UNION OF INDIA AND OTHERS versus MAHARAJA KRISHNAGARH MILLS LTD. (IN LIQUIDATION) .

Citation: [1961] 3 S.C.R. 524 · Decided: 19-01-1961 · Supreme Court of India · Bench: BHUVNESHWAR PRASAD SINHA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

I96I 
524 
SUPREME COURT REPORTS 
UNION OF INDIA AND OTHERS 
v. 
(1961) 
MAHARAJA KRISHNAGARH MILLS LTD. 
(IN LIQUIDATION) . 
. (B. P. SINHA., C.J., s. K. DAS, A. K. SARKAR, 
N. RAJAGOFALAAYYANGARand J. R.MunHOLKARJJ.) 
Cotton Excise Duty-Agreement between Pre>ident and· Raj 
Pramukh of Part B State-Right of Union to collect arrears of such 
duty payable to the State-Constitution of India, Arts. 2771 278. 
The question for determination in the appeal was whether 
the Union of India was entitled to levy and recover arrears of 
excise duty on cotton cl.0th for the period April 1, 1949, to 
March 31, 1950, payable by the respondent, a cloth mill in the 
State of Rajasthan, under the Rajasthan Excise Duties Ordinance, 
1949· After the coming into force of the Indian Constitution and 
the extension of the Central Excise and Salt Act, 1944, and the 
rules framed thereunder to the State of Rajasthan by s. II of the 
Finance Act of 1950, the duty in respect of cloth manufactured 
on and from April l, 1950, became payable under that Act. The 
appellant Union.,however, claimed that as a result of the agree-
ment entered into on February 25, 1950, by the President of India 
with the Rajpramukh of Rajasthan 11nder Art. 278 and Art. 295 
of the Constitqtion, the Union of India became entitled as from 
April l, f950,lo claim and recover all arrears of excise duties 
which the State of Rajasthan was entitled to recover from the 
respondent before the Central Excise and Salt Act, 1944, was 
extended to Rajasthan. Notice having been accordingly served 
on the respondent demanding payment of the outstanding amount 
of Rs. l,36,551-12 as payable by it, it moved the High Court 
under Art. 226 of the Constitution. On a reference by the Divi-
sion Bench which heard the matter in the first instance, the Full 
Bench finding in favour of the respondent held that Art. 277 was 
a complete refutation of the said claim by the Union and Art. 278 
and the said agreement were overridden by it. 
Held, that the provisions of Arts. 277 and 278 of the Con-
stitution, properly construed, leave no manner of doubt that 
Art. 277 was in the nature of a saving provision, subject in terms 
to the provisions of. Art. 278, permitting the States to levy a tax 
or duty which, after the Constitution could be levied only by the 
centre. But Art. 277 had to yield place to any agreement in 
respect of such taxes and duties made.between the Union Govern-
ment and the Government of a Part B State under Art. 278. 
Since there could not be the least doubt in the instant case 
that the agreement between the President and the Rajpramukh 
of Rajasthan conceded to the Union the right to levy and collect 
the arrears of the cotton excise duty in Rajasthan, the High 
Court was wrong in taking a contrary view of the matter. 
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3 s.c.R. 
SUPREME COURT REPORTS 
525 
C1v1L APPELLATE JURISDICTION: Civil Appeal No. 
252 of 1956. 
Appeal from the judgment and decree dated 
September 29, 1953, of the Rajasthan High Court 
(Jaipur Bench) in Civil Writ Application No. 28 of 
1951. 
. 
Gopal Singh and T. M. Sen, for the appellants. 
S. N. Andley, J.B. Dadachanji and P. L. Vohra, for 
the respondent. 
1961. January 19. The Judgment of the Court was 
delivered by 
SINH~, C. J.-This appeal on a certificate granted 
by the Jaipur Bench of the High Court of Judicature 
for Rajasthan that "the case involves a substantial 
question of law as to the interpretation of Arts. 277, 
278, 294 and 295 of the Constitution of India and the 
case is a fit one for appeal to the Supreme Court under 
Art. 132(1) and also under Art. 133(l)(c) of the Consti-
tution of India" is directed against the judgment 
dated September 29, 1953, of the High Court of 
Judicature for Ra.jastha.n at Jaipur to the effect that 
the appellant, the Union of India., was not entitled to 
levy and recover arrears of excise duty on cotton cloth 
for the period April 1, 1949, to March 31, 1950, from 
the respondent, the Mahara.ja. Krishnagarh Mills Ltd. 
The facts of this case, which have not been in 
dispute at any stage of the proceedings, may shortly 
be stated as follows. The respondent is a cloth mill 
located in Krishna.garb in District Jaipur in the State 
of Rajasthan. It had a stock of manufactured cloth 
on April I, 1949, and also manufactured cloth during 
the period, April 1, 1949, and March 31, 1950. In res-
pect of such cloth an excise duty became payable 
under the Rajasthan Excise Duties Ordinanc

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