Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5
PETITIONER:
R. C. JAL & ANR.
Vs.
RESPONDENT:
UNION OF INDIA
DATE OF JUDGMENT23/02/1972
BENCH:
ACT:
Coal Production Fund Ordinance (39 of 1944)--Coal despatched
from colliery in British India to consignee in Princely
State--Liability of consignee to pay the cess.
HEADNOTE:
Coal was despatched from colleiries within British India in
December 1946 and January and February 1947, to the
appellant in Indore. The respondent filed a suit in 1953
for recovery of coal production cess levied under the Coal
Production Fund Ordinance, 1944, and r. 3(1) of the Coal
Production Fund Rules, 1944.
On the question whether the Ordinance had no territorial
operation to reach the appellant, because, he was a resident
of a Princely State at the time of dispatch of the coal.
HELD:In R. C. Jall v. Union of India, [1962] Supp. 3
S.C.R. 436,. it was held that the cess was an excise duty on
the manufacture or production of coal and that the method of
collection did not affect the essence of the duty. The coal
production cess was on the production of coal and was levied
on coal dispatched from collieries in the then British
India, that is, the taxable event happened within the then
British India. Under the Rules, the duty was to be
collected by the railway administration as a surcharge on
freight and was to be recovered from the consignee if the
freight charges were to be collected at the destination.
The appellant was the consignee and the freight charges were
to be collected from him at the destination, namely, Indore.
The cess thus became a part of the freight for purposes of
collection but in essence remained a tax on goods. Once the
duty attaches to the goods they became impressed with the
liability and the consignee was liable to pay. The suit was
filed in 1953 when Indore was within India and the right of
the Union to claim, as well the liability of the appellant
to pay, the cess, was valid and subsisting. It was not a
case of the Union seeing or enforcing any revenure law in a
foreign court. Therefore, the Union was entitled to a
decree against the appellant. [565D-H; 566B-D]
Govt. of India, Ministry of Finance v. Taylor, [1955] A.C.
491; 27 I.T.R. 356, distinguished.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1920 of 1968.
Appeal from the judgment and decree dated April 15, 1968 of
the Madhya Pradesh High Court in Letters Patent Appeal No.
21 of 1962.
M. C. Chagla, A. K. Verma, B. Datta, J. B. Dadachanji,
O. C. Mathur and Ravinder Narain, for the appellants.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5
562
Jagdish Swarup, Solicitor General of India, S. N. Prasad and
B. D. Sharma, for the respondent.
The Judgment of the Court was delivered by
Ray, J. This is an appeal by certificate from the judgment
dated 15 April, 1968 of the High Court of Madhya Pradesh up-
holding the judgment and decree passed by Nevaskar, J. of
that High Court.
The Union filed a suit against the appellant in the Court of
Small Causes Judge at Indore in the year 1953 and claimed a
decree for Rs. 83-12-0. The claim in the suit represented
coal production cess levied under Ordinance No. XXXIX of
1944 on coal and coke dispatched from collieries in the then
British India to the appellant.
The only question which falls for consideration in this
appeal is whether the Union could make a valid claim for the
amount. Counsel on behalf of the appellant contended that
the appellant was at the material time a resident at Indore
in the then Holkar State and the Ordinance passed in the
then British India would have no territorial operation to
reach him.
The Ordinance was called the Coal Production Fund Ordinance
of 1944. It extended to the whole of the then British
India. Section 2 of the Ordinance provided inter alia as
follows :
( 1 ) With effect from such date as the
Central Government may, by notification in the
Official Gazette, appoint in this behalf,
there shall be levied and collected as a cess
for the purposes of this Ordinance, on all coal
and coke dispatched from collieries in
British India a duty of excise at such rate
not exceeding one rupee and four annas for
ton, as may from time to time be fixed by the
Central Government by notification in the
official gazette;
Provided that the Central Government may, by
notification in the official Gazette, exempt
from liability to the duty of excise any
specified class or classes of coal or coke.
(2)
(3)A duty levied under this section shall be
in addition to any other duty of excise or
customs for the time being leviable under any
other law.
563
(4)The., duties imposed by this section
shall, subject to and in accordance with the
rules made under this Ordinance in this
behalf, be collected on behalf of the Central
Government by such agencies and in such manner
as may be prescribed by the rules."
Section 5 of the Ordinance conferred power on the Central
Government to make rules and to provide for inter alia the
manner in which the duties imposed by this Ordinance shall
be collected, the persons who shall be liable to make the
payments, the making of refunds, remissions and recoveries,
the deduction of collections agencies, of a percentage of
the realizations to cover the cost of collection, and the
procedure to be followed in remitting the proceeds to the
credit of the Central, Government.
The Coal Production Fund Rules, 1944 were made by the
Central Government, in exercise of powers conferred by
section 5 of the Coal Production Fund Ordinance 1944. Rule
3 related to recovery of excise duty. Rule 3(1) was as
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5
follows
"Recovery of excise duty : (1) The duty of
excise imposed under sub-section (1) of
section 2 of the Ordinance on coal and coke
shall, when such coal or coke is dispatched by
rail from collieries or coke plants, be
collected by the Railway Administrations by
means of a surcharge on freight, and such duty
of excise shall be recovered
(a) from the consignee if the freight
charges are being prepaid at the destination
of the consignment;
(b) from the consignee if the freight
charges are collected at the destination of
the consignment;
(c) from the party paying freight if the
consignment is booked on the "Weight Only"
system".
The Coal Production Fund Ordinance 1944 was repealed by the
Coal Production Fund (Repealing) Ordinance, 1947. The
Repealing Ordinance of 1947 for the avoidance of doubts
declared that the provisions of section 6 ’of the General
Clauses Act, 1887 applied in respect of such repeal.
Therefore the repeal of the 1944 Ordinance did not affect
the right of the railway to recover the surcharge on freight
or the liability of the appellant to pay and the remedy in
respect of the right and liability.
The claim of the Union related to coal production cess on
three several consignments of coal dispatched in the months
of
564
December, 1946, January 1947 and February, 1947 from three
different collieries at Mohuda, Unwia and Burhar
respectively in the then British India to the, appellant the
consignee at Indore. Each consignment was under a railway
invoice and a railway receipt. Freight was payable on each
consignment. Coal production cess was under the 1944 Rules
to be collected by means of a surcharge on freight. Freight
and the coal production cess as a surcharge thereon were
payable at the destination at Indore by the consignee. The
appellant paid freight but did not pay the coal production
cess by way of surcharge. The Union therefore sued the
appellant for the sums of Rs. 27-8-0, Rs. 27-8-0 and Rs. 28-
12-0 aggregating Rs. 83-12-0 in respect of the aforesaid
surcharge on the three several consignments.
The validity of the Ordinance came up for consideration by
this Court in R. C. fall v. Union of India(1). In that case
suit was filed in the year 1953 at Chhindwara for recovery
of coal cess on 3 consignments, of coal despatched from
collieries in the then British India in the months of
January/February, 1947 to the consignee at Indore. This
Court held that coal cess was levied and collected with the
authority of law. This Court however did not decide two
contentions sought to be raised in that case. These were
first, that coal cess is a fee and not a tax or duty and
secondly, that the consignee was a non-resident and
therefore the Ordinance not having extra-territorial
operation could not reach him.
Counsel on behalf of the appellant contended that the,
appellant was at the material time a resident of Indore and
was therefore not bound by the revenue law of the then
British India and no suit could be filed for enforcing
recovery of revenue dues against the appellant. Reliance
was placed in support of the contention on the decision of
the House of Lords in Government of India, Ministry of
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5
Finance v. Taylor and Anr.(2). In Taylor’s(2) case the
Government of India sought- to prove in the voluntary
liquidation of a company registered in the United Kingdom
but trading in India for a sum due in respect of Indian
income-tax including capital gains tax, which arose on the
sale of the company’s undertaking in India. It was held by
the majority opinion that although under section 302 of the
English Companies Act, 1948 a liquidator was required to
provide in the liquidation of the company for liabilities of
the company the tax claims would not be a liability within
the meaning of section 302 of the English Companies Act.
The unanimous opinion was that the revenue claims would not
be enforceable in relation to assets in England. The ratio
of the decision in Taylor’s(2) case is that India being a
foreign Government could not sue tile liquidator
(1) [1962] Supp. 3 S.C.R. 436.
(2) [1955] A.C. 491; 27 I.T.R. 356.
565
taylor in England for income tax levied and declared to be
payable under the Indian law. A foreign State cannot
enforce a claim for revenues against a foreigner in his home
country. The’ reason is that a foreign court will not be an
agency for tax gathering.
The decision in Taylor’s(1) case is of no aid to the
appellant in the present case. The Union in the present
case did not either sue or enforce any revenue law in a
foreign court.
The Coal Production Cess was levied on coal despatched from
collieries in the then British India. Under the Rules the
excise duty was to be collected by the railway
administration as a surcharge on freight and was to be
recovered from the consignee if the freight charges were to
be collected at the destination.- The fact found in the
present case was that the coal was despatched from the
collieries within the then British India. The appellant was
the consignee. Freight charges were to be collected at the
station of destination, namely, Indore. The appellant also
paid the freight charges on the consignments.
The levy of cess which is the taxable event happened within
the then British India. The duty of excise is determined by
reference to goods despatched from collieries. The tax is
on the production of coal. The liability to pay cess is on
the goods. The cess is a tax on goods and not on the sale
of goods. This Court examined the true character of the
cess in Jall’s(2) case and Subba Rao, J. speaking for the
Court said at page 451 of the Report : "Excise duty is
primarily a duty on the production or manufacture of goods
produced or manufactured within the country. It is an
indirect duty which the manufacturer or producer passes on
to the ultimate consumer, that is, its ultimate incidence
will always be on the consumer. Therefore, subject always
to the legislative competence of the taxing authority, the
said tax can be levied at a convenient stage so long as the
character of the impost, that is, it is a duty on the
manufacture or production, is not lost. The method of
collection does not affect the essence of the duty, but only
relates to the machinery of collection for administrative
convenience............... A perusal of the provisions of
the Ordinance clearly demonstrates that the duty imposed is
in essence excise duty and there is a rational connection
between the said tax and the person on whom it is imposed".
The ruling in gall’s(2) case establishes two propositions.
First, that the cess is a duty on the manufacture or
production of coal and secondly, the method of collection
does not affect the essence of the excise duty.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5
(1) [1955] A-C 491 (2) [1962] Supp. 3 S.C. P. 43 6.
566
The transaction of sale is a composite transaction
consisting of agreement of sale, passing of title, delivery
of goods and payment of price and costs charges of
transportation. The cess formed surcharge on the freight.
The appellant being the consignee was liable for the same.
The cess became a part of the freight for purposes of
collection but in essence the cess remained a tax on goods.
The machinery for collection of the duty is not to be
confused with the duty itself. Once the duty attaches to
the goods these became impressed with the liability and the
purchaser, namely, the consignee in the present case was
affixed with the liability to pay. The liability arose at
the colliery. The collection was to be at Indore. The
appellant became liable to pay the cess along with the
payment of the freight charges.
The suit was filed in the year 1953 when Indore was within
India and the right of the Union to claim as well as the
liability of the appellant to pay the cess was valid and
subsisting. The Union was therefore entitled to a decree
against the appellant.
Counsel on behalf of the appellant sought to raise an addi-
tional ground that there was no cause of action against
appellant No. 2. ’Notice of the application for urging
additional ground was given on 22 January, 1972. We did not
allow this additional ground to be raised at this late
stage. If the appellant had raised this question at the
trial of the suit the respondent would have dealt with the
same. We therefore thought that it would not be fair and
proper to allow this ground to be raised.
For these reasons the judgment of the High Court is
affirmed. The appeal is dismissed with costs.
V.P.S. Appeal dismissed,
567