LexMAHARAJA SHREE UMAID MILLS LTD. versus UNION OF INDIA
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2 S.C.R. SUPREME COURT REPORTS 515 MAHARAJA SHREE UMAID MIT~LS LTD. v. UNION OF INDIA (S. K. DAS, J. L. KAPUR, A. K. SARKAR, M. HIDAYATULLAH and RAGHUBAR DAYAL, JJ.) Euiae Duty-Agret111ef1J with Rukr-Exempting payment of duty-If amount• to law-Whether ag1·eem•nl binding on Government of India-Power of Parliament to alte1' ll!Jreement- Constitulion of India, Art. 295. A formal agreement executed in 1941, between the Ruler ofjodhpur and the appellant provided that the State would exempt the appellant from State or Federal excise duty and income-tax, super-tax, surcharge or any other tax on income and that if the appellant had to pay any such duty or tax, the State would refund the same to the appellant. After India had attained independence, Jodhpur joined the United State of Rajasthan on April 7, 1949. On January 26, 1950, Rajasthan became a Part B State. The Central Excises and Salt Act, 1944, was extended to Rajasthan from April 1, 1950, and the Union of India recovered excise duty from the appe- llant for the period 1-4-1950 to 31-3-1952. Similarly, the Indian Income-tax Act, 1922, was extended to Rajasthan and the Union sought to assess and recover inr:-01ne~tax from the appellant. The appellant contended that it was not liable to pay any exci!e duty or income-tax on the grounds that the agreement of 1941 with the Ruler ofjodhpurunder which the exemptions were granted was law which continued in force and that even if the agreement was purely contractual, the rights and obligations thereunder were accepted by each succeed- ing Sovereign and under Art. 295 (1) (b) of the Constitution they became the rights and obligations of the Government of India which could not be abrogated by any law. The appe- llant further contended that under the agreement it was entitl· ed to a refund from the State of Rajasthan of the excise duly paid by it. Held, that the appellant was liable to pay the excise duty and income-tax. The 1941 agreement was not law and did not have the force of law. Every order of a Sovereig;1 Ruler cannot be treated as law irrespective o! the m1tl1fc or character thereof. 1962 1961 Md.r•jo Shm UllllJll MUls Ltd, ... Uni .. If Illdia 516 SUPREME COURT REPORTS [1963]SUPP. The true nature of the or<ler has to be considered and the order to be Jaw must have the characteristics of law, that is, of a binding rule of conduct as the exprCision of the will of the Sovereign, which does not derive its authority from a mere contract. An agreement which is based solely on the consent of the parties is different from a law which derives its sanction from the will of the Sovereign. The 1941 agreement was entirely contractual in nature and was not law, as it had none of the characteristics of law. Ameer-un-niasa Begum v. Mahboob Begum, A. I. R. (1955) S. C. 352, Director of Endowmenls, Government of Hyderabad v. Akram Ali, A. I. R. (1956) S. C. 60, Madliarao Phallce v. Tiu State of Madhya Praduh, [1961] IS. C. R. 957 and Promode Ohandra Dev v. State of Ori&.•a, [1962) Supp. I S. C. R. 4-05, referred to. The 1941 agreement contained no term and no under- taking as to exemption from excise duty or income-tax to be imposed by the Union Legislature in future. As such the question of succeeding Sovereigns accepting such a term and an obligation arising therefrom under Art. 295 (I) (b) did not arise. Apart from this, the correspondents showed that neither the United State of Rajasthan nor the Part B State of Rajasthan affirmed this agreement. Even if the obligation under the agreement continued and Art. 295 (I) (b) was applicable to it, there was nothing in Art. 295 which prohibited Parliament from enacting a law as to excise duty or income-tax altering the terms of the agreement. Maharaj Umeg Singk v. Blau of Bombay, A. I. R. (1955) s. a. 540, referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 214/56. Appeal from the judgment and order dated October 19, 1953 of the Rajasthan High Court in D. B. Civil Misc. Writ No. 47of1953. WITH Civil Appeal No. 399 of 1960. Appeal from the judgment and decree dated May 7, 1959, of the Rajasthan High Court in D. B. Civil Regular First Appeal No. JO of J955, ---~---.--- 2 s.t:.R. SUPREME;couRT REPORTS . li17 G. S. Pathak, -Rameshu·ar Nath, · S. N. Andley and P. L. Vohra, for the appellants •. I. JI. C. Setalvad, · Attorney-General for India, II. N. Sa-1iyal, ··Additional Solicitor General of In
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