UNION OF INDIA versus STATE OF MYSORE

Citation: [1977] 1 S.C.R. 842 · Decided: 19-10-1976 · Supreme Court of India · Bench: A.N. RAY · Disposal: Dismissed

Judgment (excerpt)

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UNION OF INDIA 
v. 
STATE OF MYSORE 
October 19, 1976 
[A. N. RAY, C.J., M. H. BEG AND P. N. SHJNGHAL. JJ.] 
Constitutfrm of lmiia-Article 131-Disputes between State and 
Unio11-
J//risdiction of High Court--Clwrgc of Excise Duty-Condition of-Wlierl!<!r a11 
artfc/e mm111factllred or produced before the lery is imposed is excisable. 
•
The respondent State of Mysore runs an implements 
Factory. •the first 
•chedule to the Central Excises and Salt Act, 1944, was aD)ended whereby item 
No. 26AA was inse1ted by Finance Act, 1962. On the date when the said 
amendment came into force the respondent. had in his stock, ccrt~n iron rods 
and bars. After the amendment, however, the rods and bars were put through 
a further manufacturing process and were converted intq shovels, spades and 
other agricultural implements which were not covered by 
schedule I. The 
Central Excise Inspector issued a demand notice in respect or the said rods and 
the bars on the .ground that they were excisable. 
The r~spondcnt contended 
that no excise duty was payable o~ the said articles because when the amend-
ment came into force, they were already in the stock of the respondent and that 
they were not manufactured after the amendment came into force. 
The con-
tention of the respondent was negatived by the authorities und.or the Act. The 
Writ Petition filed by the respondent under Article 226, was allowc<l. 
Dismissing the appeal by Special Leave, 
HELD : 1. Under .Section 3 of the Act the excise duty is payable on articles 
produced or manufactured. It was admitted in the counter affidavit of the appel-
lant that the rods and bars were not produced or manufactured in the imple-
ments factory of the respondent. The goods which were made out of the rods 
and bars were admittedly not excisable goods. The appeal was dismissed as the 
goods were not liable to excise duty. [844 E-HJ 
2. The contention. that the High Court could not have decided the matter in 
'<icw of the provisions of Article 131 of the Constitution was negati'1cd on the 
ground that thern was nothing on record to show that there was any dispute 
between the Central and the State Governments. The, Union of India: was made 
a party merely because it had dismL~scd the revision application of the State 
Government. [845 A-Bl 
CIVIL APPELLATE JuRISDlCTJON : Civil Appeal 
No. 
1695 
of 
1968. 
Appeal by Special Leave from the Judgment and Order dated 
4/5-9-67 of the Mysore High Court in W.P. No. 1416/65. 
V. P. Raman, Addi. Sol. Genl., S. K. Mehtcl" and Girish Chandra, 
for the Appellant. 
H. R. Datar and N. Netli1r, for th'" Respondent. 
The Judgment of the Court was delivered by 
SHINGHAL, J.-This appeal by special leave is directed against the 
judgment of the High Court of Mysore dated September 4/5, 1967. 
The Hig!i Court was moved by the State of Mysore under article 226 
of the Constitution for quashing the demand notice dated July 21, 
·-
J 
UNION v. STATE OF MYSORE (Shinghal, J.) 
843 
1962 issued by the Inspector of Central Excise for the payment of 
Rs. 2,465.91. as excise duty on tine products despatched by the State's 
Implements Factory. 
The demand wa·s made with reference to the 
newly inserted item 26AA in the First Schedule to the Central Excises 
and Salt Act, 1944, hereinafter referred ~o as the, Act. 
That item 
was added to the Schedule by the Finance Act of 1962, and it was 
claimed by the Central Excise Department that, on the date of the 
amendment, the State Government was in possession of some stock 
of iron and steel products, namely, flats, squares and rods in its 
factor~ which had been obtained from their manufacturers when they 
were not excisable articles. The precise claim of the Excise authorities 
was that the duty became payable on t,hose articles by virtue of the 
newly i~erted item 26AA because the aforesaid stock of iron and 
steel products was used for the manufacture of agricultural implements 
like 'mamties~ pickaxes, sledge hammers, shovels and ploughs. 
The 
Assistan~ Collector of Central Excise explained in his letter dated June 
19, 1962, that the agricultural implements which were manufactured in 
the State's Implements Factory fell within the purview of item 26AA 
as they were forged or extruded during the process of manufacturing 
the agricultural implements. It was contended that the demand was 
justified because the aforesaid iron and 'steel products, out of which 
the agricultural implements were manufactur

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