United India Roller Flour Mills Ltd. vs The Union of India (UOI)

Padmanabhan, J.—This Writ Petition coming on for hearing on Friday the 12th day of September 1980 and to this day, upon perusing the

petition and the affidavit filed in support thereof, the order of the High Court dated 13.6.78 and made herein, and the Counter affidavit filed herein,

and the records relating to the order in 1961 of 1971 dated 31.10.71 on the file of the respondent comprised in the return of respondent to the

writ made by the High Court, and upon the hearing arguments of Mr. K. Krishhnamurthi Iyer, Advocate, for the petitioner and of Mr. M.N.

Balasubramaniam, Additional Central Government Standing Counsel, on behalf of the respondent, the Court made the following order:

The petitioner, M/s. United India Rollei Flour Mills Ltd., are manufacturers of wheat products such as Maida, Suji, Atta and Bren. In the

Finance Bill of No. 271 of 1971 presented to the Parliament on 28.5.1971, Maida was proposed to be included under item 1-F of the Central

Excise Tariff. On the basis of the proposal to subject Maida to excise duty, a sum of Rs. 32,004/- calculated on the basis of ad valorem duty at 10

per cent was collected from the petitioners in respect of the Maida manufactured for the period from 29.5.71 to 9-6-71. The Bill was passed by

Parliament on 10.8.1971. The Act so passed did not levy excise duty on Maida as was proposed in the Finance Bill. On the very same day the

Government of India issued Notification No. 162 dated 10.8.71 stating that Maida would be exempt from payment of excise duty. In view of this

position, the petitioners applied to the Asstt. Collector of Central Excise, Madras for refund of Rs. 32,004/- which was provisionally collected

from the petitioners by way of excise duty on Maida. The Asstt. Collector of Central Excise, Madras, dismissed the application by his letter dated

8.5.1972. Since the order of dismissal was communicated in the form of a departmental memo, the petitioners could not file an appeal. The

petitioners, therefore, filed yet another regular application on 17.7.1975 for the refund. That application too was rejected by the Asstt. Collector of

central Excise, Madras, by the order dated 30.7.1975. The petitioners then preferred an appeal before the Collector of Central Excise, Madras.

The appeal was also rejected on 17.11.1975. The petitioners'' further revision to the Government of India was also rejected on 31.10.1977. This

petitioners received a copy of the order on 31.10.1977. This writ petition has been filed for the issue of a writ of mandamous directing the

respondent, the Union of India, to refund the sum of Rs. 32,004/- which was collected from the petitioners as Excise duty on Maida Under

Provisional Collection of Taxes Act.

Mr Krishnamurthi Iyer, learned Counsel for the petitioners, contends that by virtue of the proposal in Finance Bill No. 271 of 1971 presented to

the Parliament on 28.5.1971 the respondent-Union of India had authority to make a provisional collection of excise duty on Maida from the very

date of the introduction of the Bill in the Parliament, that pursuant that the petitioners paid the excise duty due on Maida manufactured between

29.5.1971 and 9.6.1971, but however, the Finance Act which was passed on 10.8.1971 did not contain a provision for the levy of excise duty on

Maida as was proposed in the Finance Bill, that on the very same day, the Government of India issued Notification No. 162 stating tint Maida

would be exempt from levy of excise duty and that, in view of that, the Union of India is bound to refund the sum of Rs. 32,004/- which was

provisionally collected towards excise duty from the petitioners on Maida manufactured by them between 29-5-1971 and 9.6.1971. In this

connection, the learned Counsel relied on the decision of the Madhya Pradesh High Court Flour & Food Ltd. Indore V Union of India and Ors.

(M.P. No. 164 of 1971).

Mr. K. N. Balasubramaniam, learned Central Government Standing Counsel, contended that along with the introduction of the Finance Bill in the

Parliament on 28.5.1971, a Notification was issued by the Union of India u/s 3 of the Provisional Collection of Taxes Act (Central Act XVI of

1931) declaring that the proposal to levy excise duty on maida would have immediate effect. The learned Counsel further argued that though the

declaration made by the Union of India was withdrawn by Notification No. 162 dated 10.8.71, the Notification No. 162 dated 10.8.1971 would

not have any retrospective effect and that the said notification has only prospective operation on the levy of excise duty on maida with effect from

10.8.1971. Consequently the excise duty that was collected from the petitioners prior to 10.8.71 and after 28.5.1971 was authorised by law.

According to Mr. Balasubramaniam, Section 5(1) of the Act would not be attracted to the facts of this case, and consequently the petitioner would

not be entitled to any refund. In other words, the contention of Mr. Balasubramaniam is that the collection of excise duty from the petitioners for

the period from 28.5.1971 to 9.6.1971 was authorised by law and could not be held to be unauthorised under Article 265 of the Constitution of

India. According to the learned Counsel Section 5 of the Provisional Collection of Taxes Act would not be attracted because the Bill was not

passed in any amended form.

It is not dispute 1 that Finance Bill No 271 of 1971 which was presented to the Parliament on 28.5.1971 provided for the levy of excise duty

on maida, that maida was included under item IF of the Central Excise Tariff and that an ad valorem duty of 10 per cent was proposed to be

levied. It is also not disputed that the petitioners paid a sum of Rs. 32,004/- towards excise duty on maida manufactured by them for the period

19.5.1971 to 9.6.1971. Section 3 of the Provisional Collection of Taxes Act, 1931 reads as follows:

where a bill to be introduced in Parliament on behalf of Government provides for the imposition or increase of a duty of customs or excise, the

Central Government may cause to be inserted in the bill a declaration that it is expedient in the public interest that any provision of the Bill relating

to such imposition or increases shall have immediate affect under the Act.

It is not in dispute that the Finance Bill No. 271 of 1971 did contain a declaration that the provision in the Bill relating to imposition of excise duty

on maida would have immediate effect. In is admitted that it was by virtue of the declaration made u/s 3 of the Act that the petitioners paid the

excise duty of Rs. 32,004/-:

The question that arises is whether in view of the fact that the Finance Act that was ultimately passed by parliament did not contain a provision

for the imposition of excise duty on maida the petitioners would be entitled to a refund of the duty already paid by them. Section 4 of the

Provisional Collection of Taxes Act reads as follows:

(1) A declared provision shall have the force of law immediately on the expiry of the day on which the Bill containing it is introduced.

(2) A declared provision shall cease to have the force of law under the provisions of this Act

(a) when it comes into operation as an enactment, with or without amendment, or

(b) when the Central Government in pursuance of a motion passed by Parliament, directs by notification in the official Gazette, that it shall cease to

have force of law, or

(c) if it had not already ceased to have the force of law under Clause (a) or Clause (b) then, on the expiry of the seventy-fifth day after the day on

which the Bill containing it was introduced.

Section 5 of the Act reads as follows:

(1) Where a declared provision comes into operation as an enactment in an amended; form before the expiry of the seventy-fifth day after the day

on which the Bill containing it was introduced, refund shall be made of all duties collected which would not have .been collected if the provision

adopted in the enactment had been the declared provision.

Provided that the rate at which refunds of any duty may be made under this sub-section shall not exceed the difference between the rate of such

duty, proposed in the declared provision and the rate of such duty in force when the Bill was introduced.

(2) Where a declared provisions ceases to have the force of law under Clause (b) or Clause (c) of Sub-section (2) of Section 4, refunds shall be

made of all duties collected which would not have been collected if the declaration in respect of it had not been made.

The following propositions emerge from Sections 4 and 5:

(1) A provision to impose customs or excise duty in respect of which a declaration has been made u/s 3 of the Provisional collection of Taxes Act

shall cease to have the force of law under the said Act when an enactment is passed with or without amendment.

(2) The declaration shall cease to have the force of law u/s 3 of the Act, when by means of a motion, the Parliament directs the Central

Government to issue a notification that the declaration shall cease to have the force of law.

(3) The declaration made u/s 3 of the Act will cease to have the force of law on the expiry of the seventy-fifth day after the day on which the Bill

was introduced in parliament.

Here, there is no doubt that the Bill became an enactment on 10.8.1971 with amendment. I say that the Bill became an enactment with

amendment because the Central Excise Tariff included in the Bill stood amended by the deletion of maida which had been included under item 1-F

of the Central Excise Tariff in the Finance Bill. Consequently the declaration made u/s 3 of the Act ceases to have the Force of law by the

operation of Section 2(a) of the Act. Further Section 5(i) clearly states that where a declared provision comes into operation as an enactment in an

amended form before the expiry of the Seventy fifth day after the day on which the Bill containing the proposal was introduced in Parliament,

refund shall be made of all duties collected which would not have been collected if the provisions adopted in the enactment had been the declared

provision. In other words, where the Finance Bill contained a provision for imposition of an excise or customs duty on a particular item and a

declaration was also made u/s 3 of the Act, the manufacturer is bound to pay the duty from the date of the introduction of the Bill in Parliament.

However, if, ultimately when the Act is passed, the Act does not contain the same provision for the imposition of the said excise or customs duty

on the said goods as was proposed in the Finance Bill the person who would have paid the excise or customs duty, as the case may be,

provisionally in terms of the declaration made u/s 3 of the Act would be entitled to refund of the same.

Mr, Balasubramaniam, the learned Central Government Standing Counsel, contended that in this particular case the Finance Bill could not be

considered to have come into operation as an enactment with amendment since the Finance Act as passed totally deleted the proposed imposition

of excise duty on maida. I am unable to accept the contention of the learned Central Government Standing Counsel. If a Bill can be said to have

come- into operation as an enactment with amendment when there is an alteration in the rate of excise duty imposed in the original Bill, I am unable

to understand how a Finanos Bill cannot be said to have been passed with an amendment when the original provision to impose duty on a

particular item (in the case maida) stands completely deleted in the enactment as has been finally passed.

The learned Central Government Standing Counsel then argued that in this case the declaration was withdrawn by the Government by the

notification No. 162, dated 10.8.1971 and consequently Section 5(1) of the Act would not be attracted. It is not disputed that the Finance Bill was

passed by Parliament on 10.8.71. Obviously the notification No. 162 dated 10.8.1971 followed the enactment of the Finance Bill. Therefore it

cannot be said that this is not a case where the Finance Bill has not been passed in an amended form. In such circumstances, the petitioners would

be entitled to refund.

An identical question came up for consideration before the Madhya Pradesh High Court in Flour & Food Ltd. v. Union of India and Ors.

M.P. No. 164 of 1971. A bench of the Madhya Pradesh High Court consisting of the learned Chief Justice P.K. Tare and Justice G.L. Oza,

upheld a claim for refund. Before the Madhya Pradesh High Court, a manufacturer of Maida who had paid excise duty for the period from

29.5.71 to 12.6.1971 in terms of the declaration made by the Union of India u/s 3 of the Provisional Collection of Taxes Act, claimed refund of

the excise duty paid by him on the ground that the Finance Act had deleted the provision for imposition of excise duty originally contemplated in

the Finance Bill. The learned Judges observed as follows:

The Bill proposing a duty on the production of maida was presented in Parliament for the first time on 8th May 1971. Ultimately when the Finance

Act was passed on 10th August 1971 no duty was imposed on maida. It cannot, therefore, be doubted, and is not also in dispute, that the duty on

maida, which was proposed in the Bill, was ultimately withdrawn. It has been provided in the Act that when a Bill is presented in the House the

duties proposed in it can be lawfully collected from the next day. But it is also clear from the provisions in the Act that when such a declaration

ceases to have any effect, the duty so collected has to be refunded. In the present case, it is not in dispute that ultimately the duty on maida was not

imposed. Consequently the duty so collected could not be retained.

The learned Judge then referred to Section 5(1) of the Act and held that on that ground also the petitioner before them was entitled to an order of

refund.

Mr. K.B. Balasubramaniam then referred to the decision of Varadaraj, J in Writ Petitions Nos. 4503 of 1976 and 718 of 1977. The learned

Judge was not directly concerned with the question whether in such circumstances refund could be ordered. The learned Judge only stated that

notification No. 162 dated 10.8.1971 had no retrospective effect. We are not concerned with that question at all. This is a clear case where the

provision for imposition of excise duty on maida in the Finance Bill was not implemented by including it in the Finance Act. It must, therefore, be

deemed there was no excise duty on maida at all. Consequently, the duty that was collected provision ally could not be retained and it has got to

be refunded to the petitioners.

In the said circumstances, the writ petition is allowed and rule nisi is made absolute. The petitioners will be entitled to their costs.

Advocate fee is fixed at Rs. 250/-(Rupees Two hundred and fifty only).

To be paid by the Respondent to the Petitioner. (Rupees One hundred and twelve & paise fifty only).