Kanshi Ram Jagan Nath And Others vs The State

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 292 of 1958

Decision Date: 28 July 1961

Coram: M. Hidayatullah, P.B. Gajendragadkar, J.C. Shah, Raghubar Dayal

In the case titled Kanshi Ram Jagan Nath and Others versus The State, the Supreme Court of India pronounced its judgment on 28 July 1961. The opinion was authored by Justice M Hidayatullah and was delivered by a bench composed of Justice M Hidayatullah, Chief Justice P B Gajendragadkar, Justice J C Shah and Justice Raghubar Dayal. The petitioners, identified as Kanshi Ram Jagan Nath and several others, were opposed by the State, which was named as the respondent. The judgment was recorded under the citation 1966 AIR 805 and 1966 SCR (2) 942.

The dispute concerned the statutory framework governing the levy of a royalty on bricks. The question arose from an order issued by the Council of Regency of the former Patiala State on 6 February 1919, which imposed a royalty of rupees 50 per one lakh bricks produced by any kiln owner. After Patiala merged into the Patiala and East Punjab States Union, a Part B State under the Constitution of India, the Finance Act 1950 became operative in that territory on 1 April 1950. Section 11 of that Act extended the Central Excises and Salt Act 1944, inter alia, to Part B States. Section 13(2) of the Finance Act provided that any law existing immediately before 1 April 1950, which corresponded to an Act other than those referred to in Section II, would be repealed insofar as it applied in the State.

The appellants challenged the validity of the royalty levy that continued after 1 April 1950 under an order dated 19 February 1949. They contended that the royalty functioned as an excise duty, that the order was therefore a law corresponding to the Central Excises and Salt Act 1944, and consequently fell within the repeal provision of Section 13(2) of the Finance Act 1950. The Court examined whether the 1944 Act, which specified excise duties on goods enumerated in its First Schedule, expressly excluded other commodities from its operation through a negative provision. The Court held that the 1944 Act did not contain any clause that barred the operation of existing local laws on commodities not listed in the Schedule. Accordingly, the order of 19 February 1949 issued by the erstwhile Patiala State was not a law corresponding to the Central Excises and Salt Act 1944 and therefore was not subject to repeal under Section 13(2) of the Finance Act 1950.

The matter was heard under the civil appellate jurisdiction as Civil Appeal No. 292 of 1958, an appeal from the judgment and decree dated 23 October 1956 of the PEPSU High Court (now Punjab High Court) in Regular Second Appeal No. 29 of 1954. The Crown counsel appearing for the appellants included the Solicitor‑General of India, C K Daphtary, accompanied by counsel J B Dadachanji, Ravinder Narain and O C Mathur. The Court’s decision thus affirmed the continued validity of the royalty imposed on bricks and clarified the scope of the repeal provision contained in the Finance Act 1950.

Sikri, Advocate‑General for the State of Punjab, and N S Bindra together with P D Menon, appearing for the respondent, were listed as counsel. The judgment was delivered on 28 July 1961 by Hidayatullah, J. The appeal, which bore a certificate under article 133(1)(c) of the Constitution, challenged only one issue: whether the royalty of Rs 50 per one lakh bricks imposed by a Robkar issued by the Ijlas‑i‑Khas (Council of Regency) of Patiala State on 6 February 1919 was legally valid. The appeal arose from a suit filed by the present appellants in the Court of the Subordinate Judge at Faridkot, seeking a declaration and an injunction. That suit had been dismissed by the trial judge, the decision was reversed by the District Court, and on further appeal the High Court set aside the Additional District Judge’s order and restored the original trial judge’s decree. In the present appeal the sole point argued was whether the order of the Ijlas‑i‑Khas continued to have effect after the passage of the Finance Act 1950. The suit had been lodged on 13 May 1952, contending against demand notices issued by the Tehsil Office, Faridkot, around 20 April 1951. The learned Solicitor‑General conceded that the appellants’ claim must be limited to the period after 1 April 1950, the commencement date of the Finance Act 1950. He observed that, prior to that date, the law could not be held invalid because article 277 saved taxes, duties, cesses or fees that were already being levied in any State before the Constitution came into force. He also agreed that the Finance Act 1950 could not have operated before 1 April 1950, and therefore the remaining question was the effect of that Act upon the impugned order. It was also noted that the authority of the Regency Council to issue the order and the order’s validity, unless displaced by any Indian statute, were not in dispute. The Finance Act 1950 had been enacted to give effect to the financial proposals for the year beginning on 1 April 1950. Section 11 of that Act extended, among other provisions, the Central Excises and Salt Act 1944 to the entire territory of India, including Part B States, except the State of Jammu and Kashmir. Section 13(2) of the same Act then provided, inter alia, that “If immediately before the first day of April 1950 there is in force in any State other than Jammu and Kashmir a law corresponding to, but other than an Act referred to in sub‑section (1) or (2) of section 11, such law is hereby repealed with effect from the said date…”. It was contended that by extending the Central Excises and Salt Act 1944, any law imposing excise duty on the manufacture of any class of goods was repealed.

In this case, the Court drew attention to the provisions of the Robkar, which imposed a royalty described as follows: “Mehsul (Royalty at the rate of Rs. 50 per lac bricks) shall be charged from all the kilnowners irrespective of whether they construct brick‑kilns on land belonging to the Government or not. In case they construct brick‑kilns on Government land, the cost of the land or damages thereto shall be charged from them in addition to the Mehsul (Royalty).” The Court noted that section 13(2) of the Finance Act, 1950 clearly indicated that only a law corresponding to the Central Excises and Salt Act, 1944 was intended to be repealed. If a law did not correspond to the Indian statute, it would remain saved by virtue of Article 277.

The issue before the Court was whether the Robkar of the Ilas‑i‑Khas, which imposed a royalty on bricks, could be said to be a law corresponding to the Central Excises and Salt Act, 1944, which had been extended on 1 April 1950. The argument presented by counsel Daphtary was premised on the assumption that the royalty was in substance an excise duty and that therefore the Robkar was a law corresponding to the Indian statute. The Court observed that this assumption did not resolve the question, because the language of sub‑section (2) of section 13 of the Finance Act required that the repealed law be a law corresponding to the Indian statute.

The Court considered the contention that the Central Excises and Salt Act, 1944, as indicated by its long title and preamble, was a consolidation and amendment law relating to central duties of excise on goods manufactured or produced in certain parts of India and to salt. It was argued that the Act functioned as a code, providing for the levy of excise duty on the commodities specifically mentioned therein, while by implication exempting other articles from such levy, thereby making the Indian statute comprehensive enough to include not only the listed commodities but also other commodities on which there was no levy. The Court accepted that there was no negative provision expressly saving other goods manufactured in India from the operation of any other law.

Section 3(1) of the Central Excises and Salt Act, 1944, lays down the charge of excise duty and provides: “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 or manufactured in India… at the rates set forth in the First Schedule.” Section 2(d) defines “excisable goods” as “goods specified in the First Schedule as being subject to a duty of excise and includes salt.” Read together, these two provisions limit the operation of the excise law to the enumerated commodities and salt, and therefore the ambit of the Act does not extend to goods such as bricks that are not listed in the First Schedule.

The Court observed that the scope of the statute is limited to the matters expressly mentioned in its provisions. The expression “to consolidate and amend the law” actually refers to the statutes that were eliminated by section 39 of the consolidating legislation. Before that consolidating Act was enacted, there existed at least seventeen separate Acts, each dealing with different commodities. In the year 1944 all of those seventeen Acts were repealed, and a single consolidated Act was passed to replace them and to bring certain new commodities within its ambit. The purpose of that consolidation was not to codify the law in a manner that would automatically extinguish any other statutes that were not specifically listed in the Schedule of repeals. Moreover, the Act did not contain any negative clause that expressly saved other commodities from being subject to any existing local law, nor was such a saving provision contemplated. As a result, the Robkar, under which the royalty was imposed, cannot be characterized as a statute that corresponds to the Central Excises and Salt Act, 1944. Consequently, the Robkar does not fall within the repeal provision of section 13(2) of the Finance Act, 1950. The Court therefore affirmed the judgment of the High Court, dismissed the appeal, and ordered that costs be awarded against the appellant.