JWALA PRASAD MISRA Vs. UNION OF INDIA UOI

JUDGEMENT

(1.) This criminal revision application is directed against orders passed by Sri H. K. Das Tondon Second Class Magistrate of Farni-khabad, refusing to "drop a case pending again1 the applicants Under Section 9 of the Central Excises and Salt Act.

(2.) It appears that the two petitioners maintain warehouses licensed by the central excise authorities under the provisions of the, Central Excises and Salt Act for the storage of tobacco; and the prosecution allegations are at when these warehouses were inspected by the authorities in the first week of February 1959, only 198 bags could be found on the non. duty paid premises as against 278 bags which should have been in stocky while on the duty-paid premises 14 bags and some loose tobacco were found instead of 7 bags and one drum. The total amount'" of duty of which the petitioners are said to have defrauded the Government comes to Rs. 24,000/-.

(3.) The main contention of the applicants, is that no excise duty could legally be recovered from them because they are not producers or manufacturers. This argument is based on the ing remarks made by Gwyer, C. J,, in Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, (1938) In the matter of A.I.R. 1939 FC 1: In my opinion the power to make laws with respect to duties of excise given by the Constitution Act to the Federal Legislature is to be construed as a power to impose duties of excise upon the manufacturer or producer of the excisable articles, or at least at the stage of or in connection with, manufacture or production, and that extends no further.'' The case in question related to the constitutionality of a tax imposed by the Government of the Central Provinces and Berar on retail sales of motor spirit and lubricants, the contention of the Government of, India being that this tax was in effect an excise, duty and that by imposing it the. Provincial Government was encroaching on the federal field, "duties of excise on tobacco and other goods manufactured or produced in India" being reserved for the Federal Legislature by entry (45) in the Federal Legislative List set forth in Schedule 7 of the Constitution Act. The Federal Court held that the Act was not ultra vires the Provincial Legislature, Gwyer, C.J., defining the separate federal aodi provincial spheres in the following manner: The Central Legislature will have the power to impose duties on excisable articles before they become part of the general stock of the Province, that is to say at the stage of manufacture or production, and the Provincial Legislature an exclusive power to impose a tax on sales thereafter. It is to be noted, however, that in this same ruling it has been conceded that 'excise duty is not necessarily confined to the stage of production or manufacture of the goods. Gwyer, C.J.. observes: 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 imposed even on the retail sale of an article, if the taxing Act so provides. Subject always 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. The specific point decided by this ruling is that the Central Government cannot levy a tax On the retail sale of goods in the guise of excise duty. It cannot be treated as authority for the proposition that excise duty cannot be lived at stages in the distribution of goods earlier than retail sales. Indeed Jayakar, J., in the same case has expressed an opinion that runs counter to the view taken by Gwyer, C.J., on which the applicants rely. His analysis of the legal position is: