JUDGMENT
A.S. Anand, C.J.
1. Petitioner No. 1 is a company incorporated under the Companies Act, 1956. The company has set up a factory at Bari Brahmana, Jammu, and at the relevant time was engaged in manufacturing cigarettes. Since the event attracting the levy of excise duty in respect of excisable goods is their manufacture, the petitioner-company was subject to the levy of excise duty on the cigarettes manufactured by it under the Central Excises and Salt Act, 1944 and the rules framed thereunder.
2. The challenge raised inihe writ petition is to the validity of the application of the Taxation Laws (Application to Jammu & Kashmir) Act, 1954, in general and of the Central Excises and Salt Act, 1944 (hereinafter called as the 1944 Act) to the State of Jammu & Kashmir in particular and consequently to the levy and collection of excise duty from the petitioner-company.
3. The respondents, Union of India and the State of Jammu & Kashmir (which was impleaded as party-respondent by an order of the Court dated 21.11.1985) besides controverting the challenge to the applicability of the 1944 Act to the State have also arrived in the counter-affidavit that the petitioners started manufacturing cigarettes after obtaining licence under the Act of 1944 and could not, therefore, after having taken the benefit under the Act be permitted to question its application and that there was no justification for allowing the petitioners to retain the excise duty collected by them from purchasers/consignees of cigarettes.
4. The challenge is based on two contentions : (a) that since entry 84 of the Union List (List I, Schedule VII of the Constitution of India) was not included in the Constitution (Application to Jammu & Kashmir) Order, 1950, it could not be subsequently applied to the State and further that the Constitution (Application to Jammu & Kashmir) Order, 1954 and the Taxation Laws (Application to Jammu & Kashmir) Act, 1954, were invalid and inoperative being violative of the Instrument of Accession which formed the basis of the relationship of the State with the Union of India; and (b) that on 9th October, 1954, the 1944 Act was a “dead law” insofar as the State of Jammu & Kashmir is concerned and the same could not have been extended or applied to the State of Jammu & Kashmir through the Taxation Laws Act of 1954 and under Article 246, the Parliament could only make new law for the state.
5. Before appreciating the potency of the challenge, it would be profitable to make a brief reference to the evolutionary process of the growing and binding relationship of the state with the Union of India as an integral part thereof even though the same has been noticed and elaborately dealt with by this Court and the apex Court in a number of Judgments (see with advantage AIR 1959 SC 749, AIR 1960 SC1, AIR 1971 J&K 120 and 1987 JKLR 109).
6. After the attainment of independence of India and the creation of two dominions of India and Pakistan, the Ruler of the State, in whom the power to accede vested, acceded to the Dominion of India by executing an Instrument of Accession which was accepted by the Governor General of India. Wih the execution of the Instrument of Accession, the State of Jammu & Kashmir and the Dominion of India were bound legally and constitutionally. Jurisdiction in matters of external affairs, defence and communication was transferred to the Government of India and the Union Parliament was given powers to make laws for the State for the purpose of those three matters only which were specified in the Schedule annexed to the Instrument of Accession. It would be useful to notice some of the clauses of the Instrument of Accession :
“3. I accept the matter specified in the Schedule hereto as the matters with respect to which the Dominion Legislature may make laws for the State.
*** *** *** 7. Nothing in this instrument shall be deemed to commit me in any way to the acceptance of any future Constitution of India or to fetter my discretion to enter into arrangements with the Government of India under any such future Constitution. 8. Nothing in this instrument affects the continuance of my sovereignty in and over this State, or save as provided by or under this Instrument, the exercise of any powers, authority and rights now enjoyed by me as Ruler of this State or the validity of any law at present in force in this State."
7. Clause (8) of the Instrument of Accession (supra) thus, specifically provided that its execution, did not affect the continuance of the sovereignty of the Ruler in and over the state except to the extent provided in the Instrument of Accession and by Clause (7) supra complete and unfettered discretion was retained by the Ruler to enter into arrangements with the Government of India under the future Constitution of India. On March 5, 1948, to meet the hopes and aspirations of the people of the State for democratisation of the State, the Ruler, late Maharaja Hari Singh, issued a proclamation appointing a popular interim Government for the State defining its powers, duties and functions pending the formation of a fully democratic Constitution in the State.
8. After the interim Government began to function, the Ruler who continued to be the repository of all judicial, legislative and executive functions under the Jammu and Kashmir Constitution Act, 1939, issued, yet another proclamation on June 20,1949 by which he entrusted to Yuvraj Karan Singh “all his functions and powers in regard to the Government of the State whether legislative, executive or judicial including the right and prerogative of making laws, of issuing proclamations, orders and ordinances or remitting, commuting or reducing sentences and of pardoning offenders.” Thus, Yuvraj Karan Singh, thereafter, became the repository of all the legislative, executive and judicial powers in regard to the Government of the State. The powers retained by the Ruler in the Instrument of Accession now came to be vested in him. The State was moving towards democratisation. The Constituent Assembly of India was at this time busy in finalisation of the Constitution of India. Clause (7) of the Instrument of Accession, supra had saved the discretion of the Ruler to enter into further arrangements with the Government of India under the future Constitution of India, which was likely to be adopted soon. The Yuvraj, therefore, issued a proclamation on November 25, 1949, by which he inter alia declared and directed that the Constitution of India shortly to be adopted by the Constituent Assembly of India shall insofar as it is applicable to the State of Jammu and Kashmir, henceforth govern the constitutional relationship between the State and the contemplated Union of India. The extent of the applicability was as contained in the Schedule to the Instrument of Accession and other matters mutually agreed. Representatives of Jammu and Kashmir, thereafter, participated in the deliberations of the Contituent Assembly of India. On January 26,1950, the Constitution of India came into force. To cover the case of Jammu and Kashmir, it contained Article 370 (306-A of the Draft Constitution). This article provides,
“370. Temporary provisions with respect to the State of Jammu and Kashmir. –
(1) Notwithstanding anything in this Constitution, –
(a) The provisions of Article 238 shall not apply in relation to the State of Jammu and Kashmir;
(b) the power of Parliament to make laws for the said States shall be limited to-
(i) those matters in the Union List and the Concurrent List which, in consultation with the Government of the State, are declared by the President to correspond to matters specified in the Instrument of Accession governing the accession of the State to the Dominion of India as the matters with respect to which the Dominion Legislature may make laws for the State; and
(ii) Such other matters in the said lists as with the concurrence of the Government of that State, the President may by order specify.
Explanation: For the purposes of this article, the Government of the State means the person for the time being recognised by the President as the Maharaja of Jammu and Kashmir acting on the advice of the Council of Ministers for the time being in office under the Maharaja’s proclamation dated the fifth day of March, 1948;
(c) the provisions of Article 1 and of this article shall apply in relation to that state;
(d) such of the other provisions of this Constitution shall apply in relation to that State subject to such exceptions and modifications as the President may by order specify :
Provided that no such order which relates to the matters specified in the Instrument of Accession of the State referred to in paragraph (i) of Sub-clause (b) shall be issued except in consultation w ith the Government of the State :
Provided further that no such order which relates to the matters other than those referred to in the last preceding proviso shall be issued except with the concurrence of that Government.
(2) If the concurrence of the Government of the State referred to in paragraph (ii) of Sub-clause (b) of Clause (i) or in the second proviso to Sub-clause (d) of that clause be given before the Constituent Assembly for the purpose of framing the Constitution of the State is convened, it shall be placed before such Assembly for such decision as it may take thereon.
(3) Notwithstanding anything in the foregoing provisions of this article, the President may, by public notification, declare that this article shall cease to be operative or shall be operative only with such exceptions and modifications and from such date as he may specify:
Provided that the recommendation of the Constituent Assembly of the State referred to in Clause (2) shall be necessary before the President issues such a notification.”
The future relations of the State of Jammu and Kashmir with the Union of India were now to be governed by Article 370, but for its internal administration, the State continued to be governed by the Jammu & Kashmir Constitution Act, 1939, as amended from time to time. On January 26, 1950, the Constitution (Application to Jammu & Kashmir) Order, 1950 (hereinafter called the Constitution Order of 1950) was issued by the President of India in exercise of the powers conferred on him by Clause (1) of Article 370.
9. On May 1, 1951, another proclamation was issued by Yuvraj Karan Singh, directing that a Constituent Assembly of representatives of the people of Jammu and Kashmir elected on the basis of adult franchise be constituted forthwith for the purposes of framing a Constitution for the State. After the Constituent Assembly of the State took certain important decisions, it was deemed necessary, in view of the provisions of Article 370 read with Constitution Order of 1950, to consult the Government of India. As a result of the discussion between the representatives of the Government of Jammu and Kashmir and the Government of India, an agreement popularly known as Delhi Agreement of 1952 came to be framed. This agreement was aimed at extending some of the areas of jurisdiction of the Union of India over the State. The Jammu & Kashmir Constituent Assembly discussed this agreement and finally adopted it on August 21, 1952. The agreement was discussed in the Union Parliament also and accepted. On May 14, 1954, the President of India by virtue of the powers vested in him under Article 370 issued the Constitution (Application to Jammu & Kashmir) Order, 1954 (hereinafter called “the Constitution Order of 1954”) with the concurrence of the State Government. This order after endorsing the relationship of the State with the Union of India as per Delhi Agreement, 1952, also enlarged the powers of the Union Parliament in relation to the State and many provisions of the Constitution of India, not hitherto applicable, were applied to the State. By the Constitution Order of 1954 the jurisdiction of the Union Parliament was extended from the original three subjects of defence, foreign affairs and communications to all subjects on the Union List, subject to some exceptions and modifications. The internal autonomy of the State, however, was not interfered with and consequently matters which concerned the internal administration of the State were left to be incorporated in the State’s own Constitution. The Constitution Order of 1954 superseded the Constitution Order of 1950 and defined precisely the scope and extent of the limitations on State’s sovereignty consequent upon its accession to India and the incorporation of Article 370 in the Constitution. The Constituent Assembly of the State thro’ugh its resolution dated 15.2.1954 not only recommended but actually sponsored the application of the constitutional provisions contained in the Constitution Order of 1954. This Order deals only with the constitutional position of the State of Jammu and Kashmir within the framework of the Indian Constitution. This Order was first amended in 1956 by the Constitution Order No. 51 dated 11.2.1956 and then by Constitution Orders 55 and 56 in 1958. Subsequently, also the order has been amended from time to time by the President of India with the concurrence of the State Government. The effect of all these amendments has been to bring the position prevailing in the State more at par with the rest of the country and further strengthen the bonds of harmonious association of the State with the rest of the country.
10. Under Article 370 of the Constitution of India the President is given the pow6r to apply the provisions of the Constitution of India to the State, subject to such exceptions and modifications as the President may by order specify. The President has thus, power to say, by an order, that certain.provisions of the Constitution will be excepted from the application to the State of Jammu and Kashmir and on such order being made, those provisions would not apply to the State. Besides this power of making exceptions, the President is given the power to apply the provisions of the Constitution of India to the State with such modifications as he thinks fit (See with advantage AIR 1961 SC 1519). Even though Article 370 of the Constitution is stated to be a “temporary provision”, yet, by virtue of Clause (3) of the said article the provisions of Article 370 would cease to be operative only when the President issues a notification to that effect on the recommendation of the Constituent Assembly of the’State. It IS by virtue of the provisions of Article 370 of the Constitution of India that the relationship between the State and the Union of Indiahas been constantly growing and various’ Orders have come to be issued by’tne President in consultation with or with the concurrence of, the State of Jammu and Kashmir, applying certain provisions of the Constitution of India to the State as also extending the application of certain central laws to the State which conform to the enlarged jurisdiction of the Union Parliament in respect of the State of Jammu and Kashmir . The association of the State with the Union of India which began with the Instrument of Accession has been steadily and gradually growing closer and closer on a democratic basis, without affecting the internal autonomy of the State as stipulated by the Constitution of the State.
11. The Taxation Laws (Extension to Jammu and Kashmir) Act, 1954 (hereinafter called the Taxation Laws Act of 1954) was passed by the Parliament to cover some of the matters enumerated in different entries of the Union List (List I, Seventh Schedule) which were applied to the State by virtue of the Constitution Order of 1954 and the Act of 1944, was one of the several Acts applied to the State of Jammu and Kashmir through the Taxation Laws Act of 1954.
12. After having noticed the brief history of the development of the constitutional relations between the State and the Union of India, I shall now take up for consideration the grounds of challenge raised at the bar.
13. Mr. Bhagotra questioning the validity of the application of the Taxation Laws Act of 1954 and through it the applicability of the Act of 1944, precisely submitted that since the relationship of the State with the Union of India was based on the Instrument of Accession, pursuant to which the Constitution Order of 1950, was issued by the President of India the powers of the Union Parliament in respect of this State could extend only to the matters contained in the Instrument of Accession read with the Constitution Order of 1950 and that field could not be enlarged subsequently either by the Presidential Order of 1954 or even by virtue of Article 370 of the Constitution of India as both those, contended Mr. Bhagotra, were violative of the Instrument of Accession which alone formed the basis of the relationship of the State with the Union of India. According to the learned counsel, after the execution of the Instrument of Accession, the Ruler of the State as well as his successor, Yuvraj Karan Singh, was left with no power to extend the scope of Instrument of Accession except through a supplementary Instrument duly executed between the parties and consequently neither the Constituent Assembly of the State nor the State Government could concur to the enlargement of the field of Legislation of the Union Parliament in respect of the State. The argument of Mr. Bagotra, however, is,not a novel one as similar arguments have been raised earlier also and repelled both by this Court as well as by the apex Court of the country. In Dr. S.N. Dhar v. The Stateof Jammu & Kashmir and Ors. 1987 JKLR 109,1 observed :
“…Since Clause (7) of the Instrument of Accession executed between various Rulers and the Govt. of India provided that the Instrument of Accession shall not be deemed to commit the Ruler in any way to acceptance of any future Constitution of India or to fetter his discretion to enter into arrangement with the Govt. of India under the Constitution of India…. Yuvraj Karan Singh issued a proclamation on November 25, 1949 by which he declared and directed that the Constitution of India shortly to be adopted by the Constituent Assembly of India shall ‘insofar as it is applicable to the State of Jammu and Kashmir shall govern the constitutional relationship between the State and contemplated Union of India’. He also declared that the provisions of the said Constitution shall as from the date of its commencement supersede and abrogate all other constitutional provisions inconsistent therewith which were then in force in the State. On January 26, 1950 the Constitution of India came into force. To cover the case,of Jammu and Kashmir, it contained Article 370 of the Constitution of India…”
14. The Instrument of Accession itself specifically provided that its execution did not affect the continuance of the sovereignty of the Ruler in and over the State except to the extent of the powers surrendered through the Instrument of Accession, vide Clause (4) of the Instrument the power to extend the scope of the Instrument of Accession was also retained by the Ruler and any such extension was to be deemed to be extension of the Instrument of Accession. Thus, the Instrument of Accession itself provided for extending the powers of the Union Parliament and left a complete discretion in the Ruler in that behalf. The execution of the instrument of Accession, did not and could not affect the plenary powers of the Ruler and it was in exercise of those powers that the proclamations were issued by the Rulers on March 5,1948; June 20,1949 and November 25,1^49 and anything done through those proclamations had the sanction of the Instrument of Accession itself. As already noticed, Article 370 was incorporated in the Constitution of India to cover the case of Jammu and Kashmir State only. The constitutionality and validity of this article is no longer an open question and has been settled by the Supreme Court in a number of cases (see AIR 1959 SC 749; AIR 1960 SC1). Even the challenge to its continued application was repelled in Sampat Parkash v. State of Jammu and Kashmir, (1969) 1SCC 562. Just as the Constitution Order of 1950, the constitutionality of which has been made the basis of the argument by Mr. Bhagotra, was issued by the President of India by virtue of the powers vested in him by Article 370(1) of the Constitution, the Constitution Order of 1954, was also issued by the President of India on May 14,1954, in exercise of the powers conferred on him by Article 370(1) with the concurrence of the Government of the State and it superseded the earlier Order of 1950. This article clearly envisaged the convening of a Constituent Assembly for Jammu and Kashmir State and also provided that whatever modifications, amendments or exceptions that might become necessary to either Article 370 or to any other article in the Constitution of India in their application to Jammu and Kashmir State were subject to the decision of that Assembly. Later on the recommendation of the Constituent Assembly, the President by virtue of the powers conferred on him by this article, declared vide Constitution Order No. 44 of 1952, that as from November 17,1952, Article 370 shall be operative with the modification that for explanation in Clause (1) thereof, the following explanation is substituted:
“Explanation:For the purposes of this article, the Government of the State means the person for the time being recognised by the President on the recommendation of the Legislative Assembly of the State as the Sadar-i-Riyasat of Jammu and Kashmir, acting on the advice of the Council of Ministers of the State for the time being in office.”
15. Clause (l)(b) of Article 370 refers to the legislative authority of Parliament over Jammu and Kashmir. The matters over which the Union Parliament had power to make laws for the State were basically the matters covered by the instrument of Accession. Clause (b)(ii) of Article 370 left it open to the State of Jammu and Kashmir to concur to the extension of the powers of the Parliament to make laws in respect of matters other than those specified in the Instrument of Accession in the Union List, or in the Concurrent List. This provided for subsequent enlargement of the Union powers if this were deemed necessary in the interest of the Union or the State. By virtue of various Constitution (Application to Jammu and Kashmir) Orders, certain entries from these lists were extended to the State from time to time. According to Clause (l)(c) the1 only article of the Constitution which applied of their own force to the State were Articles 1 and 370. Clause (l)(d) of Article 370 provided that other provisions of the Constitution of India applicable to the State could be determined by the President of India in consultation with the Government of the State and as held in Sant Singh v. State of J. & K., AIR 1959 J & K 35, the power to modify includes the power to enlarge or add to an existing provision. Therefore, exceptions and modifications could be made in the same manner and the provision could be enlarged too. Clause (2) of Article 370 provided that if the Stajte Government recommended to the President of India an enlargement of the powers of the Union Parliament by including matters other than those included in the Instrument of Accession, it was permissible in the manner provided therein. Thus, in effect, the power to extend the scope of the legislative competence of the Union Parliament had been specifically recognised in Article 370 of the Constitution of India itself.
16. The Constitution Order of 1954 was issued by the President of India with the concurrence of the Government of the State in exercise of the powers conferred on him by Clause (1) of Article 370 and it deals with the constitutional position of the State within the framework of the Indian Constitution. Through this Order, inter alia, the jurisdiction of the Union Parliament was extended from the original three subjects of “defence, foreign affairs and communicati6ns” to all subjects in the Union List, subject to some exceptions and modifications. The autonomy of the State was not interfered with and consequently matters which concerned the internal administration of the State were left to be incorporated in the State’s own Constitution. By virtue of the Constitution Order of 1954, various articles of the Constitution of India were applied to the State either as they were or with exceptions or modifications. The distribution of power between the Central Government and the Government of Jammu and Kashmir was arrived at on an objective consideration of what powers ought to belong to which Government. The legislative competence of the Union Parliament extends, subject to the provisions of the Constitution, to making laws for the whole of India or any part thereof. Thus, within the ambit of the specified powers, Parliament is supreme and does not recognise any fetter except those provided by the Constitution itself. Article 246 of the Constitution deals with the distribution of legislative subjects. This article was also applied in a modified form to the State of Jammu and Kashmir and the powers to legislate in respect of matters contained in the Union List was conferred on the Parliament by application of various entries in the Union List with certain exceptions and modifications. For the purpose of the instant case, power to legislate on the subject under discussion (is) vested in the Union Parliament and is contained in entry 84 of List I (Union List) of Schedule 7 and reads:
“Duties of excise on tobacco and other goods manufactured or produced in India except, –
(a) * * * * (b) * * * *"
This entry was applied to the State and it is by virtue of the said entry that the Union Parliament acquired the competence to legislate in respect of the matters contained therein. The 1954 Act was enacted by the Parliament, inter alia, to cover matters covered by this entry and, therefore, had the constitutional sanction. It is fallacious to contend that since entry 84 of the Union List, was beyond the scope of the Instrument of Accession, no law could be enacted by the Parliament in respect of the State of Jammu and Kashmir by virtue of that entry. The argument ignores the obvious and shuts its eyes to the provisions of Article 370 of the Constitution. It is equally misconceived to urge that since the Constituent Assembly which was admittedly in session in 1954 did not give its concurrence to the promulgation of the Taxation Laws Act of 1954, that Act had no validity. A similar argument was raised on behalf of the petitioners in S.M.S. Naqashbandi v. Income-tax Officer, AIR 1971J & K 120, and a Division Bench of this Court repelled the same. It would be useful to notice some of the observations of the learned Judges of the Division Bench;
“It was then_argued by the petitioner that the applicability of the Taxation Laws (Extension to Jammu and Kashmir) Act, 1954, was void and unconstitutional, inasmuch as the conditions mentioned in Article 370 for application of these Acts to the State were not fulfilled. In amplification of his argument the petitioner drew our attention to Article 370(2) which runs thus:
‘If the concurrence of the Government of the State referred to in paragraph (ii) of Sub-clause (b) of Clause (1) or in the second proviso to Sub-clause (d) of that clause be given before the Constituent Assembly for the purpose of framing the Constitution of the State is convened, it shall be placed before such assembly for such decision as it may take thereon.’
and submitted that since the Act supra was regarding a matter not covered by the Instrument of Accession even after the Government of Jammu and Kashmir had given its concurrence, it was necessary to get the concurrence of the State Government ratified by the Constituent Assembly before the Act could become a valid piece of legislation. It was argued that at the time the Act was applied the Constituent Assembly was already in session and had not framed the Constitution and therefore, it was obligatory on the part of the Government of India to comply with this provision before passing the Act. In our opinion, however, this argument appears to be without substance. In the first place a careful perusal of Article 370(2) would show that the ratification of the Constituent Assembly was necessary only if the concurrence of the Government was given at a point of time before the Constituent Assembly was convened, and not at the time after the Constituent Assembly had started functioning. In the present case the State Government had given its concurrence to the Constitution (Application to Jammu & Kashmir) Order, 1954 by which all the entries contained in the Union List were applied to the State at a time when the Constituent Assembly had already started functioning and was in the process of framing its Constitution. In these circumstances Article 370(2) was not called into operation at all and the ratification by the Constituent Assembly was not necessary. Furthermore, we have already seen that by virtue of a resolution passed by the Constituent Assembly itself on 15.2.1954, the Constituent Assembly not only recommended but actually sponsored the application of the constitutional provisions contained in the Order of 1954 and that being the position there was no point in getting it ratified by the Assembly. When the Assembly itself had sponsored the application of the constitutional provisions, there was a sufficient compliance with Article 370(2).”
17. We are in respectful agreement with the view expressed by the Division Bench as early as in 1970, and the observations of the Bench are a complete answer to the challenge raised by learned counsel for the petitioners in this case as well.
18. As a matter of fact, in Naqashbandi’s case supra the precise challenge was to the validity, constitutionality and the applicability of the Taxation Laws Act of 1954 in general and of the Indian Income-tax Act to the State of Jammu and Kashmir in particular. The Division Bench held the Taxation Laws Act of 1954 to be constitutionally sound and validly applied to the State. The Bench also held the applicability of the Indian Income-tax Act to the State, which was one of the Acts applied by virtue of the Taxation Laws Act of 1954 as constitutionally sound. The Indian Income-tax Act was applied by virtue of entry 82 of the Union List, which had also been applied to the State by the Constitution Order of 1954. The distinction sought to be made by Mr. Bhagotra on the pre and the post-Contitutional law to urge that since the Income-tax Act was post-Constitution it could not be applied but the 1944 Act being pre-Constitution could not be applied is misconveived and a result of misreading of Articles 395 and 372 of the Constitution of India as applicable to this State.
19. The question raised by Mr. Bhagotra, therefore, is no longer res integra and stands settled by a Division Bench of this Court as early as in 1971. The challenge to the constitutional validity and applicability of the 1954 Act, must therefore, fail. Since, the Divission Bench in Naqashbandi’s “ase (supra) held the entire Act of 1954 to be constitutionally sound and validly applied to the State, it follows that the Act of 1944 which is one of the Acts applied through the 1954 Act is also constitutionally sound and validly applied to the State. In view of what has been noticed above, and the settled position of law, it must be reiterated that Article 370 of the Constitution of India is constitutionally sound and valid and despite the description of the article as a “temporary provision” its continued application is also constitutionally sound. The Constitution Order of 1954 was issued by the President of India by virtue of the powers vested in him under Article 370 and all subsequent amendments to that Order as also the legislation passed by the Union Parliament in pursuance of that Order in accordance with the provisions of Article 370 and the other requirements of law is also constitutionally valid. The Constituent Assembly “sponsored” the application of the Order of 1954 to the State by which Article 246 was applied and power to legislate on matters in Union List was conferred on Parliament. Thus, the area of accession was enlarged on the recommendation of the Constituent Assembly and the proclamation of the Ruler and had the sanction of Instrument of Accession itself. The challenge raised on the basis of first contention therefore fails and is rejected.
20. Coming now to the second contention, Article 246 of the Constitution deals with the distribution of legislative subjects between the Union Parliament and the State legislature. Under this article Parliament has exclusive power to make laws for the whole or any part of the territory of India with respect to matters in the Union List. Parliament and the legislature of a State have concurrent powers to make laws with respect to matters enumerated in the Concurrent List, while the legislature of a State has exclusive power to make laws with respect to matters in the State List. However, in its application to Jammu and Kashmir State in Article 246, the words brackets and figures “Notwithstanding anything in Clauses (2) and (3)” occurring in Clause (1), and Clauses (2), (3) and (4) have been omitted. The net result of these omissions is that the legislative competence of Parliament over the State extends to the matters in the Union List, with certain exceptions. Neither the State List nor the Concurrent List were applied to the State. Vide Sectici 5 of the Constitution of Jammu and Kashmir, the extent of the legislative powers of the State extend to all matters “except those with respect to which Parliament has power to make laws for the State under the provisions of Constitution of India”. Those powers are contained in the Union List with certain exceptions. Thus, the Constitution of Jammu & Kashmir itself saves and protects the power of the Parliament to make laws for the State in respect of such subjects in the Union List over which the field of legislation has been transferred to the Parliament by virtue of an Order issued by the President in accordance with the procedure prescribed by Article 370. Among various subjects enumerated in the Union List over which the field of legislation was transferred to the Union Parliament by these Constitution Orders is entry 84 of the Union List. Till the application of entry 84 of the Union List the power to levy excise duty on tobacco, etc., did not vest ir. the Union Parliament. The State law on the subject, namely, the Tobacco Excise Duty Ordinance, Samvat 2001, governed the field. However, once the field of legislation of excise duty on tobacco, etc., was transferred to the Parliament from the State Legislature by adaptation of entry 84 of the Union List vide Constitution Order of 1954 and the resolution oFthe Constituent Assembly dated 15.2.1954 and the Parliament applied the Act of 1944 through the Taxation Laws Act of 1954, the two statutes in the same field could not be allowed to continue. As held in Naqashbandi’s case (supra) “the moment the Parliament passed the Act of 1954, it resulted in automatic repeal of the State Income Tax Act“. Same holds good for the Ordinance also. Parliament while passing the Taxation Laws (Extension to Jammu & Kashmir) Act, 1954, specifically repealed the State Ordinance of 2001 (Samvat) because the legislative field covered by entry 84 of the Union List having been transferred to the Parliament, the State no longer could exercise any legislative functions over the same. Article 372 of the Constitution of India has been applied to the State in a modified form. Insofar as it applies to the State of Jammu and Kashmir, it reads :
“372. Continuance in force of existing laws and their adaptation. (1) Notwithstanding the repeal by this Constitution of the enactments referred to in Article 395 but subject to the other provisions of this Constitution, all the laws in force in the territory of India immediately before the commencement of this Constitution shall continue in force therein Until altered or repealed or amended by a competent legislature or other competent authority.
* * * * In its application to the State of Jammu and Kashmir, in Article 372.... (i) Clause (2) & (3) shall be omitted; (ii) reference to the laws in force in the territory of India shall include reference to hidayats, ailans, ishtihars, circulars, robkars, irshads, yadashts, State Council resolutions, Resolutions of the Constituent Assembly and other Instruments having the force of law in the territory of the State of Jammu and Kashmir; and (iii) reference to the commencement of the Constitution shall be construed as reference to the commencement of the Constitution (Application to Jammu and Kashmir) Order, 1954, i.e., the 14th May, 1954."
21. A bare reference to the aforesaid provisions shows that the purpose of applying Article 372 in a modified form to the State was clearly to avoid the possibility of any conflict between the pre-existing State law and the law enacted by the Parliament on the same field. The State law would be a good and valid piece of legislation only if the field of legislation in respect of that subject matter was not transferred to the Parliament from the State legislation. Clause (1) of Article 372 enacts that all laws in force in the territory of India immediately before the commencement of the Constitution shall continue to be in force until altered, repealed or amended by a competent legislature. This, however, is “subject to the other provisions of the Constitution” which means that if an existing law is repugnant to any provision of the Constitution, notwithstanding the present article, that law shall not be saved. The purpose of Article 372 is to negative the possibility of any existing law being held to be no longer in force by reason of the repeal of the law which authorised its enactment by virtue of Article 395. On the plain reading of Article 372, it must, therefore, be held that notwithstanding the repeal of the Government of India Act, 1935, by Article 395 of the Constitution, the Act of 1944 continued to be in force and did not “die” as contended by Mr. Bhagotra. If any Act “died”, it was the State Ordinance of 2001 (Svt.) on account of the enactment of the Taxation Laws Act of 1954 by the Parliament.
22. The next submission of Mr. Bhagotra that by virtue of Article 246, the Union Parliament could only enact new law for the State and could not either extend or apply the existing law to the State, though attractive on the face of it, does not bear closer scrutiny. The expression “make law” and “extend law” have the same connotation in areas where the law comes into existence, for the purpose of its application to any area, for the first time. The expression “make law” would include “extending law” and, therefore, the extension of the Central Act of 1944, to the State of Jammu and Kashmir by the Taxation Laws Act, 1954, would, for the purpose of the said article amount to “making law” for the State. Even under Article 370(l)(b), the competence to issue a Presidential Order extending laws to Jammu and Kashmir is synonymous with the power to make laws, as the said article contemplates the growing and continuous relationship with the Union of India. Thus, it must be held that the Act of 1944, was not a “dead” law so far as this State is concerned and had been validly extended to the State. There is also no force in the submission of Mr. Bhagotra to the effect that the State Ordinance of 2001 was saved by virtue of Clause (8) of the Instrument of Accession and the Parliament had no jurisdiction to repeal that law. Similar argument was raised in Naqashbandhi’s case (supra) and was repelled by the Division Bench. The Bench observed :
“Lastly it was argued that the State Income-tax Act being a valid law within the meaning of Article 372 was saved by Clause (8) of the Instrument of Accession and the Parliament had no jurisdiction to repeal this law. The argument is interesting but on closer scrutiny it appears to be without any substancq. It is true that so long as the Parliament did not have the power to legislate on Income-tax matters in the State, the State Act would be a good and valid piece of legislation, but once the field of legislation of income-tax was transferred to the Parliament from the State legislature, then two could not be allowed to continue. In other words, the moment the Parliament passed the Taxation Laws (Extension to Jammu & Kashmir) Act, 1954, it resulted in an automatic repeal of the State Income-tax Act, because the legislative field covered by entry 82 of the Union List having been transferred to the Parliament, the State could no longer exercise any legislative functions over the same. Thus, the State Income-tax Act became dead” when the Parliament passed an Act on an identical subject.”
23. The above observations are a complete answer to the argument of “Mr. Bhagotra and all the arguments having failed, the second contention also fails and is rejected.
24. No other point was raised or argued at the bar. The writ petition, therefore, merits dismissal and is dismissed as such. The stay order shall stand vacated.
25. Before parting with the judgment, however, there is an important aspect of the case to which we would like to advert. It was after obtaining a L-4 licence that the petitioner-company started manufacturing cigarettes in the State. The licence was obtained by the petitioner-company under the Act of 1944. The petitioner-company collected the excise duty from the consumers/consignees and it did so as “an agent” of the Government. The amount collected by it as excise duty from the consumers/consignees, on whom the burden eventually, falls was kept by the petitioner-company in trust for the department. Can either in equity, legally, or morally the petitioner-company be permitted to pocket the excise duty collected by it from the consumers-consignees for and on behalf of the department ? The answer has to be an emphatic “no”.
The petitioner-company, who is invoking the equitable jurisdiction of this Court, cannot be permitted to enrich itself by the amount of excise duty which it has collected from the consumers/consignees for and on behalf of the department. It is fundamental that he who seeks equity, must do equity. The petitioner is not doing equity, for having collected the excise duty, it has no right not to pay it to the department.
26. The question raised in the writ petition broadly speaking, stood settled by the Division Bench of this Court in Naqashbandhi’s case (supra) and other judgments of this Court and the Supreme Court referred to in this judgment. The State of law has been settled and in existence for about two decades. The Acts applied to the State by the Taxation Laws Act of 1954, have governed the field for over three decades. Continuity with the past is a historical necessity and Courts always lean in favour of certainty of the law. Yet, by raising the same pleas in a guised manner, the petitioners have retained the excise duty, legally due to the State, by obtaining stay orders from this Court for all these years. Excise duty, like other taxes, is a compulsory enaction for augumenting the revenues of the State and public revenue, it cannot be denied, is collected for public good. Thus, the stay of payment of excise duty has ultimately been to the prejudice of the general public and at the cost of the developmental works and we view this aspect with grave concern particularly when the delay in the disposal of the case has occasioned on account of the conduct of both the parties.
27. While granting stay of the levy and collection of the excise duty on the cigarettes manufactured by the petitioner-company, the Court had directed the petitioners to furnish bank guarantees to the extent of 50 per cent of the excise duty payable on the cigarettes and further to furnish security for the balance of 50 per cent with a personal undertaking by the Managing Director of the petitioner-company to the effect that in the event the petition faite, the excise duty shall be paid to the authorities concerned. The petitioner-company has furnished bank guarantees and renewed the same from time to time to keep them alive. Further, the security for the balance of 50 per cent with the stipulated undertaking has also been furnished by the petitioner-company.
28. In view of the dismissal of the writ petition and vacation of the stay order, the bank guarantees issued by various banks shall be encashed in favour of the respondents forthwith. Further, the petitioner-company is directed to pay the balance amount of excise duty in terms of its undertaking to the respondents. The petitioners shall also pay costs to the respondents.
