judgement:
Civil Appeals.
Nos. 89, 90 and 126 to 128/61.
Appeals from the judgment and order dated November 8, 1957, of the Kerala High Court in o. Ps.
Nos. 70 and 71 of 1956(K) and 2, 6 and 7 of 1955 E. M.C. Setalvad, Attorney General of India and R. Gopalakrishnan, for the appellants in a. As, Nos. 89 and 90 of 61.
G. section Pathak and V, A. Seyid Muhammad, for the respondent in C. As.
Nos. 89 and 90 of 61.
A. V. Viswanatha Sastri, A. George Titus, R. Mahalingier and M. R. Krishna Pillai, for the appellants in C. As.
126 to 128 of 61.
G. section Pathak and Sardar Bahadur, for the respondents in a. As, Nos, 126 to 128 of 1961.
744 1962.
January ` 24.
The Judgment of B. P. Sinha, C. J., P. B. Gajendragadkar, K. N. Wanchoo and M. Hidayatullah, JJ., Was delivered by Wanchoo, J, J. C. Shah, J., delivered a separate judgement.
WANCHOO, J. These five appeals on certificates granted by the High Court of Kerala raise a common question of law and will be dealt with together.
Two of them (appeals 89 and 90) are from what was formerly the Cochin area and the other three are from what was the Travancore area.
They relate to a tax on tobacco in these areas.
As the facts, laws and rules in the two areas are similar we propose to deal in detail with the appeals from the Cochin area.
In 1909, Act VII of 1084 was passed by the Maharaja of Cochin to consolidate and amend the law relating to tobacco and was called the Cochin Tobacco Act, VII of 1084 (hereinafter called the Cochin Act).
Section 4 of the Cochin Act prohibited the possession for sale, transport, import or export, sale and cultivation of tobacco except as permitted under the Act or the rules framed thereunder.
section 5 of the Act gave power to the Diwan to make rules from time to time consistent with the Act to permit.
absolutely or subject to any conditions, and also to regulate the possession for sale, transport, import or export, sale and cultivation of tobacco as well as the form of duty leviable on the sale of tobacco by retail.
The remaining provision of the Act deal with offences, prosecutions punishment, confiscation and other ancillary matters such as arrest and siezure, with which we are not concerned in the present appeals.
Reference may however be made to section 18 which provided that "no action shall lie against the sirkar or against any officer of the Excise department for damages in any civil court for any act bona fide done or ordered to be done in pursuance of this Act, or of any law for 745 the time being in force relating to tobacco revenue.
Rules were framed under the Cochin Act called the Tobacco Cultivation Rules, which, by the first rule provided that "the cultivation of tobacco plant is prohibited except under a licence and shall be restricted to such parts or localities of the State, as may, from time to time, be fixed by the Diwan. . " Rule 3 provided for drying, curing, manufacturing and storing of the tobacco, cultivated in the State, to be done under the supervision of an officer of the Excise Department in licensed manufacturing yards and storehouses.
Rule 4 provided for licensed for manufacturing yards and store houses.
Rule 5 laid down that the licences would be in force for one official year and were to be issued on payment of a fee of Rs. 50/ for each licence, Under r. 6, the tobacco crop could only be harvested after permission obtained from the Inspector of Excise and under r.7 the harvesting was to be done by the licensed cultivator under the general superintendence of the Sub Inspector.
Of the locality in which the area cultivated lay and the harvested corp was to be transported only under permits granted by him from such area to the manufacturing yard where alone manufacture was to be undertaken.
Rule 8 provided for the maintenance of a stock book by a licensee of a storehouse or n manufacturing yard.
Rule 13 provided that the licensed manufacturer and the storehouse keeper would sell or otherwise dispose of his stock only to licensed dealers and there was prohibition against the disposal or sale of tobacco to any person who had not the required license to possess the same.
Rule 15 made it an office for any one to cultivate, dry, cure, manufacture, store, transport, sell or otherwise dispose of tobacco in contravention of the Rules.
In addition to these Rules, there were further Rules also framed under the Cochin Act with, 746 respect to import of tobacco into the State, and all import was prohibited except under the provisions of the Diwan 's notification describing the sale of tobacco shops and licences.
Possession of tobacco for the purpose of sale was also prohibited except under the provisions for the sale of tobacco shops and licences.
Export of tobacco was also prohibited except with the special sanction of the Commissioner of Excise.
It further appears that the system in force for the collection of tobacco revenue up to August 1950 was to auction what were called A class and B class shops and the last of such auction was held under the notification dated May 30, 1919.
In addition there were a class shops, the licence for which was granted either on the recommendation or in consultation with class licensees at the discretion of the Excise Commissioner or any other officer authorised by him on payment of the prescribed fee.
This system along with the Rules already referred to was in force on April 1, 1950.
On April 1, 1950, after the Constitution had come into force and Travancore Cochin has become a Part State thereunder, the Finance Act, No. XXV of 1950, extended the , No.1 of 1944 (hereinafter called the Central Act), to the Part State of Travancore Cochin by section 11 thereof.
Section 13 (2) of the Finance Act, further provided that "if immediately before the 1st day of April, 1950, there is in force in any State other than Jammu and Kashmir a law corresponding to, but other than, an Act referred to in sub section
(1) or (2) of section 11, such law is hereby repealed with effect from the said date. " It seems that in consequence of this provision in the Finance Act, 1950, the rules which were in force on April l, 1950, were changed in the Cochin area by a notification dated August 3, 1950, and the system of auction sales of A clause and shops was done away with and instead 747 graded licence fees were introduced for various classes of licensees, including class licensees.
Similar change was made for the Travancore area by notification dated January 25, 1951.
These Rules introduced by these two notifications also did away with the control of cultivation, drying, curing, manufacturing and wrare housing which were in force under the earlier Rules, so that these new Rules were only concerned with licensing of A, and C class shops.
A class licensees under the new Rules were called stockists, class licensees were wholesale sellers and a class licensees were retailers.
The system for A class licensees was that they were to pay a minimum annual fee for a Maximum quantity of tobacco or tobacco goods possessed by them and additional fee for further additional quantity, Thus, for example, in the case of jaffra tobacco it was provided that maximum annual fee would be Rs.1,500/ for a minimum of 100 candies and further fee of Rs.1,000 for additional quantity of 100 candies or part there of.
The appellants of Cochin area were tobacco dealers and holders at the time they filed their petitions in 1956 of A class licences.
The main contention raised on their behalf in their petitions was that the Cochin Act stood repealed by the Finance Act 1950, on the introduction of the Central Act in the part State of Travancore Cochin from April 1, 1950 in consequence, the notification which was issued on August 3, 1950, or on January 25, 1951, framing new Rules for the issue of licences and prescribing rules therefor under the powers conferred under the Cochin Act or the similar Travancore Act were ab initio void, because the Acts under which the notifications were; purported to be issued stood repealed from April 1, 1950.
In addition various other grounds were raised challenging the validity of the new Rules which, however, we do not think it necessary for the purposes of these appeals to set out here, 748 The petitions were opposed on behalf of the State and it was contended that the Cochin Act or the similar Travancore Act did not stand repealed from April 1, 1950, In consequence it was urged that the State was competent to frame new Rules which it did under the Cochin Act or the similar Travancore Act.
Further the case of the State was that the graded licence fee introduced after April 1, , was a tax which was sustainable under item 60 or 62 of List II of the Seventh Schedule to the constitution.
The High Court dismissed the petitions holding that the laws under which the new Rules were framed were in force and were justifiable under item 62 of List II of the Seventh Schedule.
Unfortunately, though the judgment of the High court mentions the contention of the appellants that on the extension of the Central Act with effect from April 1, 1950, by the Finance Act, 1950, the Cochin Act as well as the similar Travancore Act ceased to be operative from that date, there is no discussion in the judgment with regard to this contention, and the High Court did not consider whether in view of s.13(2) of the Finance Act, 1950, the Cochin Act as well as the similar Travancore Act stood repealed from April 1, 1950.
If the effect of section 13(2) of the Finance Act, 1950, was to repeal the Cochin Act as well as the similar Travancore Act, from April 1, 1950, there will be no law in operation which would justify the framing of the new Rules either in August 1950 or`in January 1951 and it would then be unnecessary to consider whether a law contain in,as provisions similar to those contained in the notification would be within the competence of the State legislature under item 62 of` List ll of the Seventh Schedule.
That question would only arise if the Cochin Act or the similar Travancore Act survived the repeal effected by section 13(2) of the Finance Act.
749 We have therefore to see what the provisions of the Finance Act are in this Connection.
As already indicated, B. 11(1) of the Finance Act extends the Central Act and the Rules and orders made thereunder which were in force immediately after the commencement of the Finance Act to all Part States, except the State of Jammu and Kashmir.
Consequently, the Central Act as well as the Rules and orders made there under become applicable to the Part State of Travancore Cochin from April l, 1950.
Further section 13(2) of the Finance Act specifically provides that from April 1, 1950, any law corresponding to the Central Act will be repealed from that date.
The contention on behalf of the appellants is that the Cochin Act as well as the similar Travancore Act was a law corresponding to the Central Act and therefore stood repealed as from April 1, 1950, under B. 13(2) of the Act.
and it is this contention that we have to examine.
It was pointed out by this Court in The Custodian of Evacuee Property vs Khan Saheb Abdul Shakoor, etc.
(1) that where the Act repealed provides substantially for all matters contained in the Act effecting the repeal there is correspondence between the two Acts and the earlier Act would thus stand repealed; it is not necessary that there should be complete identity between the repealing Act and the Act repealed in every respect, Therefore, when section 13 (2) of the Finance Act provides that on the extension of the Central Act from April 1, 1950, to the Part State of Travancore Cochin, any law corresponding to the Central Act is repealed with effect from that date, all that we have to see whether the law repealed substantially provided for the same matters as the Central Act, even though it may not be identical in all respects.
Let us therefore turn to the Cochin Act and the rules framed thereunder to see if it substantially 750 provides for the same matters with which the Central Act and the Rules and Orders made thereunder deal.
The main contention on behalf of the respondent in this connection is that the Central Act is an Act imposing a duty of excise on tobacco under item 45 of List I of the Seventh Schedule to the Government of India Act, 1935 (now corresponding to item 84 of List I of the Seventh Schedule to .
the constitution), and such duty of excise is a duty on goods manufactured or produced in India.
Thus according to the respondent, the main feature of the Central Act is the imposition of a tax on goods produced or manufactured in India and unless the Cochin Act or the similar Travancore.
Act also imposes a tax on goods produced or manufactured in what was formerly Cochin or Travancore State these would be no question of correspondence between the Central Act and the Cochin Act or the similar Travancore Act.
Reference was also made to In Re the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act.
1938 Central Provinces and Berar Act XIV of 1938) Province of Madras v Messrs. Boddu Paidanna and Son(2) and Governor General in Council vs Provinces of Madras (3), where the nature of a duty of excise was considered.
In the first case it was held that the primary meaning of "excise duty" was of a tax on articles produced or manufactured in the taxing country (see p. 40).
It was also observed in that case that it could not be denied that laws were to be found which impose a duty of excise at stages subsequent to the manufactures or production.
In the second case it was held that duties of excise were duties levied on the manufacture or producer of the commodity taxed.
In the third case, the Privy council approved of the view of the Federal Court as to the nature of the duty of excise.
It may therefore be accepted that a duty of excise is a 751 tax on goods produced or manufactured in the taking country.
It may also be accepted that generally speaking the tax is on the manufacturer or the producer,.
though it cannot be denied that laws are to be found which impose a duty of excise at stages subsequent to the manufacture or production.
We cannot however forget that the Cochin Act or the similar Travancore Act was passed by State in which there were no such Constitutional provisions as are to be found in the Government of India Act and it legislative Lists and this aspect will have to be borne in mind when judging the question of correspondence between the Central Act and the Cochin Act or the similar Travancore Act.
Now the Central Act provides by section 3 for the levy and collection of duties of excise on all excisable goods other than salt which are produced or manufactured in India and also a duty on salt manufactured in or imported by land into any part of India.
Further section 6 of the central Act gives power to the central Government to issue licences and prohibits any person from engaging in the wholesale purchase or also whether on his own account or as a broker or commission agent or the storage of any excisable goods except under the authority and in accordance with the terms and conditions of a licence granted under the Central Act.
In Chaturbhai.
M. Patel vs The Union of India (1) where the various provisions of the Central Act (including section 6) and the rules framed thereunder were attacked on the ground that they had nothing to do with the levy and collection of duties of excise, this court held that the various provisions of the Central Act and the Rules made thereunder were essentially Connected with levying and collection of excise duty and in its true nature and character the Central Act remained one under item 45 of List I and that the incidental trenching upon the provincial field would not affect its constitutionality.
The nature of the Rules the 752 considered will appear from the following observations at p. 371: "It (the Central Act) is a fiscal measure to levy and realise duty on tobacco.
The method of realising duty must be left to the wisdom of the legislature taking each individual trade and its peculiarities and difficulties which arise in that matter.
Various provisions of the Act and the Rules show that the authorities are on the track of the movement of tobacco from the time it is grown to the time it is manufactured and sold in the market and the various provisions of the Act and the Rules made thereunder have been considered necessary for effectuating the purpose of the Act.
" It is true that the Central Act provides for the levy of excise duty under section 3 but in order to carry out that purpose it has provided for licences under section 6.
The Rules also provide in Chap.
III for levy and refund of duty, in Chap.
V for manufactured goods other than salt, in Chap.
VII for warehousing, in Chap.
VIII for licensing.
Thus in order to levy excise duty under the Central Act, there are provisions in the Rules which start in the case of tobacco from the stage of cultivation and continue right up to the time the finished product reaches the hand of the retailer and thus becomes a part of the commons stock for purposes of sale to the consumers.
We have also seen that the Cochin Act similarly provides for control on tobacco from the stage at which it is grows to the stage till`it reaches Glass licensees who sell it in retail to the consumers.
The Cochin Rules may not be so detailed as the Rules under the Central Act but their main object and purpose is the same, namely, to keep a check on tobacco from the time it is grown to the time it reaches the a Glass licensee who eventually sells it to the consumer.
Further if one looks at the Rules 753 under the similar Travancore Act in vol.
II of the Travancore Excise Manual which were in force on A April 1, 1950, in relation to tobacco it will be found that there are elaborate rules in Part III from pp.
257 to 325 dealing with all aspects of control relating to tobacco.
IV deals with bonding and issue; Chap.
V with licences for sales, Chap.
VI with transport and possession.
Further there are rules at p. 296 for cultivation, curing and warehousing.
Then at p. 14 are rules for the manufacture of cigars, cheroots and snuff in bond.
It will thus be clear r that the Cochin as well as the Travancore Rules provided for similar central of tobacco as under the Central Act and show that the authorities in Travancore and Cochin were also on the track of the movement of tobacco from the time it was grown and manufactured to the time it was sold in the market.
It would therefore follow that the Cochin Act as well as the similar Travancore Act along with the Rules corresponded to the Central Act substantially and would thus be repealed by section 13(2) of the Finance Act, 1950.
But it is urged on behalf of the State that there is no provision for charging duty in the Cochin Act or the similar Travancore Act and therefore all these provisions in the Rules for control from the time of cultivation to the time of the final stage of sale to the consumer, even though they are similar to the Rules under the Central Act, would not make the Cochin Act or the similar Travancore Act a corresponding Act to the Central Act.
There is no doubt that there is no provision corresponding to section 3 of the Central Act in the Cochin Act or in the similar Travancore Act.
Under the Cochin Act the tax was levied by virtue of the power conferred on the Diwan under section 5 to make rules for the purpose.
Under the similar Travancore Act, the provision is contained in section 31 which provides that the Diwan may with the sanction of the ruler make rules permitting 754 absolutely or subject to the payment of any duty or fee or to any other conditions, and regulating within the whole or any specified part of Travancore, the cultivation, manufacture, possession, transport, import and sale of tobacco.
So in both the former States, the Act did not contain a charging section and the duty was levied by the Rules framed by the Diwan under the powers conferred on him by the Act.
In essence, therefore, the provision for charging the tax was made in the Rules.
Further it is true that the method by which the tobacco revenue was realised was through auction sales of the right to possess and sell tobacco.
But we must not forget that the Cochin Act as well as the similar Travancore Act was passed by a Ruler who was not trammelled by a constitution like the Government of India Act, 1935, and its Legislative Lists.
The method evolved for realising tobacco revenue was to auction the right to poses and sell tobacco and the amounts received at such auctions would cover what would be duty under section 3 of the Central Act and licence fee under section 6 thereof.
It is urged however that this does not amount to duty on goods produced, nor is the duty in such a case paid by the manufacturer or producer of the goods.
We have already indicated that the essence of the duty of excise as held by the Federal Court and the Privy Council is that it is a duty on the goods manufactured or produced in the taxing country.
Further as generally the duty is on the goods produced or manufactured it is paid by the producer or manufacturer, though as in the case of all indirect taxes it is passed on eventually to the consumer in the shape of being included in the price and is thus really borne by the consumer.
Further the cases on which reliance bas been placed on behalf of the State also show that laws are to be found which impose duty of excise at stages subsequent to manufacture or 755 production.
As a matter of fact, even in British India before 1935 there used to be public auctions of the right to possess and sell excisable goods like country liquor, ganja and bhang aid the amount realised was excise revenue.
It is also obvious that this system of auction is not a system of levying sales tax because it has nothing to do with the levy on each sale, which is the essence of a sales tax.
It seems that in the former States of Travancore and Cochin, auction system continued right up to the time the constitution came into force and even for sometime thereafter.
It seems under the circumstances that the auction system which was in force was only a method of realising duty through the grant of licences to those who made the highest bid at the auctions.
The fact therefore that this system was used instead of the system of charging of duty as provided in section 3 of the Central Act would not in our opinion make any difference to the nature of the impost which was in force on the relevant date, namely, April 1, 1950.
It was however urged that under this system even tobacco which was not produced or manufactured in the State but was imported from outside was included for the purpose of licences granted under it.
That is undoubtedly so.
But from the Rules which were in force regarding cultivation, curing, manufacturing and so on of tobacco within the State it would not be unreasonable to infer that the substantial part of the income from auctions was still in the nature of excise duty.
Even in the case of imported tobacco, only with respect to that part of it which was eventually sold to the consumer as it was imported without any processing or treatment in the State, it can be said that the impost which fell on it was not in the nature of excise duty.
However, there is no way of differentiating this part of the revenue from the rest and considering the elaborate provisions as to the control of tobacco trade from the grower right up to the time that the 756 goods were sold to the public in retail sale it would r in our opinion be not unreasonable to hold that the Cochin Act as well as the Travancore Act was in substance an Act corresponding to the Central Act.
Therefore when the Central Act was extended to the Part State of Travancore Cochin by section 11 (1) of the Finance Act and the Finance Act specifically provided by section 13 (2) for the repeal of corresponding law, the result was that the Cochin Act as well as the similar Travancore Act stood repealed.
There would be no power in the State Government thereafter to frame new Rules either in August 1950 or in January 1951 for there would be no law to support the new Rules and without such law the new Rules could not impose a tax as that would clearly offend article 265 of the Constitution.
Further as soon as the Cochin Act as well as the similar Travancore Act stood repealed on April 1, 1950, by virtue of a 13(2) of the Finance Act there could be no question of their being sustained under item 62 of List II of the Seventh Schedule for that would only arise if these were not repealed as corresponding law by s.13(2).
Turning now to the three Travancore appeals it is enough to pay that they stand on the same footing as the two Cochin appeals.
If anything the Travancore Act as well as the Travancore Rules which were in force on April 1, 1950 are more elaborate than the Cochin Act and the Cochin Rules.
Further the Travancore Act by section 31 actually refers to manufacture also.
The Cochin Act did not refer to manufacture in the Act itself though there was provision for manufacture in the Rules framed under the Act.
What applies therefore to the Cochin Act and the Rules framed thereunder applies in force to the Travancore Act and the Rules framed thereunder and there is no doubt that the Travancore Act and the Rules framed thereunder were also a law corresponding to the Central Act and the Rules framed thereunder.
The Travancore Act therefore also stood repealed from April 1, 1950.
There 757 would thus be no law to support the Rules framed by the State Government in January 1951 and, therefore the Rules must fall.
It appears that these new Rules have been abrogated as from January 1958.
So it Was urged on behalf of the State that this Court should not grant a mere declaration as to the invalidity of the Rules when they are no longer in existence.
This argument in our opinion has no force because we must look to the situation as it was when the petitions were presented.
The Cochin petitions were presented in 1956 and the Travancore petitions were presented in 1955 and at that time the Rules were in force and they continued in force till December 1957.
Therefore the petitioners would be entitled to a declaration that the Rules were invalid because at any rate that would give them relief so far as the period after their petitions is concerned while the Rules remained in force.
We therefore allow the appeals and set aside the order of the High Court.
The petitions are allowed and it is hereby declared that the new Rules purporting to be framed either under the cochin Act or under the Travancore Act in August 1960 and thereafter in January 1951 were invalid ab initio and have no force and effect.
The appellants will get their costs from the State one set of hearing costs.
SHAH, J.
In this group of five appeals the principal question which falls to be determined is whether within the meaning of a 1:3(2) of the Finance Act, 1950 (which by section 11 thereof extended the Central Excise & Salt Act, I of 1944, to the Part b States), there was, immediately before the 1st of April 1950, in force in Part State of Travancore Cochin, a law Corresponding to the Central Excise & Salt Act, 1944 It is common ground that if there was such a law in force, by virtue of s.13(2) of the Finance Act of 1950, that law stood repealed, 758 The appellants in Civil Appeals Nos.89 and 90 of 1961 were carrying of the former state of Cochin.
Appellants in Civil Appeals 126 to 128 of 1961 were residents of and carried on business in tobacco with in territory of the former State of Travancore.
On July 1, 1949 the States of Travancore and Cochin from themselves into a Union under a common administration, but by the virtue of Travancore Cochin Administration Law ,6 of 1125 (M.E.), the Acts which were previously in force.
In the Territory of the former State of Travancore , there was in force the Travancore Tobacco Regulation I of Travancore in 1911.
By section 3 of the Act,"Tobacco" was define as including "snuff, cigars cigarettes, beedies, tobacco powder and other preparations or admixtures of tobacco" Section 4 of the Act imposed excepts as permitted by the Act or by any other enactment relating to tobacco for the time being in force by the Rules published under the Act or any other such enactment prohibitions against cultivation, manufacture possessions transport, importation exportation or sale of tobacco.
By Chapter III of the Act power was conferred upon the officers of the Excise Department to search house suspected to contain tobacco and provision was made for incidental matters.
Chapter IV dealt with offences and punishments and by section 31 the Diwan of the State was authorised, with the sanction of the Ruler, from time to time, by Notification in Gazette to make rules consistent with the Act amongst other subject permitting absolutely or subject to the payment of any duty or fee or to any other conditions and regulating within the whole or to any other conditions and regulating within the whole or any specified part of the State of Travancore, cultivation manufacture possession transportation 759 import and sale of tobacco; authorising the establishment of warehouses or bankshalls for storing tobacco legally cultivated or imported into the territory fixing the mode, time and place of levy T of duty, regulating the special custody of tobacco warehoused and the levy of fees for warehousing and transport, and generally to carry out the provisions of the Act.
Rules were framed in 1913 in exercise of the powers under section 31 of the Tobacco Act whereby restrictions were imposed upon the import and export of tobacco and provision was made for bonding tobacco in warehouses and for the issue of licences for bonding tobacco.
Provision was also made for licensing retail sale for tobacco and for transport and possession thereof.
Certain other rules regulating cultivation, curing and warehousing tobacco and for the issue of licences for those purposes were promulgated in 1937.
Rules were also framed regulating the manufacture of cigars, cigarettes and cheroots in bonds under licences.
It is unnecessary to set out these rules in detail, it may suffice to observe that cultivation, curing, manufacture, possession, transport, importation and exportation and sale of tobacco was controlled by a system of licensing.
Certain licences were issued free of charge and in respect of certain other licences, especially storage and sale, fee had to be paid to the State.
Similarly, in the State of Cochin there was enacted by the Ruler of Cochin the Cochin Tobacco Act of 1084 (M.E.) on May 3, 1909.
By section 3(d) of that Act, tobacco was defined as inclusive of "snuff, cigars and preparations of which tobacco forms a part " By section 4, except as permitted by the Act or by the Rules made thereunder, possession for the purposes of sale, transport, import, export, sale and cultivation of tobacco were prohibited.
By a 5, the Diwan of the State was authorised from time to time after previous publication, to make rules consistent with the Act to permit abso.
760 lutely or subject to any Conditions regulating the possession, transportation, importation or exportation and sale and cultivation of tobacco.
Contravention of the Act and the Rules or orders made under the Ace were penalised by section 6.
Rules were framed in 1923 under the Cochin Tobacco Act providing for a system of licensing for cultivation, manufacture and storage of tobacco and for incidental matters.
Control was maintained over harvesting, weighment, storage, stock taking and transport of tobacco, and also on the export and import of tobacco.
The authorities administering the provisions of the Tobacco Act and the Rules framed thereunder were the Commissioner of Excise and officers subordinate to him in the Excise Department.
Licences for storage were to be annual licences and to be issued on payment of licence fee.
Under the Cochin Act and the Rules framed thereunder control was maintained on tobacco at all the stages of its production, manufacture and disposal.
From a resume ', of the provisions of these two Acts and rules and notifications issued thereunder, it is manifest that on the production, manufacture storage and sale of tobacco control was imposed and the administration of this control was left in the hands of the Excise Departments of the two States.
As stated hereinbefore, by virtue of Act VI of 1125 (M.E.), the two Acts in operation within the territories of the two States were continued even after the Union of Travancore and Cochin as formed, and by article 372 of the constitution the provisions of the two Acts remained in operation in the respective area of the former States even after the Part`B State of Travancore Cochin came into being on January 26, 1950.
By s.11 of Finance Act 25 of 1950 certain Acts including the Central Excises & Salt Act, 1 of 1944, and all Rules and orders made thereunder in force from time to time before the commencement of the 761 Finance Act were extended with effect from April 1, 1950, to the part B States (except the State of Jammu & Kashmir), It was provided by section 13(2) "that if immediately before the 1st of April, 1950, there was in force in any State other than Jammu & Kashmir a law corresponding to but other than the Act referred to in sub section
(1) section 11 such law" shall stand repealed with effect from the said date.
Presumably, on account of the application of the Central Excises & Salt Act, I of 1944, by section 11 of the Finance Act, 1950, the Part B State of Travancore Cochin published fresh sets of Tobacco Rules.
These Rules were issued on January 25, 1951, in purported exercise of the powers conferred by the Travancore Regulation I of 1087 (M.E.) and the Cochin Tobacco Act of 1084 (M.E.).
Rule 14 (which is common to both the sets of Rules) provides that "the vend of tobacco of all kinds is prohibited throughout the state, except under a licence".
Rule 15 provides that the "licence for the vend of tobacco shall be of the following description: (i) Stockist or 'A ' Class licence; (ii) Wholesale or 'B ' Class licence ; and (iii)Retail or 'C ' Class licence." Rule 16(i) and (ii) provides: "(i) Holders of Stockist or 'A ' Class licences shall be entitled to purchase tobacco from any dealer within or without the State without any quantitative restriction.
This class of licensees shall sell only to other 'A ' Class licensees or to 'B ' Class licence, (ii) The annual fees for these licences shall be as follows: (Then follows a table which sets out minimum fee prescribed for varieties of tobacco stocked upto the maximum 762 prescribed quantity and the additional fee payable for stocking additional quantities.)" The appellants in all these appeals were 'A ' Class stockists and were called upon to pay licence fee prescribed by these Rules.
They claimed that they were not liable to pay licence fee under the Rules framed in 1951 because there was absolute delegation of legislative power by the Rules, that the levy infringed their fundamental rights under articles 14 and 19(1)(g) of the Constitution, that the duty levied was in any event an excise duty, and because the fee represented a tax on trade, calling or employment and on that account was subject to the constitutional restriction imposed by article 276 (2) of the Constitution.
They also contended that the Tobacco Acts of the Travancore State and the Cochin State, which had been kept alive by Act 6 of 1125 (M.E.) and by article 372 of the Constitution were superseded by the application of the , by section 11 of the Finance Act, 1950.
The High Court of Travancore Cochin in the petitions for writs of mandamus and other writs negatived the contentions raised by the appellants that the Acts and the Rules amounted absolute delegation of legislative power or that the fundamental rights under articles 14 and 19(1)(g) and the restrictions imposed by article 276(2) of the Constitution were infringed thereby.
The High Court also held that the duty levied was not an excise duty and presumably on that account declined to consider the question whether the Tobacco Acts of the States of Travancore and Cochin had been superseded either wholly of partially by the application of the of 1944.
The Travancore and the Cochin Acts do not directly levy any duty on production or manufacture of tobacco.
Restrictions, it is true, are imposed 763 the growing, curing, manufacture, storage, import and export by requiring that licences shall be obtained for those purposes and prescribing penalties for violating the provisions of the Acts and the Rules.
It also appears that the trade in tobacco was regulated before the formation of the B State of Travancore Cochin, by holding auctions for the rights to sell tobacco.
These auctions were held by Excise Commissioners and the highest bidder in the auction got the right to deal in tobacco, and the two Acts were enacted for regulating and controlling the sale of tobacco, but the State did not levy any duty on the manufacture or production of tobacco.
The licence fee for the issue of a licence for growing, curing, manufacturing, exporting, importing or storing is not in itself an excise duty on the manufacture or production.
The Federal Court In the matter of the Central Provinces and Berar Sales of Motor Spirit and lubricants Taxation Act, 1938 observed: . . at the date of the Constitution Act (Government of India Act 1935) though it seems that the word 'excise ' was not infrequently for the administration of a particular indirect tax (as salt excise or opium excise), the only kind of excise duties which were known in India by that name were duties collected from manufacturers or producers, and usually payable on the issue of the excisable articles from the place of manufacture or production.
This also may not be conclusive in itself, but it seems a not unreasonable inference that Parliament intended the expression 'duties of excise ' in the Constitution Act to be understood in the sense in which upto that time it had always in fact been used in India, where 764 indeed excise duties of any other kind were unknown.
Nor indeed are excise duties properly so called often to be found at the present day which are not collected at the stage of production or manufacture, whatever may have been the case in Blackstone 's time and whatever may have been the reasons for Johnson 's definition of 'Excise ' in the first edition of his Dictionary (1755). "(Per Gwyer C.J.) This view was approved by the Judicial Committee in The Governor General in Council vs The Province of Madras An excise duty is according to the Indian Statute, a duty on the manufacture or production of goods and the duty which was levied in the States of Travancore and Cochin on the storage of tobacco cannot be regarded as a duty of excise.
But that conclusion is not decisive of the problem under consideration.
The question has still to be considered whether the Travancore and Cochin Acts and the Rules framed thereunder were law "corresponding" to the , extended under the Finance Act, 1950.
The expression "corresponding" does not postulate identity of the State Law and the statute extended by section 11 of the Finance Act: if there was in force at the material time law in the Part B State dealing with a particular subject matter and the law extended by section 11 of the Finance Act, 1950, dealt with the same subject matter and the two laws though not identical still were such that if they stood together there would have been legislative duplication or overlapping, the law in force in Part B State would be regarded as corresponding to the law extended by the Indian Finance Act and hence repealed by the operation of section 13(2).
Let us examine the scheme of the of 1944 for the purpose of 765 ascertaining whether the Travancore and the Cochin Tobacco Acts and Rules frame thereunder are law corresponding to the , wholly or partially.
The , was enacted to consolidate and amend the law relating to Central duties of excise on goods manufactured or produced in certain parts of India and to salt.
The expression "excisable goods" is defined in section 2(d) as meaning "goods specified in the First Schedule as being subject to a duty of excise and includes salt".
By section 2(f) the expression "manufacture" is defined as inclusive of "any process incidental or ancillary to the completion of a manufactured product, and (i) in relation to tobacco includes the preparation of cigarettes, cigars, cheroots, biris, cigarette or pipe or hookah tobacco, chewing tobacco, or snuff x x x".
By section 3 it is provided that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India x x x and at the rates set forth in the First Schedule.
By section 6, certain incidental operations are made subject to licence and it is provided: The Central Government may, by notification in Official Gazette, provide that, from such date as may be specified in the notification, no person shall, except under the authority and in accordance with the terms and conditions of a licence granted under this Act, engage in (a) the production or manufacture of any specified goods included in the First schedule or of saltpetre or of any specified component parts or ingredients of such goods or of specified containers of any specified excisable goods, or (b) the wholesale purchase or sale (whether on his own account or as a broker or commission agent or the storage of any excisable goods specified in this behalf in Part A of the Second Schedule".
By virtue of these provisions power is conferred upon the Central Government to impose restrictions 766 upon the rights to produce, manufacture and to engage in any process of production or manufacture of the excisable goods or in the wholesale purchase or sale of excisable goods this power is conferred indisputably as ancillary to enforcing the law enacted for the levy and collection of excise duty.
By section 9 contraventions of the provisions of the Act and notifications thereunder are penalised.
Power to forfeit goods is conferred by section 10.
By Chapter III, power to arrest and to summon persons to give evidence or produce documents in inquiries under the Act to search and the procedure to be followed by officers in charge of police stations, inquiries to be made by Central Excise Officers against arrested persons forwarded to them are made.
Chapter VI deals with adjudication of confiscations and penalties, and Chapter VII enacts certain supplementary provisions.
The Schedule to this Act sets out the descriptions of various goods and the rates of duty chargeable in respect thereof.
The primary purpose of the Act is to levy and collect excise duty in respect of goods specified in the First Schedule and with that object in view, diverse provisions are enacted.
Tobacco is under the Act an excisable commodity, and duty at rates specified in the Schedule is leviable in respect of different forms of tobacco.
By section 6(b) wholesale purchase or sale, or storage of excisable articles is prohibited.
By Rule 7 of the Central Excise Rules, 1944, duty is made payable by every person, who produces, cures, manufactures or who stores in any warehouse any excisable goods.
Rule 174 which occurs in Chapter VII deals with licensing.
It provides, in so far as it is material, that. "Every manufacture, trader or person hereinafter mentioned, shall be required to take out a licence and shall not conduct his business in regard to such goods otherwise 767 than by the authority, and subject to the terms and conditions of a licence granted by a duly authorised officer in the proper From: (1) Matches x x x (2) Unmanufactured products.
Curers, brokers, Commission agents and wholesale dealers who purchase such products from cures, all brokers, commission agents and wholesale dealers doing business in unmanufactured tobacco; all holders of private bonded store rooms or warehouses; (3) Other excisable goods except salt (a) Manufacturers; and (b) x x x Rule 175 deals with the procedure for obtaining a licence.
By the 1st clause it provides that every person desiring to engage in operations requiring the possession of a licence aforesaid shall apply in writing every year for a licence or renewal thereof to the licensing authority who shall be such officer as the Central Board of Revenue may authorise in this behalf.
Rule 176 prescribes Forms application for licences and cl.
(2) provides that every such application for licence shall, where a fee is prescribed in the subjoined Table, be accompanied by a Central Excise Revenue Stamp showing payment of such fee under item No. 2 in the Table "a wholesale dealer in unmanufactured tobacco who purchases for the purpose of trade or manufacture" the to pay graded fee set out in the second and the third columns.
Item 6 deals with the duty payable by the holder of a private bonded store room or warehouse.
Rule 178 provides for the Forms of licence.
The appropriate forms of licence in respect of storage of tobacco for sale are Form L 2 (application for licence to carry on wholesale trade 768 in unmanufactured products liable to a central duty of excise), Form L 3 (application for licence as broker or commission agent in respect of unmanufactured products liable to a central duty of excise), and Form L 5 (application for licence for a private bonded warehouse storeroom for the storage of excisable goods).
It is manifest that under the Rules so framed duty is imposed to obtain a licence on payment of fee for storage of tobacco for sale.
It is not disputed that the appellants in all the appeals took out licences under rules 174 and 178 of the and paid the licence fee in that behalf to the Central Government.
The appellants were also required to pay licence fee for the storage of tobacco for sale under the provisions of the Travancore and the Cochin Tobacco Acts and the Rules framed thereunder on January 25, 1951.
It is true that under the , the provision for obtaining licences for storage is a provision ancillary to the recovery of excise duty, whereas under the Travancore and the Cochin Acts, the levy of licence fee was imposed in pursuance of a scheme for maintaining control on the sale of tobacco without expressly levying any excise duty.
But on that account, it cannot be said that the provisions relating to the requirement of licences and the payment of licence fees for storage of tobacco for sale under the Travancore and the Cochin Acts were not provision corresponding to the provisions of section 6(b) under the and the rules framed under the Act requiring that licences shall be taken out for storage of tobacco for sale and fee shall be paid in respect thereof.
In my judgment the relevant rules made under the Travancore and the Cochin Tobacco Acts requiring licences to be taken for storage of tobacco and in force on April, 1, 1950, were law corresponding to the provisions of the Central Excise and Salt Act, 1944, and the rules 769 framed thereunder which required licences to be taken out for storage of tobacco and for payment of licence fee in respect thereof and to that extent the provisions imposing an obligation to take out licences and to pay licence fees under the Tobacco Acts of Travancor and the Cochin States were superseded and the State of Travancore Cochin had no authority to promulgate rules 14, 15 and 16 under the Notification issued in the Travancore Cochin Government Gazette dated January 25,1951, and to levy licence fee for storage of tobacco.
It is unnecessary to consider whether the remaining provisions of the Travancore and the Cochin Tobacco Acts and the Rules framed there under were law corresponding with the .
For these reasons I agree that the appeals be allowed, and the order passed by the High Court be set aside.
In each petition a writ will issue declaring that the levy of licence fee under the Notification dated January 25, 1951, is without authority of law, and that the State of Travancore Cochin do forbear from levying and collecting the licence fee.
Appeals allowed.

summary/full:
ln 1909 the Ruler of the erstwhile State of Cochin enacted the Cochin Tobacco Act of 1084 (M.E.) with the object of controlling the cultivation, production, manufacture, storage and sale of tobacco.
Rules were framed under the Act for regulating the cultivation, possession, transportation and sale of tobacco and a system of licensing was introduced for that purpose.
Licences for storage were to be annual and to be issued on payment of licence fee.
The authorities administering the provisionals of the Act and the Rules framed thereunder were the (commissioner of Excise and his subordinates.
The system in force for the collection of tobacco revenue was to auction what were called A class and class shops.
A law similar to that prevailing in Cochin was promulgated in 1911 by the Ruler of Travancore as the Travancore Tobacco Regulation of 1087 (M.E.).
The two States merged themselves in 1919 as the State of Travancore Cochin but the two Acts continued to remain in force in the respective territories.
On April 1, 1950, after the Constitution of India had come into force and Travancore cochin had become a 742 Part B State thereunder by s.11 of the Finance Act, 1950, the central Excises and Salt Act,194,was ex tended to that State.
Section 13(2) of the Finance Act, 1950,provided that "if immediately before the 1st day of April,.1950, there is in force in any State other than Jammu and Kashmir a law correspo nding to,but other than, an Act referred to in sub s.(1) or (2) of s.11, such law is repealed with effect from the said date.
" After this provision in the Finance Act, 1950, the Rules which were in force on April 1, 1950, were changed in the Cochin area by a notification dated August 3, 1950, and the system of auction sales of A Class and Class shops was done away with and instead graded licence fees were introduced for various classes of licensees.
Similar change was made for the Travancore area by notification dated January 25, 1951.
The appellants who were carrying on business in tobacco within the territories of Travancore and Cochin challenged the legal its of the notifications of August 3, 1950,and January 25, 1951, on the ground that the Cochin Tobacco Act and the Travancore Tobacco Regulation under which the notifications were purported to be issued, were law corresponding to the , and so they stood repealed from April 1, 1950, by virtue of the operation of sections 11 and 13(2) of the Finance Act.
It was contended for the State of Kerala that the main feature of the Central Excise and Salt Act, 1944, was the imposition of a duty of excise on goods produced or manufactured in ,India and that there was no provision for charging duty in the Cochin Act or the similar Travancore Act and therefore all these provisions in the Rules for the control of tobacco from the time of cultivation to the time of the final stage of sale to the consumer, even though they were similar to the Rules under the Central Act, would not make the Cochin Act or the similar Travancore Act a law corresponding to the Central Act.
^ Held, that the rules framed under the Cochin Tobacco Act of 1084(M.E.) and the Travancore Tobacco Regulation of 1087 (M E.) requiring licences to be taken out for storage and sale of tobacco and for payment of licence fee in respect thereof were law corresponding to the provisions of the , and, hence, were superseded on April 1, 1950, by virtue of section 1312) of the Finance Act, 1950.
consequently, the new Rules framed in August 1950 and January 1951 for the respective areas of Cochin and the respective areas of Cochin and Travancore for the issue of license and payment of fee therefore for storage of tobacco, were invalid ab initio.
Per Sinha, C. J., 'Gajendragadkar,Wanchoo and Hidayatullah, JJ. (I) The Cochin Tobacco Act, 1084 743 (M.E.), as well as the Travancore Tobacco Regulation, 1087(M.E.), were in substance law corresponding to the , and therefore, stood repealed on April 1, 1950.
(2) The auction system which was in force under the Cochin and Travancore Acts was only a method of realising duty through the grant of licences to those who made the highest bid at the auctions.
The fact that this system was used instead of the system of charging of duty as provided in s.3 of the Central Excise and Salt Act, 1944, would not make any difference to the nature of the impost; the income from auctions was in the nature of excise duty.
Per Shab, .J.
An Excise duty is, according to the Indian statute, a duty on the manufacture or production of goods and the duty which was levied in the States of Travancore and Cochin on the storage of tobacco cannot be regarded as a duty of excise.
In re The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, , The Province of Madras vs Messrs Boddu Paidanna and Sons, , Governor General in Council vs Province of Madras, (1945) ' L.R. 72 I.A. 91 and Chaturbhai, M. Petal vs The Union of India, ; , considered.


judgement:
iminal Appeals Nos. 146 and 147 of 60.
Appeals by special leave from the judgment and order dated February 11, 1960, of the Madhya Pradesh High Court in Criminal Revisions Nos.
270 to 274 of 1959.
G. C. Mathur, for the appellants.
I. N. Shroff, for the respondents.
February 5.
The Judgment of the Court was delivered by KAPUR, J.
There are two appeals directed against the order of the High Court of Madhya 22 Pradesh reiecting a Reference made by the Sessions Judge against the prosecution of.
the appellant for contravening the provisions of the C. P. and Berar Sales Tax Act (C. P. XXI of 1947), hereinafter called the 'Act '.
A firm of which five brothers including the two appellants were partners submitted their sales tax returns for the quarters beginning June 1, 1947, to the quarters ending December 31, 1951.
A .complaint was filed against the partners on July 19, 1957, on the ground that the returns filed by them were false and the accounts produced were incorrect and therefore an offence under section 24(1)(b) and (g) of the Act was committed.
On December 12, 1958, an objection was taken by the accused.
persons that under section 26(2) of the Act, the prosecution could not be instituted as it was barred by time, having been instituted more than three months after the commission of the offence.
The learned, Magistrate did not go into the objection on the ground that it was not the proper forum for raising the objection.
Four revisions were taken to the Sessions Judge who on May 4, 1959, made a reference to the High Court for quashing the proceedings But the High Court rejected the reference on the ground that a person making a false return neither acts nor purports to act under the Act and therefore section 26(2) is not applicable to him.
It is against that order that these peals were brought by Special Leave.
In order to decide this question, it is necessary to refer to the relevant provisions of the Act.
Under section 10 of the Act every dealer is required to furnish a return when called upon to do so and every registered dealer is required to furnish returns by such dates as may be prescribed.
The ap pellants are registered dealers and they have made returns under that section.
Section 15 deals with 23 production and inspection of accounts and section 24 enumerates the offenses under the Act.
The alleged offence of the appellants falls under is.
34(1) (b) and (g).
failing without sufficient use to submit any return or furnishing false returns and knowingly producing incorrect accounts, registers or documents or knowingly furnishing incorrect information.
Section 26 relates to the protection of persons acting in good faith and limitation for suits and prosecutions.
The section when quoted is as follows section 26 (1) "No suit, prosecution or other legal proceedings shall lie against any servant of the Government for anything which is in good faith done or intended to be done under this Act or rules made thereunder.
(2) No suit shall be instituted against the Government and no prosecution or suit shall be instituted against 'any person in respect of anything done or intended to be done under this Act unless the suit or prosecution has been instituted within three months from the date of the act complained of.
" For the appellants, it was contended that the words "no prosecution or suit shall be, instituted against any person in respect of anything done" in sub section
(2) of section 26 cover their cases also and they fall within the words ",any person".
The respondent 's submission on this point was that the two sub sections of section 26 should be read together and the intention of the Legislature was to give protection to Government servants in regard to prosecutions or other legal proceedings.
That, in our opinion, is not *hat the words used in sub section
(2) mean.
, They are words of wider import and would cover cases of all persons including persons other than Government servants.
There are ' no words restricting the meaning of "any person" and no 24 reason has been shown why those words should not include the appellants.
The ground on which the High Court rejected the Reference was that in its opinion the appellants neither acted nor purported to act under any of the provisions of the Act when they filed false returns or produced false accounts and in fact they were rendering.
themselves liable to punishment under the provisions of section 24 of the Act.
It observed as follows : "The test whether an act is done or intended to be done under a certain law might well be whether the person who committed it can, if challenged, reasonably justify his act under any provision contained in that law".
This opinion is, in our view, not sustainable.
When the appellants submitted their returns they did so under section 10 of the Act and when they produced their accounts they did so under section 15 of the Act.
Therefore both the making of the returns and production of the accounts were done under the Act and cannot be said to be outside the provisions of the Act.
In our opinion the High Court was in error in rejecting the Reference.
The appeals are therefore allowed, the order of the High Court is set aside aid the proceedings in the trial court are quashed.
Appeals allowed.

dataset_name: IN-Abs

summary/full:
The appellants submitted their returns of sales tax.
More than three months afterwards a complaint was filed against them under section 24(1)(b) and (g) of the C. P. and Berar Sales Tax Act ' alleging that the returns filed Were false and that the accounts produced were incorrect.
They contended that the prosecution was barred by section 26(2) of the Act which provided that no prosecution shall be instituted against any person in respect of anything done or intended to be done under the Act unless it was instituted within three months from the date of the act complained of.
Held, that the prosecution was barred by section 26(2) of the Act.
The words "any person" in section 26(2) were words of wide import and included the appellants.
There was no reason to restrict them to Government servants.
Both the making of the return and the production of the accounts were acts done under the Act; the return being filed under section 10 and the accounts being produced under section 15 of the Act.
Section 26(2) was thus clearly applicable to the case.


judgement:
Appeals Nos. 344 346 of 1960.
Appeals by special leave from the judgment and order dated September 8. 1958, of the Madhya Pradesh High Court (Indore Bench), Indore, in Civil Second Appeals Nos.
11.0 1,12 of, 1952.
section T.Desai and J. B. Dadachanjifor the appellant.
B. Sen,J. Bhave and 1.
N. Shroff,for the respondent.
July 17.
The Judgment of the Court was delivered by HIDAYATULLAH, J.
These three consolidated appeals by special leave are against a common judgment and order of the High Court of Madhya Pradesh, dated September 8, 1958, in three second appeals filed under R. 13 of the Indore Industrial Tax Rules, 1927 of the former Holkar State, which were in force before the State became part of Madhya Bharat State.
They concern three assessments relating to the assessment years, 1941,1942 and 1943 respectively.
These second appeals were originally filed in the Madhya Bharat High Court as early as 1952 ; but the records of the appeals 'were destroyed by fire and had to be reconstructed.
By the time the appeals were ready, Madhya Bharat had merged in the new state of Madhya Pradesh, and the appeals were accordingly heard by a Divisional Bench of that High Court.
The appellant is a Textile Mill and a public Joint Stock Company called the Nandlal Bhandari Mills, Ltd. The appellant had appointed a" firm, Messrs Nandlal Bhandari and Sons as agents, secretaries and treasurers of the Mills, and under cl.
(6) of the agreement of agency, it agreed to pay to the agents an office allowance, commission on the Company 's net profits and commission on the sale proceeds.
of sales of yam, cloth, etc.
The 861 remuneration of the agents for the three accounting years was as follows : ___________________________________________________________ Remuneration As per Accounting Years, agree ment.
1941 1912 1943 Rs. Rs. Rs. __________________________________________________________ Clause 6 1500 18,000 18,00018,000 (a) Fixed P.M. for the for the monthly allow year.
ance as office allowance.
(b) Commission @ 16% 2,68,335 6,15,946 10,52,939 on the Com net on painy 's Net profits Profits.
(c) Commission @ 1 9 0 1,10,156 1,10156 1,64,751 2,71,672 on the sale Per Cent, proceeds of on sales sales of yarn, cloth etc.
___________________________________________________________ In computing the tax, the Mills claimed to deduct under R. 3(2)(ix) of the Rules the above amounts paid as remuneration.
The Rule reads : "(ix) any expenditure (not being in the nature of capital) incurred solely for the purposes of earning such profits or gains." The Assessing Officer accepted the appellant 's claim for deduction but only as.
to a part.
We are not required in these appeals to consider the correctness of the quantum of the deduction in view of what transpired later.
The Assessing Officer also disallowed certain other claims made by the appellant, which again need 'not be mentioned.
The appellant then.
appealed to the Appellate Authority, and on December 31, 1951 the Appellate Authority, while accepting some of 862 the appellant 's other contentions upheld the order refusing to deduct the agent,s commission on profits under R. 3(2)(ix).
Three second appeals were preferred in the Madhya Bharat High Court under R. 13 of the amended Rules.
They were dismissed by the High Court of Madhya Pradesh, and hence the present appeals.
The Indore Industrial Tax Rules were first promulgated in 1926 by a Cabinet Resolution (No. 373 dated March 22, 1926).
In 1927, by, Cabinet Resolution No. 1991 dated November 23 1927, the Rules were modified, and the new Rules, were made applicable retrospectively from May 1, 1926.
These Rules were framed for the levy of the tax and for ascertainment and determination of the income of cotton mills.
The taxcalled the "Industrial Tax" was leviable under R. 3, which imposed the charge.
It says that the Industrial Tax shall be payable by an assessee in respect of the profits or gains of any Cotton Mill industry carried on by him in the Holkar State.
Sub r.
(2) of R. 3 provides that such profits or gains are to be computed after making allowances, inter alia, for any expenditure incurred solely for the purpose of earning such profits or gains, R. 6, which is a part of the Rule imposing a charge, lays down the rates which are : (a) on all incomes up to Rs. 50,000, at 1 1/2 annas per rupee, and (b) above, at 2 1/2 annas per rupee.
The short question thus was whether in computing the profits and gains of the appellant, the remuneration paid to the agents was deductible under R. 3 (2) (ix).
It is necessary At this stage to see the legislative machinery existing in the Holkar State in 1927 and onwards.
On February 27, 1926, His Highness Maharaja Tukoji Rao III abdicated, and, his son, H.H. Maharaja Yeshwant Rao Holkar, became the Ruler, whose installation ceremony ' was performed on March 11, 1926.
A Regency Council was appointed under the orders of the 863 Government of India for the administration ' of the State during the minority of the Maharaja.
This Regency Council, which was called the Cabinet, was entrusted with the administration of the State according to existing rules and practice, under the supervision and with the advice of the Agent to the Governor General in Central India.
Prime Minister of the State was the Chairman.
H. H. Maharaja Yeshwant Rao Holkar attained majority on September 6, 1929 and resumed sovereign powers on May 9, 1930.
It was during the minority of the Ruler that the Cabinet had promulgated the amended Rules of 1927.
In 1931, the decision of the Privy Council in the well known case of Pondicherry Railway Co., Ltd. vs Commissioner oF Income tax (1) was rendered.
In that case, a Railway Company had agreed to make over to the French Colonial Government half of the Company 's net profits in consideration of a 99 year concession.
This was sought to be deducted by the Company from its assessable profits as an expenditure incurred solely for the purpose of earning such profits.
The Privy Council disallowed the deduction.
Lord Macmillan observed as follows : "A payment out of profits and conditional on profits being earned cannot accurately be described as a payment made to earn profits.
It assumes that profits have first come into existence.
But profits on their coming into existence attract tax at that point and the revenue is not concerned with the subsequent application of the profits.
" It seems that, as a result of this decision, a notification was issued in August, 1931, and another on February 2/3, 1932 by the Commerce.
and Industry Department of the Holkar State.
The latter notification reads as follows (1) (1931) L.R. 38 I.A. 239. 864 "Commerce and Industry Department Notification.
Notification No. 1 dated the 2nd/3rd Feb. 19 32.
In continuation of this office Notification No. 4733 dated the 6th December, 1927 (Vide Issue No. 11 dated the 12th December, 1927, of the Holkar Sirkar Gazette) embodying modified rules for the levy of the Industrial Tax the Cabinet,in their Resolution No. 1072 dated the 25th August, 1931, have ordered that the Agents ' Commission on 'Profits ' should not be allowed to be deducted from the assessable profits.
" It is, to be noticed that this notification refers to the earlier notification No. 4733 of December 6, 1927, under which were published the amended Industrial Tax Rules, 1927, and to the notification of August 1931.
The latter has not been produced before us.
This notification led to representations by the persons affected by it.
The Maharaja of Holkar thereupon referred the matter for the opinion of the, Full Bench of the High Court of the State.
It appears that the opinion of the High Court was in favour of disallowing such deductions.
On July 14, 1933, another notification (No. 13) was issued which reads as follows : "In continuation of this office Notification No. 1 dated 3rd February,, 1932, it is hereby published for the information of the mills and factories concerned that on submission of the Prime Minister 's (Legal Department) report No. 25 dated 11th May, 1933, His Highness the Maharaja is please to order (vide Huzur Shri Shankar, Order No. 173 dated 29th June,1933) that the opinion of the Full Bench of the High Court being that the Managing Agent 's Commission an profit 's is 865 not an item of expenditure incurred solely for the purpose of earning the said profit within the meaning of Rule 3(2)(ix) of the said Industrial Tax Rules and this being.
also the view of the Cabinet as expressed in their resolution No. 1072 dated 28th August, 1931, the aforesaid Cabinet Resolution be given effect to and the industrial tax due on the amount of the managing agent 's commission on profits be recovered with effect from the date of the said Cabinet Resolution.
" This notification, it is contended before this Court had not the force of law and was not enforceable against the appellants, who claim that they are entitled to show that the remuneration paid to the agents was deductible from the profits of the Mills before.
computing the Industrial Tax.
In this connection, the appellants wish to use the later decisions of the House of Lords in The Union Cold &wage Co., Ltd. vs Adamson(1) and of the Privy Council in The Indian Radio and Cable Communication Co., Ltd. vs Commissioner of I Income tax (2), in which the decision in the Pondicherry Railway Company case (3) was explained.
In the case before the Privy Council, Lord Maugham observed: "It is not universally true to say that a, payment the making of which is conditional on profits being earned cannot properly be described as an expenditure incurred for the purpose of earning such profits.
The typical exception is that of a payment to a, director or a manager of a commission on the profits of a company '.
If a company having made; an apparent net profit, of pound 10,000 has then to pay pound 1,000 to directors, or managers as the contractual recompense for their service during the year, it: is plain that the real net profit is only pound 9,000.
" (1) (2) (3) (1931) L.R. 58 (1) A. 239.
866 Lord Macmillan in the former case observed that the Pondicherry Railway Company case (1) must be read in the context of the facts of that case, and the obligation was first to find out the net profits of the company and then to divide them.
These two sets of cases proceed upon different principles.
If the agreement is to share the profits the expenditure cannot properly be treated as one incurred solely for the purpose of earning such profits; but if a slice of the profits is;to be paid to persons as remuneration to help in the earning of the profits, the deduction can be claimed.
All this would of course be pertinent to consider, if there was no legislative enactment on the subject.
If the matter was not one concluded by law, then there would be room for judicial interpretation of the Rule.
The rival claims in these appeals are thus confined to the legislative force of the notifications issued in 1931, 1932 and 1933 respectively,.
The appellant 's contention is that the notifications were not an act of legislation but an interpretation by the Sovereign.
Mr. Desai concedes that if they be regarded as legislation, then the later decisions of the Privy Council and some of this Court cannot be called in aid, because where the law itself speaks with clarity, judicial interpretation is out of place.
He contends, how ever that the two notifications were not framed as rules and were not expressly stated to be amendments of the rules then existing.
He points out that after the first notification which was nothing more than an administrative direction to the assessing officers to include in the profits the remuneration of the agents, the opinion of the High Court was obtained, and the second notification merely pointed out that the earlier notification was to be given effect to, and did no more than add a second administrative direction.
On the other side, it is contended that the Cabinet could make laws as often as it pleased and that (1) (1931) L. R. 58 I. A. 239.
867 the notifications must be read either as independent rules or as a legislative explanation of R. 3 (2) (ix).
In so far as the legislative supremacy of the Cabinet was concerned, no question was raised before us.
When the Indore Industrial Tax Rules, 1926 were framed, they came into existence by virtue of a Cabinet Resolution of that year.
When they were modified, they were superseded by yet another Cabinet Resolution of the year 1927, which promulgated the new Rules with retrospective effect from May 1926.
The source of the Rules 'was thus a Resolution of the Cabinet on both the occasions, and it is not denied that the Rules thus framed had legislative sanction and were unquestionable.
When the Cabinet promulgated its notifications in 1931, 1932 and 1933, it followed the same procedure, and it stated that the notification of 1932 was " 'in continuation of this office Notification No. 4733 dated December 6, 1927.
" This has reference to that notification under which the Indore Industrial Tax Rules, 1927 were orginally published.
From this, it follows that new Rules were framed by a resolution of the Cabinet and were promulgated by a notification in the Gazette as part of the Rules.
The mode followed in 1926 and 1927 was repeated in 1932 and 1933 and also presumably in 1931, though the notification of that year has not been printed in the record of this case.
This view was taken by the Full Bench of the ' Madhya Bharat High Court in Raj Kumar Mills Ltd. vs Madhya Bharat State (1).
The question which is involved in these appeals also arose in that case.
It was observed by the Full Bench : "This Notification makes it abundantly clear that His Highness the Maharaja ordered that the industrial tax due on the amount of the managing agent 's commission on profits be recovered.
This being.
an order of the (1) A.I.R. 1953 Madbya Bharat 135. 868 ruler, who enjoyed sovereign Powers, that order is not open to challenge.
This is a mandate emanating from a sovereign and as such has the force of law.
This Court has, therefore, no power to go behind the order and enquire as to whether the managing agent 's commission on profits is an item of expenditure solely incurred for the 'purpose of earning profits or not: In this view of the matter the point at issue is concluded by Huzur Shri Shanker order No. 173 dated 29th June, 1933.
" Thus view was affirmed by the High Court of Madhya Pradesh in the judgment under appeal.
In our judgment, the two notifications cannot be described as "judicial ,interpretation".
If any this, they must be interpreted as legislative exposition of R. 3(2)(ix) and in the nature of an explanation.
This Court in Ameer un nissa Begum vs Mahboob Begum in dealing with the 'Firmans" of His Exalted Highness the Nizam of Hyderabad, observed as follows : "It cannot be disputed that prior to the integration of Hyderabad State with the Indian Union and the coming into force of the Indian Constitution, the Nizam of Hyderabad enjoyed uncontrolled sovereign powers.
He was the supreme legislature, the supreme judiciary and the, supreme head of the executive, and there were no ;constitutional limitations upon his authority to act in any of these capacities.
The 'Firmans ' were expressions of the sovereign will of the Nizam and they were binding in the same way as any other law; nay they would override all other laws which were in conflict with them.
so long as a particular 'Firman ' held the field, that alone would govern or regulate (1)A.I.R. 869 the rights of the parties concerned, though it could be annulled or modified by a latter 'Firman ' at any time that the Nizam willed.
" The same can be said of the Ruler of the Holkar State.
When to the order of the Ruler was added the usual mode of making and promulgating rules, the position which emerges is really unassailable.
Mr. Desai in attempting to show that the ruling does not apply to the case, raised two contentions.
The first was based upon a more recent decision of this Court in Madhaorao vs State of Madhya Bharat (1), where certain Kalambandis of the Maharaja of Gwalior were considered.
This Court in deciding whether the Kalambandis were existing law under article 372 of the Constitution, observed : "In dealing with the question as to whether the orders issued by such an absolute monarch amount to a law or regulation having the force of law, or whether they constitute merely administrative orders, it is important to bear in mind that the distinction between executive orders and legislative commands is likely to be merely academic where the Ruler is the source of all power.
There was no constitutional limitation upon the authority of the Ruler to act in any capacity he liked ; he would be the supreme legislature, the supreme judiciary and the supreme head of the executive, and all his orders, however issued, would have the force of law and would govern and regulate the affairs of the State including the rights of its citizens.", It was, however, pointed out in the case that even where an order is issued by the sovereign ruler, one must look to the character of the order and its content to find out whether it enacted a binding rules (1) ; 870 Mr. Desai has constructed his entire argument on the basis of these observations, and has contended that the orders only expressed an opinion and did not bind.
He pointed out as the second limb of his argument that these notifications were not expressed as a rule but as an order, and that they did not seek to amend the rules, nor to add to them.
He referred to other notifications in which a legislative act was clearly discernible, as for example, Notification No. 22/Com.
dated May 17, 1946, by which for the existing Rule 4, a new Rule was substituted.
An examination of the Rules, however, shows that there was no set pattern of language.
Some of the Rules do not read like rules at all.
Notes have been appended to the rules, which are not rules proper, and R. 29 says : "All matters not dealt with in these rules may be submitted to the member incharge., Commerce and Industry Department for decision.
" The existence of such a rule seems to obliterate the frontiers between legislative, judicial and executive exercise of the power of a State, such as we understand it.
There being no invariable use of a clear cut legislative language, each general order emanating from the sovereign ruler and promulgated in the same manner as any other rule and having its roots in a resolution of the Cabinet must be regarded as one binding upon the subject.
This is the purport of the decisions of this Court, and the present case falls in line with those which have been previously decided.
There is nothing in the content, the character or the nature of these notifications, which would put them on a level lower than the Rules, which had been earlier promulgated.
In our opinion., the judgment of the High Court under appeal is correct, and the appeals are accordingly dismissed with costs, one set.
Appeals dismissed.

summary/full:
By a Cabinet Resolution of the Holkar State certain Rules known as The Indore Industrial Tax Rules were framed for the purpose of levying industrial tax.
After the decision of the Privy Council in cherry Railway Go.
, Ltd. vs Commissioner Income, tax, (1931) L. R. 58 1.
A. 239, disallowing deduction , of Commission paid out of profits to agents from the assessable profits; the Government of Holkar State of which the Maharaja was the Supreme Ruler; issued certain Notifications ordering that the Agents ' Commission on profits should not be allowed to be deducted from the assessable profits.
The appellants who under an agreement paid commission to their agents out of the company 's net profits contended, inter alia, that the Notifications in question did not have the force of law and was not enforceable against the appellants.
Held, that every general order emanating from the sovereign ruler having its roots in a resolution of the cabinet must be regarded as a law binding on the subject and the Notifications disallowing commission paid to, agents to be deducted from the assessable profits were therefore binding on the appellants, because that was the normal mode by which laws were made in the Holkar State.
Rajkumar Mills Ltd. vs Madhya Bharat State, A. I. R. 1953 Madhya Bharat 135, approved.
Ameer un nissa Begum vs Mahboob Begum, A. I. R. , followed.
The Union Cold Storage Co., Ltd. vs Anderson, (1931) 16 T. C. 293 and The Indian Radio and Cable Communications Co., Ltd. vs Commissioner of Income tax, , discussed.
Madharao vs State of Madhya Bharat, ; , referred to. 860


judgement:
minal Appeal No. 102 of 1960.
Appeal by special leave from the judgment and order dated October 7, 1959, of the Punjab High Court in Criminal Revision No. 610 of 1959.
Hardev Singh and Y. Kumar, for the appellants.
section M. Sikri, Advocate General for the State of Punjab, N. section Bindra and P. D. Menon, for the respondent.
February 6.
The four appellants were at one time members of the Pepsu Police force and were charged, before the First Class Magistrate at Faridkot, with having committed three offenses : (1) under section 26 of the PepsU Public Safety Ordinance (No. 7 of Samvat 2006), (2) under section 33 of the said Ordinance, and (3) under section 1 of the impugned Act.
We shall be referring to the provisions of the relevant enactments in due course.
The accused pleaded not guilty and were tried by the learned Magistrate who by his judgment dated August 28, 1958, held the 27 prosecution case fully established against all the accused.
He convicted the four appellants under section 26 of the Public Safety Ordinance and sentenced them to imprisonment for six months.
The third appellant alone Was convicted of the offence under a. 33 of the same Ordinance and was sentenced to imprisonment for six months.
Appellants 1, 2 and 4 were further convicted of offenses under section 3 of the impugned Act and sentenced, to imprisonment for six months, the several sentences against the respective accused being directed to run concurrently.
The appellants filed an appeal to the Sessions Judge at Bhatinda who upheld the convictions but reduced the sentences.
In respect of the offence under section 26 of the Public Safety Ordinance the sentence passed against the four appellants was reduced to imprisonment for three months while in respect of the third accused who had been addition ally sentenced under section 33 of the Ordinance the same was reduced to imprisonment for 11 /2 months and the sentences on appellants 1, 2 and 4 under section 3 of the impugned Act was reduced to imprisonment for three months, the sentences again being directed to run concurrently.
With these modifications the appeals stood dismissed.
The appellants thereafter preferred a revision to the, High Court and this was heard by a learned Single Judge who while accepting the revision of the appellants in so far as it related to their conviction and sentence under section 26 of the Ordinance.
maintained the other convictions and sentences but reduced the sentences.
It is from this judgment of the High Court that this appeal has been preferred by the four appellants.
It would be seen from the above narrative that the appeal is concerned with the propriety of the conviction of appellants 1, 2 and 4 of an offence under a. 3 of the impugned Act and of the third appellant under section 33 of the Ordinance, all the appellants having been acquitted by the High Court of the charge against them under s, 26 of the 28 Ordinance.
It is therefore not necessary to refer to the terms of section 26 or the offence constituted by it.
In the Courts below including the High Court no challenge was made as regards the legality of any of the provisions of law of the violation of which the appellants were found guilty but before us though learned Counsel did not raise any contention regarding the validity of section 33 of the Pepsu Public Safety Ordinance, challenged the constitutionality of section 3 of the impugned Pepsu Police (Incitement to disaffection) Act which appellants 1, 2 and 4 were found to have violated and for which they were sentenced to a term of imprisonment.
Learned Counsel for the appellants raised for our consideration three points : (1) the constitutional validity of s.3 of the impugned Act, (2) if section 3 were constitutional and valid whether appellants 1, 2 and 4 were proved to have been guilty of an offence for violating that provision, and (3) whether appellant 3 was property held guilty of an offence under section 33 of the Pepsu Public Safety Ordinance.
We shall first take up for consideration the attack on the validity of section 3 of the impugned Act.
Patiala and East Punjab State Union, commonly called Pepsu was one of the States specified in Part B of the First Schedule to the Constitution when the Constitution was brought into force in January 1950.
For reasons not necessary to be stated here, the administration of Pepsu was taken over by the President under article 356 of the Constitution.
The powers of the State Legislature were declared by the Presidential Proclamation issued on March 4, 1953.
to be "exercisable by or under the authority of Parliament" (vide article 356(1)(b) ).
Thereafter Parliament enacted Act XXII of 1953 which received the assent of the President on May 17, 1953, which was entitled : "The Patiala and East Punjab States Union Legislature (Delegation of Powers) Act, 1953.
" Section 3 of this enactment provided 29 "The power of the legislature of the State of Patiala and East Punjab States Union to make laws which has been declared by the proclamation to be exercisable by or under the authority of the Parliament is hereby con ferred on the President.
" There are other provisions which are contained in the other subsections of section 3 but these have no relevance for this appeal.
In exercise of the power thus delegated to him by Parliament the President enacted Pepsu Act 1 of 1953 whose long title runs : "An Act to provide a penalty for spreading disaffection among the police and for kindred offenses.
" It is the 3rd section of this enactment whose validity is challenged in this appeal and that reads "3.
Penalty for causing disaffection, etc.
Whoever inte ntionally causes or attempts to cause, or does any act which he knows is likely to cause, disaffection towards any Government established by law in India amongst the members of a police force, or induces or; attempts to induce, or does any act which he knows is likely to induce, any member of a police force to withhold his services or to commit a breach of discipline shall be punishable with imprisonment which may extend to six months, or with fine, or with both. " The attack upon the validity of this provision was rested on its being violative of the freedom guaranteed by article 19(1)(a), the submission being that the section was Dot saved by article 19(2).
Before considering the arguments advanced it is necessary to mention, for being put aside, that in construing the validity of section 3 of the impugned Act 30 the provision contained in article 33 of the Constitution has no relevance.
That Article enacts : "article 33.
Parliament may by law determine to what extent any of the rights conferred by this Part, shall in their application to the members of the Armed Forces or the Forces charged with the maintenance of public order, be restricted or abrogated so as to en,sure the proper discharge of their duties and the maintenance of discipline among them.
" No doubt, the impugned provision is concerned with ensuring discipline among the forces charged with the maintenance of public order but as the powers of the President were exercised by virtue of the delegation contained in section 3 of Act XXII of 1953 under which only the powers of the State Legislature were vested in him, any law enacted by him would not have the force of Parliamentary legislation contemplated by article 33.
Article '33 being out of the way the very short question that has to be considered is whether the impugned provision is saved by Art '.
19(2), for 'it is common ground that provision does not violate any freedom other than that of ""free speech and expression" guaranteed by article 19 (1) (a).
Article 19(2) as it stands after the amendment by the Constitution (First Amendment) Act of 1951 reads : " 19(2) Nothing in sub clause (a) of clause (1) shall affect the operation of any existing law, or prevent the State from making any law, 'in so far as such law imposes reasonable restrictions on the exercise of the right conferred by the said sub clause in the interest of the security of the State, friendly relations with foreign States, public order, decency or morality, or in relation to contempt of Court, defamation or incitement to an offence.
" of the criteria set out in this clause the one relevant 31 in the present context is that which refers to "in the interests of. . public order".
The contention urged by learned Counsel was that section 3 was too wide in that it embraced within itself not merely matters which might have relevance to circumstances intimately connected with the maintenance of public order, but also those whose connection with it might be remote or fanciful.
While not seriously disputing that seducing the loyalty of the police force, or inducing the.
members thereof not to do their duty might imperil public order and so fall within the limit of restrictions permissible of imposition under article 19(2), learned Counsel laid, stress on the fact that the impugned section made it an offence to induce a member of the police force to "commit a breach of discipline," laying special emphasis on the fact that the words "breach of discipline" besides being vague, might include within itself acts which might be innocent as well as others of varying degrees of culpability.
The content of the expression "in the interests of. . public order" has been the subject of detailed and elaborate consideration by this Court in Superintendent, Central Prison, Fatehgarh vs Ram Manohar Lohia (1) where the effect of the First (Constitution) Amendment by which the words "for the maintenance of public order" were replaced by the words ",in the interests of public order" was considered in the light of the previous decisions of this Court on that topic, Subba Rao, J., speaking for this Court said that the expression "Public order" in the juxtaposition of the different grounds set out in article 19(2) was synonymous with "public peace, safety and tranquility".
He also pointed out that the expression ,in the interests of public order" though undoubtedly wider than the previous phrasing ",for the maintenance of public order" could not mean that the existence of any remote or fanciful connection between the impugned act (1) ; 32 and public order was sufficient to sustain the validity of the law, but that on the other hand, the connection between the act prohibited or penalised and public order should be intimate; in other words there should be a reasonable and rational relation between it and the object sought to be achieved, viz., public order.
The nexus should thus be proximate not far fetched, problematical or too remote in the chain of its relation with public order.
Keeping this exposition in mind.
the question to be considered is whether the connection between what is prohibited or penalised by the impugned provision and public order, i.e., the ensuring of tranquility and orderly life is so remote or fanciful as to lead to an inference that there is no proximate connection between the two.
We have no hesitation in answering this question against the appellants.
The impugned enactment seeks to lay an embargo on certain activities in the interests of the Police service which is the arm of the State barged with the duty of ensuring and maintaining public order.
The efficiency of that service and its utility in achieving the purpose for which it is formed aid exists is sought to be secured by penalising attempts to undermine its loyalty and dissuade the members of that force from performing their functions and being available to the State as a disciplined body, Any breach in the discipline by its members must necessarily be reflected in a threat to public order and tranquility.
If the police force itself were indisciplined they could hardly serve as instruments for the maintenance of public order or function properly as the machinery through which order could be maintained among the general public.
As we have pointed out earlier, learned Counsel did not seriously contest that the impugned provision in so far as it penalised the creation of disaffection among members of the police force or the incitement of the members of the police force to withhold their services from the government could properly be sustained as enacted 33 ", 'in the interests of public order," We consider that attempts to induce indiscipline among the police do not stand on any different footing.
We do not further consider well founded the submission of learned Counsel that the word "discipline" or the .Phrase "breach of discipline" is vague.
We have therefore no hesitation in rejecting this challenge to the validity of a. 3 of the impugned Act.
The next question that was urged by learned Counsel was that the High Court was wrong in considering that the three appellants 1, 2 and 4 were guilty of any contravention of section 3 of the Act.
We do not consider that this submission is justified.
It is needless to point out that in considering an appeal which comes before us by special leave this Court normally accepts as final every finding of fact reached by the High Court as well as its appreciation of oral testimony and that if there is evidence which could serve as a basic for any finding reached by the High Court the same cannot be canvassed before us.
If the submission of learned Counsel is viewed in the light of this principle it appears to us that there is hardly any scope for argument as regards what might be termed the merits of the case.
One of the "witnesses whose evidence has been accepted by the Courts below and which is referred to in the judgment of the learned Judge in the High Court was Krishan Dayal P.W. 4 who deposed to the accused saying ",Police brothers, come and join us, stop the office work; we will sit here in dharma, start hunger strike. . and would not allow the office work to run.
" It is clear from this evidence that the accused had induced or had attempted to induce members of the police force to withhold their services as also to commit a breach of discipline by staying away without doing their duty.
In our opinion, it is not shown that the conviction of appellants 1, 2 and 4 of an offence under section 3 of Act 1 of 1953 was improper or illegal.
34 The last of the points arising in the appeal is as regards the conviction of Lal Singh the third appellant .of an offence under, section 33 of the Ordinanoe.
Section 33 of the Ordinance runs : ,"Whoever induces or attempts: to induce any public servant or any servant of local authority to disregard or fail in his duties as such servant shall be punishable with imprisonment which may extend to one year or with fine or with both.
" As regards this appellant this is what the learned Judge of the High Court stated : "As againat Lal Singh there is evidence of P. 'W. 11 Kartar Singh and P.W. 18 Balwant Singh, Foot Constable that he asked them to disobey their officers and should give up government work.
His offence under section 33 of the Ordinance is substantiated.
" As we have pointed out earlier, the validity of a. 33 of the Ordinance was not challenged and the only question therefore was whether the third appellant was properly held guilty of the offence.
It was not disputed that the two prosecution witnesses 11 & 18 did state on oath the matters referred to by the learned Judge.
In view of what we have stated earlier as regards the manner in which this Court deals with appeals under article 136 there is no ground shown for interfering with the conviction of the third appellant or the sentence passed.
Before parting with this case it is necessary to advert to one matter.
In the course of his arguments learned Counsel for the appellant drew our attention to certain police rules framed 'by the State Government which prohibited policemen from joining unions and sought to raise a point that the said rule was unconstitutional as in violation of Art.19(1)(b) and that II the activities of the four 35 accused were in reality an attempt to form an union and that therefore we should consider the legality of this rule of the police force in considering the propriety of their Convictions.
Though there is a reference to the rule in the judgment of the High Court, it is referred to only incidentally and as part of the narrative in detailing the activities of the accused.
The offence with which the accused were charged was certainly not the violation of that rule, which if might be pointed out did not create any offence, so that the validity of that rule was wholly irrelevant to their guilt when charged with substantive offences under the various enactments we have noticed earlier.
It need hardly be pointed out that the fact that a person is engaged in asserting a fundamental right affords no defence to a charge of having contravened a valid penal statute while so engaged.
In the High Court the validity of the police rule was never challenged and in the circumstances we declined to permit learned Counsel to argue any question before us in relation to the validity of that rule.
The appeal fails and is dismissed.

summary/full:
Section 3 of the Pepsu Police (Incitement to disaffection) Act 1953, provided: "Whoever intentionally causes or attempts to cause, or does any act which he knows is likely to cause, disaffection towards any Government established by law in India amongst the members of a police 'force, or induces or attempts to induce, 'or does any act, which he knows is likely to induce, any member of a police force to withhold his services or to commit a breach of discipline shall be punishable with imprisonment.
" After the administration of the State of Pepsu was taken over by the President under article 356 of the Constitution of India, Parliament enacted a law by which the power of the legislature of the State of Pepsu was conferred on the President.
By virtue of this power the President enacted the Pepsu Police (Incitement to Disaffection) Act, 1953, the object of which was to provide a penalty, inter alia, for spreading disaffection among the police.
The appellants were charged with having induced or attempted to induce members of the police force to withhold their, services and thus to commit a breach of discipline by staying away without doing their duty, and thereby having committed an offence under section 3 of the Act.
They were convicted by the Magistrate and the conviction was confirmed by the High Court.
The appellants challenged the validity of the conviction on the ground that section 3 was violative of the freedom guaranteed by article 19(1)(a) of the Constitution and was not saved by article 19(2).
Held, that section 3 of the Pepsu Police (Incitement to dis affection) Act, 1953, did not infringe article ' (19)(1)(a) of the Constitution and was intra vires.
The Police service is an arm of the State charged with the duty of ensuring and maintaining public order and since any breach of discipline on the part of its members might 26 result in a threat to public order, section 3 must be held to be valid as having been enacted "in the interests of public order" within the meaning of article 19(2).
Superintendent, Central Prison, Fatehgarh vs Ram Manohar Lohia, ; , relied on.
Held, further, that article 33 of the Constitution was not ;applicable because Parliament had delegated the powers of the legislature of the State to the President and any law enacted by him would not have the force of Parliamentary legislation contemplated by article 33.