PETITIONER: R. C. JALL Vs. RESPONDENT: UNION OF INDIA DATE OF JUDGMENT: 27/02/1962 BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. AIYYAR, T.L. VENKATARAMA SINHA, BHUVNESHWAR P.(CJ) AYYANGAR, N. RAJAGOPALA MUDHOLKAR, J.R. CITATION: 1962 AIR 1281 1962 SCR Supl. (3) 436 CITATOR INFO : RF 1963 SC1742 (54) RF 1963 SC1760 (24) R 1964 SC 925 (23) R 1967 SC1512 (19,48,66) R 1970 SC1589 (5) RF 1971 SC 152 (8) R 1977 SC1459 (6) RF 1984 SC 420 (13) RF 1986 SC 649 (25,28) RF 1990 SC 781 (67) RF 1990 SC1927 (70) ACT: Railway--Suit for recovery of cess--Limitation-- Maintainability--Consignee, if liable--Indian Limitation Act, 1908(IX of 1908), Arts. 149,120.50--Constitution of India, Arts 265, 372--Ordinance No. 39 of 1944--Ordinance 6 of 1947, s.3--Coal Production Fund Rules, 1944, rr.6, 3, 3(a), 3(b)--Supreme Court Rules,1950, as amended, O. XVIII, r.2. 437 HEADNOTE: The appellant, Amalgamated Coalfields, despatched by rail three consignments of coal to appellant R. C. Jall from Junner-Deo to Indore. The appellant R. C. Jall took deli- very of the coal after paying the freight, but by, mistake the cess payable as surcharge was not 'recovered from him at the time of delivery of goods. On April 15, 1953, the Union of India representing the Central and Western Railways filed a suit before the Civil judge Chhindwara, for the recovery of the mid cess. Since important questions of interpretation of the Government of India Act, 1935 and the Constitution were involved, the High Court withdrew the case to its own file for trial. The appellants inter alia, pleaded then the levy was illegal and the suit was barred by limitation. The High Court decreed the suit and held that it was within time and the appellants were liable to pay the cess against which the present appeals were preferred. It was urged by the appellants (1) that art. 149 of the Indian Limitation Act did not apply and the suit was governed by art. 120 of the Limitation Act; (2) that the tax could not be sustained under Art. 265 of the Constitution; (3) that the excise duty could not be levied on the consignee; (4) that the purpose of the Ordinance had exhausted and the Central Government could no longer levy the tax; (5) that under the statutory rules only the consignee was liable to pay. Held that art. 149 of the Indian Limitation Act read with art. 120 of the said Act applied to the present case and the suit was within time. Kirpa Sanker v. Janki Prasad A.I.R. 1942 Pat. 87, Secretary of State for India v. Guru Proshad Dhur, (1893) 1. L.R. 20 Cal 51;Inderchand v. Secretary of State for India (1941) 9 I.T.R. 673 and Government of India v. Taylor, (1955) 27 I.T.R. 356, held inapplicable. The repealing Ordinance, being a temporary one, expired after it fulfilled its purpose. As it had continued the life of the original Ordinance which was a permanent one, in respect of past transaction, the expiry of its life could not have any effect on that law to the extent saved. The repealed to ordinance, to the extent saved, continued to have force under Art. 372 of the Constitution and it could not be said that the coal cess was levied without authority of law within the meaning of Art. 265 of the Constitution. Hansraj Moolji v. The State of Bombay, (1957) S.C.R. 634, relied on. The Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within 438 the country. Subject always to the legislative competence of the taxing authority the said tax can be levied at a convenient stage so long as the character of the impost, is not lost. 'The method of collection does not affect the essence of the duty but only relates to the machinery of collection for administrative convenience, whether in a particular case the tax ceases to be in essence an excise duty and the rational conncction between the duty and the person on whom it is imposed ceased to exist is to be decided on a fair construction of the provisions of a particular act. In re the Central Proviaces and Berar Act. No. XIV of 1938, (1939) F.C.R. 18, The Province of Madras v. Boddu Paidanna and Sons, (1942) F.C.R. 90 and Governor General in Council v. Province of Madras, (1945) L.R. 72 1. A. 91 applied. In view of s. 3 of the repealing Ordinance it could not be said that the purpose of the Ordinance had been exhausted In the present case r. 3(a) of the Coal Production Fund Rules 1944, had no application and the only rules applicable was r. 3 (b). Rule 6 does not say that if the consignee does not pay the consignor is liable to pay and it does not purport to enlarge the statutory liability of the consignor or the consignee, as the case may be. Held, further, that a point of law not taken in the state- ment of case cannot ordinarily be allowed to be urged at the time of hearing of the appeal. JUDGMENT:
CIVIL APPELLATE JURISDIICTION: Civil Appeals Nos. 183, 184
of 1959.
Appeals from the judgment and decree dated September 5,
1954, of the Madhya Pradesh High Court in M.C. case No.
214 of 1954.
A. V. Vinwnatha Sastri and J. B. Dadachanji for the appellant
(in C. A. No. 183 of 1959) and respondent No. 2 (in C. A.
No. 184 of 1959).
B. Sen and I-N. Shroff for the appellant in O.A. No. 184
of 1959) and Respondent No. (In C. A No. 183 of 1959).
C. K. Daphthary, Solicitor-General of Y. Kumar and P. D.
Menon for respondent No. 1. (in both-the appeals).
439
1962. February 27. The Judgment of the Court was delivered
by
SUBBA RAO, J.-These two appeals by certificates are filed
against the judgment and decree of the High Court of Madhya
Pradesh, Jabalpur, by the two defendants in Civil Suit No. 1
of 1957, a suit filed by the Union of India, owing and
representing the Central and Western Railways Adminis-
trations, Now Delhi; against the said defendants for the
recovery of coal cess amounting to Rs. 81-4-0 and costs.
The material facts may be briefly stated. Under Ordinance
No. 39 of 1944, the Central Government was authorised to
levy and collect as a cess on all coal and coke despatched
from collieries in British India a duty of excise at such
rate, not exceeding Rs. 1-4-0 per ton. In exercise of the
power conferred on the Central Government under s. 5 of the
Ordinance, the said Government made rules ; and r. 3
thereof, the duty of excise imposed under the Ordinance on
coal and coke shall, when such coal and coke is despatched
by rail from collieries or coke plants, be collected by the
Railway Administration by means of a surcharge on freight,
and such duty of excise shall be recovered either from the
consignor or the consignee, as the case may be. On January
1, 1947, February 1, 1947 and February 7/9, 1947, the
second defendant, namely the Amalgamated Coal fields,
despatched by rail to the first defendant three consignments
of coal from Junner-Deo to Indore. The freight for the
three consignments was payable at the destination station i.
e. Indore. The first defendant duly paid the freight and
took delivery of the coal but by some mistake the cess
payable as surcharge on the three consignments was not
recovered from the first defendant at the time of delivery
of the goods. Under
440
s. 55(5) of the Indian Railways Act the Railway
Administration can recover the freight or any balance
thereof left unrecovered by way of suit. On April 15, 1953,
the Union of India,, representing the Central and Western
Railways I Administrations, filed Civil Suit No. 126 of 1953
in the Court of the Civil Judge, II Class, at Chhindwara,
for the recovery of the said cess. The High Court withdrew
the case and took it on its own file for trial on the ground
that important questions of interpretation of the Government
of India Act, 1935, and the Constitution were involved, and
it was numbered as Civil Brit No. 1 on 1957. The defendants
inter alia pleaded that the levy was illegal and the suit
was barred by limitation. The High Court held that the suit
was within time under Art. 149 of the Limitation Act and
that the defendants were liable to pay the cess and decreed
the suit. The first defendant filed Civil Appeal No. 183 of
1959 and the second defendant filed Civil Appeal No. 184 of
1959 against the said decree.
At the outset we may take up two of the points, which were
not mentioned in the statement of case, raised by Mr.
Viswanatha Sastri. learned counsel for the appellant in
Civil Appeal No. 183 of 1959. The said points are : (1)
Coal cess is a fee and not a tax or duty and (2) the first
defendant i.e., the consignee, was a non-resident and,
therefore, the Ordinance not having extra-territorial
operation could not reach him. These two contentions do not
find place in the statement of case as they should. Under
Order XVIII r. 2 of the Supreme Court Rules, each party
shall lodge his case within the time prescribed therein,
and, under r. 3 thereof, the said case shall consist of two
parts, and Part II, which is relevant now, says that it
shall set out the propositions of law to be urged in
441
support of the contentions of the party lodging the case.
The object of the statement of case is not only to enlighten
the Court on the questions that would be raised before it,
but also Co enable the opposite party to know before hand
the arguments he would have to meet and to prepare his case
that the statement of case should be complete and full is
also emphasized by the fact that, under the Schedule of
Fees, a decent fee is prescribed to the junior and senior
advocates for preparing the same. But we regret to observe
that sufficient care is not being taken in the preparation
of the statement of case as contemplated by the said Rules.
If the rules should serve the purpose they were intended
for, it is necessary that counsel should, at the time of
preparing the case, read their brief thoroughly, decide for
themselves the questions that will be raised and express
them clearly therein. Any dereliction of this obvious duty
cannot easily be overlooked. This Court, therefore,
ordinarily will not allow counsel at the time of hearing an
appeal to raise questions not disclosed in the statement of
case. There axe no exceptional circumstances in this case
for us to depart from that salutary practice, and we,
therefore., cannot allow the appellant to raise these two
questions before us.
The first question is whether the suit is barred by
limitation. The coal cess should have been collected at the
time of the delivery of the three consignments, namely,
January 9, 1947, February 8, 1947., and February 18, 1947,
respectively. The suit was filed on April 24. 1953, that
is, more than six years from the date of amount was payable.
It is contended that the suit was, therefore, barred ,under
Art, 120 of the Limitation Act. The High Court held the
suit was within time under Art. 149,
442
read with Art. 50, of the Limitation Act. The said
Articles read
———————————————————–
Description of suit
Period Time from which
of limi- period begins to
tation. run.
===========================================================
149.Anysuitby or on Sixty When the period
behalf of the Central years of limitation
Government or any would begin to
State Government run under this
except a suit before Act against a
the Supreme Court like suit by a
in the exercise of its private person.
original Jurisdic–
tion.
50. For the hire of ani- Three When the hire
mals, vehicles, boats years becomes payable.
or house-hold furni-
ture.
120. Suit for which no Six When the right
period of limitation years to sue accrues.
is provided else-
where in this sche-
dule.
———————————————————–
The High Court held that the suit was of the character of a
suit contemplated by Art. 50 and therefore the Central
Government could file the suit within 60 years from the date
the freight became payable. Mr. Sastri contends that a
private person cannot file a suit like the suit filed by the
Central Government to recover a statutory cess and,
therefore, Art. 149 does not avail the Government and that
in the circumstances the suit is governed only by Art. 120
of the Limitation Act, which prescribes a period of six
years from the date the right to sue accrues.
The argument of the- learned counsel appears to be
plausible, but, in our view, has no merits. It
443
mixes up the question of maintainability of the suit with
that of limitation prescribed under the Act. For a. suit
described in Art. 149 a period of limitation of 60 years is
prescribed and the period would begin to run as it would
“against a like suit by a private person”. The article does
not posit that such a suit should have been maintainable at
the instance of a private party: it assumes its
maintainability and, on that basis, refers’ to the
appropriate, article of the Limitation Act for the limited
purpose of ascertaining the starting point of limitation.
The statute of limitation assumes the existence of a cause
of action and does not define it or create one. To state it
differently, if a private party had filed a suit for the
recovery of a statutory duty, what would be the article of
the Limitation Act applicable to such a suit? Article 50,
which prescribes the period of limitation for a suit to
recover the hire of animals, vehicles, boats or household
furniture, cannot obviously apply to a suit for the recovery
of a statutory cess filed at the instance of a private
party. There is no other specific article in the Limitation
Act applicable to such a suit and,. therefore, it would be
governed only by the residuary Article 120. Under the said
article, time runs from the time when the right to sue
accrues. It follows that when such a suit is filed by the
Central Government, the period of limitation of 60 years
should be computed when the right to sue accrues. The right
to sue accrued in the present case when the defendants
refused to pay the cess when demanded. The decisions relied
upon by the learned counsel in support of his contention,
namely, Kirpa Sanker v. Janki Prasad Secretary of State for
India Guru Prasad Dhur Inderchand v. Secretary of State for
India(3) and Government of India v. Taylor (1) have. no
bearing on the question raised in the present case, as none
of those cases related to a suit filed by Government to
recover amount due to it from defendants therein
(1) A.I.R. 1942 Pat. 87.
(3) (1941) 9 I.T.R. 673.
(2) (1893) I.L.R. 20 Cal. 51.
(4) (1955) 27 I.T.R. 356.
444
We, therefore, hold that the suit was clearly well within
time and was not barred by limitation.
The next contention raises the question of validity of the
levy. The argument of the learned counsel may be summarized
thus: Ordinance 39 of 1944 was a temporary Ordinance, and
that it was repealed by Ordinance 6 of 1947; that the saving
clause in the latter Ordinance applying s. 6 of the General
Clauses Act to the repealed Ordinance fell with the expiry
of the repealing Ordinance on January 1, 1947, with the
result that there was no law when the Constitution came
‘into force so as to be continued ‘under Art. 372 thereof
and, therefore, the duty, if any, payable under Ordinance 39
of 1944 could neither be levied nor recovered after the
Constitution came into force, as there was no longer any
authority of law to sustain the said tax within the meaning
of Art. 265 of the Constitution. To appreciate the
contention it would be necessary to read the material parts
of the relevant provisions.
Ordinance 39 of 1944
Section 2. Imposition and Collection of excise and Customs
duties.-
(1) With effect from such date is the
Central Government may, notification in-
the Official Gazette, appoint in this
behalf, there shall be levied and collected as
a cess for the purposes of this Ordinance, on
all coal and coke despatched from collieries
in British India a duty of excise at such
rate, not exceeding one rupee and four annas
per ton, as may from time to time be fixed by
the Central Government by notification in the
Official Gazette.
The Repealing ordinance. Ordinance 6 of
1947.
Section 2. The Coal Production Fund Ordinance
shall be repealed, and for the
445
avoidance of doubts it is hereby declared that
the provisions of Section 6 of the General
Clauses Act, 1897 (X of 1897) shall apply in
respect of such repeal.
General Clauses Act, 1897 (X of 1897).
Section 6. Where this Act, or any Central
Actor Regulation made after the commencement
of this Act, repeals any enactment hitherto,
made or hereafter to be made, then unless a
different intention appears, the repeal shall
not :
(c) affect any right privilege, obligation
or liability acquired, accrued or incurred
under any enactment so repealed.
(e) affect any legal proceedings or remedy
in respect of any such right, privilege,
obligation, liability, penalty, forfeiture or
punishment and any such legal proceedings or
remedy may be instituted, continued or
enforced as if the Regulating Repealing Act or
Regulation had not been passed.
Section 30. In this Act, the expression
Central Act, wherever it occurs shall be
deemed to include an Ordinance made and
promulgated by the Governor-General
Constitution of India
Article 372. (i) 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 immediatel
y
before the commencement of this
446
Constitution shall continue in force therein
Until altered or repealed or amended by a
competent Legislature or other competent
authority.
On August 26, 1944, the Governor-General of India, in
exercise of the powers vested in him under a. 72 of the
Ninth Schedule to the Government of India Act, 1935, read
‘with India & Burma (Emergency Provisions) Act, 1940
promulgated the Coal Production Fund Ordinance 1944 (39 of
1944). to constitute a fund for the financing of activities
for the improvement of production, marketing and distribu-
tion of coal and coke. This Court in Hansrdi Moolji v. The,
State of Bombay(1) held that the deletion of the words “for
the space of not more than six months from its promulgation”
from s. 72 of the 9th Schedule of the Government of India
Act, 1935, by s.1(3) of The India and Burma (Emergency
Provisions) Act, 1940, had the effect of equating Ordinances
which were promulgated between June 27, 1940, and April 1,
1946, with Acts passed by the Indian Legislature without any
limitation of time as regards their duration, and therefore
continuing in force until they were repealed. It follows
from this decision that the Ordinance promulgated on August
26, 1944. was a permanent one and would continue to be in
fore till it was repealed. The second Ordinance, that is
repealing, Ordinance, was promulgated on April 26, 1947, and
the repeal took effect from May 1, 1947. But in express
term it declared that the provisions of s.. 6 of the General
Clauses Act, 1897 (X of 1897) shall apply in respect of the
repeal. Without the said express provision, s.6, read with
s.30, of the General Clauses Act, might have achieved the
said result, but ex abundanti cautela and to place the
matter beyond any controversy. s.6 of the General Clauses
Act was expressly made applicable to the repeal. Under s.6
(1) [1957].S.C.R.,634
447
of General Clauses Act, so far it is material to the present
case, the repeal did not affect the right of the railway to
recover the freight or the liability of the defendants to
pay the same, and the remedy in respect of the said right
and liability. The result was that Ordinance 39 of 1944 and
the rules made thereunder must be held to continue to be in
respect of the said right and liability, accrued or incurred
before the said Ordinance was repealed and the remedies
available thereunder. But the life of the repealing
Ordinance had expired on November 1, 1917. What was the
effect of the expiry of the repealing Ordinance on the said
liability continued after repeal in respect of past
transactions? The repealing Ordinance, being a temporary
one, expired after it fulfilled its purpose. As it had
continued the lift, of the original Ordinance, which was a
permanent one, in respect of past transactions, the expiry
of its life could not have any effect on that law to the
extent saved. The decisions relating to the repeal of a
temporary Ordinance with a saving clause have no bearing in
the present Context, for in that case the repealed
Ordinance, in so far as it was kept alive, could not have a
larger lease of’ life than the repealed and the repealing
Ordinances possessed. If so, it follows that the repealed
Ordinance, to the extent saved, continued to have force
under the Art. 372 of the Constitution until it was altered,
repealed or amended by competent Legislature. It cannot,
therefore, be said that the coal cess was levied or
collected without the authority of’, law.
It is when contended that the excise duty not legally be
levied on the consignee , who had nothing to do with the
manufacture or production of coal. The argument confuses of
the incidence of taxation with the machinery provided for
the collection thereof. The or an excise duty has been
448
considered by the Federal Court and the Privy Council. In
re the Central Provinces and Berar Act No. XIV of 1938(1),
which was a special reference by the Governor-General to the
Federal Court under is. 213 of the Government of India Act,
1935. Gwyer, O.J., described “excise duty” thus:
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.”
In dealing with the contention advanced on behalf of the
Government of India that an excise duty was a duty which may
be imposed on home-produced goods at any stage from
production to consumption, the learned Chief Justice
observed:
“This is to confuse two things the nature of
excise duties and the extent of the federal
legislative power to impose them.”
After referring to Blackstone and Stephen’s Commentaries,
the learned Chief Justice proceeded to state:
“………. a brief examination of those
duties shows that in practically all cases it
is the producer or manufacturer from whom the
duty is collected. But there can be no reason
in theory why an excise duty should not be im.
posed even on the retail sale of an article,
if the taxing Act so provides. 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 find to be the most convenient and
the most lucrative, wherever it may be: but
that is a matter of the machinery of
collection, and does not affect the essential
nature of the tax. The ultimate incidence of
an excise duty, a typical indirect tax, must
(1) [1939] F.C.R. 18, 40, 41, 107.
449
always be on the consumer, who pays as he
consumes or expends : and it continues to be
excise duty, that is, a duty on home-produced
or home-manufactured goods, no matter at what
stage it is collected.”‘
Jayakar, J., made the following pertinent remarks
,,And this, in my opinion, is as it should be,
for if the proper import of an “excise duty”
is that it is a tax on consumption, there is
no reason why the State should not have the
power to levy and collect it at any stage
before consumption, namely, from the time the
commodity is produced or manufactured up to
the time it reaches the consumer.”
The Federal Court again, in The Province of Madras v. Boddu
Paidanna and in the context of a question that arose under
the Madras General Sales Tax Act, 1939, restated the scope
of an excise duty. Therein the learned Chief Justice
observed:
“There is in theory nothing to prevent the
Central Legislature from imposing a duty of
excise on a commodity as soon as it comes into
existence, no matter what happens to it
afterwards, whether it be sold, consumed, des-
troyed, or given away. A taxing authority
will not ordinarily impose such a duty, be-
cause it is much more convenient administra-
tively to collect the duty (as in the case of
most of the Indian Excise Acts) when the
commodity leaves the factory for the first
time, and also because the duty is intended to
be an indirect duty which the manufacturer or
producer is to pass on to the ultimate
consumer, which he could not do if the
commodity had, for example, been destroyed in
the factory itself. It is the fact of
manufacture which
(1) [1942] F.C.R. 90, 101.
450
attracts the duty,, even though it may, be
collected later………..
The Judicial Committee, in Governor-General in Council v.
Province of Madras (1), approved the views expressed by the
Federal Court in regard to excise duties. In that case,
Lord Simonds, speaking for the Board, observed:
“An exhaustive discussion of this subject,
from which their Lordships have obtained
valuable assistance, is to be found in the
judgment of the Federal Court in In re the
Central Provinces Berar Act No. XIV of 1935
(2). Consistently with this decision their
Lordships are of opinion that a duty of excise
is primarily a duty levied on a manufacturer
or producer in respect of the commodity
manufactured or produced. It is a tax on
goods not on sales or the proceeds of sale of
goods. Here, again, their Lordships find
themselves in complete accord with the
reasoning and conclusions of the Federal Court
in the Boddu Paidanna case(3).”
Adverting to the decision of Boddu Paidanna with approval,
Lord Simonds made the following observations in pointing out
the difference between excise tax and sales tax:
“The two taxes, the one levied on a
manufacturer in respect of his goods, the
other on a vendor in respect of his sales,
may, as is there pointed out, in one sense
overlap. But in law there is no overlapping
The taxes are separate and distinct imposts.
If in fact they overlap, that may be because
the taxing authority, imposing a duty of
excise finds it convenient to impose that duty
at the moment when the exciseable article
leaves the
(1) (1945) L.R. 72 I.A. 91, 103. 101
(3) [ 1942] F.C.R. 90. 101 [1939] F.C.R.
18,
451
factory or workshop for the first time on the
occasion of its sale. But that method of
collecting the tax it; an accident of
administration; it is not of the essence of
the duty of, excise, which is attracted by the
manufacture itself.
With great respect, we accept the principles laid down by
the said three decisions in the matter of levy of an excise
duty and the machinery for collection thereof. Excise duty
is primarily a duty on the production or manufacture of
goods produced or manufactured within the country. It in’
an indirect duty which the manufacturer or producer passes
on to the ultimate consumer, that is, its ultimate incidence
will always be on the consumer. Therefore, subject always
to the legislative competence of the taxing authority, the
said tax can be levied at a convenient stage so long as the
character of the impost, that is, it is a duty on the
manufacture or production, is not lost. The, method of
collection does not affect the essence of the duty, but only
relates to the machinery of collection for administrative
convenience. Whether in a particular case the. tax ceases
to be in essence an excise duty, and the rational connection
between the duty and the person on whom it is imposed ceased
to exist, is to be decided on a fair construction of the
provisions of a particular Act.
In this case, a perusal of the provisions of the Ordinance
clearly, demonstrates that the duty imposed is in essence an
excise duty and there is a rational connection between the
said tax and the person on whom it-is imposed. Section 2 of
Ordinance 39 of 1944 clearly shows that the tax is an excise
duty on the manufacture or production, of coal or coke.
Section 5(2) thereof confers in express terms a power on the
Central Government to make rules, Inter alia, to provide for
the manner in which the duties imposed by the Ordinance
shall be collected and the persons who shall be. liable to
pay
452
the duty. Rule 3 of the Rules made by the Central
Government provides for the recovery of excise duty on the
coal produced; under the said rule it would be collected by
the Railway Administration by means of a surcharge on
freight and such duty of excise shall be recovered from the
consignor, if the freight charges are being prepaid, at the
time of consignment or from the consignee, if the freight
charges are collected at the destination of the consignment.
The machinery provided for the collection of the tax is, in
our view, a reasonable one. Having regard to the nature of
the tax, that is, the tax being an indirect one to be borne
ultimately by the consumer, it cannot be said that there is
no rational connection between the tax and the consign.
When the consignor pays., it cannot be denied that it is the
most convenient stage for the collection of the tax, for it
is the first time the coal leaves the possession of the
consignor. The fact that the consignee is made to pay, in
the contingency contemplated by r.3(b) of the rules cannot
affect the essence of the tax, for the consignor, if he had
paid the freight, would have passed it on to the consignee
and instead the consignee himself pays it. The Central
Government was legally competent to evolve a suitable
machinery for collection without disturbing the essence of
the tax or ignoring the rational connection between the tax
and the person on whom it is imposed. We hold that the
machinery evolved under the Rules for collection of the duty
satisfies the said conditions and therefore the exigibility
of the tax at the destination point in the hands of the
consignee cannot legitimately be questioned.
Another facet of the contention of Mr. Sastri is that the
purpose of the Ordinance had worked itself out and,
therefore, the Central Government could no Ionizer levy or
collect the tax. The purpose of the Ordinance was to
constituted a fund
453
for the financing of activities for the improvement of
production, marketing and distribution of coal. Section 3
of the repealing Ordinance provided that the unexpended
balance, if any, at, the credit of the Coal Production Fund
constituted under the aforesaid Ordinance shall be applied
to such purposes connected with the coal industry, as the
Central Government may direct. The validity of this
Ordinance has not been questioned. It, therefore, follows
that the purpose of the Ordinance has not been exhausted,
for under s.3 of the repealing Ordinance, the Central
Government is authorized to apply the Coal Production Fund
to such purposes connected with the coal industry. There
is, therefore, no force in this argument.
The last contention is raised by the appellant in Civil
Appeal No. 184 of 1959. The High Court held him also liable
for the payment of the cess on the ground that he was the
person who entered into contract with the Railway
Administration for the carriage of the goods and that the
collection of freight was in respect of his goods and that
he was the main contracting party. The was given against
him on the basin that he was under a contractual obligation
to pay the amount. Mr. Son, appearing for this appellant,
contends that the consignments were on F.O.R. basis and that
under the statutory rules only the consignee is liable and
that the High Court was wrong in giving, a decree against
him As we have already pointed out earlier, under r.3 of the
Coal Production Fund Rules, 1914, the Railway Administration
is empowered only to collect the cess by means of a
surcharge on freight from, (a) the consignor, if the freight
charges are being prepaid at the time of consignment, and
(b) from the consignee, if the freight charges are collected
at the destination of the consignment. In the present case,
r.3(a) has no application, for the freight charges were not
prepaid at the time of
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consignment, and therefore the only rule applicable where
under the Railway Administration earn seek to recover the
cess is r.3(b) i.e., the consignee. has to pay it. The rule
does not empower the Railway Administration to recover the
tax, in the circumstance of the cast,, from the consignor.
Learned Solicitor General seeks to sustain the decree of the
High Court on the basis of r.6, which reads :
“Refunds and Recoveries :-(1) Where the
amount of excise duty due under these rules
has not been collected either wholly or in
part or where the amount collected is in
excess of the amount due, the Railway
Administration shall deal with the under
charges or overcharges, as the case may be, on
the same principles as apply to undercharges
and overcharges in regard to Railway freight
charges.”
It is suggested that, under this rule in the case of an
undercharge, the Railway Administration can collect the
deficit either from the consignor on consignee. The rule
does not say that if the consignee does not pay the
consignor is,, liable to pay. The rule does not purport to
enlarge the statutory liability of the consignor of the
consignee, as the case may be and, therefore, it must be
understood to provide only for the recovery of undercharges
from persons statutorily’ liable to pay in accordance with
the principles governing the railway freight charges ca.
In the result, Civil Appeal No. 183 of 1959 is dismissed
with costs of the first respondent, and Civil Appeal No. 184
of 1959 is allowed with costs to be paid by the first
respondent.
C. A. 183 of 1959 dismissed.
C. A. 184 of 1.959 allowed.
455