ivil Appeal No 500 of 1985
From the Judgment and Order dated 2571984 of the Customs Excise and Gold Control Appellate Tribunal New Delhi in Appeal No 92381 A in Order No 55984 A Soli J Sorabjee AN Haksar Sanjay Grover and KJ John for the Appellant
G Ramaswamy Additional Solicitor General Mrs Indira Sawhney Miss A Subhashini and Mrs Sushma Suri for the Respondent
The Judgment of the Court was delivered by OZA J
This appeal involves the determination of the only question as to whether the appellant is entitled to refund of Rs224200209 paid as excise duty on the price of packing material used for packing of superfine cement which according to the appellant was paid under protest whereas according to the respondent it was not 717 paid under protest and therefore the claim of refund is barred by time
The brief facts necessary for determination are
The appellant company is a manufacturer of superfine cement
The company preferred the claim for refund of Rs224300209 alleged to be duty on price of packing material of the aforesaid product paid during July 4 1974 to March 1 1975
This claim of refund was rejected by Assistant Collector of Central Excise Tirunelveli on the ground that Rule 11 of the Central Excise Rules 1944 was applicable as duty was not paid under protest and the claim was barred by time
On appeal the Appellate Collector of Custom and Central Excise by the judgment dated February 7 1981 maintained the order passed by the Assistant Collector on the same ground of limitation as the merits of the claim was not disputed by the department
This is clear from the following observa tions in the Appellate Collector s order They based their claim on the Trade Notice No 23279 dated 291079 of Madras Collector ate declaring that the said cement is not the variety of cement requiting packing to prevent deterioration and the cost of packing of such cement is not liable to be included in the assessable value
The ground on which the claim was made are not disputed in this ap peal
 Thereafter the appellant unsuccessful ly approached the Customs Excise and Gold Control Appellate Tribunal
Before the Tribunal also only the question of limitation was put against the appellant
The Tribunal by its order dated July 25 1984 has stated Before us the only question argued was the question of limitation
It was urged that the letter dated 11674 amounted to a protest so that the period of limitation prescribed in Rule 11 of the Rules ceased to be applicable
 The Tribunal also took the view that the letter dated June 11 1974 was not a protest to save the period of limi tation
Hence this appeal
718 We heard learned counsel for parties
It is not in dispute that the duty was paid for the period from July 4 1974 to March 1 1975
If it was paid under protest the orders of the authorities cannot be sustained
It is there fore necessary to refer to the contents of the letter dated June 11 1974
The letter raised many objections against the levy of packing charges
It was stated that the duty on packing charges on superfine cement was not leviable
The appellant finally said If the department feels that the duty is leviable on packing charges we have no op tion but to suggest the rates fixed by the Government of India from quarter to quarter as packing charges
 The counsel also referred to us the decision of the Central Government in the case of Birla Cement Works where a similar claim was allowed by order dated December 31 1980
Counsel further referred to us the Trade Notice dated Octo ber 29 1979 issued by the Collectorate Madras wherein it was clearly indicated that the costs of packing was not liable to be included in the assessable value
Learned Additional Solicitor General frankly conceded that at the material time there was no particular form prescribed for protesting against the levy or paying under protest
He also contended that if the letter is treated as a protest and the payments are held to be payments under protest then the limitation prescribed under Rule 11 admit tedly would not be applicable but the Trade Notice issued by the Madras Collectorate on October 29 1979 could not be given retrospective effect and therefore the matter should go back to the Tribunal for disposal on other questions
We gave our anxious considerations to the rival submis sions
A perusal of the letter dated June 11 1974 clearly shows that all possible contentions which could be raised against the levy of duty on the value of packing material were raised
If this could not be said to be a protest one fails to understand what else it could be
It does not require much time to analyse the contents of the letter
An ordinary reading with common sense will reveal to anybody that the appellant was not accepting the liability without protest
We have no hesitation to hold that the letter was in the nature of protest
That being the position the question of limitation does not arise for refund of the duty
719 It is rather strange that learned Additional Solicitor General wants the matter to go back to the Tribunal for considering the effect of Trade Notice
The Central Govern ment in their revisional order dated December 31 1980 in the case of Birla Cement Works gave the benefit without any Trade Notice
There it was observed In the circumstances Government accepted the petitioner s pleas and observe that superfine cement is nothing other than ordinary portland which is grounded to a very high fineness of not less than 3500 CM 2gm and that this higher fineness does not lead  to its deterio ration without packing
The Government there fore accept the contention of the petitioners and hold that the impugned good being capable of being sold without packing like ordinary gray portland cement the cost of packing for superfine cement should not be added to the assessable value
 The authorities ought to have extended the view taken by the Central Government in the case of Birla Cement Works to all similar cases
Moreover the Appellate Collector and the Tribunal clearly stated that the only question agitated before them was the question of limitation
The order does not indicate that the counsel for the Department or the departmental representative raised any other question on merits
Indeed no objection could have been raised on the merits of the matter in view of the order of the Central Government in the Birla Cement Works
In these circumstances the appeal is allowed the orders passed by the Tribunal and Other authorities are set aside
It is declared that the appellant is entitled to refund of the amount
The appellant shall be paid interest at the rate of six per cent from the date of refusal of refund with costs of this appeal quantified at Rs 10000
NPV Appeal al lowed


Summary:
The respondent Company took over with the consent of the State Government the licence granted to a private firm under the for supply and dis tribution of electricity in the areas covered by the li cence and became entitled to the benefits and privileges of the licence
Under cl
11 of the licence Government had the option to purchase the undertaking on the expiry of the period of licence
The licence was to expire on 21st September 1977
The State Electricity Board in exercise of its option issued a notice to the Company on 26th August 1976 and required it to sell and deliver the undertaking to the Board on the midnight between 21st and 22nd September 1977
Under the provisions of the  as they stood at the time of option the Company was entitled to be paid the 519 market value of the undertaking
But by the Amending Act 1976 the Bill for which had been introduced in the State legislature on 1371976 the principle of market value in the relevant provisions of the 1910 Act was substituted by the concept of Amount legislatively fixed as a sum equal to the depreciated Book Value of the assets of the undertak ing to be taken over
The amended provisions were to govern cases where notices had been issued prior to the amendment
The respondent Company filed writ petitions before the High Court challenging the validity of sections 4 5 and 6 of the Indian Electricity Maharashtra Amendment Act 1976 and section 2 of the Indian Electricity Maharashtra Amendment and Validity Act 1974 as violative of articles 14 191f and g and 31 of the Constitution
The appellants the State and the Electricity Board claimed protection of article 31 C to the Amending Act 1976 and the consequent immunity from attack on the ground of violation of articles 14 19 and 31
The High Court held that in the absence of a declaration in the Amending Act of 1976 that the law was one intended to give effect to the objects of article 39b and c of the Constitution the Amending Act cannot have the protection of article 31 C Declaring section 4 of the Amending Act as violative of article 191f and article 14 it held that the State could not unilaterally reduce even by legislation its liability to pay the purchase price under a consensual transaction and that conferment on Government of power to fix instalments was grossly unreasonable and arbitrary and that provision for payment of interest at the Reserve Bank rate pins one per cent made more unreasonable the provisions of the Amend ing Act
The High Court also rejected the respondent Company s claim as to the Constitutional infirmity attributed to section 2 of the 1974 Act and sections 5 and 6 of the Amending Act 1976
It further rejected the Company s contention that upon the service of the notice exercising the option to purchase the Company s right to be paid the market value under the law as it then stood was crystallised into an actionable claim or A chose in action and that What was sought to be ac quired was not the undertaking itself but a chose in action and that the law was bad for excluding the service lines from computation of the amount
The appellants filed appeal in this Court assailing the correctness of the High Court s view that section 4 of the Amend ing Act
was bad
The respondent Company also filed a cross appeal questioning the correct 520 ness of the judgment on the points held against it
It was contended on behalf of the appellants that the law was entitled to the protection of article 31C and that the High Court was in error in postulating that the absence of the express legislative declaration in the law that it was enacted for giving effect to the directive principles of State Policy in article 39b and c was itself conclusive against the attraction of article 31 C
It was urged that the presence of such a declaration merely furnished evidence of a reasonable and direct nexus between the legislation and the objects of article 39b and c but the declaration was by itself not conclusive either way and the court was entitled to go behind the facade of the declaration and scrutinise whether there was really such a direct and reasonable nexus and that the absence of such an express declaration did not preclude the State from showing the existence of the requi site nexus and that apart altogether from the protection of article 31 C the Amending Act of 1976 was justifiable as a reasonable restriction on the freedom under article 191f and g
On behalf of the Company it was contended that any appeal to and reliance upon article 31 C was wholly misplaced as the option to purchase the undertaking was in effectua tion of a purely consensual transaction and that the scheme of the Electricity Act 1910 and the covenants in the license enabling the Government or the Board as the case may be to exercise the option to purchase did not amount to a compulsory acquisition of the undertaking and that the provisions of the Amending Act 1976 which had the effect Of bringing down the purchase price payable under a mutual agreement could not be justified on any nexus with or for the effectuation of the objects of article 39b
The point for consideration was whether Indian Electric ity Maharashtra Amendment Act 1976 which statutorily modified the principles for the determination of the pur chase price for the undertaking from the principle of market value contained in the unamended section 7A of 1910 Act to the concept of Amount equal to the depreciated book value of the assets under section 7A as amended the Amending Act of 1976 could be said to be a law enacted for the acquisition of the undertaking with a reasonable and direct nexus with the object of article 39b of the Constitution and therefore had the protection of article 31 C Allowing the appeals preferred by the appellants Maha rashtra State Electricity Board and dismissing the cross appeal of the 521 respondent Company this Cpurt HELD The provisions of the Amending Act of 1976 have a direct and substantial relationship with the objects of article 39b and therefore are entitled to the protection of article 31 C
Therefore all challenge to the law on the ground of violation of Articles 14 19 and 31 must necessarily fail
That apart there is no merit in the grievance that service lines had been omitted from computation of the amount
Similarly there is no merit in the contention that the value of the goodwill has been omitted from computa tion of the amount
542D F The nexus between the law and the objects of article 39b could be shown independently of an express declaration by the legislature in the law that it was enacted for giving effect to the directive principles of State Policy contained in article 39b
The absence of evidence of nexus in the form of such an express declaration was not by itself evidence of absence of such nexus
534F G State of Maharashtra vs Basantibai  at 1475 and Fazilka Electric Supply Co Ltd vs The Commis sioner of Income Tax Delhi 1962 Supp 3 SCR 496 re ferred to
The business of an electricity supply undertaking a public utility service in pursuance of a license granted under the Electricity Act 1910 is comprehensively con trolled by the terms of that Statute
The terms on which a franchise is created and conferred are amenable to unilater al modification by Statute and include the term pertaining to the quantification of the price payable for the take over
The proposition that the right to the payment of the price gets crystallised into a chose in action  independ ently of or even before the actual transfer of ownership of the undertaking cannot be accepted
539C D Fazilka Electric Supply Company s case 1962 Supp 3 SCR 496 and Gujarat Electricity Board vs Girdharilal Motilal   referred to
Even if the provisions of the Electricity Act 1910 are held and understood to provide for take over by the State of a privately owned undertaking only by the adoption of the expedient of a consensual sale that circumstance by it self would not be decisive of whether the amending Act of 1976 had no direct and reasonable nexus with the objects of Art 39b
539F 522 The effect of the relevant provisions of the 1910 Act as amended by the amending Act of 1976 is the transfer of the ownership and control of material resources of the community for purposes of ensuring that they are so distrib uted as best to subserve the common good
In effect the provisions bring about nationalisation in the larger sense of that term
The Amending Act of 1976 sought to limit the economic burden of this reform
540C D The expression nationalisation means the acquisition and control of privately owned business by Government  540D E The idea of nationalisation of a material resource of the community cannot he divorced from the idea of distribu tion of that resource in the community in a manner which advanced common good
540G No doubt the protection of article 31 C is accorded only to those provisions which are basically and essentially necessary for giving effect to the objects of article 39b
540H But the High Court was in error in taking the view that while the provision for the take over in the Principal Act might amount to a power to acquire the objects the
Amending Act of 1976 which merely sought to beat down the price could not be said to be part of that power and was
therefore incapable of establishing any nexus with article 39b
1541A B The amending Act of 1976 renders the cost of this economic reform brought about with the objects of article 39b in view an affordable one in terms of money
This can not he held to have no direct or reasonable nexus with the objects of Act
39b When a legislative enactment is challenged as not conforming to the constitutional mandate the judicial branch of the Government has only one duty to lay the Arti cle of the Constitution which is invoked beside the Statute which is challenged and to decide whether the latter squares with the former 541B C The community s economic burden for social and economic reforms is an integral part of the exercise involved in social and economic change in the ushering in of an egali tarian and eclectic social and economic order in tune with the ethos of the Constitution
The cost in terms of monetary expenditure of economic change is a factor integrated with the objects of article 39b
The Court must on matters of economic policy defer to legislative judgment as con 523 ditioned by time and circumstances
The wisdom of social change is dependant in some degree upon trial and error on the left needs of the time
542A C