CHHOTABHAI JETHABHAI PATEL AND CO. versus THE UNION OF INDIA AND ANOTHER

Citation: [1962] SUPP. 2 S.C.R. 1 · Decided: 11-12-1961 · Supreme Court of India · Bench: SYED JAFFER IMAM · Disposal: Dismissed

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Judgment (excerpt)

• 
THE SUPREME COURT REPORTS 
CHHOTABHAI JETHABHAI PATEL AND CO. 
v. 
THE UNION OF INDIA AND ANOTHER 
(S. J. IMAM, J. L. KAPUR, K. c. DAS GUPTA, 
RAGHUBAR DAYAL AND N. RAJAGOPALA 
AYYANGAR, JJ.) 
Excise duties-Retrospective Levy-Validity of enactment-
legislative competence of Po.rliament-Constitutional validity-
Finance Act J.951 (23 of 1951), •· 7(2)-Constitution of India 
Arts. 19(1)(/), 31, 265, Seventh Schedule, List I, Enlry 84, 
List II, Entry 60. 
The appellants who were carrying on business in tobacco 
had in their Jicenced warehouse considerable quantity of 
tohacco on February 28, 1951. 
On the same day a Bill was 
introduced in the House of the People containing the financial 
proposals of the Government of India for the fiscal year 
beginning April 1, 1951. 
Clause 7 of the Bill made provision 
for the amendment of the Central Excises and Salt Act, 
1944, 
by way of alteration of duties, inter alia, on unmanufactured 
tobacco by imposing an excise duty of 8 annas per lb, Under 
the provisions ofihe Provisional Collection of Taxes Act, 1931, 
the duty could become leviable as from 
the date of the 
introduction of the Bill and it was so made. In accordance 
therewith the appellants paid excise duty on tobacco in their 
p:>ssession at the rates mentioned in the Bill and obtained 
clearance certificates. On April 28, 1951, the Bill was passed 
and became Finance Act, 1951, but as 
passed changes were 
effected as regards the duty proposed in the Bill. Under 
s. 7(1) of the Finance Act, the duty on unmanufactured tobacco 
was increased to 14 annas per lb. Section 7 (2) thereof 
provided that "the amendments made in ~he Central Excises 
and Salt Act, 1944, 
shall be deemed to have, effect on and 
after March 1, 1951, and accordingly ..... , recoveries shall be 
made of all rluties which have not been collected but which 
would have been collected if the amendment had so come into 
force." In pursuance ofs. 7(2) a deinand \Vas made upon the 
appellants on June 22, 1951, for payment of the excess of the 
1961 
Dtcemher 11. 
lhhotaLhai J ethobh•i 
Par,.! and Co. 
v 
Thi L'ni~ oj ~nii• 
2 
SUPREME COURT REPORTS [1116:!] SUPP. 
excise duty payable on tohacco cleared out of the warehouse 
from March I, 1951, 
to April 28, 
1951. 
The appe!lanlS 
challenged the legality of the clernand on the grounds, inter 
alia, that (1) excise duty \vas· a tax on goods \\•hic:h must exist 
at the time- \vhen the tax \\·as levied and it 
1nu~t have been 
intended and 
expected by the 
kgislatur. that it would be 
passed on to the consumer, and as the retro~;>«ctive operation 
of the duties deprived 
the tax of these qualitirs they did not 
fall within the term "duties of excise" in Emry 84, List I of 
the Seventh Schedule to the Constitution of India, and 
therefore, s. 7(2) of the Finance Act, 
1951, in so far as it 
imposed an excise 
duty retrospectively before the date of irs 
enactment was beyond the legislative competence of Parliament 
and (2) the impugned levy contravened Art. l'l(l)(f), because 
a retrospective levy of an excise duty deprived the tax payer of 
the right of passing it on and rrcovering it from his buyer, and 
that this constituted a restraint on the right to h0Id property, 
which was not saved by c!.(5) of Art. 19. 
lleld: 
(I) 
Parliament acting within its own legislative 
field had the pnwers of a soverei"n legislature and could make 
a law 
pr0:spec1ively as 
well 
retrosperth·ely 
and the dutie!'\ 
leviable under 1he Central 
Excises and Salt 
Act, 194-4, as 
provided by s.7(2) <>fthe Finance Act. 1951. notwithstanding 
their imposition with retrospective effect and even if it be that 
they were incaµahle of being passed on to a buyer from the tax· 
nayer, were "duties of excise" within the meaning of Entry ~4, 
List I of the Seventh Schedule 
to the Con,titution of India. 
(2) 
The levy of the tax retrospectivdy ·under s. 7(2) of 
the Finance Act, 19.51, was 
valid and did not contravene 
Art. 19(l)(f) of the Constitution. 
Pe.r Kapur, J.-(1~ Entry 84 in List I deals \o.·ith taxes on 
1toods 
manufactured or 
produced. while Entry 60 in List 11 
deals with the carrying on of trade i.e., an activity in the nature 
of buying and <elling, and the Central Excises and Salt Ac!, 
1944, in its pith and substance relates to duty on goods manu~ 
factured or produced and has no relationship with Entry 60. 
(2) Reasonableness of tax laws is not justiciable aod there-
fore thev cannot fall within cl.(5) of Art. 1

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