UNION OF INDIA Vs. NARENDRA DHIRUBHAI DESAI
LAWS(GJH)-1966-6-3
HIGH COURT OF GUJARAT
Decided on June 20,1966

UNION OF INDIA Appellant
VERSUS
NARENDRA DHIRUBHAI DESAI Respondents

JUDGEMENT

P.N.BHAGWATI - (1.) One Dhirubhai was the manager and Karta of his joint family which consisted of himself and his two sons Kirtikumar and Narendra. The said joint family owned 64 power looms and carried on business of manufacturing art silk cloth on the said power looms in the name of Nalini Silk Mills at surat. There was no excise duty on art silk fabric upto 28th February 1954 but with effect from that date sec.8 of the Finance Act 1954 provided for levy of excise duty on art silk fabric by introducing Item No. 12A in the Central Excises and Salt Act 1944 (hereinafter referred to as the Act) in the following terms :- 12 Rayon or Artificial Silk fabrics. Rayon or Artificial silk fabrics include all varieties of fabrics manufactured either wholly or partly from the product commercially known as rayon or artificial silk but do not include any fabric xx xx xx xx (v) produced or manufactured in one or more factories by or on behalf of the same person in which less than twenty-five power-looms in all are installed. Originally when the bill was introduced Clause (v) of Item No. 12A exempted art silk fabric produced or manufactured in one or more factories by or on behalf of the same person in which less than ten power looms in all were installed but as a result of the representation made by the Art Silk Manufacturers Association Surat to the Government the exemption limit in terms of power looms was raised from 10 to 25 and the Finance Act 1954 as ultimately passed gave exemption in respect of art silk fabric produced or manufactured in one or more factories by or on behalf of the same person in which less than 25 power looms in all were installed. Since the said joint family owned 64 power looms it became liable to payment of excise duty on art silk fabric manufactured by it on the said power looms with effect from 28th February 1954. On 20th April 1954 however a partition was effected of the said power looms amongst Dhirubhai and his two sons Kirtikumar and Narendra and as a result of the partition 18 power looms went to the share of Dhirubhai 22 power looms went to the share of Kirtikumar and 24 power looms went to the share of Narendra. Narendra was a minor at the date of the partition and therefore in the partition he was represented by one Gajanan Joshi who was a close friend of the family. The partition was thereafter recorded on the next day in a memorandum drafted and prepared by an advocate practising in Surat and the memorandum was executed in triplicate by Dhirubhai Kirtikumar and Gajanan Joshi representing minor Narendra. Consequent on the partition Dhirubhai started manufacturing art silk fabric on the 18 looms allotted to his share in the name of Nalini Silk Mills Kirtikumar started manufacturing art silk fabric on the 22 looms allotted to his share in the name of Arora Textiles and Narendra started manufacturing art silk fabric on the 24 looms allotted to his share in the name of Narendra D. Desai. The result was that from and after 20th April 1954 the said 64 power looms ceased to be joint family property and the joint family ceased to manufacture art silk fabric on the said 64 power looms but instead each one of the three members of the joint family namely Dhirubhai Kirtikumar and Narendra carried on his own independent and separate business of manufacturing art it fabric on the power looms that came to his respective share on partition:- Since the power looms owned by each of these three persons were less than 25 they contended that none of them was liable to payment of excise duty In respect of art silk fabric manufactured by him with effect from 20th April 1954 nor was there any obligation on any of them to obtain any licence for carrying on the business of manufacturing art silk fabric. The Superintendent of Central Excise however by his letter dated 28th July 1954 Exhibit 96 refused to recognize the partition of the said 64 power looms amongst these three persons and stated that all the said power looms would be considered as a single unit for the purpose of central excise control. The Superintendent of Central Excise pointed out that the production of art silk fabric on all the said power looms was taxable from 28th February 1954 and that Messrs. Nalini Silk Mills being the alleged joint family firm should therefore arrange to give a complete account of art silk fabric manufactured by It from 28th February 1954 till the date of the receipt of the letter and should also maintain with immediate effect production account of all the said power looms in the prescribed forms. The alleged joint family firm was also required to submit an AL4 Application for taking out a licence and executing the necessary bond without any delay. It was stated in the letter that if the alleged joint family firm was aggrieved by this decision it may represent its case to the Assistant Collector of Central Excise Baroda within three months from the receipt of the letter. Dhirubhai as the sole proprietor of Nalini Silk Mills accordingly preferred a representation dated 2nd August 1954 to the Assistant Collector of Central Excise pointing out that in view of the partition effected between the members of the joint family none of them was liable to payment of excise duty from 20th April 1954 and that the view expressed by the Superintendent of Central Excise was therefore incorrect but the Assistant Collector of Central Excise by his order dated 13th September 1954 stated that having regard to all the facts of the case he did not see any reason to interfere with the decision of the Superintendent of Central Excise. Dhirubhai Kirtikumar and Narendra thereupon each gave a notice under sec. 80 of the Code of Civil Procedure to the Government of India and after the expiration of the period of the respective notice each of them filed a suit against the Union of India claiming a declaration that he was the owner of the power looms which came to his share as a result of the partition effected on 20th April 1954 and that such power looms being less than 25 the art silk fabric manufactured by him on such power looms was not liable to excise duty and an injunction restraining the Union of India from recovering excise duty In respect of art silk fabric manufactured by him on such power looms with effect from 20th April 1954.
(2.) The Union of India resisted the suits on various grounds of which two were of a preliminary nature. The first was that the suits were barred under sec. 40(1) of the Act and the second was that the Court had no jurisdiction to entertain the suit Inasmuch as the question whether the art silk fabric manufactured on the said 64 power looms was liable to excise duty or not was within the exclusive jurisdiction of the authorities under the Act and the jurisdiction of the civil Court In respect of such question was barred by necessary Implication. On merits the Union of India disputed the factum of partition and urged that the memorandum of partition which was relied on for the purpose of establishing the partition was not admissible in evidence since it did not bear proper stamp and was not registered. The Union of India also contended that the partition was not a valid partition since it was entered into with a view to circumvent the provisions of the Act and therefore despite the alleged partition the said 64 power looms continued to remain as one unit for the purpose of the applicability of the Act. On these contentions the Union of India submitted that the plaintiff in none of the suits was entitled to the relief claimed by him and that the suits were liable to be dismissed.
(3.) The learned trial Judge who tried the suits accepted the case of the plaintiff in each suit and negativing the preliminary objections of the Union of India held that the plaintiff in each suit was entitled to the declaration and injunction prayed for by him and accordingly granted the relief of declaration and injunction to the plaintiff in each suit. The Union of India thereupon preferred three appeals. one in each suit challenging the decision of the learned trial Judge. The learned District Judge who heard the appeals agreed with the view taken by the learned trial Judge on all the points urged before him and dismissed the appeals. The learned District Judge on a consideration of the oral as well as documentary evidence on record came to the conclusion that the partition alleged by the plaintiffs was established and that the plaintiff in each suit carried on his own independent and separate business of manufacturing art silk fabric on the power looms allotted to him on partition with effect from 20th April 1954. The learned District Judge relied on the memorandum of partition in reaching this conclusion and in regard to the admissibility of the memorandum of partition be held that the memorandum of partition was not an instrument of partition but was merely a record of the partition effected on the previous day and it was therefore not required to be stamped as an instrument of partition nor was it required to be registered and it could not therefore be held to be inadmissible on the ground of want of proper stamp or registration. The learned District Judge negatived the plea of the Union of India that the partition was invalid because it was effected with a view to circumventing the provisions of the Act and pointed out that it was quite proper and legal for the plaintiffs to have effected the partition if by doing so they could legitimately avoid the incidence of excise duty. The learned District Judge also rejected the preliminary objections of the Union of India and held that the Court had jurisdiction to entertain the suits and that the suit were not barred by sec. 40(1) of the Act. The learned District Judge accordingly held that the plaintiff in each suit being the owner of the power looms allotted to his respective share and such power looms being less than 25 the art silk fabric manufactured by him on such power looms was not liable to excise duty under Item 12A of the First Schedule to the Act and in the result he confirmed the decrees passed by the learned trial Judge granting the reliefs of declaration and injunction prayed for by the plaintiff in each suit. The Union of India thereupon preferred three Second Appeals in this Court. These three appeals involve identical questions of law and it would therefore be convenient to dispose then of by a common judgment.;


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