Case: R.C. Jall &amp; Others Vs. Union of India &amp; Another

2. The material facts may be briefly stated. Under Ordinance No. 39 of 1944, the Central Government was authorized 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 under 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 cosignee, as the case may be. On January 1, 1947, February 1, 1947, and February 7/9, 1947, the second defendant namely the Amalgamated Coalfields, despatched by rail to the first defendant three consignments of coal from Junnor-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 the 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 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 Administrations, flied 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 ofthe Government of India Act, 1935, and the Constitution were involved, and it was numbered as Civil Suit No. 1 of 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.

Reasoning:
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 is 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 support of the contentions of the party lodging the case. The object of the statement of the case is not only to enlighten the Court on the questions that would be raised before it, but also to enable the opposite party to know beforehand 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 disclose in the statement of case. There are 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 beforeAugust 26, 1944, the Governor-General of India, in exercise of the powers vested in him under S. 72 of the Ninth Schedule tothe Government of India Act, 1935, read with India and 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 distribution of coal and coke. This Court in Hansraj Moolji v. State of Bombay, 1957 SCR 634   : ((S) AIR 1957 SC 497  ) 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 ofthe 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 force till it was repealed. The second Ordinance, that is the repealing ordinance, was promulgated on April 26, 1947, and the repeal took effect from May 1, 1947. But in express turns it declared that the provisions of S. 6 ofthe 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 abundant 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 of the 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 force 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, 1947. 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 life 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 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 ofgreat 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 is 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 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 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 recover 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 consignee. 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 eligibility of the tax at the destination point in the hands of the consignee cannot legitimately betherefore, 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 thiswe have already pointed out earlier, under R. 3 of the Coal Production Fund Rules, 1944, 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) 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 pre-paid at the time of consignment, and therefore the only rule applicable whereunder the Railway Administration can 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 circumstances of the case, from therule 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 or 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.