutory ccss
filed at the instance of a private party. There is no
other specific article in the Limitation Act applicable to such a suit and, therefore, it would be
governed only by the residuary Article 120. Under
the said article, time runs from the time when the
right to sue accrues. It follows that when such a
suit is filed by the Central Government, the period
of limitation of 60 years should be computed when
the right to sue accrues. The right to sue accrued
i11 the present case when the defendants refused to
pay the cess when demanded. The decisions relied
upon by the learned counsel in support of his conteμtion, namely, Kirpa Sanker v. Janki Prasad ('),
S'ecretary of State for India v. Guru Prasad Dhur ('),
1 nderchand v. Secretary of State for I ndW,(') and Go'OON!-
ment of India v. Taylm (')have no bearing on the
question raised in the present case, as none of those
cases related to a suit filed by Government to
recover amount due to it from defendants therein.
(I) A.I.R. 1942 Pat. 87.
(2) (1893) I.L.R. 20 Cal. 51.
(3) (1941) 9 I.T.R. 673.
(4) (1955) 27 I.T.R. 356.
1962
-.-
R.0. J•ll
v.
Union of.fndia
Subha Rao J.
R.r:. Jall
v ••
l}nfou of lr.diu
S ubha Rao -J.
4-44
SuPREME COURT REPoRTS [1962] St:JPP.
We, therefore, hold that the snit waR clearly well
within time and was not barred by limitation.
The nt'xt cont0ntion raises the question of
validity of the levy.
The argum~·nt of the learned
counsel nmy be summarized thus: Ordinance 3D of
l9i4 was a temporary Ordinanco, .'\nd that it was
repcn,Jed by Ordinance 6 of 1947; that the saving
clause in the latter Ordinance applying s. 6 of the
General Clauses Aet to the repealed Orclinauce fell
with the oxpiry of the repealing
Ordinance on
January I, 194i, with the result that there was no
la.w· when
the Constitution came into force so
as to be continued under Art.
:n~ thereof and,
therefore, the duty, if any. pa.ya.hie under Ordinance
39 of 1944 could neither be levied nor r<>CO"l"ered
after the Constitution came into force, as thero was
no longer any authority of law to suatain the said
tax within th1' meaning of Art, 265 of the Constitution. To a11preciato the contention it would be
necessary to read the ma.teiial parts of the relevant
provisions.
Ordinance 39 of 1944
Section 2.
Imposition and Collection of excise and
Customs duties.-
( I) With effect from such date as the
Central Government may, notification in the
Official Gazette, appoint in this behalf, there
shall be levied and collected as a cess for the
purposes of this Ordinance, on all coal nnd
coke despatched from collieries in British
India a duty of excise a.t Buch rate, not excoeding one rupee a.nd four annas per ton, as
may from time to timo be fixed by the Central
Govornment by notification in the Official
Gazette.
'l'he Repe,aliny Ordinance. Ordinance 6 of 1947.
Section 2.
Tho Coal
Production l•'und
Ordinanoe, 1944, shall be repealed, and for the
3 S.C.R.
SUPREME COURT REPORTS 445
avoidance of doubts it is hereby declared that
the provisions of Section 6 of tbe General
Clauses Act, 1897 (X of 1807) shall apply in
respect of such repeal.
General Clauses Act, 1897 (X of 1897).
Section 6.
Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment
hitherto, made or hereafter to be made, then
unless a different intention appears, the repeal
shall not:-
x
x
x
x
x
x
(c)
affect any right privilege, obligation or
liability acq~ired, accrued or incurred
under any enactment so repealed.
x
x
x
x
x
(e) affect any ............ leg~l proceedings or
remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment ......... and any such
legal proceedings or remedy may be
instituted, continued or enforeed ......... as
if the Regulating Repealing Act or Regulation had not been passed.
Section 30. In this Act, the expression
Central Act, wherever it occurs ............ shall
be deemed to include an Orilinance made and
promulgated by the Gov<'rnOr·General .........
Constitution of India
Article 372. { i)
N otwitbstanding
the
repeal by this Constitution of the enactments
referred to in article :{95 but subject to the
other provisions of tbis Constitut,ion, all thn
laws
in force in the territory of India
immediatelr btifore the cmnmence~ent of thia,
1962
R. C. Jail
V,
Union of /11di1
Suhba Rno J,
19"2
R.C. Jall
v.
Union of India
Subha Rao J.
446 SUPREME COUR'."i: .REPORTS [1962). SUPJ:>.
Constitution shall continue in force therein
until altered or repealed or amended by a
competent Legislaturn or other competent
authority.
On August 26, 1944, the Governor-Gener.'>! of In<lia,
in exel'ciso of tho powers vestPd in him urnkr s. 72
of the ~inth Schedule to the Government of Indi11.
Act, 1935, r<~ad with India & Burma (Emergency
Provisions) Act, 1940 promulgated •.he Coal Produc.
tion Fund Ordinance 1944 (39 of 1944) to constitute
a fund for tho financing of activities for the improvement of production, marketing and distribution :if coal and coke. This Court in !Jri 1swj Moo/ji
v. The State of Romhay(1) held that the deletion of
the words "for the space of not moro than bix
months from its promulgation" from H
i~ of th"
!lth Schedule of the Governm•mt of fndia Act, 193:>,
bys. I (3) of The India and Burma (Emerg•·ncy Provisions) Act, 1940, had tho effoc·t of equating Ordi·
nances which were promulgated between .June 27,
1940, and April I, 1946, with Acts passccl by t.he
Indian Legislature without any limitation of time as
regards their c!uration, and therefore continuing in
forec until they wore repealed. It followH from
thi;i decision that the Ordinance promulgated on
August 26, 1944. was I' permanent one and would
continue to be in fore
till it was repealed.
The
second Ordinance, that itc_ repealing, Ordinance, waH
promulgated on April :!6, l!l4i, and the repeal took
effect from :lfay I, 1947.
But in express term it
declared that tho provisions of s. G of the General
Clauses Act, 189i (X of l89i) Hhall apply in respect
of the repeal. 'Vithout the said cxpr<>ss provision,
s.H, read with s.30, of tho General Clauses Act,
might have achi<'ved the said result, but e.T ab·undanti cautela and to place the matter bcy•HHI nny
controversy, s.(; of the General Clans<'S Act w1Ls expressly ma.de applicable to tho repeal.
Uoder s.6
(I) [1957].S.C.R._634.
3 S.Q.R.
SUPREME COURT REPORTS
447
or General Clauses Act, so far it is material to the
present case, the repeal did not affect the right of
the railway to recover the freight or the liability of
the defendants to pay the same, and the remedy in
respect of the said right and liability. Tl)e result
was that Ordinance 39 of 1944 and the rules made
thereunder must be held to continue to he in respect·
of the said right and liability, accured or incurr<'d
before the said Ordinance was repealed and the remedies available thereunder. But the life of the repea·
ling Ordinance had expired on.November J, 1947.
What was the effect of the expiry of the repealing
Ordinance on the said liability continued after repeal in respect of past transactions?
The repealing
Ordinance, being a temporary one, expired after· it
fulfilled its purpose.
As it had continued the life
of
the
original
Ordinance,
which
was
a
permanent one, iu respect of past transactions,
the expiry of its life could not have any effect on
that law to the extent saved. The decisions relating to the repeal of a temporary Ordinance with a
saving clause have no bearing in the present context,
for in that case the repealed Ordinance, in so far as
it was kept aliv<', could not have a larger lease of
life than the repealed and the repealing Ordinances
possessed. If so, it follows that the repealed Ordinance, to the e:ictent saved, continued to have force
under the Art. 372 of the Constitution until it was
altered, repealed or amended by competent Legislature. It cannot, therefore, be said that the coal
cess was levied or collected without the authority of
law,
It is then contended that the excise duty cannot legally be levied on the consignee, who had
nothing to do with the manufacture or production
of coal. The argument confuses the
incidence of
taxation with tJ>~ machinery provided for the collectjoμ tqereof. The natqre of an e:iccise d11ty J:ias beeIJ
1902
R. G. Joli
••
Uaion of India
Subba Rao J,
1962
/LC.Jail
v,
Unim of Ind/•
Subb1 Rao J.
448 SUPREME COURT REPORTS (1962) SUPP.
considered by the Federal Court and the Privy Council. In In re lhe Central Province& und Bemr Act No.
XIV of lf)38( 1), which was a spclcial reference by the
Governor Genenl to the Federal Court under~. :!l:l
of the Govllrnm~nt of forl.ia Act, l935. Gwyer, C.J.,
described "excise duty" thus:
'But its prima.ry and fundamental moaning in Engli~h is still that of a. tax on articles
produced or motnufactured in the taxing country
and int.ended for homo consumption."
In dealing with the contention advanced on behalf
of the Government of India that an excise duty was
a duty which may bu imposed on home-produced
goods at any stage from production to consumption,
the learned Chief Justice observed:
"Thia is to confuse two things, the na. ture
of excise duties and the extent of the federal
legislative power to impose them."
After referring to Blackstone and Stophen's Commentaries, the learned Chief .Justice proceeded to
state:
" ......... a brief examination of those duties
shows that in practically all c~es it iq the producer or manufacturer from whom the duty
is collected.
But there can be no reason in
theory why an excise duty shoulrl not be imposed even on the retail sale of an artiele, if
the taxing Act so providP8.
Subjeet alway8
to the legislative competence of the taxing
authority, a duty on homo-produced good8
will obv:ioue ly be impose<! at the stage which
the a.uthoritv find to be the most C'lnvcnient
and tho mc;st lucrative, wherever it may be:
but that is a matter of the machin<"ry of
co llcction, an< 1 does not affect the cAscntial
nature of the tax. ·The ultimat,{i incidence of
an exciRe duty, a typical indirect tax, must
, I) [1939) f.C.R, 18, 40, 41, 107,
3 S.C.R.
SUPREME COURT REPORTS
449
always be on the consumer, who pays as he
consumes or expends : and it continues to be
excise duty, that is, a duty on home-produced
or home-manufactured goods, no matter at
what stage it is collected."
J ayaka.r, J., made the rollowing pertinent remarks :
"And this, in my opinion, is as it should
be, for if the proper import of an "excise
li'luty" is that it is a tax on consumption, there
is no reason why the State should not have
the power to levy and collect it at any stage
before consumption, namely, from the time
the commodity is produced or manufactured
up to the time it reaches the consumer."
The Federal Court again, in The Province, of Madras
v. Boddu Paidanna and Son8( 1), in the context of a
question that arose under the Madras General Sales
Tax Act, 1939, restated the scope of an excise
duty. Therein the learned Chief ~ustice observed:
"There is in theory nothing to prevent the
Central Legislature from imposing a duty of
excise on a commodity as soon as it comes
into existence, no matter what happens to it
afterwards, whether it be sold, consumed, destroyed, or given away. A taxing authority
will not ordinarily impose such a duty, because it is much more convenient administratively .to collect the duty (as in the case of most
of the Indian Excise Acts) when the commodity leaves the factory for the first time, and
also because the duty is intended to be an indirect duty which the manufacturer or producer is to pass on to the ultimate consumer,
which he could not do if the commodity had,
for example, been destroyed in the factory
itself. It is the fact of manufacture which
(IJ [1942] F.C.R. 90, 101.
1962
R. C. Jail
••
Unian of India
Sabha Rao J.
1962
B. C Jail
••
ll.Wn aj India
SujlHI RaaJ.
450 SUPREME COURT REPORTs (1962] SUPP.
attracts the duty, even though it may be collected later ......... ".
The Judicial Committee, in Governor-Gt1wral in
Cauncil v. Province of Jludms (1), approved tho views
expressed by the .Fedora) Court in regard to exciile
duties. In that case; Lord Simonds, speaking for
the Board, observed:
"An exhaustive discussion of this subject,
from which their Lordships have obtained
valuable assistance, is to be found in the judgment of the Federal Court in In re the Central
Pro?/in.ces and Berar Act No. XIV of 1935 (').
Consistantly with this decision their Lordships
aro of opinion that a duty of excise is primarily a cuty levied on a manufacturer or producer in respect of the commodity manufactered or produced. It is a tax on goods not
on sales or the proceeds of sale of goods. Here,
again, their Lordships find themsolves in complete accord with the reasoning and conolusions of the Federal Court in the Boddu Paidanna case(')."
Adverting to the decision of Boddu Paidanna case(')
with approval, Lord Simonds made the following
observations in pointing out the difference between
excise tax and sales tax:
"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 thero 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 exciseable article leaves the
ii) (1945) I..R.72J.A.91,J03.
(2) (1939]F.C.R.IS,
(3)
[ 1942] F.C.R. 90, IOI,
3 S.C.R.
SUPREME COURT REPORTS
451
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 of the essence of the duty of, excise,
which is attracted by the manufacture itself.
With great respect, we accept the principles laid
down by the said three decisions in the matter of
levy of an excise duty and the machinery for collection thereof. Excise duty is primarily a duty on
the production or manufacture of goods produced
or manufactured within the country. lt in an
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 s><id tax ca.n 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 relates to the machinery of collection for
adm1nistrative convenience. Whether in a particular case the tax ceases to be in essence an excise
duty, and the rational connection between the duty
and the person on whom it is imposnd ceased to
exist, is to be decided on a fair construction of the
provisions of a particular Act.
In this case, a perusal of the provisions of the
Ordinance clearly demonstrates that the duty imposed is in essence an excise duty and there is a
rational connection between the said tax and the
person on whom it is imposed. Section 2 of Ordinance 39 of 1944 clearly shows that the tax is an
excise duty on the manufacture or production of
coal or coke. Section 5(2) thereof confers in express· terms a power on the Central Government to
make rules, Inter alia, to provide for the manner in
which the duties imposed by the Ordinance shall be
oollected and the persons who shall be liable to pay
196•
R. C. Jail
v,
Union of India
Suhba Rao J,
1962
R. C. Jall
••
Union of India
Si.bba Roi J.
452
SUPRE'.IIE COURT REPORTS [1962] SUPP.
the duty. Ruic 3 of th~· Rules made by the Central
Government provides for the recovery of excise
duty on the coal produced; under the said rule it
would be collected by the Railway Administration
by means of a surcharge on freight and such duty of
excise shall be recovered from the consignor, if the
freight charges arc being prepaid, at the time of
consignment or from the consignee, if the freight
charges are collected at the destination of .tho consignment. The machinery provided for the collection of the tax is, in our view, a reasonable one.
Having regard to the nature of the tax, that is, the
tax being an indirect one to be borne ultimately by
the consumer, it cannot be said that there is no
rational connection between the tax and the consignee, When the consignor pays, it cannot be
denied that it is the most convenient stage for the
collection of the tax, for it is the first time the coal
leaves the posseSBion of the consignor. The fact
that the consignee is made to pay, in the contingency contemplated by r.il(h) of the rules cannot
affect the cFsence of the tax, for the consignor, if he
had paid the freight, would have passed it on to the
consignee and instead the consignee himself pays
it. The Centr~l Govemment was legally competent
to evolve a suitable machinery for collection without disturbing the essence of the tax or ignoring the
rational connection between the tax and the person
on whom it is imposed. We hold that the machinery evolved under the Rules for collection of the
duty satisfies the said conditions and thcreforn
the exigihility of the tax at the destination point in
tho hands of tho consignee cannot legitimately be
questioned.
Another facet of the contention of Mr. Sastri
is that the purpose of tho Ordinance had worked
itself out and, therofore, the Central Government
could no longer levy or collect the tax. The pur.
pose of the Ordinance was to constituted a fund -
. a s.c.a.
SUPREME COURT REPORTS
453
for the financing of activities for the improvement
of production, marketing and distribution of coal.
Section 3 of the repealiug Ordinance provided that
the unexpended balance, if any, at the cr0dit of the
Coal Production Fund constituted under the afore·
said Ordinance shall be applied to such purposes
connected with the coal industrv, a9 the Central
Government may direct. The • validity of this
Ordinance has not been questioned. It, therefore,
follows that the purpose of the Ordinance has not
been exhausted, for under s.3 of the repealing
Ordinance, the Central Government is authorized to
apply the Coal Production Fund to such purposes
connected with the coal industry. Thero is, therefore, no force in this argument.
The last contention is raised by the appellant
in Civil Appeal No.184 of 1959. The High Court held
him also liable for the payment of the cess on the grou·
nd that he was the person who entered into contract
with the Railway Administration for the carriage of
the goods and that the collection of freight was
in respect of his goods and that he was the main
contracting party. The decree was given against him
on the basis that he was under a contractual obligation to pay the amount. Mr. Sen, appearing for
this appellant, contends that the consignments
were on F.O.R. basis and that under the statutory
rules only the consignee is liable and that the High
Court was wrong in giving a decree against him.
As we have already pointed out earlier, under r.3
of the Co11.l
Production Fund Rules, 10±4, the
Railway Administration is
empowered only to
collect the cess by means of a surcharge on freigh L
from, (a) the consignor, if the freight charges ar!"
being pre-paid at the time of consignment, and ( u)
from the consignee, if the freight charges are
collected at the destination of the consignment. In
the present case, r.3(a) has no application, for the
frei~ht charges were not pre-paid at the time of
R. C. Jal/
..
(Jnion of lnlia
Subba Rao J.
1962'
R. C. :J~ll
_\'.!
Union of1n.dia
Subba Hao J.
454 SUPREME COURT REPORTS [1962] SUPP.
consignment, ahd therefore the only rule applicable
whereunder the Railway AdministFatjon can seek
to recover the- cess is r.:{(b) i.e., the consignee hlj,s to
pay it. ThP rule does not empower ·the Railway
Administration to recover the tax, in the circumstances of the case, from the consignor.
Learned
Solicitor General se'eks to sustain the decree of the
High c·ourt on the basis of r:6, which reads :
'.'Refunds and Rewveries :-(l) Where· the
simount of excise duty due under these rules
has not been collected either wholly or in part -
.or where the amount collected is in excess of ·
~ fhe amount due, the Railway Administration
shall-deal with the underoharges or overcharges, as the case may be, On the same_ principles as apply . to undercharges and OVE'rcharges
in • regard to
Railway
freight
charges."
- -~
It is suggested that, under this rul\l in the case of an
undercharge, the Railway Administration can collect
the deficit either from the codsign.or on consigI\ee.
The rule does not say that if the consignee does not
pay the consignor is liablu to pay. The rule does not
purport to en!ltrge the statutory liabHity of the consignor of the consignee, as the case may ue and, therefore, it must be understood to provide only for the
r.13covery of undercharges from persons statutorily
liable to pay in accordance with the principles
gqverning the railway freight charges.
.
In the result; Civil Appeal No. 18.J of 1959 is
dis.missed with costs of the first respondent, and
Civil Appeal No. 184 of 1959 is allowed with .costs
to be paid by the first respondent.
. 0.A. 183 of 1959 dismissed.
0.A. 18'1of1959 allowed.
,
..
1