Modi, J.:— This is a writ application by the Mewar Textile Mills Bhilwara under Article 226 of the Constitution and has arisen under the following circumstances.
2. The petitioner is a limited company carrying on business of the manufacture and sale of yarn and cloth at Bhilwara, and, ‘inter alia’ manufactures Dhoties. It is admitted that the petitioner increased the number of spindles from 7812 to 10860 and the number of looms from 250 to 300 during the period, April 1932 to December, 1952. The Government of India in exercise of the powers conferred by S. 3, Essential Supplies (Temporary Powers) Act (No. 24) of 1946 made the Cotton Textiles (Control) Order, 1948. By Cl. 20 of the Order, the Textile Commissioner was given the power to issue directions from time to time to any producer regarding the classes or specifications of cloth or yam and the maximum or minimum quantities to be produced, and it was incumbent upon the producer to produce cloth or yarn accordingly. In pursuance of Cl. 20 referred to above, the Textile Commissioner, Bombay, issued a notification dated 9-12-1952, by which he directed that no producer shall, during December, 1952, and every subsequent month thereafter produce quantity of dhoties more than 60 per cent, of the average quantity packed for sale by such producer per month during April, 1951, to March 1952, and the petitioner was also informed accordingly. On 24-12-1952, the Textile Commissioner directed the petitioner not to produce more than 97,350 yards of dhoties per month. Then came into force the Dhoties (Additional Excise Duty) Ordinance (No. 6) of 1953 (hereinafter referred to as the Excise Ordinance), and this provided for the levy of additional excise duty on the quantity of dhoties packed by a mill (as defined under the Ordinance) in excess of the permissible quota from 26-10-1953.
3. By S. 3 of the Ordinance, it was laid down that the permissible quota of dhoties which may be packed by any mill during any quarter shall be one-fourth of 60 per cent, of the total quantity of dhoties packed by that mill during the relevant period, and under explanation (1) of S. 3, the Central Government declared by a notification in the official gazette the twelve months' period between April, 1951, to March, 1952, as the relevant period. By S. 4 it was further laid down that where the quantity of dhoties packed by any mill on or after the commencement of this Ordinance exceeds in any quarter the permissible quota for that quarter, there shall be levied and collected on that quantity of dhoties which is in excess of the permissible quota a duty of excise at the rate or rates which may be applicable thereto as specified in the Schedule appended to the Ordinance.
4. This Schedule imposed the excise duty on a graduated scale rising with the quantity of the excess over the permissible quota. The Textile Commissioner by his letter dated 31-10-1953, informed the petitioner that the permissible quota for it per quarter would be 2,92,050 yards, and, pro rata, for the unexpired portion of the quarter (that is, 26-10-1953 to 31-12-1953) it would be 2,12,688 yards. The Excise Ordinance was replaced by the Dhoties (Additional Excise Duty) Act, 1953 (hereinafter referred to as the Excise Act). This was enacted by Parliament and received the assent of the President on 16-12-1953, and was published in the Gazette of India, Extraordinary, dated 17-12-1953. It is remarkable that Section 3 of the Act was different from the corresponding S. 3 of the Ordinance, and the Act, instead of merely limiting the packing, now limited the issue, of dhoties and in effect it was provided that the number already fixed was the maximum quota of dhoties which might be issued out of the mill in any quarter irrespective of the consideration whether the dhoties were manufactured during that quarter or at any time previous thereto.
5. Section 4 was naturally cast in the same mould and it was enacted that the excise duty mentioned in the Schedule appended to the Act will be levied on the quantity of dhoties issued out of the mill in excess of the quota fixed. What is important to remember is that the Act was to be deemed to have come into force on 26-10-1953, which was the date on which the Ordinance was first brought into force. A quarter is defined by Cl. (d) of Section 2 of the Act as a period of three months ending on the last day of March, June, September and December, and this was also the definition of ‘quarter’ under the Ordinance. The case of the petitioner is that it had a balance of 1,03,020 yards of dhoties lying with it at the commencement of 26-10-1953, and these had already been issued from 26-10-1953, to 17-12-1953, which was the date on which the Act had first been published. In addition, the mill states to have packed 1,62,430 yards of dhoties from the 26th October to the 16th December, 1953, out of which 1,28,990 yards were issued up to 16-12-1953.
6. The mill further packed 47,956 yards of dhoties from 17-12-1953, up to 31-12-1953, and issued thereout 59,744½ yards up to the end of the quarter; with the result that its total clearance came to 2,91,754½ yards, that is, 79,066½ yards over the prescribed figure of 2,12,683 for the unexpired period of the quarter under the Act. Consequently, the Resident Inspector of Central Excise sent a notice on 8-6-1954, to the petitioner to pay a sum of Rs. 25,179/8/- as what was erroneously called “penal excise duty”. This was later corrected by a subsequent letter from the Superintendent, Central Excise, Udaipur, dated 1-7-1954, and the amount of demand was reduced to Rs. 14,781/12/- as being the additional excise duty on 79,066½ yards of dhoties cleared in excess of the permissible quota fixed under Section 3 of the Excise Act for the period from 26-10-1953, to 31-12-1953.
7. Thereupon the petitioner made his first writ application to this Court, questioning the aforesaid demand as illegal and ultra vires, on 14-6-1954, soon after the demand for Rs. 25,000 odd had been made (petition No. 142 of 1954). As this demand was later reduced by the Superintendent, Central Excise, by his letter dated 1-7-1954, the petitioner made a fresh application on 29-10-1954, and it was prayed that both these applications be heard together as they arose substantially out of the same set of facts and raised the same issues for decision. As the present application was based on a fresh letter of demand the former application was dismissed by an order of the Court dated 1-11-1954, without any decision on the merits thereof.
8. The main contentions raised before us on behalf of the petitioner in his present application are these. First, that the Excise Act is retrospective in its operation as it was made to come into force on 26-10-1953, that is, a month and twenty three days before it was published in the gazette, and as its object was to levy and collect an additional excise duty on goods which had been manufactured and packed and even issued before the commencement of the Act, such a demand was illegal and, therefore, the Excise Act was void and of no effect. The contention was that an excise tax could not be levied retrospectively as it must have the potentiality of being shifted on to the consumer. Such shifting was impossible in the present case for the reason that the petitioner had already cleared a large quantity of dhoties lying with it which had been packed before 26-10-1953, there being under the Ordinance no prohibition against the issue of dhoties which had already been packed before the said date.
9. This prohibition first came on 17-12-1953, which limited not merely packing but the total issue and did so retrospectively from 26-10-1953. It was, therefore, contended with great force that the mill had no opportunity to fix the price of the dhoties after taking into account the incidence of the additional excise duty. Alternatively it was contended that this was not at all an excise duty and was an attempt to regulate trade in dhoties, but such regulation was not a Union subject (see entry No. 24 of the State List and No. 52 of the Union List of the Seventh Schedule of the Constitution) and was outside its legislative competence.
10. Secondly, it was contended that the Excise Ordinance as well as the Act violated the provisions of Article 14 of the Constitution as they made discrimination between mills which carried on the business of both weaving and spinning and those which merely did weaving. This discrimination was stated to have arisen as a result of the definition of the expression ‘mill’ as contained in both the Ordinance and the Act. Section 2(b) of the Excise Act, defines a mill as
“any building or place in which cotton yarn is spun and dhoties are manufactured by machinery moved otherwise than by manual labour, and includes every part of such building or place.”
11. Another ground of attack under the same head was that both the Ordinance and the Act discriminated between mills which had commenced business after or during the relevant period, and mills which had expanded their machinery or equipment during or after the relevant period. It was contended that the petitioner had increased the number of spindles and looms during the period between April to December, 1952 (and this fact is not controverted) but this factor could not be, and was not taken note of in any fixation of the permissible quota under the Act. This argument was raised particularly with reference to the proviso to explanation 1 of Section 3 of the Excise Act, which laid down that
“Where in the case of any mill, the relevant period so fixed is not applicable by reason of the fact that the mill came into existence or commenced working only during or after the expiry of the relevant period, the Central Government may, by a like notification, fix the permissible quota in respect thereof to be such quantity as, in its opinion, is reasonable having regard to the machinery and other equipment installed therein and to the other circumstances of the case.”
12. The contention was that the Act was bad inasmuch as it did not contain any provision for fixing a proportionately suitable quota for a mill like the petitioner which had expanded its equipment during or after the relevant period just in the same manner as it had made a provision for mills which came into existence during or subsequently to the relevant period.
13. On behalf of the Union of India, who are the main contesting party, all the above contentions were denied and it was submitted that the demand made by them was just and proper and that the Excise Act as well as the Ordinance which preceded it and the notifications issued from time to time thereunder were perfectly valid and did not in any way infringe the Constitution.
14. The first and the most important point for determination in this case is what is the real character of the duty imposed by the Ordinance and the Act, and if, as it is claimed on behalf of the Union of India that the impost is an excise duty, whether its retrospective imposition is valid. Now, it appears to us that what the Central Government purported to levy by means of the Act was an additional excise duty. The title and the preamble of the Act are clear. It is an Act to provide for the levy and collection of an additional excise duty on dhothies issued by mills in excess of the quota fixed for the purpose. It is a short Act consisting of five sections only and that is its character in pith and substance. The duty has been imposed on a certain class of manufacturers or producers of dhoties, and is connected with their manufacture. It may be conceded that this impost was levied in order to afford protection to the industry of handloom dhoties, which was in difficulties and was unable to compete with dhoties produced at cheaper cost of production by mills run by machinery; but we are not concerned with the motives of Parliament in judging the character of a piece of legislation enacted by it but with what it has actually enacted.
15. It is true that the duty has been levied retrospectively but we think that the retrospective imposition of a tax cannot have the effect of depriving it of its real character as excise duty, if Parliament has the power to enact such law retrospectively. It would be convenient to consider the meaning of the term “excise duty” and its true character at this place. Now the term “excise duty” has not been precisely nor authoritatively defined anywhere so far as we know. It is generally used in contradistinction to the term “customs duty”. Customs duties or duties of custom are levied on goods going abroad or imported from abroad; while duties of excise, on the other hand, are levied on home-made goods or goods made in the taxing country. The juxtaposition of these terms in the legislative lists appended to the Constitution appears to lend strength to the same view.
16. Various definitions of the term “excise duties” by jurists and economists and lexicographers have been collected in the judgment of the Federal Court in — ‘In re C.P & Berar Sales of Motor Spirit and Lubricants Taxation Act’, AIR 1939 FC 1 (A), and we consider it unnecessary to repeat them here. Gwyer C.J, there pointed out that the word ‘excised’ in the United Kingdom has a very wide signification which includes a tax on certain articles of luxury such as spirits, beer or tobacco, manufactured in that country, as also licence fees payable by persons who produce or sell excisable articles, and licence fees imposed for revenue, administrative or regulative purposes on persons engaged in a number of other trades or callings and even the duty payable on payments for admission to places of entertainment in the United Kingdom; but its primary and fundamental meaning in English is still that of a tax on articles produced or manufactured in the taxing country and intended for home consumption. The learned Chief Justice expressed the view that was its primary and fundamental meaning in India also and gave the same meaning to Entry (45) of the Federal List in the Seventh Schedule of the Government of India Act, 1935.
17. According to the learned Chief Justice, Black-stone's definition of an “excise duty” that it was an inland imposition paid sometimes on the consumption of the commodity and frequently on the retail sale was demonstrably wrong because an examination of such duties showed that in practically all cases it was the producer or manufacturer from whom the duty was collected. His Lordship further observed that subject always to the legislative competence of the taxing authority, a duty on home-produced goods will obviously be imposed at the stage which the authority finds to be the most convenient and the most lucrative, wherever it may be, and that the ultimate incidence of an excise duty which was a typical indirect tax must always be on the consumer who pays as he consumes or expends; and it continues to be an excise duty, that is, a duty on home-produced or home-manufactured goods, no matter at what stage it was collected.
18. It was further observed that there was no reason in theory why an excise duty should not be imposed even on the retail sale of an article provided the taxing Act so directs, or that an excise duty could not be levied at a stage subsequent to production or manufacture, and, concluded the learned Chief Justice, that, in his view, the definition of ‘excise duties’ was, therefore, of little assisance in determining the extent of the legislative power to impose them; for the duty imposed by a restricted legislative power does not differ in essence from the duty imposed by an extended one. We respectfully agree and would add that nothing has been pointed out to us to show that the meaning of the term ‘excise duties’ is different under the present Constitution from that placed on that expression in Entry No. 45 in the Federal list of the Government of India Act, 1935.
19. Now learned counsel for the appellant laid considerable emphasis on certain observations in the judgment of Jayakar J. in this very case at p. 35 where while dealing with a contention that the excise duty was on manufacture or production, the learned Judge observed that he found some difficulty in accepting that contention and that looking at the words of item 45, the duty was on the goods, and the words “manufactured or produced in India” were descriptive of the goods only, and that the legislature had not used the words “in respect of” manufacture or production which it might well have used if the intention was that excise duties were to be levied on manufacture or production. Having closely read Jayakar J.'s judgment, it appears to us that he was in favour of giving a wider meaning to the expression ‘excise duties’, namely, some such thing as “a tax on consumption” although the remaining two judges were not prepared to go to that extent so far as the Constitution Act of India was concerned. What we wish to stress for the purposes of the controversy before us is that the words “manufactured or produced in India” are an integral part of the entry in question and are not without significance and, with respect, the scheme of the Indian Constitution appears to us clearly to be that excise duties, though on goods, are connected with their manufacture or production.
20. Besides, what we wish to emphasise is that whether the duties of excise are on the goods or on the manufacture or production thereof, the true position under the present Constitution or the Government of India Act, 1935, appears to be that they are to be charged from the manufacturer or producer of course in respect of the goods produced, and it is this aspect of the matter which needs to be brought out and appreciated clearly for the purposes of the present case. We desire in this connection to refer to two cases, one of the Federal Court and the other of the Privy Council, both of which involved the same point and neither was referred to at the bar of this Court. The issue in both the cases was whether the Madras General Sales Tax Act, in so far as it purported to levy a tax on first sales in Madras of goods manufactured in India was ultra vires of the provincial legislature. In — ‘Madras Province v. Boddu Paidanna & Sons’, AIR 1942 FC 33 (B), Gwyer C.J, held that the Act was valid and made the following observations which are relevant for our present purposes:
“The duties of excise which the Constitution Act assigns exclusively to the Central Legislature are ……….. duties levied upon the manufacturer or producer in respect of the manufacture or production of the commodity taxed.”
21. The Privy Council, in ‘Governor-General in Council v. Madras Province’, AIR 1945 PC 98 (C), in an appeal from the decision of the Federal Court dismissing an original suit by the Province of Madras involving the same question, fully approved of the decision of the Federal Court in the earlier case and observed that:
“the term duty of excise is a somewhat flexible one; it may no doubt cover a tax on first and perhaps on other sales. ………………. Their Lordships are of opinion that “a duty of excise is primarily a duty levied upon a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax upon goods, not upon sales or the proceeds of the sale of goods.”
22. In view of what we have stated above, we hold that the duty in the present case is an excise duty inasmuch as it is imposed on a manufacturer in respect of the dhoties produced by it over the permissible quota and is connected with the manufacturer thereof.
23. We further hold that Parliament undoubtedly possesses the authority to levy such an impost. Entry No. 84 of List 1, Union List under the Seventh Schedule is in these terms:
“84. Duties of excise on tobacco and other goods manufactured or produced in India except …………….” (We are not concerned with the remaining part of this entry).”
24. It is clear that the levy of an excise duty on goods manufactured and produced in India is a subject which falls within the exclusive competence of the Union of India. Parliament was, therefore, fully authorised to enact a law imposing such a duty for certain reasons into which it is not necessary for us to enter here.
25. It was strenuously urged before us in this connection that what was really levied in the present case was not an excise duty at all but that it was virtually something in the nature of regulating the industry of dhoties which were mill-made as against dhoties which were hand-made, and that “industries” were really a State subject vide entry No. 24 of List 2 of the Seventh Schedule except in so far as the central control thereof may be declared by Parliament by law to be expedient for public interests. Parliament having made no such declaration, it was argued that the regulation of the trade of dhoties in the shape of the Act in question was nothing but an encroachment into a field which was really left by the Constitution to the States and not to the Union. This contention is, to our mind, devoid of all force. We wish to point out, in the first place, that merely because the imposition of such a duty may have the effect of exercising control on a certain trade would not take the matter out of the exclusive competence of the Union Government.
26. In the next place we would invite attention to Article 369 of the Constitution which, in our opinion, clinches the issue. That Article provides in effect that notwithstanding anything contained in the Constitution, Parliament shall, during a period of five years from the commencement of the Constitution, have power to make laws with respect to trade and commerce within a State in, and the production, supply and distribution of cotton and wollen textiles and certain other things which are not material for our present purposes. Even granting, therefore, the Central Legislature was, by the imposition of this tax, regulating the production, supply or distribution of cotton textiles, its competency to enact the laws which are impugned before us cannot be rightly questioned, as they were made within a period of five years prescribed by Article 369.
27. The next question that falls to be determined is whether a law imposing an excise duty can be enacted retrospectively. The argument is that an excise duty being an indirect tax and (like all indirect taxes) it is intended to be shifted on to the consumer by the producer; but in the present case the petitioner had already issued certain bales which had been lying packed with it when such issue was perfectly in order and it was only on 17-12-1953, that the Excise Act had limited the issue of bales with back effect from 26-10-1953, and put additional excise duty on the quantity issued in excess and thereby the result was that it was impossible for the petitioner to take this new factor into consideration in fixing the sale price of the bales sold before 17-12-1953. It was strenuously contended, therefore, that in such circumstances the imposition of the excise duty as a retrospective measure was unjust and illegal, and ultra vires of the Constitution.
28. We may at once point out that the question so far as we are concerned is of the legal efficacy of the measure or the legal competency of the authority passing it and not of its ethical or economic justification. It is a fundamental principle of Indian, as of English, law that no statute shall be construed to have a retrospective operation, as a general rule, and laws should, broadly speaking, receive prospective operation only. It also appears to us that normally an indirect tax should, as is usually done, be imposed prospectively so that the burden thereof eventually falls upon the shoulders on which it ought to rest. But that is not the question for us. The position here is that the Parliament has in its wisdom clearly given retrospective effect to a piece of legislation and it has also equally clearly intended thereby that the burden of the impugned taxation may fall upon the manufacturers without such a burden being necessarily transferred to the consumer.
29. The question that arises in such circumstances is whether in such a case we must hold that the legislation which is sought to be challenged is on that account void, illegal or inoperative. Having given our most careful and anxious consideration to this difficult question, we are of opinion that the answer thereto ought to be in the negative. It seems to us beyond question that it is open to Parliament, which possesses supreme authority within the powers given to it by the Constitution, to pass laws retrospectively if it so considers necessary. A law does not become bad merely because it has been passed retrospectively provided that it is otherwise within the legislative competence of the authority passing it. We may go further and say that unless there is anything in the Constitution which deprives the Parliament of the power to pass fiscal or other laws with retrospective effect (and no such limitation has been pointed out to us except Article 20 which has 110 application to the present case) it can pass such laws retrospectively.
30. Thus Lord Ashbourne laid down in — ‘Smith v. Callander’, 1901 AC 297 (D), that it is obviously competent for the legislature in its wisdom to make the provisions of an Act of Parliament retrospective. Now, certain principles seem to be well established in the construction of taxing statutes. One such principle is that the intention to impose a tax on the subject must be shown by clear and unambiguous language. Lord Cairns laid down in — ‘Partington v. Attorney-General’, (1869) 4 HL 100 (E), that
“If the person sought to be taxed comes within the letter of the law, he must be taxed however great the hardship may appear to the judicial mind to be. On the other hand, if the crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law, the case might otherwise appear to be. In other words if there be admissible in any statute what is called an equitable construction, certainly such a construction is not admissible in a taxing statute.”
31. Again, in the language of an eminent English Judge:
“In a taxing Act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.” (In — ‘Cape Brandy Syndicate v. Inland Revenue Commrs..’, (1921) 1 KB 64 (F)).
32. Another principle which is equally well established is that a retrospective operation is not to be given to a statute which impairs existing rights or imposes additional obligations otherwise than as respects matters of procedure. But if the language is plainly retrospective it must be so interpreted. Applying these principles to the case before us, we find that the Excise Act here clearly says that it I shall be deemed to have come into force on 26-10-11953. The Act is, therefore, clearly retrospective. We further consider that such effect it must receive according to its express language which is perfectly plain subject however to one qualification, namely, that there is nothing in the Act which may be contrary to the Constitution which is and must stand supreme in our body politic. One important limitation provided in the Constitution in this connection is that no tax shall be levied or collected except by authority of law. This principle clearly does not involve the further proposition that under the Indian Constitution taxes cannot be levied retrospectively. We may add that our Constitution does not embody the principle which has sometime been accepted in some other countries that laws are not to have any retrospective operation. It follows from the above discussion that once a competent legislature has passed a fiscal law with retrospective effect, the tax levied thereby must be held to be by authority of law and it would be perfectly constitutional and not invalid because of its being retrospective.
33. Secondly, we consider that the argument which was built before us upon the distinction between direct and indirect taxation has small relevance for the decision of the issue before us. The reason is that our Constitution unlike the constitutions of some other countries has not fashioned the limits of legislative authority with reference to any such distinction. The framers of our Constitution have steered clear of what has Been a prolific source of controversy under other constitutions and have simply employed the expression “duties of excise” which, as we have already explained above, primarily mean duty on goods manufactured in our own country and intended for home consumption, and the term is flexible enough to admit of such a duty being charged from a manufacturer on goods at a stage even after their issue from their place of manufacture, although ordinarily such an impost is and would usually be, levied and collected before the manufactured goods are issued from the place of manufacture.
34. We wish to add here that cases of taxes from other countries which have their own constitutions different from our own and which recognise the distinction between direct and indirect taxes cannot serve as a safe ground for interpreting the provisions of our own Constitution. To illustrate what we mean we would refer briefly to a few examples to which our attention was invited on behalf of the petitioner.
35. In the — ‘Attorney-General for Quebec v. Reed’, (1884) 10 AC 141 (G), the question was whether a duty of ten cents imposed by the Quebec Act upon every exhibit filed in Court in any action pending therein was ultra vires of the provincial legislature. It was held by the Privy Council that the Act was ultra vires of the provincial legislature. The decision mainly depended upon whether it was a case of direct taxation within the meaning of sub-s. (2) of Section 92 of the British North America Act, 1867, because if it was, then the provincial legislature was competent to pass it. The terms of this clause were these:
“Direct taxation within the province in order to the raising of revenue for provincial purposes.”
36. Their Lordships generally approved of the definition, of James Stuart Mill that
“a direct tax is one which is demanded from the very persons who it is intended or desired should pay it”,
37. and that indirect taxes are “those which are demanded from one person under the expectation and intention that he shall indemnify himself at the expense of another”, and came to the conclusion that the tax in question was not “direct” and, therefore, was outside the legislative competence of the Quebec legislature.
38. Similarly, in the — Bank of Toronto v. Lambe’, (1887) 12 AC 575 (H), the question raised was whether a tax imposed by the Quebec Act 45 Victoria C. 22 on certain commercial corporations carrying on business in the province was intra vires of the provincial legislature. The provincial authority depended upon its being a case of direct taxation; as otherwise it would be within the legislative competence of the dominion. It was held that the tax was direct within Cl. 2 of Section 92 of the British North America Act, and, therefore, within the authority of the provincial legislature. Another case to which our attention was drawn is — ‘Attorney-General for British Columbia v. Kingcome Navigation Co.’, 1934 AC 45 (I). This was a case from British Columbia and related to the imposition of a fuel-oil tax under the Fuel-oil Tax Act, 1930. Here again the question was whether it was a case of direct taxation, because if it was, then, it was within the authority of the provincial legislature, and if not, it would be ultra vires of it.
39. Their Lordships of the Privy Council considered their previous cases, some of which we have referred to above, and came to the conclusion that it was a case of a direct taxation within the meaning of Section 92, head 2 of the British North America Act, and, therefore, they held that it was not invalid as infringing the Dominion authority under S. 91, head 2. We desire to say that our Constitution does not proceed on the same pattern as that of the British North America Act, and does not make any distinction between direct and indirect taxation as such, or fix the limits of legislative authority with reference to any such distinction, and, therefore, these cases are of no assistance in deciding the question before us.
40. Another case to which our attention was invited comes from Australia — ‘The King v. Barger’, 6 CLR 41 (J). The question was whether the Excise Tariff Act (No. 16) of 1906 enacted by the Commonwealth Parliament was valid. In a judgment which was reached by a majority of three to two, it was held that the Act was not in substance an Act imposing duties of excise but was an Act to regulate the conditions of manufacture of agricultural implements and was, therefore, not an exercise of the power of taxation conferred by the Constitution. A perusal of this case shows, clearly to our mind, that decisions on matters like taxation, depending for their answer upon the constitutional provisions of a certain country may indeed be and often are very dangerous precedents for the answering of similar questions arising under the constitution of another country.
41. It is plain that the majority decision depended largely on certain considerations which are wholly inapplicable to the case before us. One such consideration is that the power of taxation primarily vests in the States in Australia and not in the Commonwealth Parliament. The scheme of the Indian Constitution is entirely in the reverse direction. Again, as we have already pointed out above, even if we were to hold that the Excise Act before us was an Act to regulate trade in cotton textiles (just as in the Australian case it was held that it was an Act to regulate the manufacture of agricultural implements) nothing turns on this ground of attack because Article 369 of our Constitution would be a complete answer to the objection as it vests authority in the Indian Parliament to make laws relating to the production, supply and distribution of cotton textiles throughout India for a period of five years from the commencement of the Constitution.
42. Then a further arugment was held to have been validly founded on S. 55 of the Constitution of Australia which provides that
“laws imposing taxation shall deal only with the imposition of taxation and any provision therein dealing with any other matter shall be of no effect.”
43. It is clear that the decision in the case cited rested on premises which have no application to the question before us, and, therefore, no argument can be validly founded by the petitioner in his favour on that case.
44. We next turn to the challenge directed against the laws in question on the ground of discrimination. In the first place it was urged that the impugned Act is or its predecessor was bad because either of them discriminates between mills which carry on the business of both spinning and weaving and those which do merely weaving. It is common ground that no excise duty has been imposed under the Act on dhoties produced by the weaving mills irrespective of the quantity produced by them whereas the spinning-cum-weaving mills have been saddled with excise duties in so far as they produce dhoties in excess of the quota fixed for them. It is contended that this is violative of Article 14 of the Constitution. Now, the principle of equal protection of laws has been expounded in a number of decisions of the Supreme Court of the United States of America, to some of which we were referred, and in a number of decisions of our own Supreme Court; and as the legal principles on this important subject have been more or less crystallized by the decisions of our own Supreme Court, we have not thought it necessary to refer, for the purposes of the present case, to the decisions of the American Supreme Court.
45. In the first case of our Supreme Court — ‘Charanjit Lal v. Union of India’, AIR 1951 SC 41 (K), it was held that the legislature undoubtedly has a wide field of choice in determining and classifying the subject of its laws, and if the law deals alike with all of a certain class, it is normally not obnoxious to the charge of denial of equal protection but the classification should never be arbitrary. It must always rest upon some real and substantial distinction bearing a reasonable and just relation to the things in respect of which the classification is made, and classification made without any substantial basis should be regarded as invalid. It was further held that the presumption is always in favour of the constitutionality of an enactment since it must be assumed that the legislature understands and correctly appreciates the needs of its people.
46. These principles were reiterated by Fazl Ali J. in — ‘State of Bombay v. F.N Balsara’, AIR 1951 SC 318 (L). In — ‘Kathi Raning Rawat v. State of Saurashtra’, AIR 1952 SC 123 (M), it was laid down that while Article 14 forbids class legislation it does not forbid reasonable classification for the purposes of legislation. Mukherjea J. as he then was, laid down that the legislature was given the utmost latitude in making the classification and it was only when there was a palpable abuse of power and the differences made had no rational relation to the objectives of the regulation, that necessity of judicial interference arise. We would next refer to — ‘Kedar Nath Bajoria v. State Of West Bengal’, AIR 1933 SC 404 (N).
47. Patanjali Sastri C.J in that case obesrved as follows:
“It is well settled that the equal protection of the laws guaranteed by Article 14 of the Constitution does not mean that all laws must be general in character and universal in application and that the State is no longer to have the power of distinguishing and classifying persons or things for the purposes of legislation. To put it simply, all that is required in class or special legislation is that the legislative classification must not be arbitrary but should be based on an intelligible principle having a reasonable relation to the object which the legislature seeks to attain. If the classification on which the legislation is founded fulfils this requirement, then the differentiation which the legislation makes between the class of persons or things to which it applies and other persons or things left outside the purview of the legislation cannot be regarded as a denial of the equal protection of the law, for, if the legislation were all-embracing, in its scope, no question could arise of classification being based on intelligible differentia having a reasonable relation to the legislative purpose.”
48. It was further held in the above case that Article 14 did not insist that legislative classification should be scientifically perfect or logically complete. It further deserves to be noticed that their Lordships upheld the principle that if any state of facts can reasonably be conceived to sustain a classification, the existence of that state of facts must be assumed. The same principles were upheld in — ‘Harman Singh v. Regional Transport Authority, Calcutta Region’, AIR 1954 SC 190 (O), and it was laid down that the Courts should not adopt a doctrinnaire approach which might well choke all beneficial legislation and that legislation which is based on a rational classification is permissible.
49. In — ‘Sakhawant Ali v. State Of Orissa ’, (S) AIR 1955 SC 166 (P), it was further laid down that
“Legislation enacted for the achievement of a particular object or purpose need not be all embracing. It is for the Legislature to determine what categories it would embrace within the scope of legislation and merely because certain categories would embrace within the scope of legislation and merely because certain categories which would stand on the same footing as those which are covered by the legislation are left out would not render legislation which has been enacted in any manner discriminatory and violative of the fundamental right guaranteed by Article 14.”
50. Applying these well settled principles to the present case, the question for decision is whether the impugned legislation satisfies the test of reasonable classification; because, if it does, then it could not be condemned on the ground of class legislation. It is true that the Act does not expressly specify any principle of classification as to why mills which merely carried on the business of weaving were left outside the purview of the Act. The matter, however, does not rest there and the law is well settled that we must start with a presumption in favour of the constitutionality of the Act and further we are also called upon to conceive a rational basis of classification if such a course can be conceived as justifying the measure. On a consideration of the background of this legislation, it appears to us clear that at the time it was resorted, to, mill-made dhoties abounded in the market and they were selling very cheap with the result that hand-made dhoties with their higher cost of production could find no market.
51. It was obviously with the object of affording protection to those employed in the small industry of hand-made dhoties that the Parliament enacted the law in question whereby it restricted the production of mill-made dhoties and put an additional excise, duty on dhoties produced by spinning-cum-weaving mills in excess of the quantities fixed for them. The same restriction was not, however, considered necessary in the case of the weaving mills. It seems to us that Parliament may well have been induced I to do so because so far as mills which did merely weaving were concerned, they were necessarily required to purchase yarn from the spinning mills and they had, therefore, to pay the middle-man's profit, and in the result it was not possible for them to produce dhoties as cheap as the mills which did both spinning and weaving. The dhoties produced, therefore, by weaving mills were not a serious factor in competition with the dhoties made by manual labour just as the dhoties produced by mills which did both spinning and weaving.
52. This is a state of things which we can reasonably conceive, and it explains why the legislature left the weaving mills, as contra distinguished from spinning-cum-weaving mills, outside the scope of the Excise Act. We are consequently of opinion that the legislation in question cannot be held to be bad on this ground.
53. Another ground on which the impugned legislation was sought to be condemned as discriminatory was that although the Act provided in the case of a mill or mills which came into existence only during or after the expiry of the relevant period that the Central Government may fix the permissible quota such as may be reasonable having regarded to the machinery and other equipment installed therein and to the other circumstances of the case, no similar provision was to be found in the Act with regard to the mill or mills which might have increased their equipment during or after the expiry of the relevant period. Reliance was placed in this connection on the fact that the present mill had increased the number of its spindles and looms in 1952, and yet no regard was paid to this factor in fixing the quota for it which was merely based at 60 per cent, of the average quantity of dhoties produced by this mill during the relevant period. As we have already pointed out above, the law as laid down by their Lordships of the Supreme Court clearly is that Article 14 does not insist that legislative classification need be scientifically perfect or all embracing.
54. Apart from this, however, we wish to invite attention to sub-s. (2) of Section 3 of the Act which is in these terms:
“Notwithstanding anything contained in sub-s. (1), if in the case of any mill or class of mills, the Central Government is of opinion that due to economic reasons connected with the nature of the machinery or other equipment installed therein a higher percentage than that specified in sub-s. (1) should be fixed in respect thereof, it may, by notification in the Official Gazette, fix the permissible quota for a quarter for the mill or class of mills as one-fourth of such higher percentage as it may think fit, and where any such notification has been issued, the quota so fixed shall be deemed to be the permissible quota for the mill or class of mills within the meaning of this Act.”
55. The important words which we would emphasise are “due to economic reasons connected with the nature of the machinery or other equipment installed therein.” It seems to us that the word “nature” in the context in which it has been used must be given a comprehensive meaning and that it really includes not merely “nature” strictly so called, but also “extent” of the machinery involved. In view of the meaning of this sub-section which has commended itself to us, we consider that mills which might have expanded their machinery or equipment during or after the relevant period have been provided for under the Act for suitable treatment. In this view of the matter it was open to the petitioner to have moved the authorities concerned for itself. In any event, we consider that there is no merit in this contention and we hereby overrule it.
56. It only remains for us to deal briefly with one more contention which was raised before us. It was argued that according to the scheme of the Central Excise and Salt Act (No. I) of 1944, and the Rules made thereunder, an excise duty cannot be recovered after the goods have been lawfully removed from the place where they are produced, cured or manufactured or any premises appurtenant thereto such as may be authorised for the purpose, and, therefore, the demand raised against the petitioner under the circumstances narrated in the earlier part of this judgment was bad and impossible of realisation according to law, and should be quashed on that ground alone.
57. It may be accepted as a general rule that the proper time for collection of excise duty from a producer or manufacturer is when he wishes to remove the excisable goods from the place of manufacture etc. and secures the permission of the proper officer for that purpose. But exceptional cases may and do arise as in the present case when the excise duty has been ordered to be levied after the goods have been already cleared away. Such cases are, in our opinion, clearly covered by R. 10-A which runs as follows:
10-A. Residuary powers for recovery of sums due to Government.—
Where these Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short-levied, or of any other sum of any kind payable to the Central Government under the Act or these Rules, such duty, deficiency in duty or sum shall, on a written demand made by the proper (authority?) be paid to such person and at such time and place, as the proper officer may specify.”
58. The language of the rule is plain enough and conclusively meets the objection raised. In view of this rule we have no hesitation in coming to the conclusion that the demand made in the present case for payment of the additional excise duty even though it was made after the goods were cleared from the usual premises can be recovered according to law. There may have been some difficulty in the way of the recovery of excise duty in a case like the present in the absence of R. 10-A, but once that rule was enacted, we can see no legal impediment in the matter of the realisation of the duty sought to be recovered even after the goods have been removed from the place of manufacture or storage under the rules. In view of the conclusions at which we have arrived above, this application fails and is hereby dismissed with costs.
D.H.Z
59. Application dismissed.