Sinha, C. J. - (1.)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 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(1) (c) of the Constitution of India" is directed against the judgment dated September 29, 1953, of the High Court of Judicature for Rajasthan 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 Maharaja Krishnagarh Mills Ltd.
(2.)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 Krishnagarh in District Jaipur in the State of Rajasthan. It had a stock of manufactured cloth on April 1, 1949, and also manufactured cloth during the period, April 1, 1949 and March 31, 1950. In respect of such cloth an excise duty became payable under the Rajasthan Excise Duties Ordinance, 1949 (XXV of 1949) at rates set forth in the schedule to the Ordinance. The sum of Rs. 1,56,291 odd became payable on that account out of which only a sum of Rs. 19,739 odd was paid to the Government of Rajasthan, thus leaving the sum of Rs. 1,36,551 odd outstanding against the respondent. After the Indian Constitution came into effect, the Central Excises and Salt Act, 1944 and the rules framed thereunder were extended to the State of Rajasthan by S. 11 of the finance Act of 1950. Hence, the duty became payable in respect of the cloth manufactured on and from April 1, 1950, under the provisions of that Act. The appellant claimed that as a result of the agreement between the Government of India and the State of Rajasthan, to be noticed hereinafter in detail, and of the Constitution, the Union of India became entitled to realise the arrears of the excise duty in respect of the cloth manufactured by the respondent the cloth manufactured by the respondent before April 1, 1950. In enforcement of that claim the Superintendent of Central Excise, Jaipur, served a notice dated February 16, 1951, on the respondent demanding payment of the outstanding amount of Rs. 1,36,551 odd. The respondent thereupon filed a writ petition in the High Court of Rajasthan, Jaipur, under Art. 226 of the Constitution against (1) the Union of India, (2) the Central Board of Revenue, Delhi, (3) the Collector of Central Excise for Rajasthan, Delhi, and (4) the Superintendent of Central Excise, Jaipur, who are the appellants before us, praying for a writ of prohibition against them prohibiting them from imposing, levying or collecting any tax or duty by way of excise as also for any appropriate direction, order or writ. The writ petition was founded on the contentions that the notice of demand served upon the respondent as aforesaid was illegal and unauthorised on the ground (1) that the Central Government had no jurisdiction to levy any tax before January 26, 1950, (2) that the Central Excise and Salt Act was not in force in Rajasthan before April 1, 1950 and (3) that without the application on the rules framed by the Central Government under S. 37 of the Central Excises and Salt Act, 1944, to Rajasthan no duty could be imposed, levied or collected and those rules were made applicable to Rajasthan only on December 16, 1950.
(3.)On behalf of the appellants, who were the respondents in the High Court, it was contended that it was not correct to say that the rules framed under S. 37 of the Central Excises and Salt Act, 1944, were made applicable to the State of Rajasthan by virtue of the notification dated December 16, 1950, and it was asserted that those rules became applicable to the State of Rajasthan with effect from April 1, 1950 as a result of S. 11 of the Finance Act, 1950. It was also contended that by virtue of S. 3 of Rajasthan Excise Duties Ordinance (XXV of 1949) promulgated by His Highness the Raj Pramukh of Rajasthan on September 5, 1949, excise duty was levied on cloth and other articles produced and manufactured in Rajasthan on and after April 1, 1949, at the rates set forth in the first schedule of the said Ordinance. It was also contended that in pursuance of Arts. 278 and 295 of the Constitution the President of India had entered into an agreement with the Raj Pramukh of Rajasthan on February 25, 1950, whereby the parties agreed to accept the recommendations of the Indian States Finance Enquiry Committee, 1948-49, contained in part I of its report, read with Chapters I, II and III of Part II of its report, in so far as they applied to the State of Rajasthan together with the recommendations contained in Chapter VIII of part II of the said report. By virtue of the said agreement the Union of India became entitled to claim and recover all excise duties whether assessed or unassessed, which the State of Rajasthan was entitled to recover from the respondent as from April 1, 1949, before the Central Excises and Salt Act, 1944, was extended to the State of Rajasthan, as aforesaid.