# UNION OF INDIA v. MADDALA THATHIAH

- **Citation:** [1964] 3 S.C.R. 774
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Case number:** Civil Appeal No. 53 of 1961
- **Bench:** K. Subba Rao, Raghubar Dayal, J. R. MunHOLKAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-v-maddala-thathiah-3023
- **Pages:** 14

## Headnote

Oontract-Con•truction--Agreement for supply-TenderAcceptance-Formal order for •Upply-Stipulation in the contract
for cancellation at any stage-If effective even after formal order
for •upply had been made.
The General Manager of a Railway invited tenders for
the supply of jaggery to the railway grain shops. Paragraph 2
of the tender set out the quantity required and described d4tes
of delivery. 'l here was a note in that para that "the Administration reserved the right to cancel the contract at any.stage
during the tenure of the contract without calling up the out·
standings on the unexpired portion of the contract· "
Under
para 8 the successful tenderer was required to pay security deposit
towards proper fulfilment of the contract. Paragraph 9 stated
that a formal order for supply would be placed after the security
deposit referred to in para 8 was made. The respqndent
submitted his tender for the supply of 14000 maunds as mentioned in the tender, and by the letter dated January 29, 1948,
the Deputy General Manager accepted the tender stating that
the official order would be placed on the respondent on receipt
of the remittance of security. In his letter dated February 16,
1948, the Deputy General Manager reiterated the acceptance
of the tender subject to the respondents' acceptance of the
t<rms and conditions printed on the reverse of that letter, under
which 3500 maunds each were to he delivered on March I,
3 S.C.R.
SUPREME COURT REPORTS
775
March 22, April 5 and April 21, 1948 respectively. At the
end of the terms and conditions was a note that the administration reserved the right to
c~ncel the contract at any stage
during the tenure of the contract without calling upon the
outstandings on the unexpired portion of the coatract. By his
letter dated March 8, 1948, the Deputy General Manager
informed the respondent that the balance quantity of jaggery.
outstanding on date against the order dated February 16,
1948, be treated as cancelled and the contract closed. In the
suit instituted by the respondent for the recovery of damages
resulting from breach of contract, the appellant relied, by way
of defence, on the stipulation in the contract that the appellant
was at Jibery to terminate the contract at any stage.
Held that, on the true construction of the contract, the
condition mentioned in the note 2 of the tender or in the letter
dated February 16, 1948 referred to a right in the appellant to
cancel the agreement for such supply of jaggery about which no
formal order had been passed by the Deputy General Manager
with the respondent and did not •pply to such supplies of
jaggery about which a formal order hau been placed specifying
deimite amount of jaggery to be supplied and the definite date
or definite short period for its actual delivery. Once the order
was placed for such supply on such dates, that order amounted
to a binding contract making it incumbent on the respondent
to supply jaggery in accordance with the terms of the order
and also making it incumbent on the Deputy General Manager
to accept the jag~ery dehvered in pursuance of that order.
Ohatturbhuj Vithalda" Ja•ani v. Moneshwar Para•hram,
[1954] S.C.R. 817, referred to.

## Text

1969
Athmanathaswami
D1t10Slhanam
"·
IC. Gof>olasw"'"I
A.iyangar
196J
M.,9
.774 SUPREME COURT REPORTS[l964] VOL.
We therefore dismiss the appeal except in so
far as it relates to the order of the High Court on the
cross-objection filed
by
the appellant. We set
aside the order dismissing the cross-objection. We
order the appellants to pay the costs of the respondent throughout.
UNION OF INDIA
v.
MADDALA THATHIAH
(K. SUBBA RAO, RAGHUBAR DAYAL and
J. R. MunHOLKAR JJ.)
Oontract-Con•truction--Agreement for supply-TenderAcceptance-Formal order for •Upply-Stipulation in the contract
for cancellation at any stage-If effective even after formal order
for •upply had been made.
The General Manager of a Railway invited tenders for
the supply of jaggery to the railway grain shops. Paragraph 2
of the tender set out the quantity required and described d4tes
of delivery. 'l here was a note in that para that "the Administration reserved the right to cancel the contract at any.stage
during the tenure of the contract without calling up the out·
standings on the unexpired portion of the contract· "
Under
para 8 the successful tenderer was required to pay security deposit
towards proper fulfilment of the contract. Paragraph 9 stated
that a formal order for supply would be placed after the security
deposit referred to in para 8 was made. The respqndent
submitted his tender for the supply of 14000 maunds as mentioned in the tender, and by the letter dated January 29, 1948,
the Deputy General Manager accepted the tender stating that
the official order would be placed on the respondent on receipt
of the remittance of security. In his letter dated February 16,
1948, the Deputy General Manager reiterated the acceptance
of the tender subject to the respondents' acceptance of the
t<rms and conditions printed on the reverse of that letter, under
which 3500 maunds each were to he delivered on March I,
3 S.C.R.
SUPREME COURT REPORTS
775
March 22, April 5 and April 21, 1948 respectively. At the
end of the terms and conditions was a note that the administration reserved the right to
c~ncel the contract at any stage
during the tenure of the contract without calling upon the
outstandings on the unexpired portion of the coatract. By his
letter dated March 8, 1948, the Deputy General Manager
informed the respondent that the balance quantity of jaggery.
outstanding on date against the order dated February 16,
1948, be treated as cancelled and the contract closed. In the
suit instituted by the respondent for the recovery of damages
resulting from breach of contract, the appellant relied, by way
of defence, on the stipulation in the contract that the appellant
was at Jibery to terminate the contract at any stage.
Held that, on the true construction of the contract, the
condition mentioned in the note 2 of the tender or in the letter
dated February 16, 1948 referred to a right in the appellant to
cancel the agreement for such supply of jaggery about which no
formal order had been passed by the Deputy General Manager
with the respondent and did not •pply to such supplies of
jaggery about which a formal order hau been placed specifying
deimite amount of jaggery to be supplied and the definite date
or definite short period for its actual delivery. Once the order
was placed for such supply on such dates, that order amounted
to a binding contract making it incumbent on the respondent
to supply jaggery in accordance with the terms of the order
and also making it incumbent on the Deputy General Manager
to accept the jag~ery dehvered in pursuance of that order.
Ohatturbhuj Vithalda" Ja•ani v. Moneshwar Para•hram,
[1954] S.C.R. 817, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 53 of 1961.
Appeal by special leave from the judgment and
decree dated August 9, 1!156 of the Madras High
Court in O.S. Appeal No. 64 of 1952.
Ii. N. Sanyal, Additionul Solicitor-General of
India, K. L. Gosain and P. D. Menon, for the
appelfant.
A. V. Viswanatha Sastri and M. S. K. Sastri,
for the respondent.
·11.'J
Uoi'!' of I,adio
••
Modl4• I.ful!iiM
. 1963
U•ion of /niia
••
Mali•/• Thathioh
Razhuiar D~1•l J.
776
SUPREME COURT REPORTS(1964)VOL .
1963. May 9, The Judgment of the Court was
delivered by
RAGHUBAR DAYAL J.-The facts giving rise
to this appeal, by special leave, are these :
.
The Dominion of India, as the owner of the
Madras and S0uthern Mahratta Railway, represented
by the General Manager of that railway, invited
tenders for the supply of jaggery to the railway grain
shops. The respondent submitted his tender for the
supply of 14,000 imperial maunds of cane jaggery
duriug the months of February and March 11148.
The tender form contained a note in paragraph 2
which was meant for the quantity required and the
described dates of delivery. This note was :
"This Administration reserves the right to
cancel the contract at any stage during the
tenure of the contract without calling up the
outstandings on the unexpired portion of the
contract."
The Deputy General Manager of the Railways,
by his letter dated January 29, 1948, accepted this
tender. The letter asked the respondent to remit a
sum of Rs. 7,900/-for security arid said that on
receipt of the remittance, official order would be
placed with the respondent. In his letter dated
February 16, 1948, the Deputy General Manager
reiterated the acceptance of the tender subject to the
respondent's acceptance of the terms and conditions
printed on the reverse of that letter.
Among these
terms, the terms of delivery stated : Programme of
delivery to be 3,500 maunds on March 1, 1948 ;
.3,500 maunds on March 22, 1948; 3,5011 on April
5, 1948; and 3,500 maunds on April 21, 1948. At
the end of the terms and conditions was a note that
the administration reserved the right to cancel the
contract at, any stage during the tenure ·of· the
3 S.C.R. SUPREME COURT REPORTS
777
contract without calling up the outstandings on the
unexpired portion of the contract. The date for the
delivery of the four instalments were slightly changed
by a subsequent letter dated February 28, 1948.
By his letter dated March 8, 1948, the Deputy
General Manager informed the respondent that the
balance quantity of jailgery outstanding on date
against the order dated February 16, 1948, be treated
as cancelled and the contract closed. The protests
of the respondent were of no avail as the railway
administration took its stand against the stipulation
that the right to cancel the contract at any stage was
reserved to it. Ultimately, the respondent instituted
the suit against the U a ion of India for recovering
damages resulting from breach of contract. The
trial Cot.rt dismissed the suit holding that the railway
administration could cancel the contract without
giving any reason whenever it liked, without making
itself liable to pay any demages. The High Court
held that the clause reserving the right in the appellant to cancel the contract was void and in view of
the trial Court having not decided the issue about
damages, remanded the suit for disposal after dealing with that matter. It is against this decree that
the Union of India has filed this appeal after obtaining special leave.
The contentions raised for the appellant are
two. One is that on a proper construction of the
terms of the contract, the appellant had agreed to
but only sue~ quantity of jaggery as it might require,
up to a maximum of 14,000 maunds and therefore
there was no enforceable obligation to purchase the
entire quantity. The other contention is that the
respondent had expressly agreed to the impugned
clause ~nd that therefore the appellant was at liberty
to terminate the contract at any stage of the duration
o.f the contr~ct with respect t? th~ outs~anding obligations under 1t.
The stipulation 1s vahd and binding
196$
Union of India
••
Maidal• Tholliiah
Raghuba• Da}Ol J,
1965
U,.io11 of India
v.
Moddola Tna1hiah
Roghobar Da7•1 J.
778 SUPREME COURT REPORTS[l964] VOL.
on the parties and it amounted to a provision in the
contract itself for its discharge or determination. On
the other hand it is contended for the respondent that
the contract was a complete contract of the supply
of a definite quantity of jaggery viz., 14,000 maunds,
on the dates mentioned in the order dated February
lfi, 1948, to start with, and ultimately on the dates
mentioned in the subsequent letter dated February
28, and that the stipulation relied on was repugnant
to the contract and, even if valid, the appellant could
rescind the contract only for good and reasonable
ground and ·not arbitrarily.
To decide the contentions raised it is necessary
to construe the true nature of the contract between
the parties which has given rise to these proceedings.
The relevant conditions of tender are described in
paragraphs 2, 8 and 9 and are set out below :
"2. Qpantity required and described dates of
delivery.-14,000 imperial maunds of cane
jaggery are required for the months of December 1947 and January 1948 and should be'delivered in equal lots of 1, 750 imperial maunds
each commencing from 10th December 1947
and completed on 31st January 1948.
Note : This Administration reserve~ the right
to cancel the contract at any stage during the
tenure of the contract without calling up the
outstandings on the unexpired portion of the
contract.
8. Security deposit.-Five percent of the tender
value will be required to be paid by the successful tenderer as security deposit towards proper .
fulfilment of the contract. This amount will
carry no interest. This should be paid in cash·
in addition to the earnest money already paid
, to the Paymaster and Cashier of this .Railway,
3 S.C.R. SUPREME COURT REPORTS
779
Madras, and his official receipt obtained therefor. Cheques and drafts will not be accepted
in pa) ment of security deposit. In the case of
contracts or the supply of gingelly oil, the security deposit will be arranged only after 90 days
have elapsed from the 1late of the last supply
against the order.
·
9. Placing of order.-A formal order for
supply will be placed on the successful tenderer
only on the undersigned being furnished with
the receipt issued by the Paymaster and Cashier
of this Railway for the security deposit referred
to in paragraph 8."
Paragraph 12 provides for the rejection of supplies if
they be of unacceptable quality. Paragraph lJ deals
with penalties and reads thus :
"13. Penalties.-When supplies are not effected
on the dates as laid down in the Official Order
or when acceptable replacement of the whole
or part of any consignment which is rejected in
accordance with paragraph 12 is not made within the time prescribed the administration will
take penal action against the supplier in one or
more of the following ways :-
(a) Purchase in the open market at the risk
and expenses of the supplier goods of
quality contracted for, to the extent due ;
(b) Cancel any outstandings on the contract
and;
(c) Forfeit the security deposit."
The respondent made an offer to supply the
• necessary quantity of jaggery during the period it
·. was wanted and expressed its readiness to abide by
1963
Union of Indi•
••
M•ddala rhathiah
R•zhubar il•y•I /.
1963
Union of India
••
MaddAla Thathiah
Rag/iubar Dayal J.
780 SUPREME COURT REPORTS (1964] VOL.
the terms and conditions of the tender. He agreed
to supply the jaggery at the rate mentioned in his
letter. This tender was accepted by the letter dated
January 29, 1948. So far, the offer of a supply of
a definite quantity of jaggery during a specified
period at a certain· rate and the acceptance of the
· offer would constitute an agreement, but would fall
short of amounting to a legal contract inasmuch as
the date of delivery of the j aggery was not specified.
Only the period was mentioned.
The agreement
arrived at therefore could be said, as urged for the
appellant, to be a contract in a popular sense with
respect to the terms which would govern the order
for supply of j aggery. The acceptance of the tender
did not amount to the placing of the order for any
definite quantity of jaggery on a definite date.
Paragraph 9 of the tender referred to the placing of
a formal order for the supply of jaggery, after the
respondent had not only made a security deposit as
required by the provisions of paragraph 8 but had
also furnished a receipt issued for that deposit to the
Deputy General Manager, Grain Shops. So construed, the note in paragraph 2 of the tender would
refer to cancel this agreement, loosely called a contract, at any stage during the tenure of that agreement without calling up the outstandings on the
unexpired portion of the contract.
The various expressions used in this note point
to the same conclusion. The expression 'tenure of
the contract' contemplates the contract being of a
continuing nature. It is only a contract with a sort
of a tenure. The contract is to be cancelled at any
stage during such a tenure, that is, it could be cancelled during the period between the acceptance of
the tender and March 31, 1948, the last date for the
delivery of the jaggery under the contract. The
note further provided that as a result of the cancella•
tion, the appellant will not call up the outstandings
. on the unexpired portion of the ·contract. This
3 S.C.R. SUPREME COURT REPORTS
781
expression can only mean "without ordering the
supply of jaggery which was to be delivered within
the rtmaining period of the contract", that is, the
period between the date o,f cancellation and March
31, 1948.
Paragraph 13 dealing with penalties draws a.
distinction between outstandings on the contract and
the purchase of the goods to the extent not supplied
by the respondent.
The provision about penalty
comes into operation when the supplies are not effected on the dates laid down in the officia I order, or
when acceptable replacement of the whole or part of
any consignment which is rejected is not made within
the time prescribed. Clause (a) of para 13 contemplates penal action by purchasing in the open market
at the risk and expenses of the supplier, goods of the
quality contracted for to the extent due, either due
to the failure to supply or due to failure to replace
rejected goods which had been supplied in compliance of an order. Clauqe (b) of para 13 contemplates a further penal action in the form of cancellation of any outstandmgs on the contract. Such a
cancellation could only be of the balance of the
supplies agreed upon but not yet supplied. If this
expression was meant to cover the goods for which
order had been placed but whose date of deli very
had not arrived, a different expressin would have
been more appropriately used.
The appellant's letter dated January 29, 1948,
which conveyed the acceptance of the tender, directed the respondent to remit a certain sum for the
security deposit and stated that on receipt of advice
of remittance official order would be placed. This
is the order contemplated by para 9 of the tender.
By his letter dated February 16, 1948, the
Deputy General Manager repeated in paragraph 1
of the letter that the tender dated January ~7, 1948,
llflion of l•dia
••
Madd'li• Thathiah
Raghuli•1 Day•l J;
196!
Union of lntlia
••
Madda/a Thoth/ah
/laghub.r Dayal I.
782
SUPREME COURT REPORTS (1964] VOL.
was accepted for the supply of jaggery, only subject
to the respondent's acceptance of the terms and con·
ditions printed on the reverse.
The tender had
already been accepted. There was no occasion to
re-open the question of the acceptance of the tender
or to re-inform the respondent about the accepta'Jce
of the tender or to obtain a second acceptance of the
respondent to the terms and conditions of the tender.
No occasion could have arisen for imposing any
fresh conditions for the acceptance of the tender
which had been accepted earlier.
Paragraph 2 of the Jetter contains a definite
order for despatching and delivering of t:1e consign·
ment to the Assistant Controller of Grain Shops.
The details given in the letter provided for the entire
supply of 14,000 maunds to be in four equal instalments, each instalment to be delivered on a particular
date. The only other condition or term in this
letter is :
"This administration reserves the right to
cancel the contract at any stage during the
tenure of the contract without calling up the
outstandings on the unexpired portion of the
contract."
This is identical in terms with the note in paragraph
2 of the tender and can bear the same construction
with respect to that portion of the goods to be sup·
plied for which no formal order had been placed.
If this note had a particular reference to the cancel·
lation of the orders, if that was possible in law, its
language would have been different. It would have
referred to the right to cancal the orders about the
delivery of the consignments and would have pro·
vided that the orders for such supplies which were
to be made on dates subsequent to the date of
cancellation would stand cancelled or that the appellant would not be bound to take delivery of such
'3. S.C.R.
SUPREME COURT"REPORTS 783:
1961,
consignments which were to be delivered on dates·
· subsequent to the cancellation of the orders .. There
Union of ladia ·
v.
is nothing in this letter. that the formal order placed
is subject to this condition. The condition governed
the acceptance of the tender according to the content .
of para 1 of this letter.
.
. . ·
. · ·
• .
·
/l[ad<iala Ththiah
,
R1gliu/uzr Dayd J.
·
It appears that the order has been. placed on a
printed form which could be used also for placing an,.
order 'for delivery, of part of the commodity which
the tenderer has agreed to supply. ' That seems to·
be the reason why that particular recital appears
in the letter. It cannot possibly' have any .bearing ' ·
on a case like the present where the railway <>.dmillis'
tration has definitely placed an order for the supply
of the entire quantity of the commodity for which
a tender had been called.
· ·
·
·
·
In this connection we may refer to the language·
of the letter of the Deputy General J\fanager dated
!\!arch 8, 1948, which informed the respondent
about the cancellation of the contract. The letter
states that the balance quantity of jaggery_ outstanding on date against the above order, ,i.e., the order
dated February 16, Hl48, is treated as'cancelled and
the contract closed. Thls letter itself draws a distinction between the order and the contract. The
contract has a reference to the agreement . consisting of the offer of supply of jaggery and acceptance
of the offer by the Deputy General Manager.
\Ve are therefore of the view that the condition
mentioned in the note to para 2 of the tender or in
the letter dated February 16, 1948, refers to a right.
in the appellant to cancel the agreement for such
supply of jaggery about which no formal order had
been placed by the Deputy General Manager· with .
the respondent and does not apply to such· supplies
of jaggery ·about which a formal order had been·
placed specifying definite amount of jaggery to be
/96J.
Union of /MUI
v.
Maadd• T/i41hia~
P.aghuh.r D•;pll J. ·
,
784. SUPREME COURT REPORTS (1964] VOL.
supplied and the definite date or definite short period
for its actual delivery.. Once the order is placed
for such supply on such dates.; that order amounts
to a binding contract making it incumbent on the
respondent to supply jaggery in accordance with the
terms of the order and also making it incumbent on
the Deputy General l\fanager to accept the jaggery
delivered in pursuance of that order.
.
We may refer to what was. said by this Court in
Chatturbhuj
Vithaldaa
Jasani · v.
jforeshwar
Parashram ('), in connection with an arrangement
arrived at between the Central Government and a
firm of bidi manufacturers,
l\:foolj i Sickka &
Company. The arrangement under which the firm
was to sell and the Government was to buy from the
firm from time to time two brands of bid is manufactured by it. The contention raised before the Court was
that this arrangement amounted to a contract for the
supply of goods within the meaning of that section.
The contract was said to be embodied in four letters.
This Court said :
"But except for this the letters merely set out
the terms on which the parties were ready to do
business with each other if and when orders
were placed and executed.
As soon as an
order was placed and accepted a contract arose.
It is true this contract would be governed by
the term set out in the letters but until an
order was placed and accepted there was no
contract.''
Reference may also be made to what is said in
'Law of Contract', by Cheshire & Fi foot (5th Edition)
at p. 36.
·
"There is no doubt, of course, that the tender
is an offer. The question, however, is whether
its '?.cceptance' by the corporation is an acceptance in the legal sense so as to produce a
•n 11954] s.c.R. 817.
3 S.C.R.
SUPREME COURT REPORTS
785
binding contract. This can be answered only by
examining the language of the original invitation to tender.
There are at least two possible
cases.
First, the corporation may have stated
that it will definitely require a specified quan·
tity of goods, no more and no less, as, for instance, where it advertises for 1,000 tons of coal
to be supplied during the period January !st to
December 31st.
Here the 'acceptance' o( the
tender is an acceptance in the legal sense, and
it creates an obligation. The trader is bound
to deliver, the corporation is bound to accept,
1,000 tons, and the fact that delivery is to be
by instalments as and when demanded doe1
not disturb the existence of the obligation."
On the basis of this note, the acceptance of the res·
pondent's tender by the Deputy General Manager
may even amount to a contract in the strict sense of
the term, but we do not consider it in that sense in
view of the provisions of paragraphs 8 and 9 of the
tender requiring a deposit of security and the placing of the formal order.
The other case illustrated by Cheahire and
Fifoot is :
"Secondly, the corporation advertises that it
may require articles of a specified description
up to a maximum amount, as, for instance,
where it invites tenders for the supply during
the coming year of coal not exceeding 1,000
tons altogether, del~veries to be made if and
when demanded. the effect of the so.called
'acceptance' of the tender is very different.
The trader has made what is called a standing
offer.
Until revocation he stands ready and
willing to deliver coal up to 1,000 tons at the
agreed . price when the cor,poration from time
to time <lemands
a pl"et1se quantity. The
,,., -
U•IMlofl""-
•·
Millitifo 1/iotltW
a.,, ... ~,.
196J·
Un•Oll oj !Nii• .
••
.'lfoJJa/a T.lathid
Roiho~or D•yol 11
788 SUPREME COURT REPORTS (1964] VOL.
'acceptance' of the tender, however, does not
convert the offer into a binding contract, for a
contract of sale implies that the buyer has
agreed to accept the goods. In the present
case the corporation has not agreed to t3,ke
1,000 tons, or indeed any quantity of coal.
It has merely stated that it may require sup·
plies up to a maximum limit."
"In this latter case the standing offer may be
revoked at any time provided that it has not
been accepted in the legal sense; and acceptance in the legal sense is complete as soon as
a requisition for a definite quantity of goods
is made. Each requisition by the offeree is an
individual act of acceptance which creates a
separate contract."
We construe the contract between the parties
in the instant case to be of the second type. The
note below para 2 of the tender form, reserving a
right to cancel an outstanding contract is then consistent with the nature of the agreement between the
parties as a result of the offer of the respnndent
accepted by the appellant and a similar note in the
formal order dated February 16, 1948, had no reference to the actual orders but could refer only to
such contemplated supplies of goods for wh:ch no
orders had been placed,
In view of the construction we have placrd on
the contract between the parties it jg not necessary
to decide the other contention urged for the appellant that the stipulation. in the not amounted to a
term in the contract itself for the discharge of the
contract and therefore was valid, a contention to
which the reply of the respondent is that any such
term in a contract which destroys the contract it!ielf
according to the earlier terms is void as in that case
there would be nothing in the alleged contract which
would ha•e been binding on the appellant.
3 S.C.R.
SUPREME COURT REPORTS
787
We are of opinion that the order of the High
Court is correct and therefore dismiss the appeal
with costs.
u.i. ... 1 '""' •
••
M "'41• T.lal.llc.\
Appeal dismissed.
&1Ji.Hr D,,,,J J •
IN RE. THE BILL TO AMEND S. 20 OF THB
SEA CUSTOMS ACT, 1878, AND S. 3 OF THE
CENTRAL EXCISES AND SALT
ACT, 1944
(B. P. SINHA c. J., s. K. DAS, P. B. GAJENDIU.·
G.olDKAR,
A. K. SARKAR,
K. N. WANCHOO,
M. HIDAYATULLAH, K.C. DAS GUPTA, J.C. SHAJI,
and N. RAJAGOPALA AYYANGAR JJ.)
Pre6ident'• Reference-Ouatom., dutiea and dutiea of e11:ci1tParliamenl'• power to levy such dutiea on the property of Btolt•-
Direct and indirect taxes-Distinction, if valid under 00111titution-·Ouatoms duties and duties of exciBe, if ta:u1 Oii
properly-"Taxation", Definition-Bea Oustoma
Act, 1878
(8 of 1878), s 20-0entral Excises and Bait Act, 1944 (1 of
1944). •· 3 (11-Go•vernment of India Act, 1935 (25 It 25
Geo. Ii, Oh. 42), as. 154, llili-Oon•titution of India, .frll. 246,
246, 285, 289, 366 \28).
As a result of a proposal to introduce in Parliament a
Bill to amend s. 20 of the Sea Customs Act, 1878, ands. 3 of
the Central Excises and Salt Act, 1944, with a view to apply·
ing the provisions of the ·said two Acts to goods belonging to
the State Governments, in regard to which certain doubts arose
as to whether the provisions of the Bill were inconsistent with
Art. 289 of the Constitution of India, the President of India
referred under Art.
143 of the Constitution certain questio111
for the opinion of the Supreme C mrt to ascertain if the proposed amendment• would be constitutional. The question
was whether the provisions of Art. 289 of the Constitution
precluded the Union from imposing, or authorising the impo1i•
tion of (a) custom• duties on the import or export, or (b)
excise duties on the production or manufacture in India, of 1he
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M9 II