Union of India Vs. State of Mysore
[1976] INSC 251 (19 October 1976)
SHINGAL, P.N.
SHINGAL, P.N.
RAY, A.N. (CJ) BEG, M. HAMEEDULLAH
CITATION: 1977 AIR 127 1977 SCR (1) 842 1976
SCC (4) 531
CITATOR INFO :
1984 SC1675 (8,9)
ACT:
Constitution of India--Article 131--Disputes
between State and Union-Jurisdiction of High Court---Charge of Excise
Duty---Condition of--Whether an article manufactured or produced before the
levy is imposed is excisable.
HEADNOTE:
The respondent State of Mysore runs an implements
Factory. The first schedule to the Central Excises and Salt Act, 1944, was
amended whereby item No. 26AA was inserted by Finance Act, 1962. On the date
when the said amendment came into force the respondent had in his stock, certain
iron rods and bars. After the amendment, however, the rods and bars were put
through a further manufacturing process and were converted into shovels, spades
and other agricultural implements which were not covered by schedule 1. The
Central Excise Inspector issued a demand notice in respect of the said rods and
the bars on the ground that they were excisable. The respondent contended that
no excise duty was payable on the said articles because when the amendment came
into force, they were already in the stock of the respondent and that they were
not manufactured after the amendment came into force. The contention of the
respondent was negatived by the authorities under the Act. The Writ Petition
filed by the respondent under Article 226, was allowed.
Dismissing the appeal by Special Leave,
HELD: 1. Under Section 3 of the Act the
excise duty is payable on articles produced or manufactured. It was admitted in
the counter affidavit of the appellant that the rods and bars were not produced
or manufactured in the implements factory of the respondent. The goods which
were made out of the rods and bars were admittedly not excisable goods. The
appeal was dismissed as the goods were not liable to excise duty. [844 E-H]
2. The contention that the High Court could
not have decided the matter in view of the provisions of Article 131 of the
Constitution was negatived on the ground that there was nothing on regard to
show that there was any dispute between the Central and the State Governments.
The Union of India was made a party merely because it had dismissed the
revision application of the State Government. [845 A-B]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1695 of 1968.
Appeal by Special Leave from the Judgment and
Order dated 4/5-9-67 of the Mysore High Court in W.P. No. 1416/65.
V.P. Raman, Addl. Sol. Genl., S.K. Mehta and
Girish Chandra for the Appellant.
H.R. Datar and N. Nettar, for the Respondent.
The Judgment of the Court was delivered by
SHINGHAL, J.--This appeal by special leave is directed against the judgment of
the High Court of Mysore dated September 4/5, 1967. The High Court was moved by
the State of Mysore under article 226 of the Constitution for quashing the
demand notice dated July 21, 843 1962 issued by the Inspector of Central Excise
for the payment of Rs. 2,465.91 as excise duty on the products despatched by
the State's Implements Factory. The demand was made with reference to the newly
inserted item 26AA in the First Schedule to the Central Excises and Salt Act, 1944,
hereinafter referred to as the Act. That item was added to the Schedule by the
Finance Act of 1962, and it was claimed by the Central Excise Department that,
on the date of the amendment, the State Government was in possession of some
stock of iron and steel products, namely, flats, squares and rods in its
factory, which had been obtained from their manufacturers when they were not
excisable articles. The precise claim of the Excise authorities was that the
duty became payable on those articles by virtue of the newly inserted item 26AA
because the aforesaid stock of iron and steel products was used for the
manufacture of agricultural implements like 'mamties, pickaxes, 'sledge
hammers, shovels and ploughs. The Assistant Collector of Central .Excise
explained in his letter dated June 19, 1962, that the agricultural implements
which were manufactured in the State's Implements Factory fell within the
purview of item 26AA as they were forged or extruded during the process of
manufacturing the agricultural implements. It was contended that the demand was
justified because the aforesaid iron and 'steel products, out of which the
agricultural implements were manufactured, had not borne any excise duty at
all. An appeal was preferred to the Collector of Central Excise against the
demand, but without success. A revision was taken to the Central Government
under the provisions of the Act, but it was also dismissed. That was why the
State Government applied to the High Court for quashing the demand and for
setting aside the appellate order of the Collector and the revisional order of
the Central Government.
The Central Government traversed the claim of
the State Government on the ground that as the rods and bars, which were held
in stock by the State's Implements Factory, were "pre-excise stock",
and as they were put to further process by forging them into shovels, spades
and other agricultural implements, they became liable to duty . until the
"preexcise stock" held by the factory on April 24, 1962, was utilised
and converted into forged implements and was cleared from the factory. It was
also urged that the petition was not maintainable in the High Court as it
raised a dispute between the Government of India and the State Government
within the meaning of article 131 of the Constitution.
The High Court rejected both the contentions
of the Central Government and quashed the impugned demand notice and the
appellate and the revisional orders. That is why the Union of India has
preferred the present appeal.
It is not in controversy that the claim for
the levy of excise duty was based on sub-sections (1) and (1A) of section 3 of
the Act which read as follows,-"3(1) There shall be levied and collected
in such manner as may be prescribed duties of excise on all excisable goods
other than salt which are produced 4---1338SCI/76 844 or manufactured in India
and a duty on salt manufactured in, or imported by land into, any part of India
as, and at the rates, set forth in the First Schedule.
(1A) The provisions of sub-section (i) shall
apply in respect of all excisable goods other than salt which are produced or
manufactured in India by, or on behalf of, Government, as they apply in respect
of good's which are not produced or manufactured by Government." It is
therefore quite clear, and is not in dispute before us, that the claim for the
levy of excise duty in question could be justified only if it could be shown
that excisable goods (other than salt) were produced or manufactured in the
Implements Factory of the State Government. It was however admitted in the
counter-affidavit of the Senior Superintendent of Central Excise as follows,-"In
the case of the petitioner, since the rods and bars held in stock by the Implements.
Factory were pre-excise stock and since those rods and bars were put to further
process by forging the same into shovels, spades and other agricultural
implements etc., they became liable to duty and therefore, duty was demanded on
such forged articles during the period that is till such quantities of the bars
and rods as were in stock with the factory on 24-4-62 were utilised and
converted into forged implements and cleared from the factory." This makes
it quite clear that the rods and bars in question were not "produced or
manufactured" in the State Government's implements Factory. They could not
therefore be subjected to the levy of excise duty. It is true that the rods and
bars were utilised for the manufacture of agricultural implements like shovels
and spades; but those agricultural implements were not of the description
specified in item 26AA of the First Schedule with reference to section 3 of the
Act.
It is admitted by Mr. Raman that agricultural
implements were not included in the First Schedule to the Act and were not
excisable articles. This appears to be so because they are the basic tools of
trade by which a vast majority of the citizens of the country earn their
livelihood. There could therefore be no question of levying any excise duty on
shovels and spades or other agricultural instruments 'manufactured by the
Implements Factory of the State Government and, as has been shown, the rods and
bars which formed the pre-excise stock of the factory had not been manufactured
by the Implements Factory. Section 3 of the Act could not therefore be invoked
to levy excise duty merely on the ground that the "pre-excise stock"
of rods and bars was utilised for the purpose of manufacturing agricultural
instruments. There is therefore nothing wrong with the view which has prevailed
with the High Court in this respect.
845 Mr. Raman tried to argue that the High
Court erred in not applying article 131 of the Constitution to the controversy
even though the writ petition was barred there under as it fell exclusively
within the jurisdiction of this Court under article 131 of the Constitution as
a dispute between the Government of India and the State of Mysore. The argument
is however futile because there is nothing on the record to show that there was
any such dispute between the Central and the State Governments. As the High
Court has pointed out, the Union of India was made a party to the writ petition
merely because it had dismissed the revision application of the State
Government.
There is thus no merit in this appeal anti it
is dismissed with costs.
M.R. Appeal dismissed.
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