KALYANI STORES versus THE STATE OF ORISSA AND OTHERS

Citation: [1966] 1 S.C.R. 865 · Decided: 21-09-1965 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Case Partly allowed

Cited by 10 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

I 
.A 
KALYANI STORES 
v. 
THE STATE OF ORISSA AND OTHERS 
September 21, 1965 
B 
[P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, 
c 
D 
E 
F 
G 
M. HIDAYATULLAH, J. C. SHAH AND S. M. Snau, JJ.] 
Bihar d: Orissa Excise Act. 1915, S. 21-Countervailing duty-Nature 
of-Whether can only be Imposed on imparted goods when similar goods 
mtJnufactured or produced in the State-Validity of levy before and after 
tire constitution came into force,. 
Constitution of India, Articles 301 to 305-Scope of-Whether com-
bination of Act and notification issued under it constitute existing law 
under Articles 305 and 372. 
In a petition under Article 226, the appellant challenged the imposition 
of a duty of excise on 'foreign liquor' imported into the State which had 
been levied at Rs. 40/- per L.P. Gallon until March 31, 1961, by virtue of· 
a ootification issued in 1937 under s. 27 of the Bihar and Orissa Excise 
Act, 1915, and which had been enhanced w.e.f. !st April 1961 by a fresh 
nC11.ification. 
It was contended on behalf of the appellant that since no 'foreign 
liquor' was manufactured within the State and consequently no excise duty 
was being levied on any locally manufactured 'foreign liquor', countervailM 
ing duty could not be charged on such liquor brought from outside the 
State; that the impose was in violation of Articles 301, 303 and 304 of 
the Constitution; that even if the original countervailing duty of Rs. 40/ -
could be held to be leviable, the enhancement of the existing duty made· 
the imposition a new tax which could not be levie.d if there was no corres-
ponding duty on locally manufactured goods of the same kind. The 
petition was dismissed by the High Court. 
On appeal to this Court, 
HELD (per majority) 
(i) The notification dated March 31, 1961, enhancing the duty on 
'foreign liquor' by Rs. 30/ - per gallon was invalid as it infringed the 
guarantee of freedom of trade etc. under Art. 301. [874 m 
A restriction on the freedom of trade, commerce and intercourse 
throughout the territory of India declared by Art. 301 cannot be ju.•tified 
unless it falls within Article 304. 
Exercise of power under Article 3041 a) 
can be effective only if the tax or duty imposed on goods imported from 
other States and the tax or duty imposed on similar goods manufactured 
or produced in that State are such that there is no discrimination. 
As no 
foreign liquor was produced or manufactured within the State, the protec-
tion of Article 304 was not available in the present case. [872 F, GJ 
I 
Power to levy countervailing duties under Entry 51 List II is 
meant to be exercised for the purposes of equalising the burden on alcoholic 
liquors imported from outside the State and the burden placed by excise 
H 
duties on alcoholic liquors manufactured or produced in the State. There-
fore countervailing duties can only be le,;ed if similar goods are actually 
produced or manufactured in the State on which excise duties are being 
levied. 
[869 H: 870 A] 
L8SupCIJ65-12 
865 
866 
SUPllEMB COUllT REPORTS 
[1966] l S.C.R. 
(ii) Although no 'foreign "liquor' was manufactured within the State, 
A 
.the State could continue to levy duty at the rate of Rs. 40/ - per gallon 
prescribed by the notification of 1937 even after the Constitu1ion came 
into force because that notification, and the provisions of s. 27 of tho Bihar 
and Orissa Excise Act under which it was issued, constituted an existing 
law or a law in force that was protected by Articles 305 and 372. But 
the notification of March 1961, which enhanced the duty by Rs. 30/ -
and altered the existing law could be valid only if it complied with the 
constitutional requirements. 
Existing law within the meaning of Art. 305 
B 
was the provision in s. 27 of Act 2 of 1915 authorising the State Govern-
ment to issue a notification, and the notification issued in exercise of that 
.authority. A fresh notification issued alter the Constitution could be 
valid only if it complied with the constitutional requirements. 
[872 H-
873 C] 
The Bangak>re W.C. &: 5 Mills Co. v. The Bangalore Corporation, 
A.1.R. 1962 S.C. 562 and 1263; distinguished. 
(per Hidayatullah, J. dissenting) 
The Bihar and Orissa Excise Act, 1915 was valid under the Govem-
·ment of India Act, 1935 and in view of cl. (3) of tho Adaptation of Laws 
Order, 1937, could not be questioned in a court of law. By reason of 
c 
Art. 372 of the Constitution, the Act must be deemed to be valid even 
D 
today. The absence of man

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