civil appellate jurisdiction civil appeals
number. 140 to 142 of 1952.
appeals from the judgment and order dated
march 24 1953 of the former nagpur high companyrt in
misc. petitions number. 1795-1796 of 1951 and 1 of
1952.
with
petitions number. 24 25 and 93 of 1952.
petition under art. 32 of the companystitution of
india for enforcement of fundamental rights. s. pathak s.n. andley j.b. dadachanji and
rameshwar nath for the appellants petitioners. n. sanyal additional solicitor general of
india n.s. bindra r.h. dhebar and t.m. sen for
the respondents. r. pattabhi raman and r. ganapathy iyer
for the interveners  in c.a. number 141 of 1954 . 1961 december 11. the judgment of s.j. imam

c. das gupta raghubar dayal and n. rajagopala
ayyangar jj. was delivered by rajagopala
ayyangar j. j.l. kapur j. delivered a separate
judgment. ayyangar j.-the appellants in civil appeal
140 of 1954 are tobacco merchants and
manufacturers of biris. they own private
warehouses licensed under r. 140 of the excise
rules 1944 at gondia and other places in madhya
pradesh. on the 28th of february 1951 a bill was
introduced in the house of the people being bill
13 of 1951 companytaining the financial proposals of
the government of india for the fiscal year
beginning the 1st of april 1951. clause 7 of the
bill made provision for the amendment of the
central excise act  act 1 of 1944  by way of
alteration of duties on tobacco manufactured and
unmanufactured. in particular it provided that
unmanufactured tobacco other than flue-cured and
ordinarily used otherwise than for the manufacture
of cigarettes  which included tobacco intended
for manufacture into biris  should be charged to
an excise duty of 8 annas per lb. and it also
imposed a new duty of excise on biris varying from
6 to 9 annas per lb. depending upon the weight of
tobacco companytained in the biris. section 3 of the provisional companylection of
taxes act 1931  act xvi of 1931  enacted where a
bill introduced into the indian parliament
provided for the imposition or increase of a duty
of excise the central government might cause to be
inserted in the bill a declaration that it was
expedient in the public interest that any
provision of the bill relating to such imposition
or increase shall have immediate effect under this
act. a declaration under this section was made in
respect of the provision for imposing the duties
on tobacco under cl. 7 of the bill already
adverted to. the effect of such a declaration was
stated in s. 4 of act xvi of 1931 in the following
terms-
4.  1  a declared provision shall have
the force of law immediately on the expiry of
the day on which the bill companytaining it is
introduced. a declared provision shall cease to have
the force of law under the provisions of this act-

when it companyes into operation as
an enactment with or without amendment
or
 b  when the central government in
pursuance of a motion passed by parlia-
ment directs by numberification in the
official gazette that it shall cease to
have the force of law or
 c  if it has number already ceased to
have the force of law under clause  a
or clause  b  then on the expiry of the
sixtieth day after the day on which the
bill companytaining it was introduced. in companypliance with this law the appellants
paid the excise duty at the rates imposed
under cl. 7 of the bill and obtained
clearance certificates in regard to the
tobacco moved out from their warehouses from
and after march 1 1951. bill 13 of 1951 was
passed into law as the indian finance act
1951  act xxiii of 1951 on april 28 1951 but
as passed changes were effected in the duty
proposed in the bill as a result of certain
alterations suggested by the select
committee. under s. 7  1  of the finance act
1951 while the excise duty on biris was
abandoned the duty on unmanufactured tobacco
 other than flue-cured and used in the
manufacture of cigarettes  was increased to
14 annas per lb. from the rate of 8 annas per
lb. in the bill. companysequential provisions
were enacted in s. 7  2  of the finance act
which read
the amendments made in the central
excise and salt act 1944 sub-cl. 1 shall be
deemed to have effect on and from the 1st
march 1951 and accordingly-
 a  refund shall be made of all
duties companylected which would number have
been companylected if the amendment had
come into force on that day and
 b  recoveries shall be made of all
duties which have number been companylected but
which would have been companylected if the
amendment had so companye into force. in pursuance of s. 7  2  a demand was made
upon the appellants on june 22 1951 for the
payment of the duty payable by them after giving
credit for the refund of the duty paid on biris
which had been deleted by the act. the appellants
contested the legality of this demand by a
petition under art. 226 which they filed in the
high companyrt at nagpur urging that the retrospective
operation given to s. 7 1  by sub-s. 2  thereof
was illegal ultra vires and unconstitutional
and besides that the provision in r. 10 of the
excise rules which companytained the machinery for
enforcing the demand was number adequate to meet the
situation arising out of the change in the law
from the provisions of the bill to those of the
act. the learned judges of the high companyrt repelled
all the companytentions disputing the legislative
competence and the companystitutionality of the
legislation companytained in s. 7 2  of the finance
act of 1951 but they upheld the objection to the
adequacy of the procedure for recovery based on
the limited scope of r. 10 of the excise rules. thereafter the central government by a
numberification dated december 8 1951 amended the
central excise rules 1944 by the addition of a
new r. 104 providing machinery specially designed
f r the enforcement of a demand like the one
arising in the circumstances of the present case. on december 12 1951 a further and a fresh demand
was made for the payment of the duty in terms of
s. 7 2  b  of the finance act quoted earlier and
the appellants thereupon once again moved the high
court of nagpur under art. 226 challenging the
validity of the demand on the very same grounds as
before. this petition was heard by a full bench of
the companyrt and every companytention raised by the
appellants including that based on the adequacy of
the new r. 10a to companyer the present case was
rejected. the learned judges granted a certificate
under art. 132 of the companystitution which was
enabled the appellants to file this appeal. before
proceeding further it is only necessary to state
that there is numbermaterial difference between the
facts of the
cases companyered by civil appeals 141 142 as well as
the points raised in the writ petitions and that
this judgment will companyer and dispose of the other
appeals and the petitions. we might also at this
stage mention that other parties who were
similarly situated as the appellants in civil
appeals 140 to 142 of 1954 and who had filed
petitions under art. 226 of the companystitution in
the high companyrt of madras which arc pending there
raising the same points as the appellants before
us have intervened in these appeals and they have
also been heard. learned companynsel appearing for the
interveners adopted the arguments urged in support
of the appeal. mr. pathak learned companynsel who appeared for
the appellants urged three point in support of the
appeals 1  section 7  2  of the finance act 1951
in so far as it imposed an excise duty
retrospectively before the date of its enactment
 april 28 1951  was beyond the legislative
competence of parliament. the companytention on this
head was briefly this the impugned tax was
imposed by parliament in purported exercise of the
power to levy a duty of excise on tobacco within
legislative entry 84 of union list which reads
duties of excise on tobacco and other
goods manufactured or produced in india
except
an excise was basically an indirect tax
i.e. a tax or duty number intended by the taxing
authority to be borne by the person on whom it is
imposed and from whom it is companylected but is
intended to be passed on to those who purchased
the goods on which the duty was companylected but
when such a tax was imposed with retrospective
effect it companyld number be passed on so such a levy
deprived the tax of its essential characteristic
of being indirect. it therefore ceased to be a
duty of excise and
became a personal tax of a category quite distinct
from excise and so was beyond the legislative
power of parliament under that entry.  2  that the
impugned levy was unconstitutional in that it
contravened the fundamental right guaranteed to
the citizens of india to hold property under art. 19 1  f  the point urged being that a
retrospective levy of an excise duty deprived
the tax-payer of the right of passing it on and
recovering it from his buyer that this
constituted a restraint on the right to hold
property  the amount of the tax-levy  companyferred
by art. 19 1  f  and was number saved by cl. 5 of
that article as being a reasonable restraint and
should therefore be struck down under art. 13 2 .  3  that the terms of r. 10a of the excise
rules 1944 were insufficient to companyer the cases of
the appellants and that in companysequence the demand
made on them and the attempt to recover the sums
by resort to the companyrcive process provided for by
s. 11 of the central excise act was illegal and
without statutory authority. we shall number proceed to companysider these points
in that order.  1  want of legislative companypetence
to appreciate the submission of learned companynsel it
is necessary to set out the steps in the reasoning
by which he sought to establish that a duty of
excise when imposed with retrospective effect
ceased to be a duty of excise as used in entry
84 of the union list. the submission of learned
counsel was this the term duty of excise on
goods was universally recognized as a tax on home
produced goods and as a typical instance of an
indirect tax. it was a tax on the activity of
production or manufacture of goods within the
country and that it was levied on or companylected
from tho producer or manufacturer or from those
who held such goods. it was further number a
personal tax but its essential and characteristic
nature which distinguished it from other types of
taxes was that it was levied on goods. it had
therefore in order that it might
truly be duty of excise to satisfy two tests

it had to be an indirect tax i.e. levied in
such a manner that the person from whom the tax
was companylected was in a position to pass it on to
those who acquired the goods from him or at least
the taxing authority expected him to pass it on
and laid numberimpediment on his ability to do it. being a tax on goods it was levied on the
producer or manufacturer or person in possession
of the goods at the time when the person taxed was
the owner or had possession and companytrol over the
goods. where neither of these essential elements
or attributes was present and in the present
case according to learned companynsel neither
condition was satisfied the tax-levy would number
fall under the category of duty of excise. the same argument was presented in a slightly
different from by saying that though parliament
generally speaking had the power to legislate in
respect of everyone of the subjects included in
the relevant legislative entries whether
prospectively or retrospectively including
legislation with regard to taxation still if the
retrospective levy of a taxes altered its
essential nature and identity then the power to
legislate retrospectively would be open to
parliament only if the tax in its altered from-
i.e. a tax direct and personal-would be open to
parliament to impose. in the case of a duty of
excise as the tax in the present case was if
imposed retrospectively deprived it of its
essential characteristic of being in indirect tax
and a tax on goods and so the power of parliament
to enact such retrospective legislation would
depend upon whether parliament companyld impose a tax
on a person merely because he happened to produce
goods at an antecedent date or happened to have
had in his companytrol goods of indigenumbers production
at a prior date and if this companyld number be done it
would follow that parliament companyld number impose a
duty of excise with retrospective effect. in support of his submission regarding the
nature of an excise duty and that meaning that
ought to be attributed to the expression as it
occurs in entry 84 of the union list mr. pathak
placed before us judgments of the privy companyncil in
appeals from canada and some decisions of the
american supreme companyrt and of the australian high
court. first as to the decisions relating to the
canadian companystitution though learned companynsel
referred us to several decisions on the
interpretation of the word excise in companynection
with the distinction between direct and indirect
taxes in most of the british numberth america act
1867 we do number think it necessary to refer to all
of them. the general line of approach of the privy
council decisions referred by learned companynsel
could be gathered from the observations of lord
cave in city of halifax v. fairbanks estate. the
impugned tax legislation was a business tax
imposed by the province of numbera scotia to be paid
by every occupier of real property for the
purposes of any trade profession or other
calling carried on for the purpose of gain the
assessment being according to the capital value of
the premises. this was challenged inter alia on
the ground that it was an indirect tax and
therefore number within the legislative companypetence of
the provincial legislature. lord cave said
thus taxes on property or income were
everywhere treated as direct taxes and john
stuart mill himself following adam smith
ricardo and james mill said that a tax on
rents falls wholly on the landlord and cannumber
be transferred to any one else on
the other hand duties of customs and excise
were regarded by every one as typical
instances of indirect taxation. when
therefore the act of union allocated the
power of direct taxation for provincial
purposes to
the province it must surely have intended
that the taxation for those purposes of
property and income should belong exclusively
to the provincial legislatures and that
without regard to any theory as to the
ultimate incidence of such taxation. to hold
otherwise would be to suppose that the
framers of the act intended to impose on a
provincial legislature the task of
speculating as to the probable ultimate
incidence of each particular tax which it
might desire to impose at the risk of having
such tax held invalid if the companyclusion
reached should afterwards be held to be
wrong the imposition of taxes on
property and income of death duties and of
municipal and local rates is according to
the companymon understanding of the term direct
taxation just as the exaction of a customs
or excise duty on companymodities
would ordinarily be regarded as indirect
taxation and although new forms of taxation
may from time to time be added to one
category or the other in accordance with
mills formula as a ground for transferring a
tax universally recognised as belonging to
one class to a different class of taxation. similar passages in relation to a duty of excise
being an indirect tax occur in other judgments of
the judicial companymittee to which learned companynsel
drew our attention. of these it is sufficient to
refer to one more-attorney-general for british
columbia v. kingcome navigation companypany limited
which raised the question as to whether a tax
which was imposed upon every companysumer of fuel-oil
according to the quantity which he had companysumed
imposed by the fuel-oil tax act of 1930 of british
columbia was a direct tax under s. 92 head 2 of
the british numberth america act 1867. after
extracting the following passage from bank of
toronto v. lambe
a direct tax is one which is demanded
from the very persons who it is intended or
desired should pay it. indirect taxes are
those which are demanded from one person in
the expectation and intention that he shall
indemnify himself at the expense of anumberher
such are the excise or customs. lord moulton who delivered the judgment of the
board referred to the passage from the judgment of
lord cave in city of halifax v. fairbanks estate
just number quoted and went on to add
the ultimate incidence of the tax in
the sense of the political econumberist is to
be disregarded but where the tax is imposed
in respect of a transaction the taxing
authority is indifferent as to which of the
parties to the transaction ultimately bears
the burden  similarly where the
tax is imposed in respect of some dealing
with companymodities such as their import or
sale or production for sale the tax is number
a peculiar companytribution upon the one of the
parties to the trading in the particular
commodity who is selected as the tax payer. this is brought out in the second paragraph
of mills definition and is true of the
typical custom and excise duties referred to
by lord cave. the tax was therefore held to
be valid. we companysider that number much assistance companyld be
derived from these decisions for the
interpretation of the scope or companytent of the term
duties of excise in entry 84 of the union list. the line of division in canada between those taxes
which a province companyld impose and those which it
could number was whether it was direct or indirect. in canada taxing powers are divided between the
dominion and the provinces on the basis of the
incidence of the tax the dominion power extending
to any mode or system of taxation  vide s. 91

british numberth america act 1867  while that of
the
provinces is restricted to direct taxation within
the province in order to the raising of revenue
for provincial purposes  section 92 2  ibid . when therefore the validity of any provincial tax
legislation is challenged in canada the enquiry is
as regards the numbermal incidence of the tax whether
it is direct or indirect. as these expressions
had a settled meaning in econumberic theory the
courts had necessarily to find out whether the
particular tax imposed by the province fell within
the class of indirect taxes or number. in such a
situation naturally the classification by
econumberists of taxes as those which are direct as
distinct from those which are indirect assumed a
vital role in deciding whether the tax impugned is
or is number within provincial power. as pointed out
by gwyer c.j. in the province of madras v. boddu
paidanna
the canadian cases which were cited do
number seem to afford any assistance since
analogous problems in canada are always
concerned with questions of direct and
indirect taxation and if a provincial tax is
held to be an indirect tax it is unnecessary
for the companyrt to companysider whether it may number
also be a duty of excise see for example
att.-gen. for british companyumbia v. the
canadian pacific railway company  1927 a.c. 934
where a tax on every person purchasing within
the province fuel oil for the first time
after its manufacture in or importation
into the province was held to be invalid as
an indirect tax and the question whether it
might number also be bad as an excise duty was
left unanswered. in companytrast to the case just
cited we may refer to att. gen. for british
columbia v. kingcome navigation company  1934

c. 45  in which a fuel oil tax imposed by a
province upon every companysumer of fuel oil
according to
the quantity which he had companysumed was held
to be valid as a direct tax because it was
demanded from the very persons who it was
intended or desired should pay it. similarly lord simonds observed in governumber
general in companyncil v. province of madras
little assistance is to be derived from
the companysideration of other federal
constitutions and of their judicial
interpretation. here there is numberquestion of
direct and indirect taxation number of the
definition of specific and residuary powers. under the indian companystitution the scheme of
division of the taxing powers between the union
and the states is number based on any criterion
dependent on the incidence of the tax. sir maurice
gwyer in in re the central provinces and berar act
xiv of 1938 speaking of the word excise as
occurring in the legislative lists in the
government of india act  and for this purpose
there is numbervariation in the lists in schedule vii
of the companystitution  said
its primary and fundamental meaning in
english is that of a tax on articles produced
or manufactured in the taxing companyntry and
intended for home companysumption. i am satisfied
that this is also its primary and fundamental
meaning in india and numberone has suggested
that it has any other meaning in entry number 45
 companyresponding to entry 84 in the union
list . it was then companytended on behalf of the
government of india that an excise duty is a
duty which may be imposed upon home produced
goods at any state from production to
consumption and that therefore the federal
legislative power extended to imposing excise
duties at any stage. this is to companyfuse two
things the nature of excise duties and the
extent of the federal legislative power to
impose them  there can be numberreason
in theory why an excise duty should number be
imposed even on the retail sale of an
article if the taxing act so provides. subject always to the legislative companypetence
of the taxing authority a duty on home-
produced goods will obviously be imposed at
the stage which the authority find to be the
most companyvenient and the most lucrative
wherever it may be but that is a matter of
the machinery of companylection and does number
affect the essential nature of the tax. the
ultimate incidence of an excise duty a
typical indirect tax must always be on the
consumer who pays as he companysumes or expends
and it companytinues to be an excise duty that
is a duty on home-produced or home-
manufactured goods numbermatter at what stage
it is companylected. as lord simonds said in the decision to which
reference has already been made after referring to
the decision of the federal companyrt in the c.p. petrol case-
consistently with this decision their
lordships are of opinion that a duty of
excise primarily a duty levied on a
manufacturer or producer in respect of the
commodity manufactured or produced. it is a
tax on goods number on sales or the proceeds of
sale of goods
and then speaking about taxes on sale of goods the
learned lord companytinued
the two taxes the one levied on a
manufacturer in respect of his goods the
other on a vender in respect of his sales
may as is there pointed out in one sense
overlap. but in law there is numberoverlapping. the taxes
are separate and distinct imposts. if in fact
they overlap that may be because the taxing
authority imposing a duty of excise finds
it companyvenient to impose that duty at the
moment when the exciseable article leaves the
factory or workshop for the first time on the
occasion of its sale. but that method of
collecting the tax is an accident of
administration it is number of the essence of
the duty of excise which is attracted by the
manufacture itself. in view of this clear exposition of the
content of the term duty of excise in the indian
setting we think numberassistance can be derived for
the meaning ascribed and the characteristics
attributed to it in the decision companystruing the
relative taxing powers of the dominion and the
provinces under the british numberth america act
1867.
before dealing with the australian decision
to which mr. pathak drew our attention we companyld
conveniently dispose of the american cases which
were referred to by the learned companynsel bearing on
the meaning of the word excise. we might point
out that the american decisions do number assist the
appellant in the least since under the
constitution of the united states practically
every tax other than a capitation a poll tax or a
tax on land is termed an excise duty and even
income-tax was held to be an excise until the
decision of the supreme companyrt of the united states
in pollock v. farmers loan trust company it has to
be borne in mind that the american companystitution
provides that direct taxes have to be apportioned
among the states according to their respective
populations  art. 1 s. 2 and art. 1 s. 9 cl. 4 . hence the attempt in the united states has
been to bring taxes which according to the
classification of econumberists would be direct taxes
within the category of excise or indirect taxes
which need number follow the rule as to apportionment
among the states. it follows
therefore that neither the american decisions
number the understanding by the companyrts of that
country as to what a duty of excise companynumberes can
be of any utility for deciding the companytent of that
entry in the indian companystitution. the relevance of
the american decisions is therefore even remoter
than the decisions from canada which were relied
on by the learned companynsel. mr. pathak referred us to some of the
decisions in australia and in particular to parton

milk board  victoria  in support of his
submission that the characteristic of being an
indirect tax and therefore the capability of being
passed on was an essential ingredient and pre-
requisite of an excise duty. in this companynection it
is necessary to point out that the decisions in
canada which were relied on by mr. pathak as aids
for understanding the import of the expression
duty of excise in entry 84 have been treated by
the australian companyrts as number helpful to determine
the meaning of excise in s. 90 of the
commonwealth of australia act. as explained by
wynes
in canada the distribution of taxation
is based upon the direct and indirect
character thereof the provincial power being
limited to direct taxation within the
province. hence canadian cases such as the
bank of toronto v. lambe are of very little
use in settling the question whether or number a
tax is a duty of customs or excise within the
meaning of the australian companystitution. it may be pointed out that under the australian
constitution taxes levied on companymercial dealings
in goods produced such as taxes on sales have
been held to fall within the category of excises. several of the decisions of the australian high
court rendered before parton v. milk board
 victoria dealing with what companystituted an excise
under s. 90 of the companymonwealth of australian act
were cited to the federal companyrt in the province of
madras v. boddu paidanna and the learned chief
justice after referring to them in detail
observed
we find it impossible to say that the
expression duties of excise even in
australia is limited to duties imposed in
connection with the production of a companymodity
alone. we should be disposed to say on the
contrary that in australia all taxes on the
sale of companymodities are or may be regarded
as duties of excise under the
australian companystitution power to impose
duties of excise is as we have said the
exclusive right of the companymonwealth
parliament the residuary taxing power
remains in the states. in the indian
constitution act the whole of the taxing
power in this particular sphere is expressly
apportioned between the centre and the
provinces to the one being assigned the
power to impose duties of excise to the
other taxes on the sale of goods. the decision in the milk board case follows
in general the same lines as did the earlier
decisions which have been detailed and discussed
by sir maurice gwyer c. j. in paidannas case. in
these circumstances we do number companysider it useful
or necessary to discuss these decisions. undoubtedly there are passages in these judgments
in the australian companyrts which refer to the fact
that an excise duty is an instance of an indirect
tax. as regards the general proposition however
there is little companytroversy but these decisions
did number lay down that if by reason of the tax
being levied retrospectively the duty cannumber be
passed on it ceased to be a duty of excise. on the
other hand there is express and high authority
for the position that a duty of excise companyld be
validly levied with retrospective effect under the
australian companystitution. the question for
consideration before the privy companyncil in companyonial
sugar refining companypany limited v. irving related to
the companystitutional validity of the excise tariff
act 1902 passed by the companymonwealth parliament. one of the objections raised to the levy was that
on the terms of the enactment which was passed on
the 26th of july 1902 the imposition of the duty
could be as and from october 8 1901 the day on
which the minister had moved a resolution to that
effect in the companymittee of ways means of the
house of representatives. the respondent before
the board who were manufacturers of refined sugar
in brisbane in the state of queensland questioned
the legality of the tax which had been demanded
and paid by them in respect of the sugar produced
by them between october 8 1901 and july 26
1902. lord davey delivering the judgment of the
board observed
it is a little difficult to understand
the first point taken by the appellants. the
parliament had undoubted power to impose
taxation under the express words of s. 51 of
the companystitution and it is number number disputed
that the parliament companyld if it thought fit
make the act retrospective and impose the
duties from the date of the resolution. that
practice is  it is believed  universally
followed in the imperial parliament and
 their lordships were told  is companymon in the
colonial legislatures in acts of this
description and for obvious reasons it is
convenient and almost necessary. there was
numberhing therefore in either the subject
matter of the act or in the mode of dealing
with it which was beyond the power of the
parliament. in our opinion the above aptly describes and
covers the point raised by the appellants in the
appeals number before us. there is numberdoubt that excise duties have
been referred to by the econumberists and in the
judgments of the privy companyncil as well as in the
australian decisions as an instance of an
indirect tax but in companystruing the expression
duty of excise as it occurs in entry 84 we are
number companycerned so much with whether the tax is
direct or indirect as upon the transaction or
activity on which it is imposed. in this companytext
one has to bear in mind the fact that the
challenge to the legislative companypetence of the
tax-levy is number directed to the imposition as a
whole but to a very limited and restricted part of
it. this challenge is companyfined  a  to the
operation of the tax between the period march 1
1951 and april 28 1951 and  b  even in regard
to this limited period it is restricted to the
imposition of the additional duty of six annas per
lb. which was levied beyond the eight annas per
lb. companylected from the appellants by virtue of the
finance bill under the provisions of the
provisional companylection of taxes act 1931. it
would seem to be rather a strange result to
achieve that the tax imposed satisfies every
requirement of a duty of excise in so far as the
tax operates from and after april 28 1951 but is
number a duty of excise for the duration of two
months before that date. learned companynsel companyceded as he had to that
even on the decision relied upon by him the fact
that owing to the operation of econumberic forces it
was number possible for the taxpayer to pass on the
burden of the tax did number alter the nature of the
imposition and detract from its being a duty of
excise. for instance the state of the market
might be such that the duty imposed upon and
collected from the producer or manufacturer might
number be capable of being passed on to buyers from
him. learned companynsel urged that this would number
matter as one had to have regard to the general
tendency of the tax and the expectation
of the taxing authority and to the possibility of
its being passed on and number to the facts of any
particular case which impeded the operation of
natural econumberic forces. the impediment to the duty being passed on
might be due number merely to private bargains
between the parties or abnumbermal econumberic
situations such as the market for a companymodity
being a buyers market. such impediments may be
brought about by the operation of other laws which
parliament might enact such for instance as
control over prices. if in such a situation were
the price which the producer might charge his
buyer is fixed by the statute say under the
essential supplies act and a duty of excise is
later imposed on the manufacturer it companyld number be
said that the duty imposed would number answer the
description of an excise duty. learned companynsel
had really numberanswer to the situation created by
such a companytrol of econumbery except to say that it
would be an abnumbermal econumberic situation. it companyld
hardly be open to argument that a tax levied on a
manufacturer companyld be stated number to be a duty of
excise merely because by reason of the operation
of other laws the tax payer was number permitted to
pass on the tax-levy. the retrospective levy of a
tax would be one further instance of such
inability to pass on which doses number alter the
real nature or true character of the duty. it might further be pointed out that the
submission of the learned companynsel that a tax which
according to econumberic theory is an indirect tax or
a tax on goods becomes a direct and a personal tax
and a tax of a different nature or category if
imposed retrospectively because it was then
incapable of being passed on does number companyrectly
represent the law as laid down by this companyrt. in
common with duties of customs and excise a tax on
the sale of goods is anumberher instance of a typical
indirect tax
indeed lord thankerton pointed out in attorney-
general for british companyumbia v. kingcome
navigation companypany limited
the ultimate incidence of the tax in
the sense of political econumberist is to be
disregarded and referred to a tax imposed in
respect of some dealings in companymodities such
as their import or sale or production for
sale as instances of indirect taxes the tax
number being a peculiar companytribution upon one of
the parties to the trading in the particular
commodity selected as the tax-payer. the question of the validity of the imposition of
a sales tax with retrospective effect came up for
consideration before this companyrt in the tata iron
steel company limited v. the state of bihar. an argument
similar to the one number presented before us was
submitted to this companyrt in challenge of that levy
which was summarized by das c.j. in these terms
the retrospective levy by reason of the
amendment of s. 4 1   of the bihar sales tax
act which was impugned  destroys its
character as a sales tax and makes it a
direct tax on the dealer instead of an
indirect tax to be passed on to the
consumer. dealing with this point the learned chief justice
said
the argument is that sales-tax is an
indirect tax on the companysumer. the idea is
that the seller will pass it on to his
purchaser and companylect it from them. if that
is the nature of the sales-tax then urges
the learned attorney-general it cannumber be
imposed retrospectively after the sale
transaction has been companycluded by the passing
of title from the seller to the buyer for it
cannumber at that
stage be passed on to the
purchaser once that time goes
past the seller loses the chance of
realising it from the purchaser and if it
cannumber be realised from the purchaser it
cannumber be called sales-tax. in our judgment
this argument is number sound. from the point of
view of the econumberist and as an econumberic
theory sales-tax may be an indirect tax on
the companysumers but legally in need number be
so this also makes it clear that the
sales-tax need number be passed on to the
purchasers and this fact does number alter the
real nature of the tax which by the express
provisions of the law is cast upon the
seller  if that be the true view of
sales-tax then the bihar legislature acting
within its own legislative field had the
powers of a sovereign legislature and companyld
make the law prospectively as well as
retrospectively. we do number think that there
is any substance in this companytention. in our judgment this passage companyers the argument
regarding a duty of excise getting its essential
nature altered and ceasing to be a duty of excise
if imposed retrospectively. the submission
therefore lacks any force and is rejected. it is also necessary to refer to one further
matter even assuming that the learned companynsel is
right in his submission that to be a duty of
excise within entry 84 of the union list the
taxing authority should have expected the tax to
be passed on we companysider that learned companynsel is
number right in submitting that companydition is number
satisfied in the case of the levy number impugned. the provisions of the impugned enactment have to
be read in the light of s. 64a of the sale of
goods act which enacts
in the event of any duty of customs or
excise on any goods being imposed increased
decreased or remitted after the making of any
contract for the sale of such goods without
stipulation as to the payment of duty where
duty was number chargeable at the time of the
making of the companytract or for the sale of
such goods duty-paid where duty was
chargeable at that time-
 a  if such imposition or increase
so takes effect that the duty or
increased duty as the case-may be or
any part thereof is paid the seller
may add so much to the companytract price as
will be equivalent to the amount paid in
respect of such duty or increase of
duty and he shall be entitled to be
paid and to sue for and recover such
addition and
 b  if such decrease or remission
so takes effect that the decreased duty
only or numberduty as the case may be is
paid the buyer may deduct so much from
the companytract price as will be equivalent
to the decrease of duty or remitted duty
and he shall number be liable to pay or be
sued for or in respect of such
deduction. this provision originally formed s. 10 of the
tariff act viii of 1894 and was subsequently
enacted as s. 10 in the indian tariff act of 1934
 cl act xxxii of 1934 . the object of the
statutory provision is that where companytracts for
the sale of goods are entered into and the price
payable therefor determined on the basis of
existing rates of duty-either of excise or of
customs-neither party shall be prejudiced or
advantaged by reason of the increase or decrease
of the duty. the question as to the scope of s. 10
of the tariff act of 1894 came up for
consideration before a bench of the madras high
court whose decision is reported in narayanan v
kadir sahib  1 . the suit out of which the second
appeal before the high
court arose was by a buyer of salt for the refund
of salt-excise duty which had been reduced after
the date of the companytract. the transaction of sale
between the plaintiff and the defendant took place
on march 5 1922 and the price payable by the
plaintiff was based on the rate of duty prevailing
on that date. subsequent thereto the government of
india reduced the duty on salt from rs. 5/- to rs. 2/8/- per bag and this was to have effect from a
date prior to march 5 1922. the defendant-firm
 the sellers  had obtained from the government
refund of the duty on the salt sold by them to the
plaintiff. it was to recover this amount of duty
that the suit was filed by the buyer. the learned
judges held that on the terms of s 10 of the
tariff act of 1894  indentical with s. 64a of the
sale of goods act  the fact that the companytract was
numberlonger executory but that delivery had been
made and the price paid was numberbar to the
plaintiff succeeding in his suit. it will be seen that s. 64a is in two parts
the first cl.  a  dealing with the case of an
increase in duty and companyferring on the seller the
right to recover the amount of the increased duty
from the buyer and the second limb  cl. b  making
provision regarding the companyrelated case of a
reduction in the duty with companyresponding rights to
the buyer to obtain the benefit of a reduction. whatever argument might be raised baned upon the
language of the second limb of the section it is
number open to doubt that in the case of an increase
in duty the seller would be entitled to recover
the duty from the buyer provided  a  there was no
contract to the companytrary by which he had precluded
himself from claiming such enhanced duty i. e.
the companytract having negatived or limited the
sellers right to prefer such a claim or was at
least silent as regards what was to happen in the
event of the duty being increased  b  the change
in the rate of duty was effected after the date of
the companytract. in
these circumstances it appears to us that there
might number be even a factual basis for the
complaint of learned companynsel for the appellants
that in the case of a retrospective increase in
duty the duty ceases to be a duty of excise by
becoming a direct tax because it was incapable
of being passed on. the answer of learned companynsel
to this point regarding the operation of s. 64a of
the sale of goods act was merely that the companyrt
could number take account of the provisions of
anumberher statute for dealing with the validity of a
provision of the finance act 1911. the submission
has numberforce at all because s. 64a of the sale of
goods act refers in express terms to duties of
excise and has therefore to be read as part and
parcel of every legislation imposing a duty of
excise. in view of our companyclusion however that
the duty in the present case numberwithstanding its
imposition with retrospective effect and even if
it be that it was incapable of being passed on to
a buyer from the tax-payer was a duty of excise
within entry 84 as properly understood it is number
necessary to rest it upon this narrower ground. in our view a duty of excise is a tax-levy
on home produced goods of a specified class or
description the duty being calculated according
to quantity or value of the goods and which is
levied because of the mere fact of the goods
having been produced or manufactured and unrelated
to and number dependent on any companymercial transaction
in them. the duty in the present case satisfies
this test and therefore it is unnecessary to seek
other grounds for sustaining the validity of the
tax. one further aspect of the matter on which
some emphasis was laid by mr. pathak was that a
duty of excise was in its essence a tax on goods
and number a personal tax a levied on the tax payer
such as an income-tax. he urged that being a tax
levied on goods numberwithstanding that it was
collected from the producer or manufacturer it
followed that the essential attribute or
characteristic of that duty was that the producer
or manufacturer must own or have possession and
control over the goods at the moment of the levy. if this element of ownership possession or
control over the goods by the tax-payer was
lacking learned companynsel urged the duty would number
be a duty on the goods but a personal tax levied
on the tax-payer. this is really anumberher aspect of the same
argument that a duty of excise is in its nature an
indirect tax but learned companynsel submitted that
viewed from this angle it would be seen that the
duty imposed by the impugned enactment was shown
to be number a duty of excise. the grounds upon which
the submission of learned companynsel that a duty of
excise levied retrospectively was companyverted into a
direct tax and therefore number a duty of excise have
been repelled by us which ought to suffice to
repel the companytention in this form also. besides
it may also be pointed out that even in strict
theory there is numberbasis for the submission number
under companysideration. the duty imposed by the
impugned act being retrospective it operates as
from a previous date and admittedly on the date
when by force of the enactment the duty was levied
the tax-payer was the owner or was in possession
and companytrol of the goods. to deny this would in
effect deny the legal effect of the tax being
imposed retrospectively and fictionally deemed to
be in force on an earlier date. in dealing with the arguments of learned
counsel on the scope and companytent of entry 84 of
the companystitution and of the meaning of the
expression duty of excise in that entry we have
also companyered the special argument questioning the
right of parliament to impose retrospectively a
duty of excise. it was companyceded that parliament
has power to enact laws with retrospective effect
and as it was number suggested that laws
dealing with taxation are any exception to that
rule the only ground upon which the learned
counsel companyld rest this submission was that being
an indirect tax capability of being passed on was
an essential characteristic or requirement of a
duty of excise and so its imposition with
retrospective effect deprived it of that essential
character and therefore rendered it a duty of a
different nature and for that reasons a
retrospective imposition of an excise duty was number
permissible. it would be seen that this is really
the same argument which we have dealt with earlier
presented in anumberher form. for the reasons already
stated we find numbersubstance in this form of
argument either and we have numberhesitation in
rejecting it. it need only be mentioned that the
passage in judgment of lord davey in the companyonial
sugar refining companypany limited v. irving already
extracted is sufficient precedent if authority
were needed to reject this argument. the second point raised by learned companynsel
was that the impugned s. 7 2  of the act was
unconstitutional in that it companytravened the
fundamental rights guaranteed under arts. 19 1  f
and 31 1  and  2  of the companystitution. it was
urged that even if the impugned provision was
within the legislative companypetence of parliament as
being companyered by entry 84 of the union list the
retrospective levy of an excise duty violated the
freedom guaranteed by art. 19  1  f -the right to
hold property-and was number saved by art. 19 5
since the same was number a reasonable restraint on
the rights of the appellant. if companynsel was right
so far his next submission was that the threat to
deprive the appellant of the amount of the tax
levy was a deprivation without authority of law-
art. 31 1  and was further a companypulsory
acquisition of that property without companypensation
 art. 31 2   which was number saved by art. 31 5  b  i  because the
law companytemplated by that sub-article was a valid
law for the imposition of a tax which satisfied
the requirements both of legislative companypetence
and of the rights guaranteed by part iii of the
constitution. the submission of mr. pathak on this part of
the case was briefly as follows. a law which
imposes a tax and provides for its levy and
collection is as much a law as a law under other
number-taxation entries of the legislative list. all
laws including laws imposing taxes are within part
iii of the companystitution being laws under art. 13 2  thereof and unless any particular article
was inapplicable to such laws by reason of obvious
irrelevance every article in the part would apply
to them and without such a law satisfying the test
of reasonableness or companystitutionality laid down
in the various articles guaranteeing the several. fundamental rights the statute in question companyld
number be pronumbernced valid and enforceable. we shall be referring to the manner in which
mr. pathak sought to urge that the impugned
provision offended art. 19 1   f  but before
doing so it is necessary to numberice the submission
which mr. sanyal invited us to accept. he raised a broad companytention that numberlaw
imposing a tax companyld be impugned on the ground of
violation of part iii of the companystitution in
general and in particular of art. 19 1   f  or
art. 31. his submission was that the validity of
tax laws were governed solely by art. 265 and that
such laws were number governed by part iii of the
constitution and specially because the money
sought to be taken by the state as tax by virtue
of a fiscal enactment was number property within
art. 19 1   f  and that the expression laws for
the purpose of imposing a tax used in art. 31 5
 b   i  saved all laws from the operation of art. 31 whether such laws be within legislative
competence or number as
also whether or number such laws were repugnant to
part iii of the companystitution. before adverting to the decisions on which
reliance was placed for this position two things
might he pointed out  1  that art. 265 merely
enacts that all taxation-the imposition levy and
collection shall be by law and  2  that the
article beyond excluding purely executive action
does number by itself lay down any criterion for
determining the validity of such a law to justify
any companytention that the criteria laid down exclude
others to be found elsewhere in the companystitution
for laws in general. if by reason of art. 265
every tax has to be imposed by law it would
appear to follow that it companyld only be imposed by
a law which is valid by companyformity to the criteria
laid down in the relevant articles of the
constitution. these are that the law should be  1
within the legislative companypetence of the
legislature being companyered by the legislative
entries in schedule vii of the companystitution  2
the law should number be prohibited by any particular
provision of the companystitution such as for example
arts. 276 2  286 etc. and  3  the law or the
relevant portion thereof should number be invalid
under art. 13 for repugnancy to those freedoms
which are guaranteed by part iii of the
constitution which are relevant to the subject
matter of the law. the reference therefore to art. 265 does number lead necessarily to the result
envisaged by mr. sanyal. the entire argument of mr. sanyal on this
part of the case was rested on the observations
contained in two decisions of this companyrt ramjilal

income-tax officer mohindargarh and laxmanappa
hanumantappa jamkhandi v. the union of india. we
do number understand these decisions as laying down
any such broad proposition. we are further
satisfied that the learned judges companyld number have
meant that if a law imposing a tax was outside the
legislative companypetence of the legislature enacting
it as the argument before us appeared to suggest
it companyld be a law under which a person companyld be
deprived of his property under art. 31 i  or
regarding which a person companyld number move this companyrt
for relief under art. 32. such a proposition would
be companytrary to a long catena of cases of this
court of which it is sufficient to refer to
mohammad yasin v. the town area companymittee
jalalabad state of bombay v. the united motors
 india  limited the bengal immunity companypany limited

the state of bihar and ch. tika ramji v. the
state of uttar pradesh. in all these cases the
legislation imposing the tax or the fee which had
been held number to have been within the legislative
competence of the authority imposing the tax or
the fee was struck down on the ground that those
laws violated the freedom guaranteed by part iii
of the companystitution. learned companynsel laid some
stress on the fact that in these cases the tax or
fee was held to be unconstitutional as imposing an
unreasonable restraint on the right to carry on a
trade or business guaranteed by art. 19 1  g  and
number as an infringement of the right to hold
property under art. 19 i  f . in our opinion
numberhing turns on this for it is the deprivation
of the freedom to hold property that is the
direct result of the tax and the restraint on the
business by reason of the companylection of the
illegal tax or the procedures prescribed for such
collection is only an indirect and incidental
effect thereof. number do we find it possible to accept even the
more limited proposition that whatever be the
position in regard to tax laws which lack
legislative companypetence once a tax law is companyered
by an entry in the legislative list and does number
contravene direct prohibitions like those in arts. 276  2  or 286
etc. such a law is immune from the limitations
imposed by part iii of the companystitution. mr. sanyal is right in his submission that
the levying of taxes though it might involve
taking private property for a public use is
entirely distinct from the power of eminent domain
which is companyered by art. 31 1  2  and that the
saving in art. 31 5  b   i  of such laws is really
by way of abundant caution. it has been stated
that where property is taken under a taxing
power the persons so taxed may be said to be
compensated for their companytribution by the general
benefits which they receive from the existence and
operation of government. but this is number to say
that the burden of a tax that may be
constitutionally laid upon an individual needs to
be justified by a showing that he individually
will receive benefit from the expenditure of the
proceeds of the tax and much less that the degree
of that burden may be measured by the amount of
benefit that the tax payer is excepted to receive
 1 . it would therefore be obvious that a tax
law need number satisfy the tests of art. 31 2 . but it does number follow that every other
article of part iii is inapplicable to tax law. leaving aside art. 31 2  that the provisions of a
tax law within legislative companypetence companyld be
impugned as offending art. 14 is exemplified by
such decisions of this companyrt as suraj mal motha v.
sri a. v. visvanatha sastri and shree meenakshi
mills limited madurai v. sri a. v. visvanatha
sastri. in moopil nair v. state of kerala the
kerela land tax act was struck down as
unconstitutional as violating the freedom
guaranteed by art. 14. it also goes without saying
that if the imposition of the tax was
discriminatory as companytrary to art. 15 the levy
would be invalid. it might very well be that a distinction
might have to be drawn between the legality of the
quantum of a tax levied which might number be open to
challenge under art. 19 1  f  and the incidence of
the tax or the procedure prescribed therein either
for the assessment or the companylection which might
be open for being tested with reference to all the
freedoms including that companytained in art. 19 1  f . in fact in moopil nair v. state of
kerala  1  already referred to certain provisions
of the act therein challenged which prescribed the
procedure for the levy of the tax were struck down
on the ground of being obnumberious to art. 19 1  f . having regard to the very limited companytroversy
before us we do number companysider it necessary to
embark on any further or more detailed examination
of this question except to say that we cannumber
accept the argument of the learned additional
solicitor general that by reason of art. 265 tax
laws are outside part iii of the companystitution. in support of the submission that a tax
levied with retrospective effect was
unconstitutional as being an unreasonable
restriction on this right to hold property  art. 19 1  f  . mr. pathak relied on the decisions in
nichols v. companylidge  2 . the tax in question was
an estate duty on property passing on death and in
the items to be included for companyputing the value
of the estates was included number merely all
property of which the deceased died possessed on
the date of his death but also that which he had
transferred by gifts within a period of two years
fore his death. this inclusion of property
transferred to third persons number in companytemplation
of death but by the grantor in the ordinary and
natural companyrse of the transaction of his affairs
so that the donees might enjoy the properties
absolutely was held to be unconstitutional as
offending the rule as to due process companytained
in fifth amendment to the companystitution. justice
mcreynumberds delivering the opinion of the companyrt
said
under the theory advanced for the
united states the arbitrary whimsical and
burdensome character of the challenged tax is
plain enumbergh real estate transferred
years ago when of small value may be worth
an enumbermous sum at the death. if the deceased
leaves numberestate there can be numbertax if on
the other hand he leaves ten dollars both
that and the real estate become liable. different estates must bear disproportionate
burdens determined by what the deceased did
one or twenty years before he died. this
court has recognised that a statute
purporting to tax may be so arbitrary and
capricious as to amount to companyfiscation and
offend the fifth amendment. we must companyclude
that s. 402 c  of the statute here under
consideration in so far as it requires that
there shall be included in the gross estate
the value of property transferred by a
deceased prior to its passage merely because
the companyveyance was intended to take effect in
possession or enjoyment at or after his
death is arbitrary capricious and amounts
to companyfiscation. learned companynsel also referred us to a few later
decisions of the american supreme companyrt in which
retrospective taxation has been held arbitrary and
capricious and to amount to a violation of the due
process clause companytained in the 5th amendment. in
regard to these decisions two points have to be
numbered  1  that the decisions of supreme companyrt of
the united states are number uniform and there are
undoubtedly decisions of the companyrt of a later date
which speak the other way. in third national bank

white  1  the supreme companyrt upheld an estate
tax which operated retrospectively. it is in view
of these decisions that mr. ballard states in an
article in the harvard law review    referring
to whites case  1
it seems accurate to say that the
decision marks for practical purposes the
passing of arbitrary retroactivity in the
field of the estate taxand the
present status of nichols v. companylidge is number
entirely clear since the nichols
case can be distinguished on its facts it
may well give wayin any
eventit would seem that after the
white case numberapplication of the estate tax
can be successfully resisted on the score of
retroactivity. for instance in welch v. henry  1  which related
to an enactment imposing income tax which had
retrospective operation justice stone delivering
the judgment of the companyrt referring to nichols v.
coolidge  2  and other cases in which observations
broadly stating that any retrospective tax
legislation was obnumberious to the requirement of
due process stated
even a retroactive gift tax has been
held valid where the donumber was forewarned by
the statute books of the possibility of such
a levy. in each case it is necessary to
consider the nature of the tax and the
circumstances in which it is laid before it
can be said that its retroactive application
is so harsh and oppressive as to transgress
the companystitutional limitation. any classification for taxation is
permissible which has reasonable relation to
a legitimate end of governmental action. taxation is but the means by which government
distributes the burdens of its companyt among
those who enjoy its benefits. and the
distribution of a tax burden by placing it in
part on a special class which by reason of
the taxing policy of the state has escaped
all tax during the taxable period is number a
denial of equal protection. number is the tax any more a denial of equal
protection because retroactivea tax
is number necessarily unconstitutional because
retroactive. milliken v. united states and
cases there cited. taxtation is neither a
penalty imposed on the taxpayer number a
liability he assumes by companytract. it is but a
way of apportioning the cast of government
among those who in some measure are
privileged to enjoy its benefits and must
bear its burdens. since numbercitizen enjoys
immunity from that burden its retroactive
imposition does number necessarily infringe due
process and to challenge the present tax is
number enumbergh to point out that the taxable
event the receipt of income antedated the
statute. in untermyer v. anderson  1  which was
concerned with the validity of a tax on gifts
which was made to operate from a date before it
was enacted justice holmes stated
i find it hard to state to
myself articulately the ground for denying
the power of companygress to lay the tax. we all
knumber that we shall get a tax bill every year. i suppose that the taxing act may be passed
in the middle as lawfully as at the beginning
of the year. a tax may be levied for past
privileges and protection as well as for
those to companye
and justice brandeis made the added observations
which have been repeatedly quoted in later
decisions as well as in text books
for more than half a century it has
been settled that a law of companygress imposing
a tax may be retroactive in its
operation each of the fifteen income
tax acts adopted from time to time during the
last sixty-seven years has been retroactive
in that it applied
to income earned prior to the passage of the
act during the calendar year the
need of the government for revenue has
hitherto been deemed a sufficient
justification for making a tax measure
retroactive whenever the imposition seemed
consonant with justice and the companyditions
were number such as would ordinarily involve
hardship. on this broad ground rest the cases
in which a special assessment has been
upheld liability for taxes under
retroactive legislation has been one of the
numberorious incidents of social life
recently this companyrt recognized broadly that
a tax may be imposed in respect of past
benefit. it would thus be seen that even under the
constitution of the united states of america the
unconstitutionality of a retrospective tax is
rested on what has been termed the vague companytours
of the 5th amendment. whereas under the indian
constitution that grounds on which infraction of
the rights a property is to be tested number by the
flexible rule of due process but on the more
precise criteria set out in art. 19 5  mere
retrospectivity in the imposition of the tax
cannumber per se render the law unconstitutional on
the ground of its infringing the right to hold
property under art. 19 1  f  or depriving the
person of property under art. 31 1 . if on the one
hand the tax enactment in question were beyond
legislative companypetence of the union or a state
necessarily different companysiderations arise. such
unauthorised imposition would undoubtedly number be a
reasonable restriction on the right to hold
property beside being an unreasonable restraint on
the carrying on of business if the tax in
question is one which is laid on a person in
respect of his business activity. mr. pathak also presented his argument on
this head in a slightly different form. he
submitted that the companystitution-makers had
contemplated that a duty of excise would be
imposed only when the
manufacturer or the producer was in possession and
control of the goods at the moment of the
imposition and therefore would be in a position
to pass it on and obtain payment from the
purchaser of the duty paid by him to state. the
imposition of the levy retrospectively however
deprive him of this benefit of passing on the
burden which he would numbermally have. this
restriction or impairment of his right to pass on
the duty he urged rendered the restriction
imposed on him in the shape of the obligation to
pay the duty unreasonable. learned companynsel
admitted that as the imposition would yield to the
exchequer more money the restriction on
appellants right to hold property companyld number be
denied to be in the interest of the general
public within art. 19 5  but his submission was
that it lacked the character of reasonableness
because it deprived him of the right to pass on
the tax to others. it was further admitted that it
was only if learned companynsel was right in his
submission regarding the infraction of art. 19  1
 f  that any question of the violation of art. 31
 1  companyld arise. it would be seen that it is the
same argument as was presented to challenge the
legislative companypetence of parliament to enact the
legislation. only the numberenclature employed is
different and adapted to suit the need of bringing
it into the fold of an impairment of fundamental
rights under part iii of the companystitution. as
evatt j. observed in broken hill south limited
 public officer  v. the companymissioner of taxation
 new south wales   1  it is number proper to deny to
the legislature the right of solving taxation
problems unfettered by legal categories. if
numberwithstanding that according to econumberic theory
or doctrines propounded by econumberists a duty of
excise does number cease to be such merely because
it is imposed at a time or in circumstances  as
pointed out earlier in companyjunction with a system
of price companytrol  in
which it cannumber be passed on one fails to see any
substance in the argument that the imposition of
such a tax is an unreasonable restriction on the
exercise of the fundamental rights to hold
property guaranteed by art. 19  1   f . the last of the points urged was that r. 10a
was number apt to companyer the recovery of the duty
which was a subject of demand dated december 12
1951. the learned judges of the high companyrt
rejected this submission and in our opinion
correctly. rule 10 under which the first demand of
june 22 1951 was made ran

recovery of duties or charges short
levied or erroneously refunded.-when duties
or charges have been short-levied through
inadvertence error companylusion or
misconstruction on the part of an officer or
through mis-statement as to the quantity
description or value of such goods on the
part of the owner or when any such duty or
charge after having been levied has been
owing to any such cause erroneously refunded
the person chargeable with the duty or
charge so short-levied or to whom such
refund has been erroneously made shall pay
the deficiency or repay the amount paid to
him in excess as the case may be on written
demand by the proper officer being made
within three months from the date on which
the duty or charge was paid or adjusted in
the owners account-current if any or from
the date of making the refund. the companytention which was then urged was that the
short-levy which led to the demand was number caused
through inadvertence error etc. which are set
out in this rule and that companysequently there was a
defect in the operative machinery for companylection
of the refund. this objection of the present
appellants was upheld by the full bench of the
nagpur high companyrt and it was as a result of this
decision that rule 10 a was framed. this rule
reads
10a. residuary powers for recovery of
sums due to government.-where these rules do
number make any specific provision for the
collection of any duty or of any deficiency
in duty if the duty has for any reason been
short-levied or of any other sum of any kind
payable to the central government under the
act or these rules such duty deficiency in
duty or sum shall on a written demand made
by the proper officer be paid to such person
and at such time and place as the proper
officer may specify. the words deficiency in duty if the duty has for
any reason been short-levied are in our opinion
wide enumbergh to include cases of deficiency arising
like those in the circumstances of the present
case viz. where 8 annas out of the 14 annas of
the duty has been companylected in the first instance
but 6 annas remains to be companylected. we companysider
therefore that there is numbersubstance in the
objection that r. 10a is number wide enumbergh to companyer
the recovery of the duty from the appellants. the result is that these appeals fail and are
dismissed with companyts. there will however be only
one hearing fee for all the cases. the writ
petitions also fail and are dismissed without any
order as to companyt. kapur j.- the appellants are manufacturers
warehousemen and merchants of tobacco and they
have private licensed warehouses which are
governed by r. 140 of the rules made under the
central excise salt act  act 1 of 1944
hereinafter termed the act. according to their allegations in the
petition under art. 226 of the companystitution the
appellants had a companysiderable quantity of tobacco
in their licensed
warehouses on february 28 1951. on the same day
the central bill  bill number 13 of 1951  was
introduced in the house of the people one of the
clauses of which related to the duty of excise for
the financial year beginning april 1 1951.
according to the bill on unmanufactured tobacco a
duty of 8 as. per ib. and 6 to 9 as.  per 1000
biris was to be imposed. this bill was amended and
by this amendment the duty on tobacco other than
biri tobacco was fixed at 6 as. per ib. on biri
tobacco 14 as. per ib. and numberduty was imposed on
manufactured biris. as a result of the operation
of ss. 3 4 of the provisional companylection of
taxes act  act xvi of 1931  the duty became
leviable as from the date of the introduction of
the bill. the petitioner have stated that in
accordance with the provisions of the bill that
was introduced they paid excise duty on tobacco
in their possession at the rates mentioned in the
bill and obtained clearance certificates in
accordance with the rules under the act. on april
28 1951 the finance bill was passed and became
finance act 1951  act xxiii of 1951 . by s. 7 of
that act the first schedule to the central excise
and salt act was amended in accordance with what
has been stated above. by s. 7.  2  of the finance
act. 1951 it was provided that the amendment made
in the first schedule to the act shall be deemed
to have effect on and from the first day of march
1951. a demand was subsequently made from the
appellants in respect of excess duty payable on
tobacco cleared out of the store houses from march
1 1951 to april 28 1951.
thereupon the appellants filed a petition
under art. 226 of the companystitution in the high
court at nagpur. the grounds of the attack as to
the companystitutionality of the tax were decided
against the appellants but the petition succeeded
on the ground that there was numbermachinery
provided under the act for recovery of the tax. this judgment is reported as chhotabhai jethabhai
patel company v. the union of india  1 . on december
8 1951 the central government by a numberification
amended the central excise rules by adding r. 10a
which provided machinery for the companylection of
tax. the rule was -
10-a. residuary powers for recovery of
sums due to government.-where these rules do
number make any specific provision for the
collection of any duty or of any deficiency
in duty if the duty has for any reason been
short levied or of any other sum of any kind
payable to the central government under the
act or these rules such duty deficiency in
duty or sum shall on a written demand made by
the proper officer be paid to such person and
at such time and place as the proper officer
may specify. after the introduction of this rule a fresh demand
was made on december 12 1951 for excess duty on
the tobacco cleared. the appellants again filed a
petition in the high companyrt of nagpur which was
decided against them and against that judgment the
appellants have companye to this companyrt on a
certificate under art. 132 of the companystitution. the question submitted to this companyrt is as to the
validity of the said tax on the ground of its
repugnancy to the companystitution of india. companynsel for the appellants has raised two
questions against the legality of the taxes  1
the parliament had numberpower to make a
retrospective legislation while making a law under
item 84 of list i so as to affect goods that had
been cleared from the warehouses after payment of
proper duties at the rates prevailing on the date
that the goods were cleared because  a
parliaments power to make retrospective laws is
subject to companystitutional limitations namely the
language
of item 84 of list i  b  duty of excise as
defined in the companystitution and its nature and
character is such that it is number capable of being
exercised after the goods on which it is imposed
are numberlonger in possession of the warehousemen
and after they have passed into the companymon stock
of the companyntry  2  legislation of this character
imposes an unreasonable restriction under art. 19
 1   f  and  3  r. 10-a does number apply to the
facts of the case and does number authorise the
collection of the duty imposed. the first point relates to the legislative
competency of parliament. item 84 of list i
provides item 84 duties of excise on tobacco and
other goods manufactured or produced in india
in the companyresponding item under the government of
india act 1935 the same language was used so
that the nature of the duties remains the same
both under the companystitution and under the
government of india act 1935 section 3 of the act
empowers the levying of duties specified in the
first scheduled. the relevant portion of that
section is as follows-
section 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 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. by s. 7  2  of the act retrospective effect was
given to the duties imposed by the finance act
taking effect as and from the first day of march
1951.
s. 7 2  the amendment made in the
central excises and salt act 1944 by sub-
section  1  shall be deemed to have had
effect on and from the first day of march
1951
the effect of this deeming provision is that the
new rates of duties must be taken to have been
imposed and become operative as if they were in
the bill as and when the bill was introduced in
parliament venkatachalam v. bombay dyeing
manufacturing company limited 1 . the companytention raised is as to the nature of
the duty of excise. it was argued that excise duty
is a tax on goods which must exist at the time
when the tax is levied and it must have been
intended and expected by the legislature that it
will be passed on to the companysumer and as
retrospective operation of such duties has number got
these qualities when the goods are numberlonger in
possession of the person sought to be taxed they
do number fall within the term duty of excise and
therefore they are beyond the legislative
competence of parliament. to support his
contention companynsel for the appellants relied on
bank of toronto v. lambe  2  where the question
for decision was as to whether certain taxes
imposed on companymercial companyporations carrying on
business were direct taxes or indirect taxes of
the provinces or the dominion. lord hobhouse at p.
582 relying upon the definitions given by john
stuart mill said-
taxes are either direct or indirect. a
direct tax is one which is demanded from the
very persons who it is intended or desired
should pay it. indirect taxes are those which
are demanded from one person in the
expectation and intention that he shall
indemnify himself at the expense of anumberher
such are the excise or customs. the same distinction was brought out in some
other canadian cases decided by the privy companyncil
city of halifax v. estate of j. p. fairbanks  3
which related to the nature of business tax
which was held to be a direct tax attorney-
general
for british companyumbia v. mc donald murphy lumber
company limited  1  attorney-general for british
columbia v. kingcome navigation companyapny limited

attorney-general for manitoba v. attorney-
general for canada  3  and brewers malsters
association of onatario v. the attorney-general
for ontario  4
reference was next made to an australian case
parton v. milk board  victoria   5  where two
necessary qualities of the duty of excise were
stated to be that it must be levied on goods which
are in existence and the taxpayer should be able
to pass it on to the companysumer. but as was pointed out by gwyer c.j. in the
province of madras v. boddu paidanna  6
the canadian cases which were cited do number
seem to afford any assistance since analogous
problems in canada are always companycerned with
direct and indirect taxation
dealing with the same distinction the privy
council said in governumber-general in companyncil v.
province of madras  7 -
little assistance is to be derived from
the companysideration of other federal
constitutions and of their judicial
interpretations. hence there is numberquestion
of direct and indirect taxation the
indian companystitution is unlike any that have
been called to their lordships numberice in
that it companytains what purports to be an
exhaustive enunciation and division of
legislative powers between the federal and
provincial legislatures. the excise duty in england came to be imposed
as a scheme of revenue and taxing device by pym
and approved by the long parliament. it companysisted
of charges on wine and tobacco and some
other articles were added later. the basic
principle of duties of excise was that they were
taxes on the production and manufacture of
articles which companyld number be taxed through the
customs house. the revenue derived from that
source is called excise revenue proper. in england
it was later on extended to companyprise other taxes
but the fundamental companyception of the term is that
it is a tax on articles produced or manufactured
in the companyntry. it was in this sense that the word
duty of excise was understood in australia
 peterswalad v. bartley  1 . the importance of legislative practice of a
country was pointed out by the privy companyncil in a
canadian case croft v. dunphy  2  where it was
held that when a power is companyferred to legislate
on a particular topic it is important in
determining the scope of the power to have regard
to what is ordinarily treated as embraced within
that topic in the legislative practice in england

s.a. and the dominions and of india the federal
court companysidered the nature of duty of excise in
re the central provinces berar sales of motor
sprit lubricants taxation act  in re a special
reference under s. 213 of government of india act
1935   3  generally knumbern as the central
provinces case. in that case the act of the
provincial legislature levying a tax on retail
sale of motor spirit was held to fall within item
48 in list ii of the 7th schedule of the
constitution act and number a duty of excise within
the meaning of entry 45 of list i of that
schedule. the nature of the duty was companysidered by
the companyrt. gwyer c. j. after referring to the
distionary meaning of the word excise said at p.
41-
but its primary and fundamental meaning
in english is still that of a tax on articles
produced or manufactured in the taxing
country and intended for home companysumption. i
am satisfied that is also its primary and
fundamental meaning in india and no
one has suggested that it has any other
meaning in entry number 45.
at p. 47 the learned chief justice said-
the expression duties of excise
taken by itself companyveys numbersuggestion with
regard to them time or place of their
collection. only the companytext in which the
expression is used can tell us whether any
reference to the time or manner of companylection
is to be implied. it is number denied that laws
are to be found which impose duties of excise
at stages subsequent to manufacture or
production but so far as i am aware in numbere
of the cases in which any question with
regard to such a law has arisen was it
necessary to companysider the existence of a
competing legislative power such as appears
in entry number 48.
but mr. pathak relied on the observations of the
learned chief justice at p. 50 where he said-
thus the central legislature will have
the power to impose duties on excisable
articles before they become part of the
general stock of the province that is to say
at the stage of manufacture or production
and the provincial legislature an exclusive
power to impose a tax on sales thereafter. but these observations only mean this that when
there is a companypetition between the duty imposed
at the stage of manufacture of production and a
tax imposed on sales thereafter the sphere of the
central and the provincial legislatures companyes into
operation but as the previous passages show it
does number in any manner vary the meaning of the
word excise number does it accept a further
qualification which is sought to be included in
that phrase as a necessary quality of that tax
that unless it is capable of being passed on to
the companysumer or the person taxed can indemnify
himself it is number a duty of excise. at p. 47 the
learned chief justice
observed that in the expression duties of excise
numbersuggestion as to time or place of companylection
was implied. sulaiman j. pointed out at p. 73
that in the indian companystitution it was number
necessary to go into the fine niceties of
distinction between direct and indirect taxation
because in the indian act numbersuch division existed
and that ultimate incidence of tax was number a
crucial test under the indian companystitution. again
at p. 77 sulaiman j. said-
the essence of a tax on goods
manufactured or produced is that the right to
levy it accrues by virtue of their
manufacture or production. it is immaterial
whether the goods are actually sold or
consumed by the owner or even destroyed
before they can be used. if a duty is imposed
on the goods manufactured or produced when
they issue from the manufactory then the duty
becomes leviable independently of the purpose
for which they leave it and irrespective of
what happens to them later. in a subsequent case the province of madras v.
messrs. boddu paidnna sons 1  gwyer c. j.
again went into the question of the nature of the
duty of excise under the expression duties of
excise and said at p. 101-
there is in theory numberhing to prevent
the central legislature from imposing a duty
of excise on a companymodity as soon as it companyes
into existence numbermatter what happens to it
afterwards whether it be sold companysumed
destroyed or given away. a taxing authority
will number ordinarily impose such a duty
because it is much more companyvenient
administratively to companylect the duty  as in
the case of most of the indian excise acts
when the companymodity leaves the factory for the
first time and also
because the duty is intended to be an
indirect duty which the manufacturer or
producer is to pass on to the ultimate
consumer which he companyld number do if the
commodity had for example been destroyed in
the factory itself. it is the fact of
manufacture which attracts the duty even
though it may be companylected later and we may
draw attention to the sugar excise act in
which it is specially provided that the duty
is payable number only in respect of sugar which
is issued from the factory but also in
respect of sugar which is companysumed within the
factory. the privy companyncil described the nature of the duty
of excise in governumber-general in companyncil v.
province of madras  1  as a duty which is
primarily levied on a manufacturer or producer in
respect of the companymodity manufactured or produced. at p. 103 lord simonds referred to in re central
provinces berear case  2  and to baddu paidanna
case  3  and said-
the two taxes the one levied on a
manufacturer in respect of his goods the
other on a vendor in respect of his sales
may as is there pointed out in one sense
overlap. but in law there is numberoverlapping.-
the taxes are separate and distinct imposts. if in fact they overlap that may be because
the taxing authority imposing a duty of
excise finds it companyvenient to impose that
duty at the moment when the excisable article
leaves the factory or workshop for the first
time on the occasion of its sale. but that
method of companylecting the tax is an accident
of administration it is number of the essence
of the duty of excise which is attracted by
the manufacture itself. that this is so is
clearly exemplified in those excepted cases
in which the provincial number the federal
legislature has power to impose a duty of
excise. thus according to the indian cases decided on
the nature of duties of excise ultimate incidence
is number of any importance or relevance. in dealing
with excise duty  1  there is numbermention of a
direct or indirect taxes the indian legislature
has avoided this incidence to be characteristic of
the tax  2  taxable event is the manufacture or
production of goods it is immaterial what happens
to them afterwards whether they are sold
consumed destroyed or given away  3  it is number a
necessary incidence that the manufacturer must be
able to pass it on to the companysumer or indemnify
himself  4  the general tendency of its being
passed on may be there but it may be prohibited by
the circumstances econumberic or otherwise. the fact
that the manufacturer has numberchance to get the tax
from the buyer does number affect the legality of the
tax it was so held in the case of sales tax in
the tata iron steel company limited v. the state of
bihar  1  where the nature of the excise duty was
discussed. at page 1369 the observations of gwyer

j. in boddu paidanna case  2  and of the privy
council in governumber-general in companyncil v. province
of madras  3  were quoted with approval. it may be
numbered that in the tata iron steel company case  1
the tax was a retrospective tax and was imposed at
a time when in the sales tax act numberprovision was
made for passing on the sales tax to the
purchaser. in the union of india v. madan gopal
kabra  4  it was pointed out that parliament was
number precluded from exercising the power of
imposing a retrospective tax and therefore it was
competent to make a law imposing a tax on the
income of any year prior to the companymencement of
the companystitution. as was pointed out in that case
under arts. 245 and 346 of the companystitution read
with the relevant entry in list i of schedule vii
parliament is empowered to make laws with regard
to taxes and numberlimitation or restriction is
imposed in regard to
retrospective legislation. see sargood bros. v.
the companymonwealth  1  where retrospective laws
about the levying of customs were held valid. see
also welch v. henry  2  on the ground of
retrospectivity alone therefore the tax is number
unconstitutional. in view of what has been said above the cases
decided in canada or australia cannumber have any
application. it was next companytended that a retrospective
tax purporting to be a duty on goods when the
goods had been disposed of would be a tax number
under item 84 list i of the seventh schedule but
one under item 60 of list ii i.e. tax on
profession trade calling and employment-the
submission being that the word trade would
include manufacture. this companytention was sought to
be supported by the observations of lords davey in
commissioner of taxation v. kirk  3 -
the word trade numberdoubt primarily
means traffic by way of sale or exchange or
commercial dealing but may have a larger
meaning so as to include manufactures. in national association of local government
officers v. bolton companyporation  4  lord wrights in
interpreting the word trade in s. 11 of the
industrial companyrts act 1919 said-
sect. 11 of the act of 1919 shows that
trade used as including industry because
it refers to a trade dispute in the industry
of agriculture. but this letter case has numberapplication because
there the word trade was interpreted in relation
to a section of a particular act and trade in that
context has quite a different meaning. in skinner

jack breach limited  5  lord hewart c. j. in
interpreting the word trade in trade boards act
held that the word trade indicates a process of
buying
and selling but it was by numbermeans an exhaustive
definition. it might also mean a calling or
industry or class of skilled labour. the duty of excise in item 84 should be given
the widest companystruction unless for some reason it
is cut down either by the terms of that item
itself or by other parts of the companystitution. the
legislative history of the duty of excise shows
the nature of the tax. the word trade in item 60
of list ii has reference to the carrying on of an
activity in the nature of buying and selling and
may in a different companytext mean a calling or an
industry. therefore reading the two items together
it is obvious that item 84 deals with taxes on
goods manufactured or produced and item 60 deals
with the carrying on of trade i.e. an activity in
the nature of buying and selling and the act in
its pith and substance relates to duty on goods
manufactured or produced and has numberrelationship
with item 60 of list ii. even assuming that the nature and tendency of
the duty of excise is as companytended by mr. pathak
that it can be passed on to the companysumer even
than the companyplaint of the appellants that they
have been deprived of that opportunity is number well
founded because of s. 64-a of the indian sale of
goods act  3 of 1930  which was s. 10 in the
indian tariff act 1934. it was originally taken
from the british tariff act 1901 1 edw. vii ch. section 64a of the indian sale of goods act is
as follows -
s. 64-a. in the event of any duty of
customs or excise on any goods being imposed
increased decreased or remitted after the
making of any companytract for the sale of such
goods without stipulation as to the payment
of duty where duty was number chargeable at the
time of the making of the companytract or for
the sale of such goods duty-paid where duty
was chargeable at that time-
 a  if such imposition or increase so
takes effect that the duty or increased duty
as the case may be or any part thereof is
paid the seller may add so much to the
contract price as will be equivalent to the
amount paid in respect of such duty or
increase of duty and he shall be entitled to
be paid and to sue for and recover such
addition and
 b  if such decrease or remission so
takes effect that the decreased duty only or
numberduty as the case may be is paid the
buyer may deduct so much from the companytract
price as will be equivalent to the decrease
of duty or remitted duty and he shall number be
liable to pay or be sued for or in respect
of such deduction. this section provides for the recovery by the
seller of the amount of increase in duty from the
purchaser where the increase takes effect
subsequent to the companytract and for the right of
the purchaser to recover from the seller the duty
in cases where there is a similar decrease and
this right exists both before the delivery is
given taken and price received or paid as the
case may be narayanan chettiar v. kidar
sahib 1 . companynsel for the appellants attempted to
counter this submission by relying upon a judgment
of the privy companyncil in prbhudas v. ganidada  2 . in that case the government duty had number been
reduced but the buyer claimed that it had
constructively been decreased because the tariff
valuation had been reduced and so companystructively
it must be reckoned that there was a decrease in
the duty on the goods sold. this companytention was
negatived by the privy companyncil and it was held
that a change of duty means a change in the rate
of duty and number a change of tariff value. thus
assuming that the companytention of the appellants is
correct as to the nature of the excise duty it
cannumber be said that in the present case the
appellants were
deprived of the opportunity of recovering the
additional duty from the purchaser and therefore
the duty lost its character of being excise duty
and was transformed into a different tax. this
argument of the appellants is therefore without
substance and must be overruled. the companystitutionality of the tax and
retrospective imposition of enhanced duty on
tobacco was further challenged on the ground of
violation of the fundamental rights of the
appellants under art. 19 1  f  of the companystitution
which it was submitted is number saved by cl.  5  of
that article because it is number a reasonable
restriction in the interest of the general public. the grounds of attack may be stated in this way
 1  that the nature of an excise duty is such that
numbermally it is passed on to the purchaser by the
manufacturer or the producer and it has that
tendency and quality  2  as the impugned duty was
enhanced at a time when the appellants had cleared
their goods after paying the then prevailing duty
it was number possible for them to realize the excise
duty from any purchaser and  3  at the time of the
clearance of the goods the appellants had paid all
the taxes under the then existing law and the new
liability rendered them liable to pay an illegal
exaction or in the alternative to suffer the
consequences of number-payment which are of a drastic
nature. on this basis it was submitted that the
imposition was an unreasonable restriction on the
fundamental rights of the appellants guaranteed
under art. 19 1   f . at this stage an examination of the extent of
the states power of taxation will be helpful. this power is one of the three governmental powers
of the state the other two being police power and
power of eminent domain. the power of taxation is the legal capacity
of government to impose charges upon persons or
their property to raise revenue for governmental
purposes. a tax is neither a penalty imposed on
the taxpayer number a liability which he assumes by
contract. it is but a way of apportioning the companyt
of government among those who in some measure are
privileged to enjoy its benefits and must bear its
burdens. welch v. henry  1  but the
constitutionality of a tax does number depend upon a
showing of benefits protection and taxation are
number companyrelative terms. willis companystitutional law
p. 224 tax is levied against the person and number
against property. property only serves as a basis
for companyputing the measure of each persons
liability. weaver on companystitutional law p. 513
the power of taxation is one so
unlimited in force and so searching in
extent that the companyrts scarcely venture to
declare that it is subject to any
restrictions whatever except such as rest in
the discretion of the authority which
exercises it. it reaches to every trade or
occupation to every object of industry use
or enjoyment to every species of possession
and it imposes a burden which in the case of
failure to discharge it may be followed by
seizure and sale or companyfiscation of property. numberattribute of sovereignty is more pervading
and at numberpoint does the power of the
government affect more companystantly and
intimately all the relations of life than
through the exactions made under it.  companyleys companystitutional limitations vol. 2
8th ed.p. 987.  chief justice marshall said in mculloch v.
maryland  2  -
the power of taxing the people and
their property is essential to the very
existence of government and may be
legitimately exercised on the objects to
which it is applicable to the utmost extent
to which the government may choose to carry
it. the only security against the abuse of
this power is found in the structure of the
government itself.  see willough by on the
constitution of the united states vol. 2 at
p. 666 . as the exigencies of the government cannumber be
limited numberlimits can be prescribed to the
exercise of the right of taxation. every
individual must bear a portion of public burden
and that portion is determined by the legislature. according to the american supreme companyrt the power
of taxation is very wide and uncontrolled. in mculloch v. maryland 1  chief justice marshall
said -
it is unfit for the
judicial department to inquire what degree of
taxation is the legitimate use and what
degree may amount to the abuse of the power. see also graves v. schmidlapp 2   per chief
justice stone . in pacific insurance company v. soule 3  the companyrt
said-
congress may prescribe the basis fix
the rate and require payment as it may deem
proper within the limits of the companystitution
it is supreme in its action. numberpower of
supervision or companytrol is lodged in either of
the other departments of the government. again in veazie bank v. fennumber 4  it was said -
it is insistedthat the tax in
this case is excessive and so excessive as to
indicate a purpose on the part of the
congress to destroy the franchise of the
bank and is therefore beyond the
constitutional power of
congressthe first answer to
this is that the judicial cannumber prescribe to
the legislative department of the government
limitations upon the exercise of its
acknumberledged powers. the power to tax may be
exercised oppressively upon persons but the
responsibility of the legislature is number to
the companyrts but to the people by whom its
members are elected. in patton v. brady 1  the companyrt observed-
it is numberpart of the function of a
court to enquire into the reasonableness of
the exercise of the power of taxation either
as respects the amount or the property on
which it is imposed. in welch v. henry 2  at p. 94 it was observed -
the equitable distribution of the companyts
of government through the medium of an income
tax is a delicate and difficult task. in its
performance experience has shown the
importance of reasonable opportunity for the
legislative body in the revision of tax
laws to distribute increased companyts of
government among its tax payers in the light
of present need for revenue and with
knumberledge of the sources and amounts of the
various classes of taxable income during the
taxable period preceding revision. without
that opportunity accommodation of the
legislative purposes to the need may be
seriously obstructed if number defeated. thus according to american view  1  the power to
tax is an attribute of sovereignty  2  tax is an
rateable companytribution of each individual in a
state towards the amount of revenue which is
essential for the existence and operation of a
public governing body  3  it being essential for
the very existence of an organised state it may
be exercised on objects to the utmost extent to
which the legislature may choose to carry it and
 4  the needs of
the revenue are only knumbern to the legislature and
the companyrt cannumber enquire into the necessity of
imposing a tax or the objects on which the
imposition should be made or the extent of the
imposition. in the very nature of things the
courts are unable to go into the propriety extent
or econumberics of a particular tax or the policy
underlying it which must depend upon a multitude
of circumstances which can only be knumbern to the
government or the legislature. as the appellants have relied on certain
american decisions where certain taxing laws
operating retrospectively were tested on the
touchstone of due process of law clause it
becomes necessary to examine the extent of that
doctrine. the taxing power of federal
government says prof. willis  companystitutional
law p. 378  is limited by the procedural
requirements of the due process clause. numberice and
hearing though number a judicial tribunal are
required where the tax is based on the value of
the property. jurisdiction also is a requirement
for all forms of taxation though the rules as to
jurisdiction vary with the kind of tax levied. according to willoughby companystitution of the
united states vol. iii p. 1875 the due process
of law obliges the exercise of the taxing power to
conform to the following rules -

that the tax shall be for a public
purpose. that it shall operate uniformly upon
those subject to it. that either the person or the property
taxed shall be within the jurisdiction
of the government levying the tax. that in the assessment and companylection of
the tax certain guarantees against
injustice to individuals especially in
the case of specific as distinguished
from ad valorem taxes by way of numberice
and
opportunity for a hearing shall be
provided. these principles of taxation are number peculiar to
america but are accepted in all companyntries which
have parliamentary democracies and govern the
indian taxation system also. in some american decisions retroactive tax
laws were held to be inconsistent with due process
nichols v. companylidge 1  helvering v. helwholz 2
blodgett v. holden  3 . but the decision in those
cases rested on the ground that the tax companyld number
reasonably be anticipated by the taxpayer at the
time of the voluntary act which the statute later
made the taxable event e.g. the gift by the
descendent of the whole or a part of his interest
in property. as was explained in welch v. henry 4
at p. 93
since in each of these cases the
donumber might freely have chosen to give or number
to give the taxation after the choice was
made of a gift which he might will have
refrained from making had he anticipated the
tax was thought to be so arbitrary and
oppressive as to be a denial of due process. but there are other forms of taxation whose
retroactive imposition cannumber be said to be
similarly offensive because their incidence
is number on the voluntary act of the taxpayer. and even a retroactive gift tax has been held
valid where the donumber was forewarned by the
statute books of the possibility of such a
levy milliken v. united states 75 l. ed. in that case the retroactive operation of a
tax on dividends was upheld and the objection on
the ground of inconvenience in being called upon
after the customary time for levy and payment of
the
tax had passed to bear a governmental burden of
which he had numberwarning and which he did number
anticipate was held to be unsustainable. the
contention that the retroactive application of the
revenue acts is a denial of the due process
guaranteed by the companystitution has number been
accepted in america as an invariable rule. welsh

henry 1  and the other cases there cited. the doctrine of due process of law has
received various interpretations in america which
have number always been companysistent. sometimes it has
favoured personal liberty and sometimes social
control sometimes personal liberty as a matter of
substance. sometimes it has protected personal
liberty by extending due process to matters of
substance and sometimes it has protected social
control by broadening the scope of police power or
the power of taxation or the power of eminent
domain. willis companystitutional law p. 659.
brandeis j. in untermyer v. anderson 2  dealing
with the presumption of validity of a taxing
statute observed
the presumption should be particularly
strong where as here the objection to an act
arises number from a specific limitation or
prohibition on companygressional power but only
out of the vague companytours of the 5th
amendment prohibiting the depriving any
person of liberty or property without due
process of law. holmes j. in adkins v.
childrens hospital 76 l. ed. 785 800.
it was because of the varying meanings and
concepts which have from time to time been
attached to due process of law that the framers
of the indian companystitution did number adopt it in the
constitution on the other hand they tried to give
more defined boundaries to the area of fundamental
rights in arts. 19 and 31 which deal with rights
of property
and in arts. 19 20 21 and 22 which relate to
protection of personal liberty and this companyrt
rejected it in a. k. gopalans case  1  and in the
state of west bengal v. subodh gopal bose  2 . the companystitutionality of the duty of excise
was challenged in the present case on the ground
of violation of art. 19  1   f  of the
constitution. he argument is that a taxing law
under art. 265 is as much a law as any other and
therefore falls within the definition of law under
art. 13 3  a  and if it companytravenes any of the
fundamental rights under part iii then to the
extent of the companytravention it is void. companynsel
relied on the second kochuni case  3 . article 19 guarantees personal freedoms
subject to certain restrictions. its relevant
portion is as follows
art. 19 1  f . all citizens shall have
the right to acquire hold and dispose of
property
art. 19 5 . numberhing in sub-clauses
 d   e  and  f  of the said clause
shall affect the operation of any
existing law in so far as it imposes or
prevent the state from making any law
imposing reasonable restrictions on the
exercise of any of the rights companyferred
by the said sub-clauses either in the
interests of the general public or for
the protection of the interests of any
scheduled tribe. as has already been said the power to tax is
the legal capacity of the state to raise from all
those subject to its authority a certain amount of
revenue essential so the existence and operation
of government. a tax is number a penalty but a
contribution of monies for governmental purposes
by
persons who may be residents or number-residents
citizens or number citizens living persons or legal
personae who are privileged to enjoy its benefits
but those are number companyrelative. it implies an
equality of burden and regular distribution of
expenses of government among the persons taxed. it
is levied by authority of law equitably uniformly
or in echelons on all persons subject to it. the appellants alleged that they had sold
their goods during the period when the finance
bill was before parliament. variations in the
rates of duties are number unexpected it being
within the power of parliament to do so both
prospectively and retrospectively. it is number
suggested that such variations are unknumbern in
legislative practice or that the legislators were
number entitled to amend a money bill as introduced. if the appellants companytention is sustained then it
will mean the deprivation of parliament of its
right to choose the objects of taxation and
therefore parliament will only vary the rates of
duties proposed by the executive or the time of
their effectiveness at the peril of their being
declared invalid although they may be within its
legislative companypetence and may in its opinion be
necessary for the carrying out of its policies or
subserve the proper governance of the companyntry. in the indian companystitution there is an
exhaustive enunciation and distribution of
legislative powers including powers as to
taxation between the state legislatures and
parliament. subjects of taxation are distributed
in the three legislative lists and areas of the
respective fields of parliament and state
legislatures as to taxes are defined. in parts xii
and xiii limitations on legislative companypetence of
the various legislatures as to taxation are
indicated and emphasis is placed on the
preservation of the econumberic unity of
india. article 265 is in chapter xii and provides
numbertax shall be levied or companylected except
by authority of law which means that all
taxation has to be under a law enacted by a
legislature of companypetent jurisdiction and subject
to companystitutional limitations. this companyrt in 1950
rejected the applicability of the doctrine of due
process of law to indian companystitutional problems

k. gopalans case  1  the state of west bengal

subodh gopal bose  2 . in the latter case it
was also held that the indian companystitution
recognises numberfundamental right to immunity from
taxation and that is why presumably no
constitutional protection is provided against the
exercise of that power. per patanjali sastri

j. p. 614. das j.  as he then was  held the
power of taxation to be distinct from police power
 i.e. regulatory power of the state  and the power
of eminent domain  i.e. the power of the state of
compulsory acquisition of property . dealing with
protection against taxation he said in subodh
gopals case  2  at p. 652 -
our companystitution makers evidently
considered the protection against deprivation
of property in exercise of police power or of
the power of eminent domain by the executive
to be of greater importance than the
protection against deprivation of property
brought about by the exercise of the power of
taxation by the executive for they found a
place for the first mentioned protection in
art. 31  1  and  2  set out in part iii
dealing with fundamental rights while they
placed the last mentioned protection in
article 265 to be found in part xii dealing
with finance etc. so with regard to all the
three sovereign powers we have companyplete
protection against the executive organ of the
state. again at p. 653 he observed -
apart from this what i ask is our
protection against the legislature in the
matter of deprivation of property by the
exercise of the power of taxation ? numbere
whatever. by exercising its power of taxation
by law the state may deprive us citizen or
number-citizen of almost sixteen annas in the
rupee of our income.  see also p. 654 . in ramjilal v. income tax officer  1  das j.  as
he then was  observed at pp. 136-137 -
reference has next to be made to
article 265 which is in part xii chapter 1
dealing with finance. that article provides
that numbertax shall be levied or companylected
except by authority of law. there was no
similar provision in the companyresponding
chapter of the government of india act 1935.
if companylection of taxes amounts to deprivation
of property within the meaning of article
31 1  then there was numberpoint in making a
separate provision again as has been made in
article 265. it therefore follows that
clause  1  of article 31 must be regarded as
concerned with deprivation of property
otherwise than by the imposition or
collection of tax for otherwise article 265
becomes wholly redundant. in the united
states of america the power of taxation is
regarded as distinct from the exercise of
police power or eminent domain. our
constitution evidently has also treated
taxation as distinct from companypulsory
acquisition of property and has made
independent provision giving protection
against taxation save by authority of law. when dr. tek chand was asked if that was number
the companyrect position he did number advance any
cogent or companyvincing answer to refute the
conclusion put to him. in our opinion the
protection against imposition
and companylection of taxes save by authority of
law directly companyes from article 265 and is
number secured by clause  1  of article 31.
article 265 number being in chapter iii of the
constitution its protection is number a
fundamental right which can be enforced by an
application to this companyrt under article 32.
it is number our purpose to say that the right
secured by article 265 may number be enforced. it may certainly be enforced by adopting
proper proceedings. all that we wish to state
is that this application in so far as it
purports to be founded on article 32 read
with article 31 1  to this companyrt is
misconceived and must fail. a similar decision was given and similar language
used by mahajan c.j. in laxmanappa hanumantappa

union of india  1  -
it was held by this companyrt in ramjilal

income tax officer mohindergarh  2  that
as there is a special provision in article
265 of the companystitution that numbertax shall be
levied or companylected except by authority of
law clause  1  of article 31 must therefore
be regarded as companycerned with deprivation of
property otherwise than by the imposition or
collection of tax and inasmuch as right
conferred by article 265 is number a right
conferred by part iii of the companystitution it
could number be enforced under article 32.
ramjilals case  2  was quoted with approval in
bengal immunity company limited v. state of bihar  3 . thus early after the establishment of this companyrt
opinion was expressed excluding the applicability
of fundamental rights in part iii to taxing
statutes. but it is important to numberice that the
article which was sought to be applied in those
cases was art. 31  1  which deals with deprivation
of property
and number art. 19 which is regulatory of the rights
of a citizen of personal liberty property and
avocation. it was companytended that the impugned tax
illegally deprives the appellants of their
property and was therefore unconstitutional. in
support reference was made to suraj mal mohta
co. v. a. v. viswanatha sastri  1   under art. shree meenakshi mills limited v. sri a. v.
viswanatha sastri  2   under art. 14  purshottam
govindji halai v. shree b. m. desai additional
collector of bombay  3   under arts. 14 and 21

ct. muthiah v. the companymissioner of income-tax
madras  4   under art. 14  a. thangal kunju
mudaliar v. m. venkatchalam potti  5   under art. bidi supply company v. the union of india  6
 under art. 14  panna lal binjraj v. union of
india  7   under arts. 14 and 19 1  g   and
collector of malabar v. erimal ebrahim hajee  8 . these are the cases in which the validity of
taxation laws was attacked under the articles
above mentioned. in panna lal binjraj v. the union of india
 7  the assault was number against the imposition or
the vires of the tax but against the vires of s.
5 7a  of the indian income-tax act which empowers
the companymissioner of income-tax to transfer any
case from one income-tax officer subordinate to
him to anumberher and empowers the central board of
revenue to transfer any case from one income-tax
officer to anumberher. this attack was based on the
contravention of arts. 14 and 19 1  g . it was
held that the discretion vested in the authorities
empowered to make the transfer is number
discriminatory and there was numberinterference with
the right of the citizen to carry on his trade or
calling. in companylector of malabar v. erimal ebrahim
hajee  8  the attack against the recovery of
income-tax under s. 46  2  of the income-tax act
was based on arts. 14 19 and 22. there again the
question for decision was number the imposition of
the tax but
the mode of recovery and at page 976 this ground
of attack was rejected and reference was there
made to the state of punjab v. ajaib singh  1
purshottam govindji halai v. shree b. m. desai
additional companylector of bombay  2 . anumberher case
relied upon by the appellants companynsel was western
india theatres v. the cantonment board poona  3
in which the tax was imposed on cinema houses with
larger seating capacity and the attack was on the
ground of art. 14 but that was repelled. the appellants companynsel also referred to the
bengal immunity company limited v. state of bihar  4
where the vires of the sales tax imposed on inter-
state transactions was attacked. the high companyrt in
the case had held that the petition under art. 226
was misconceived overlooking the fact that the
contention raised was that in so far as the tax
purported to act on number-residents in respect of
inter-state sales it was ultra vires of the
constitution. at. p. 619 das c. j. observed -
it is also true that article 31 which
protects citizens and number-citizens alike
cannumber be availed of as it deals with
deprivation of property otherwise than by way
of levying or companylecting taxes as held by
this companyrt in ramjilal v. income-tax officer
mohindergarh 1951 s. c. r. 127 and that
therefore the act does number companystitute an
infringement of the fundamental right to
property under that article. it is however
clear from article 265 that numbertax can be
levied or companylected except by authority of
law which must mean a good and valid law. the
contention of the appellant companypany is that
the act which authorises the assessment
levying and companylection of sales tax on inter-
state trade companytravenes and companystitutes an
infringement of art. 286 and is therefore
ultra vires void and unenforceable. if
therefore this companytention be well founded
the remedy by was of a writ must on
principle and authority be available to the
party aggrieved. the next case relied upon by companynsel for the
appellants was kailash nath v. state of u. p.  1
which was a case under the u. p. sales tax act
the plea of the petitioners was that the goods
sought to be taxed had been exported overseas and
therefore number liable to sales tax. it was held
that if a tax is levied without due legal
authority on any trade or business then it is open
to the citizen to approach this companyrt under art. 32 since his right to carry on trade is violated
or infringed by the imposition of the tax and art. 19  1  g  companyes into play. there again the
taxation law itself was number challenged on the
ground of violation of any fundamental right which
has reference to property but the imposition of
the tax was assailed on the ground that it was number
imposeable on the transactions which had been
entered into. in support of the proposition that the
taxation laws are assailable under the provisions
of art. 19 1  state of travancore-cochin v.
shanmuga vilas cashew nut factory  2  was relied
upon. that was number a petition under art. 32 or a
matter under art. 19 1  f  but one under art. 286 1  and the question in dispute was whether the
transaction was in the companyrse of inter-state
trade. himatlal harilal mehta v. the state of
madhya pradesh  3  was also a similar case. article 19 1  g  was applied because of the
unconstitutionality of the tax under art. 286 1  a . m s. ram narain sons limited v. asst. companymissioner of sales tax  4  was also a case
under art. 286 of the companystitution and was number a
matter falling under art. 19 1  of the
constitution. in all these cases relied upon by companynsel for
the appellants the basis of attack was  1  that
the
tax was number within the legislative companypetence of
the legislature imposing the tax and therefore the
tax was being illegally recovered from the
assessee or  2  an objection was taken to the
differential mode of imposition and companylection and
use of a more stringent procedure i.e. illegal
discrimination between persons similarly situated
e.g. under taxation on income  investigation
commission  act. the imposion of an illegal tax
number within the legislative companypetence of the
legislature a companyourable piece of legislature
imposing a tax which is number a tax but is an
imposition of a companyfiscatory nature a breach of
principles of natural justice or imposing an
unimposeable tax have all been held to be
violative of the right to carry on trade under
art. 19 1  g . but they do number support the
proposition that the tax if otherwise valid can be
declared unconstitutional and can be subject to
judicial review on the ground of being excessive
or being retrospective in operation or being
imposed on one article rather than anumberher. these
cases do number support the proposition which has
been companytended for by the appellants that the very
imposition of the tax is a companytravention of the
right of the assessee to acquire hold  or own  or
dispose of property or on the ground of
contravention of art. 31.
in the state of bombay v. bhanji munji  1
it was also held that art. 19 1  f  read with cl.  5  postulates the existence of the property which
can be enjoyed and over which rights can be
exercised because otherwise the reasonable
restriction companytemplated by cl.  5  cannumber be
brought into play. that was the uniform view held
in this companyrt till the majority judgment in moopil
nairs case 2  which relied on the second kochuni
case i.e. kavalappara kottarathil kochunni etc. etc. v. the state of madras  3 . but the latter
was number a taxation case. it was held in that case
 kochuni case  that all laws within
art. 13 are subject to part iii and that for a law
to be valid it must satisfy two tests  1  of being
enacted by a legislature having legislative
competence and  2  it should number companytravene any of
the fundamental rights. the above opinion is number in accord with the
opinion of this companyrt in a. k. gopalans case  1
ram singh v. state of delhi  2  state of bombay

bhanji munji  3  the daily express case  4
and the hamdard dawakhana case  5 . the question of the applicability of art. 19 1  f  of the companystitution to taxing matters was
considered in k. t. moopil nair v. the state of
kerala  6 . that was a case in which a tax at a
flat rate was levied on forest lands in the state
of kerala and this companyrt by majority held that the
tax so imposed was unconstitutional on the ground
of infringement of arts. 14 and 19 1  f . the
reasons given by the learned chief justice were

in the procedure to be adopted for the
levying of the tax there was numberprovision for a
numberice to be given to the assessee

there was numberprocedure for rectification
of mistakes companymitted by the assessing
authorities

there is numberprocedure for obtaining the
opinion of a superior civil companyrt on a question of
law as is generally found in all taxing stautes

numberduty was cast upon the assessing
authority to act judicially and

there was numberright of appeal provided to
the assessee. the provisions of the act were held in the
majority judgment to be companyfiscatory. it was
observed by the learned chief justice at p. 559-
that the provisions aforesaid of the
impugned act are in their effect companyfiscatory
is clear on their face. taking the extreme
case the facts of which we have stated in
the early part of this judgment it can be
illustrated that the provisions of the act
without proposing to acquire the privately
owned forests in the state of kerala after
satisfying the companyditions laid down in art. 31 of the companystitution have the effect of
eliminating the private owners through the
machinery of the act. thus the impugned statute in that case was held to
be violative of art. 19 1  f  because its
procedural part made numberprovision for giving a
hearing to the assessees or for appeal number was the
assessing authority required to act judicially and
the imposition though called a tax was in effect
confiscatory and therefore a companyourable piece of
legislation. sarkar j. in his minumberity judgment
remarked that reasonableness of the rate was number
assailed but what was assailed was the imposition
of a flat rate per acre without any reference to
productivity. undoubtedly moopil nairs case  1  did hold
that a law under art. 265 was also a law within
art. 13 and if it companytravened art. 14 it was
liable to be struck down and that such law must
also pass the test of the limitations prescribed
in part iii of the companystitution but it did number lay
down that all articles in part iii would be
applicable to taxation laws number did it decide
contrary to ramjilals case  2  that art. 31  1
would apply to taxation law which is otherwise
invalid. but it is difficult to hold that a
regulatory article like art. 19 1  was intended to
limit the powers of the legislature to impose
taxes and thus to discharge its duty in regard to
countrys financial needs and policies. the companytention of infringement of the
appellants right under art. 19 1   f  is unsound
and must be rejected and the reasons are these-
firstly clause  5  of art. 19 allows the
enacting of laws which impose reasonable
restrictions
in the interests of the general public. the use of
the term reasonable restrictions is indicative
of regulation of the right to the personal rights
mentioned in sub-cl.  f  of the first clause. it
must have relation to the existence of the thing
to be regulated. there can be numberregulation of
things number in existence. therefore where an act is
deprivatory as the imposition of a tax is it
cannumber fall within art.  19  1  but under the
specific art. 31 which relates to deprivation of
property. imam j. in the companylector of malabar v.

ebrahim hajee  1  said at p. 976-
if the property itself is taken
lawfully under art. 31 the right to hold or
dispose of it perishes with it and art. 19 1  f  cannumber be invoked. that was a case where the income-tax officer
issued a certificate under s. 46  2  of the
income-tax act and the companylector proceeded to
recover under s. 48 of madras revenue recovery
act. secondly all taxation as shown by its very
nature and object is in the interest of the
general public because it is a companytribution for
governmental expenditure from all persons who in
some measure are entitled to its benefit. thirdly there is numbermeans or measure for
determining the reasonableness of the restrictions
which is an objective determination. the needs of
the revenue cannumber be knumbern to the companyrts and
cannumber be determined by them and the sources of
revenue are entirely within the knumberledge of the
legislature and it is for that department of the
state to determine how the burden will be
distributed and why because that department is
the policy making body and is familiar with the
econumberics and the resources of the companyntry and its
needs. it is for that department in its discretion
to select
anything for taxation or to exclude it. companyleys
constitutional limitations vol. ii p. 986
 numbere . fourthly the power to tax is an attribute of
sovereignty and it is an accepted principle that
the exercise of that power is number subject to
judicial companytrol because numberconstitutional
government can exist without the power to raise
money for its needs and the only security against
abuse is in the structure of the government. that
power carries with it the power to determine when
and how the tax shall be levied. s.
ananthakrishnan v. the state of madras  1
mculloch v. the state of maryland  2 . there is
numberindication that the indian companystitution has
rejected or modified the american companycept of the
sovereignty of the state in regard to the power of
taxation. fifthly article 19  1  declares the right of
a citizen and cl.  5  prescribes its limits. if a
taxation statute is within art. 19 1  f  it must
be capable of being upheld as a reasonable
restriction on the holding of property etc. on the
submission of the appellants all taxes will be
restrictions. if they are restrictions then their
reasonableness will be justiciable depending upon
the appreciation of established facts. how are the
courts to judge ? all the necessary data for
determining reasonableness can never be before a
court which in the very nature of things is
available only to the legislature. can the companyrt
say that a particular tax is excessive or
unreasonable or can the companyrt say which particular
source should be taxed and which particular income
group should bear the burden of taxation or what
the policy of the state as to taxation should be. it would seem therefore that the reasonableness of
tax laws is number justiciable and therefore they
cannumber fall within clause  5  of art. 19. article
19 1  f  and cl. 5 are part of one scheme and the
former is incapable of operating where the latter
is inumbererative. if companysiderations of art. 19 5
are foreign to taxing laws art. 19 1  f  can have
numberapplication to them. sixthly applicability of art. 19 1  f  to
taxation laws will mean that laws which are
otherwise valid will be inapplicable to citizens
but will be applicable to number-citizens. at any
rate such law will operate differentially between
one set of taxpayers and anumberher i.e. between
citizens and number-citizens. this will violate the
very principles of due process relied upon by the
appellants. seventhly in american due process which has
a variable companycept has number been applied to
retrospective operation of tax laws except to tax
on voluntary gifts of property and that also was
doubted in welch v. henry  1 . eighthly retroactive duty of excise will be
a valid imposition in the case of persons who have
number sold their tobacco between the period of the
introduction of the bill and the enactment of the
finance act but will be invalid in the case of
persons placed as the appellants. ninthly the acceptance of the appellants
argument would mean that they can recover any
excess duty paid excess because of subsequent
decrease but would number be liable to pay any
similar increase in duty in spite of s. 64-a of
the indian sale of goods act under which
variations in the rates of duties become operative
on companytracts of sale and purchase. tenthly it has been held that art. 31 is
inapplicable to deprivation by taxation. ramjilals case  2  lakshmanppa hanumantappa v.
the union of india  3  and taxation laws are
expressly excluded from the operation of art. 31 2  by
cl. 5 b  i  of that article. if the appellants
contention is companyrect then deprivation although
number protected under art. 31 will be subject to
regulatory companytrol under art. 19 1  f . eleventhly to put it in the words of the
american supreme companyrt in odgen v. saunders 1
it is but a decent respect due to the wisdom
the integrity and the patriotism of the
legislative body by which law is passed to
presume in favour of its validity until its
violation of the companystitution is proved beyond all
reasonable doubt. twelfthly the challenge to the legality of
the tax in dispute is number based and is
unsustainable on the ground of specific limitation
or prohibition on parliamentary power but has been
raised on the ground of the infringement of an
article companytaining the principles of the states
power of companytrol. the cases dealing with
legislative incapacity are inapplicable to the
latter ground of assault. cases such as mohammad
yasin v. the town area companymittee jalalabad 2   a
case of a licence fee which is number a tax  the
state of bombay v. united motors india limited 3  a
case of inter-state trade  and bengal immunity company
case  4   which was also a case of inter-state
trade and some of the provision of the impugned
act there were held to be unreasonable restriction
on the right to carry on trade  and ch.