Modi, J. - (1.) THIS is a writ application by the Mewar Textile Mills Bhilwara under Art. 226 of the Constitution and has arisen under the following circumstances.
(2.) THE petitioner is a limited company carrying on business of the manufacture and sale of yarn and cloth at Bhilwara, and, 'inter alia' manufactures Dhoties. It is admitted that the petitioner increased the number of spindles from 7812 to 10860 and the number of looms from 250 to 300 during the period, April 1952 to December, 1052. The Government of India in exercise of the powers conferred by S. 3, Essential Supplies (Temporary Powers) Act (No. 24) of 1946 made the Cotton Textiles (Control) Order, 1948. By Cl. 20 of the Order, the Textile Commissioner was given the power to issue directions from time to time to any producer regarding the classes or specifications of cloth or yarn and the maximum or minimum quantities to be produced, and it was incumbent upon the producer to produce cloth or yarn accordingly. In pursuance of Cl. 20 referred to above, the Textile Commissioner, Bombay, issued a notification dated 9 -12 -1952, by which he directed that no producer shall, during December, 1932, and every subsequent month thereafter produce quantity of dhoties more than 60 per cent of the average quantity packed for sale by such producer per month during April, 1951, to March 1952, and the petitioner was also informed accordingly. On 24 -12 -1952 the Textile Commissioner directed the petitioner not to produce more than 97,350 yards of dhoties per month. Then came into force the Dhoties (Additional Excise Duty) Ordinance (No. 6) of 1953 (hereinafter referred to as the Excise Ordinance), and this provided for the levy of additional excise duty on the quantity of dhoties packed by a mill (as defined under the Ordinance) in excess of the permissible quota from 26 -10 -1953. By S. 3 of the Ordinance, it was laid down that the permissible quota of dhoties which may be packed by any mill during any quarter shall be one -fourth of 60 per cent, of the total quantity of dhoties packed by that mill during the relevant period, and under explanation (1) of S. 3, the Central Government declared by a notification in the official gazette the twelve months' period between April, 1951, to March, 1952, as the relevant period. By S. 4 it was further laid down that where the quantity of dhoties packed by any mill on or after the commencement of this Ordinance exceeds in any quarter the permissible quota for that quarter, there shall be levied and collected on that quantity of dhoties which is in excess of the permissible quota a duty of excise at the rate or rates which may be applicable thereto as specified in the Schedule appended to the Ordinance. This Schedule imposed the excise duty on a graduated scale rising with the quantity of the excess over the permissible quota. The Textile Commissioner by his letter dated 31 -10 -1953, informed the petitioner that the permissible quota for it per quarter would be 2,92,050 yards, and, pro rata, for the unexpired portion of the quarter (that is, 26 -10 -1953 to 31 -12 -1953) it would be 2,12,688 yards. The Excise Ordinance was replaced by the Dhoties (Additional Excise Duty) Act, 1956 (hereinafter referred to as the Excise Act). This was enacted by Parliament and received the assent of the President on 16 -12 -1953, and was published in the Gazette of India, Extraordinary, dated 17 -12 -1953. It is remarkable that S. 3 of the Act was different from the corresponding S. 3 of the Ordinance, and the Act, instead of merely limiting the packing, now limited the issue, of dhoties and in effect it was provided that the number already fixed was the maximum quota of dhoties which might be issued Out of the mill in any quarter irrespective of the consideration whether the dhoties were manufactured during that quarter or at any time previous thereto. Section 4 was naturally cast in the same mould and it was enacted that the excise duty mentioned in the Schedule appended to the Act will be levied on the quantity of dhoties issued out of the mill in excess of the quota fixed. What is important to remember is that the Act was to be deemed to have come into force on 26 -10 -1953, which was the date on which the Ordinance was first brought into force. A quarter is defined by Cl. (d) of S. 2 of the Act as a period of three months ending on, the last day of March, June, September and December, and this was also the definition of 'quarter' under the Ordinance. The case of the petitioner is that it had a balance of 1,03,020 yards of dhoties lying with it at the commencement of 26 -10 -1953, and these had already been issued from 26 -10 -1953, to 17 -12 -1953, which was the date on which the Act had first been published. In addition, the mill states to have packed 1,62,430 yards of dhoties from the 26th October to the 16th December, 1953, out of which 1,28,990 yards were issued up to 16 -12 -1953. The mill further packed 47,956 yards of dhoties from 17 -12 -1953, up to 31 -12 -1953, and issued thereout 59,744 1/2 yards up to the end of the quarter; with the result that its total clearance came to 2,91,754 1/2 yards, that is, 79,066 1/2 yards over the prescribed figure of 2,12,683 for the unexpired period of the quarter under the Act. Consequently, the Resident Inspector of Central Excise sent a notice on 8 -6 -1954, to the petitioner to pay a sum of Rs. 25,179/8/ - as what was erroneously called "penal excise duty". This was later corrected by a subsequent letter from the Superintendent, Central Excise, Udaipur, dated 1 -7 -1954, and the amount of demand was reduced to Rs. 14,781/12/ -as being the additional excise duty on 79,066 1/2 yards of dhoties cleared in excess of the permissible quota fixed under S. 3 of the Excise Act for the period from 26 -10 -1953, to 31 -12 -1953. Thereupon the petitioner made his first writ application to this Court, questioning the aforesaid demand as illegal and ultra vires, on 14 -6 -1954, soon after the demand for Rs. 25,000 odd had been made (petition No. 142 of 1954). As this demand was later reduced by the Superintendent, Central Excise, by his letter dated 1 -7 -1954, the petitioner made a fresh application on 29 -10 -1954, and it was prayed that both these applications be heard together as they arose substantially out of the same set o œ facts and raised the same issues for decision. As the present application was based on a fresh letter of demand the former application was dismissed by an order of the Court dated 1 -11 -1954, without any decision on the merits thereof. The main contentions raised before us on behalf of the petitioner in his present application are these. First, that the Excise Act is retrospective in its operation as it was made to come into force on 26 -10 -1953, that is, a month and twenty three days before it was published in the gazette, and as its object was to levy and collect an additional excise duty on goods which had been manufactured and packed and even issued before the commencement of the Act, such a demand was illegal and, therefore, the Excise Act was void and of no effect. The contention was that an excise tax could not be levied retrospectively as it must have the potentiality of being shifted on to the consumer. Such shifting was impossible in the present case for the reason that the petitioner had already cleared a large quantity of dhoties lying with it which had been packed before 26 -10 -1953, there being under the Ordinance no prohibition against the issue of dhoties which had already been packed before the said date. This prohibition first came on 17 -12 -1953, which limited not merely packing but the total issue and did so retrospectively from 26 -10 -1953. It was, therefore, contended with great force that the mill had no opportunity to fix the price of the dhoties after taking into account the incidence of the additional excise duty. Alternatively it was contended that this was not at all an excise duty and was an attempt to regulate trade in dhoties, but such regulation was not a Union subject (see entry No. 24 of the State List and No. 52 of the Union List of the Seventh Schedule of the Constitution) and was outside its legislative competence. Secondly, it was contended that the Excise Ordinance as well as the Act violated the provisions of -Art. 14 of the Constitution as they made discrimination between mills which carried on the business of both weaving and spinning and those which merely did weaving. This discrimination was stated to have arisen as a result of the definition of the expression 'mill' as contained in both the Ordinance and the Act. Section 2(b), Excise Act, defines a mill as any building or place in which cotton yarn is spun and dhoties are manufactured by machinery moved otherwise than by manual labour, and includes every part of such building or place. Another ground of attack under the same head was that both the Ordinance and the Act discriminated between mills which had commenced business after or during the relevant period, and mills which had expanded their machinery or equipment during or after the relevant period. It was contended that the petitioner had increased the number of spindles and looms during the period between April to December, 1952 (and this fact is not controverted) but this factor could not be, and was not taken note of in any fixation of the permissible quota under the Act. This argument was raised particularly with reference to the proviso to explanation 1 of S. 3, Excise Act, which laid down that Where in the case of any mill, the relevant period so fixed is not applicable by reason of the fact that the mill came into existence or commenced working only during or after the expiry of the relevant period, the Central Government may, by a like notification, fix the permissible quota in respect thereof to be such quantity as, in its opinion, is reasonable having regard to the machinery and other equipment installed therein and to the other circumstances of the case. The contention was that the Act was bad inasmuch as it did not contain any provision for fixing a proportionately suitable quota for a mill like the petitioner which had expanded its equipment during or after the relevant period just in the same manner as it had made a provision for mills which came into existence during or subsequently to the relevant period.
(3.) ON behalf of the Union of India, who are the main contesting party, all the above contentions were denied and it was submitted that the demand made by them was just and proper and that the Excise Act as well as the Ordinance which preceded it and the notifications issued from time to time thereunder were perfectly valid and did not in any way infringe the Constitution.;