9 of 1957
Petition under Article 32 of the Constitution of India for enforcement of fundamental rights
B D Sharma for the petitioner
C K Daphtary Solicitar General of India R H Dhebar and T M Sen for the respondents
December 2
The Judgment of the Court was delivered by KAPUR J
The petitioner was a wholesale and retail dealer in tobacco at Banaras and also owned a private bonded warehouse for tobacco and held licences for the same
In this petition he challenges the legality of certain orders passed by the Collector of Excise Allahabad which on appeal were confirmed and revisions against those orders were dismissed by the Central Government
The petitioner s warehouse was checked by Inspector Das who on finding some irregularity sealed the warehouse on December 8 1953 and subsequently took possession of all the registers and stock cards
On December221953 11 12 bags of kandi ie  stems of tobacco 
which were found in the petitioner s warehouse were removed from the warehouse by the Inspector and stored in some other 364 place
Against those orders the petitioner made certain representations to the Collector and some correspondence passed
On June 15 1954 the Collector Central Excise issued a notice to the petitioner to show cause why a penalty should not be imposed on him for the contravention of Rules 151Cand 226 of the Central Excise Rules 1944 and why the bags of kandi should not be confiscatted
The petitioner showed cause the Collector heard the petitioner who had also filed written arguments
Finding the charges against the petitioner proved the Collector ordered confiscation of the bags of kandi imposed a fine of Rs 150 and the duty leviable thereon in lieu of confiscation
He further imposed a penalty of Rs 2000 under rr
151C and 226 of the Central Excise Rules
The appeal taken to the Central Board of Revenue was dismissed as the petitioner refused to deposit the penalty of Rs 2000 and a revision to the Central Board of Revenue was also dismissed for the same reason
This is one of the orders which is challenged by the petitioner
On July 29 1954 the Collector called upon the petitioner to produce another surety as the previous surety Mohammad Satar was not prepared to act as such
The petitioner states that he thereupon furnished two bonds in Form B 4 and B 5 for Rs 7000 and Rs 10000 respectively
As there was a sum of Rs 15 263 8 0 due from him the petitioner as Excise duty 373 Mds
of tobaco were attached by the Excise Department and sold by auction for Rs 6878 5 0 thus leaving a balance of Rs 8385 3 0
As the Department made demands for the recovery of this balance of duty the petitioner filed a civil suit in the court of the First Additional Civil Judge Banaras who issued an ad interim injunction against the Department restraining it to recover the amount
On January 25 1956 the Superintendent of Excise called upon the petitioner to deposit a cash security of Rs 10000 otherwise his licence would be treated as cancelled under r 1811 of the Central Excise Rules
The petitioner demurred to this and as the outstanding amount of excise duty was not paid the Deputy 365 Collector ordered on February 13 1956 that till the deposit was made the petitioner s licence shall remain inoperative
The petitioner took an appeal against this order to the Central Board of Revenue which was dissmissed
The petitioner also filed a petition under article 226 in the Punjab High Court which was also dismissed and a revision against the order of the Deputy Collector making the licence inoperative was dismissed by the Central Board of Revenue on December 20 1956
This is the second order which is challenged
The present petition was filed on January 21 1957 in which the petitioner prayed 1 that the provisions of sections 6 8 9 and 10 of the of 1944 which for the sake of convenience will hereinafter be termed the Act and the rr
140 to 148 150 171 to 181 215 and 226 of the Central Excise Rules made under the Act be declared ultra vires and to issue a writ of certiorari or any other writ to quash the orders passed by the Collector as confirmed on appeal and revision by the Central Board of Revenue and the Central Government respectively
These orders have already been referred to
2 For a writ of mandamus directing the respondents not to interfere with the fundamental right of the petitioner to carry on trade in tobacco or to store tobacco 3 directing the respondents to return the goods confiscated by them
For the petitioner three points were raised 1 that sections 6 and 8 of the Act and the Rules made thereunder were beyond the legislative competence of the Central legislature under the Constitution Act of 1935 2 even if they were within the legislative competence they impose excessive and unreasonable restraint on the fundamental right of the petitioner to trade in tobacco and they were not in the interest of the general public and therefore were not saved by article 196 3 orders passed were ultra vires the Act and the Rules made thereunder
Before we proceed to consider the arguments raised on behalf of the petitioner it is necessary to examine 47 366 the scheme of the Act
Its scope as given in the preamble is to consolidate and amend the law relating to central duties of excise on goods manufactured or produced in British India and to salt Section 2 of the Act gives the definitions
Chapter 11 provides for levy and collection of duty
The two main sections ie 6 and 8 fall under this Chapter
Section 6 provides for certain operations to be subject to licences and when quoted it runs as follows section 6  The Central Government may by notification in the official Gazette provide that from such date as may be specified in the notification no person shall except under the authority and in accordance with the terms and conditions of a licence granted under this Act engage in a the production or manufacture or any process of the production or manufacture of any specified excisable goods or of saltpetre or of any specified component parts or ingredients of such goods or of specified containers of such goods or b the wholesale purchase or sale whether on his own account or as a broker or commission agent or the storage of any excisable goods specified in this behalf in part A of the Second Schedule
 Section 8 imposes restriction on possession of excisable goods
It is as follows From such date as may be specified in this behalf by the Central Government by notification in the official Gazette no person shall except as provided by rules made under this Act have in his possession any excisable goods specified in this behalf in Part B of the Second Schedule in excess of such quantity as may be prescribed for the purpose of this section as the maximum amount of such goods or of any variety of such goods which may be possessed at any one time by such a person
 Section 9 deals with offences and penalties
Section 10 gives to the court the power to order forfeiture
Section 11 makes provision for recovery of duties due to 367 Government
Chapter VI deals with adjudication of confiscation and penalties specifying the powers of the Collector of Central Excise and appeals against such orders and revision to the Central Government
Chapter VII contains supplementary provisions section 37 therein empowers the Central Government to make rules and in the Schedule the rates or duties leviable on each class of goods are given and tobacco falls in item 9
The question is as to whether the Act falls within item No 45 of List 1 read with section 100 of the Government of India Act
It was contended on behalf of the petitioner that even though the imposition of excise duties may fall under item No 45 of List 1 of the Constitution Act it is a serious encroachment on the territory covered by items 27 and 29 of List 11 of that Act
The argument raised was that although the Act imposes duty of excise within item 45 of List 1 and that was one of its objects it also regulates trade or commerce and therefore falls within the above mentioned items of List 11 and would to that extent be ultra vires
It was contended that the pith and substance of a statute may cover two fields and in support re lied upon the following observation of Mahajan CJ in Cooverjee B Bharucha vs The Excise Commissioner and The Chief Commissioner Ajmer  Ors
1  The pith and substance of the regulation is that it raises excise revenue by imposing duties on liquor and intoxicating drugs by different methods and it also regulates the import export transport manufacture sale and possession of intoxicating liquors
 But that case did not raise the question of legislative competence  the point for decision was whether the statute there impugned infringed the right to carry on trade in liquor and also whether the auction money was a fee or a tax
It was in that connection that the observation above quoted was made
It was also argued that if the purpose and object of the Act is levying of duty of excise then it could not provide for regulation of trade and reliance was 1   877 882
368 placed on King vs Barger 1 where by a majority it was held that the question in substance was not an exercise of the power of taxation and if it was the statute would be invalid as being in contravention of section 55 of the Constitution Act of Australia
The minority however was of the opinion that the reserved powers of the States are those which remain after full effect was given to the powers granted to the Commonwealth
In support of the argument that the Act did not only relate to levying of excise duties but also regulated trade reference was made to rr
174 to 182 of the Central Excise Rules which relate to licensing
Particular reliance was placed on r 1762 imposing a licence fee which in the case of tobacco is as much as Rs  100
Reference was also made to r 181 which deals with revocation and suspension of licences and empowers the Licensing Department to revoke or suspend a licence under certain circumstances
The rule is as follows R 181  1 Any licence granted under
these Rules may be revoked or suspended by the licensing authority if the holder or any person in his employ is found to have committed a breach of the conditions thereof or any of the provisions of the Act or these Rules or has been convicted of an offence under section 161 read with section 109 or with section 116 of the Indian Penal Code
2     3    
Counsel then drew our attention to r 182 which relates to matches Only but which places limitation on the issue of licences for the manufacture of matches
The next set of Rules which were relied upon were rr 140 to 148 in regard to warehousing and then our attention was drawn to rr
210 to 215 relating to penalties confiscation and appeals
In regard to the latter set of Rules it was submitted that they laid down no procedure and did not make any provision for issuing of notice to licensees or hearing them or their witnesses before imposing penalties
From all this 1  369 the conclusion which counsel wished us to draw was that the Act read with Rules shows that the pith and substance is not merely levying an excise duty but the possession of and trade in tobacco was also regulated and therefore the subject matter of the Act did not fall exclusively in the legislative field covered by List 1 but it trenched upon the provincial field of legislation and must be held to fall under List 11 also
In every case where the legislative competence of a legislature in regard to a particular enactment is challenged with reference to the entries in the various lists it is necessary to examine the pith and substance of the Act and if the matter comes substantially within an item in the Central List it is not deemed to come within an entry in the Provincial list even though the classes of subjects looked at singly overlap in many respects
It is within the competence of the Central legislature to provide for matters which may otherwise fall within the competence of the Provincial legislature if they are necessarily incidental to effective legislation by the Central legislature on a subject of legislation expressly within its power
Attorney General for Canada vs Attorney General  for British Columbia 1 Attorney General for Canada vs Attorney General for Quebec 2
In Gallagher vs Lynn 3 it was held that if the true nature and character of an Act is to protect the health of the inhabitants then even though it may incidentally affect trade it is not enacted  in respect of  trade
Moreover it is a fundamental principle of constitutional law that everything necessary to the exercise of a power is included in the grant of the power
Edward Mills Co Ltd vs The State of Ajmer 4
The item which falls for consideration in the present case is No 45 of List 1 which is as follows  Duties of excise on tobacco and other good manufactured or produced in India except a alcoholic liquors for human consumption b opium Indian hemp and other narcotic drugs and narcotics non narcotic drugs 1  118
2  43
3 4   749 370 c medical and toilet preparations containing alcohol or any substance included in sub paragraph b of this entry
 The other items which have to be considered are items Nos 27 29 and 31 of List 11 which are as follows  Item 27
Trade and commerce within the Province  markets and fairs money lending and money lenders
 Item 29 Production supply and distribution of goods development of industries subject to the provisions in List 1 with respect to the development of certain industries under Federal control
 The question for decision is whether the Act in question is a law with respect to the matters enumerated in item 45 of List 1 or to the matters enumerated in item 27 and 29 of List 11
In other words does it in pith and substance relate to duties of excise on tobacco as contained in item 45 or it falls within the boundaries of items 27 and 29 of the provincial list and if it falls within the former is its validity affected by its incidental trespass into the territory reserved for provincial legislation
In the interpretation of the scope of these items the widest possible amplitude must be given to the words used and each general word must be held to extend to ancillary or subsidiary matters which can fairly be said to be comprehended in it
United Provinces vs
Atiqa Begum  Ors
1 Navinchandra Mafatlal vs
The Commissioner of Incometax 2 The State of Madras vs Gannon Dunkerley  Co 5
In Subramanyan Chettiar vs Muthuswamy Goundan 4 Sir Maurice Gwyer CJ dealing with items in the Lists observed  It must inevitably happen from time to time that legislation though purporting to deal with a subject in one list touches also on a subject in another list and the different provisions of the enactment may be so closely intertwined that blind adherence to a strictly verbal interpretation would result in a large number of statutes being declared invalid because 1 2 1955 1 SCR 829 833 836
3   391 393
4  201
371 the Legislature enacting them may appear to have legislated in a forbidden sphere
 We agree as did the Privy Council in Prafulla Kumar Mukherjee and Ors
vs Bank of Commerce Ltd 1 and this Court did in State of Rajasihan vs G Chawla 2 that this passage correctly describes the ground on which the rule is founded and in our opinion it is a correct method of interpreting the words of the various items in the Lists read with section 100 of the Constitution Act
Hidayatullah J in State of Rajasthan vs G Chawla2 said at p 546   It is equally well settled that the power to legislate on a topic of legislation carries with it the power to legislate on an ancillary matter which can be said to be reasonably included in the power given
 We now proceed to determine the true nature and character or the pith and substance of the Act
It is a fiscal measure to levy and realise duty on tobacco
The method of realising duty must be left to the wisdom of the legislature taking each individual trade and its peculiarities and difficulties which arise in that matter
Various provisions of the Act and the Rules show that the authorities are on the track of the movement of tobacco from the time it is grown to the time it is manufactured and sold in the market and the various provisions of the Act and the Rules made thereunder have been considered necessary for effectuating the purpose of the Act
Rules made under the Act also are directed for achieving the same objective
Chapter IV in the Rules deals with unmanufactured products
Rule 15 therein requires the growers to make a declaration in respect of all land upon which tobacco is to be grown
Rule 17 which requires curing to be done on the declared and approved premises is also a step in the same direction
Under Rule 18 a security can be demanded from a grower and curer Rules 19 20 and 21 deal with liability to duty exemption from duty of certain kinds of tobacco for personal use books to be kept by growers and curers and the 1 1947 LR 74 IA 23 41
2  372 manner of keeping the entries in the books
Rule 31 deals with transport of tobacco from thegrower to the premises of a curer and from the premises of a curer to a public or a private warehouse
Chapter V of the rules deals with manufactured tobacco and how that is to be kept in warehouses
Similarly at every stage whether the tobacco is in unmanufactured stage or manufactured stage provisions have been made in the Rules to keep a watch over the movement of tobacco
All these Rules show that the object of the Act is to make collection of excise duties on tobacco effective and the levying of fees is only a collection of money for the upkeep of supervision over the movement of tobacco for the purpose of excise duty
The system of licensing of bonded warehouses was always considered to be a part of effective control of evasion of tax in England and Parliament must be deemed to have contemplated the inclusion of this power
Besides the levying of licence fees is itself a form of taxation
Cooverji B Bharucha vs The Excise Commissioner of Ajmer 1 and would in this case be within the legislative competence of the Central legislature whose powers of taxation should not be restricted so as to exclude the raising of revenue by imposing licensing fees
In the State of Madras vs Gannon Dunkerley  Co 2 the following passage from the Broken Hill South Ltd vs Commmissioner of Taxation NS W 3  In any investigation of the constitutional powers of these great Dominion legislatures it is not proper that a Court should deny to such a legislature the right of solving taxation problems unfettered by a priori legal categories which often derive from the exercise of legislative power in the same constitutional writ  was quoted with approval by Venkatarama Aiyar J and if it is only a fee its constitutionality cannot be challenged because of item 69 relating to fees on matters in List 1
Counsel for the petitioner relied upon r 181
This rule may have an indirect effect of depriving an owner of a bonded warehouse from the 1   877 822
2   391 393
3   379
373 privilege of keeping such a warehouse but that does not mean that the object and purpose of the Act is not imposition collection and realisation of duty of excise
This rule is a means of making the realisation of duty effective and necessarily incidental to effectual legislation for collection of duties
Attorney General for Canada vs Attorney General for British Columbia 1
Looking at the scheme of the Act its object and purpose its true nature and character and the pith and substance the conclusion is inevitable that the Act was within the legislative competence of the Central legislature and although there may be certain matters otherwise within the legislative competence of the provincial legislature they are necessarily incidental to effective legislation by the Central legislature
The various provisions of the Act and the Rules made thereunder were in our opinion essentially connected with the levying  collection of excise duty and in its true nature and character the Act remains one that falls under item 45 of List 1 and the incidental trenching upon the provincial field of items 27 or 29 would not affect its constitutionality because the extent of invasion of the provincial field may be a circumstance to determine the true pith and substance but once that question is determined the Act in our opinion would fall on the side of Central field and not that of the provincial field
Prafulla Kumar Mukherjee vs Bank of Commerce Ltd 
It was then contended that the restrictions imposed were unreasonable and therefore not saved by article 196
The basis of this argument was that there is no procedure laid down in the provisions for levying penalties nor any provision made for notice or the taking of evidence and power of confiscation was given to persons who could not be termed unbiased
If the tribunal is to act judicially it must confirm to the principles of natural justice of audi alteram partem and there is no dispute that in the instant case there was no breach of this rule
Not only this there is a right of appeal and a revision is also provided and both these remedies the petitioner availed himself of
The 1  118 48 2 1947 LR 74 IA 23 41 374 argument of unreasonable restriction because of this ground must also fail
Lastly it was contended that the two main orders passed were ultra vires because in the first case the petitioner was asked to deposit the penalty before his appeal or revision could be heard and reliance was placed on Himmatlal Harilal Mehta vs The State of Madhya Pradesh 1
But it is difficult to see how that case applies
There was no illegal imposition on the petitioner nor is it shown that anything was threatened to be realised without the authority of law
In regard to the second order Mohammad Satar had ceased to be the petitioner s surety and therefore in terms of the proviso to r 140 of the Excise Rules which was as follows   Provided that in the event of death insolvency or inefficiency of the surety or where the amount of the bond is inadequate the collector may in his discretion demand a fresh bond and may if the security furnished for a bond is not adequate demand additional security The Collector was acting within his powers if he asked for the deposit of cash security of Rs 10000
This is not a matter with which we can in the circumstances of this case  interfere
It was also urged that the orders passed were mala fide but no such allegation was made in the petition nor is it shown as to why the orders are mala fide
In our opinion this petition is without substance and is therefore dismissed with costs
Petition dismissed


Summary:
In a suit for partition of the joint family properties filed by the respondent against his brother and his sons appellants 1 to 5 respectively the latter while admitting the relationship of the respondent and his half share to the family properties pleaded inter alia that the court had no jurisdiction to divide the immoveable properties situated in Burma and in the Indian State of Pudukottai
The trial court passed a preliminary decree excluding from its operation the aforesaid immoveable properties
Against the preliminary decree appeals were preferred before the High Court by the several parties on various grounds but in his appeal the respondent did not challenge the finding of the trial court that it had no jurisdiction to deal with foreign immoveable properties
During the pendency of the appeals on the joint application made by the parties the trial court made an order referring for determination by the two arbitrators named by them  all the matters in dispute in the suit and all matters and proceedings connected therewith 
In due course the arbitrators gave an award which was then filed in the trial court
As regards immoveable properties in Pudukottai the award recited that since the parties had separated and the properties in suit before the arbitrators had been actually divided by metes and bounds the two branches shall enjoy the Pudukottai properties in equal halves while with reference to the properties in Burma the arbitrators asked the parties to hold the documents of title half and half for safe custody and added that when the parties decided to divide the properties all the documents would have to be 27 210 brought together and a partition made according to law
The appellant challenged the validity of the award on the grounds inter alia 1 that the reference and the award dealt with immoveable properties in Burma and Pudukottai and so they were invalid and 2 that the trial court was not competent to make the order of reference under section 21 of the Indian 
Held 1 that the reference and the award could not be challenged on the ground that they purported to deal with foreign immoveable properties because a at the time when the matters in dispute were referred to arbitration it was on the basis of the finding of the trial court that the court had no jurisdiction to deal with foreign immoveable properties and b the award did not divide the said properties or declare their shares in them but merely recited the fact that the parties having become divided and accepted a half share in each of the branches they would hold and enjoy the properties half and half
There is a distinction between a mere recital of a fact and something which in itself creates a title
Bageshwari Charan Singh vs Jagarnath Kuari 1932 LR 53 IA 130 relied on
2 that the words  suit  and  court  in section 20 of the Indian  include appellate court proceedings and appellate court respectively
Abani Bhusan Chakravarthy and Others vs Hem Chandra Chakravarthy and Others  disapproved
Thakur Prasad vs Baleshwar Ahir and Others AIR 1954 Pat 106 Moradhwaj vs Bhudar Das AIR 1955 All 353 and Subramannaya Bhatta vs Devadas Nayak and Others AIR 1955 Mad 693 approved
3that the word  judgment  in section 21 of the Act means a judgmentwhich finally decides all matters in controversy in the suit and does not refer to the various interlocutory orders and judgments that may be passed during the hearing of the suit
4 that a judgment delivered by a court in a partition suit which is followed by a preliminary decree is not a final judgment in the suit and that a court after a preliminary decree has been passed has jurisdiction to make an order of reference under section 21 of the Act
Jadu Nath Roy and Others vs Paramesway Mullick and Others 1939 LR 67 IA 11 relied on
5 that where a preliminary decree has been drawn up and an appeal has been filed against it both the trial court and the appellate court are possessed of the matters in dispute in part and it would be open to either court to make an order of reference in respect of all the matters in dispute between the 211 parties that as in the present case proceedings subsequent to the preliminary decree were pending before the trial court the latter was competent to act under section 21 of the Act