PETITIONER: COMMISSIONER OF INCOME-TAX WEST BENGAL,CALCUTTA Vs. RESPONDENT: SMT. ANUSUYA DEVI DATE OF JUDGMENT: 28/11/1967 BENCH: <NAME>, J.C. BENCH: <NAME>, J.C. RAMASWAMI, V. CITATION: 1968 AIR 779 1968 SCR (2) 466 CITATOR INFO : F 1969 SC1917 (10) ACT: Income-tax Act , s. 66(1) , (2) and (4)--question not raised before <ORG> either in appeal or application to state a case-If <ORG> can direct reference on such question-If <ORG> must answer question referred-Power to reframe question and call for additional statement from <ORG> when to be exercised. HEADNOTE: The husband of the respondent died in October 1944. For the assessment year 1945-46, his estate was assessed to income- tax on a total income of Rs. 22,160. In January 1946, the respondent encashed 584 high denomination notes of the value of Rs. 5,84,000. There were proceedings for re-assessment of the total income of the assessee, wherein it was stated before the Income-tax Officer, on behalf of the respondent, that during the previous 30 years, her husband was giving gifts to the respondent and was also setting apart money exclusively for her and their children and, that the fund so accumulated amounting to Rs. 5,84,000 remained in a cupboard and was found after his death, and therefore, the amount was not liable to tax as the income of her husband in the previous year. The Income-tax Officer disbelieved her explanation and brought the amount of Rs. 5,84,000 to tax as tre income of the respondents' husband from an undisclosed source in the year of account 1944-45. The order was con- firmed by the Appellate Assistant Commissioner who also referred to the respondent's declaration under the High Denomination Bank Notes (Demonetisation) Ordinance that the amount was made over by the de,ceased, some time before his death, to her for her benefit and that of her 8 minor sons. The Appellate <ORG> also upheld the order of the Income- tax Officer. The respondent then filed an application under s. 66 (1) to state a case to the <ORG>. In that application she asserted that 494 out of the 584 notes were received from a Bank in Calcutta in realisation of a cheque drawn for Rs. 4,94,000 in September 1945 by her eldest son. The <ORG> rejected the application. The <ORG>, under S. 66(2) directed the <ORG> to state a case on the question6n:-Whether the <ORG> erred in law by basing its decision on a part of the evidence ignoring the 'statement made as regards the withdrawal of Rs. 4,94,000 by 494 pieces of Rs. 1,000 notes from the bank. The <ORG>, while submitting the statement of case, pointed out that the statement in the petition under s. 66(1) was materially different from that made before the Income-tax Officer and that the <ORG> was not invited to consider, at the hearing of the appeal, the truth of that statement. The <ORG>, thereafter, heard the reference and decided in favour of the assessee, holding that: (1) the <ORG> ignored a part of the declaration made by the respondent that 494 high denomination notes were received from the bank in Calcutta in September 1945; (2) no opportunity was given by the <ORG> to the respondent to clear up the discrepancies in her statements made at the time of the disclosure of the high denomination notes and before the Income-tax Officer; and (3) it was not open to the <ORG> hearing a reference under s. 66(2) to hold, contrary to the decision recorded at the time when the <ORG> was directed to state the case on a question, that the question did not arise out of the order of the <ORG>. 467 In appeal to this <ORG>, HELD : (1) In the question which was directed to be referred it was assumed that the <ORG> had before it the statement about the receipt of 494 currency notes from the bank at Calcutta. But that evidence was not before the <ORG>. No such statement was made either before the Income-tax Officer, or before the Appellate Assistant Commissioner or in the appeal before the <ORG>. The statement was made for the first time in the petition under s. 66(1) . Even in the application it was not suggested that the finding of the <ORG> was vitiated because some relevant evidence was ignored. The order of the <ORG> was not therefore open to the objection that the appeal before it was decided on a partial review of the evidence. [471 B, D-F] (2) The plea of want of opportunity was not raised before the <ORG>, and therefore, the validity of the conclusion of the <ORG> on the evidence could not be assailed before the <ORG> on the ground that the departmental authorities had violated the basic rules of natural justice, without raising that question before the <ORG>. [472 H] (3) The <ORG> was in error in holding that at the hearing of a reference pursuant to an order calling upon the <ORG> to state a case, the <ORG> must proceed to answer the question without considering whether it arises out of the order of the <ORG> or whether it is a question of law, or whether it is academic, unnecessary or irrelevant especially when by an erroneous order the <ORG> directed the <ORG> to state a case on a question which did not arise out of the order of the <ORG>. [472 D-E] Observations contra in <CITATION> , 20 I.T.R. 484. overruled. (4) When the <ORG> was not invited to state a case on a question of law alleged to arise out of its order, the <ORG> could not direct the <ORG> to state it on that question. [471 <CITATION> ., 24 I.T.R. 589 followed. (5) The irregularities in the judgment of the <ORG> could not be cured by reframing the question referred to the <ORG> and calling for a supplementary statement from the <ORG> The power to reframe a question may be exercised only to clarify some obscurity in the question referred or to pinpoint the real issue between the tax payer and the department or for similar other reasons. It cannot be exercised for reopening an enquiry on questions of fact, which was closed by the order of the <ORG>. Similarly, a supplementary statement could be ordered only on a question arising out of the order of the <ORG> if the court is satisfied that the original statement is not sufficient to enable it to determine the question raised thereby, and, when directed the supplementary statement may be only on such material and evidence as may already 1 on record, but not included in the statement initially made. [473 <CITATION> , 56 I.T.R. 365 and <NAME> Y. Commissioner of Excess Profits Tax, 26 I.T.R. 765, referred to. (6) The <ORG> was not in- error in failing to raise and state a case on the question whether the amount of Rs. 5,84,000 was taxable in the accounting year 1944-45. That question was considered by the Incometax Officer and by the Appellate Assistant Commissioner and the explana- 468 tion of the respondent was rejected by them, and no argument was raised before the tribunal that the amount, though taxable, was not the income of the year of account 1944-45. Further, when the <ORG> did not direct the <ORG> to state a case on the question, it must be deemed to have, rejected the application to refer that question, and the order of rejection having become final, this <ORG> cannot set it aside without an appeal by the respondent. [474 B, E, H; 475 A] JUDGMENT:

CIVIL APPELLATE JURISDICTION:. Civil Appeal No. 2457 of 1966.

Appeal from the judgment and order dated September 13, 1963 of <ORG> in Income-tax Reference No. 29 of 1959.

<NAME>, <NAME> and <NAME>, for the appellant.

<NAME>, <NAME>, and <NAME>, for the respon-

dent.

The Judgment of the Court was delivered by <NAME>, <NAME> died on October 18, 1944. For the assessment year 1945-46 his estate was assessed to tax on a total income of Rs. 22,160/- from salary and other sources. In January 1946, <NAME> widow of <NAME> encashed high denomination notes of the value of Rs. 5,84,000/-, and made a declaration as required by the High Denomination Bank Notes (Demonetisation) Ordinance, 1946 that:

"A sum of Rs. 5,84,000/- in notes were made over and/or directed to be made over by the declarant's deceased husband <NAME> at Rajkot in April, 1944, sometime before his death for the benefit of declarant and her 8 minor sons."

In a proceeding for reassessment of the income of Amritlal for the assessment year 1945-46 the attorney who appeared on behalf of <NAME> stated that "Amritlal was from time to time, during the last 30. years of his life, giving gifts to his wife and also setting apart money exclusively for his wife and children and that the fund so accumulated which remained in a cupboard" was found after his death. The Income-tax Officer disbelieved the explanation furnished and brought the amount of Rs. 5,84,000/- to tax as income of Amritlal in the year of account 1944-45 from an undisclosed source, and with his decision the Appellate Assistant Commissioner agreed.

At the hearing of the appeal before <ORG>, <NAME>-widow of Amritlal-filed an affidavit in which it was stated, inter alia

5. "From time -to, time during our married life, late <NAME> used to make presents of cash moneys to me on occasion of birthday of myself and of my sons and daughter by him and also on the occasion of his own birthday and on the anniversary of our marriage."

6. "My husband late Sri <NAME> used to tell me that these presents of cash money that he made was to make provisions for me and my minor sons and daughter and also to meet the expenses of their education and marriage in the event of his death."

8. "The total amount of the money so paid by late Sri <NAME> was Rs. 5 84,600/-. This amount was my stridhan property and was all along in my possession."

This affidavit was admitted in evidence by the <ORG>, but the <ORG> declined to admit an affidavit of <NAME> one of the sons of Amritlal, because in their view an attempt was made to bring on record a large number of new facts which were not disclosed before the departmental authorities. The <ORG> declined to accept the case set up by <NAME>. Beside pointing out the discrepancies in the statements made from time to time, which rendered her case unreliable, the <ORG> expressed the view that gifts made during a long period of "20 to 30 years" could not all have been made only in thousand rupee notes. The <ORG> accordingly upheld that order bringing to tax Rs. 5,84,000/- as income from an undisclosed source in the account year 1944-45.

In her application for stating a case to <ORG> on eleven questions set out therein <NAME> asserted that in her declaration under s. 6 of the High Denomination Bank Notes (Demonetisation) Ordinance, 1946, she had given information pursuant to the queries as follows : Reasons for keeping above in No bank account. The high denomination notes rather amount is held in trust than in current account, fixed for minors and as prices deposit or securities. of securities very so for greater safety the amount is held in cash for the benifit of the defandent and in trust for the minors.

When and from what source did A sum of Rs. 5,84,000 in declarant come into possession notes were made over and or of bank notes now tendered. directed to be made over by the declarant's deceased husband <NAME> at Rajkot in April 1944 sometime before his death for benefit of the declarant and her eight minor sons. in the latter part of August and beginning of September 1945, Rs.4,94,000/was deposited with <ORG>

at its Bombay Branch and transferred by <ORG> to their Calcutta Branch in the account of the declarant's major son <NAME> who drew a self cheque for Rs.

4,94,000/- received payment by 494 pieces of 1,0001-

notes (included in the list) and made them over to the declarant.

The Tribunal rejected the application. <ORG> at Calcutta however directed <ORG> to state a case on the following question :

"Whether the <ORG> erred in law by basing their decision on part of the evidence ignoring the statement made as regards the withdrawal of Rs. 4,94,000/- by 494 pieces of Rs. 1,000/- notes from the bank?"

In compliance with the order, the <ORG> observed that the extract from the statement incorporated in the petition under s. 66(1) was materially different from the statement reproduced in the order of the Income-tax Officer and that the <ORG> was not invited to consider at the hearing of the appeal the truth or otherwise of the alleged copy of the declaration incorporated in the petition under S. 66(1) and that at the hearing of the appeal the original declaration had not been produced.

The learned Judges of <ORG> who heard the reference were apparently of the view that the question referred did not arise out of the order of the <ORG>, but they felt bound by the view expressed in <CITATION> (1) that it is not open to the <ORG> hearing a reference under s. 66(2) to hold, contrary to the decision recorded at the time when the <ORG> was directed to state the case on a question, that the question did not arise out of the order of the <ORG>. <NAME>, J., who delivered the principal judgment of the <ORG> observed that the <ORG> had apparently ignored a part of the declaration made by <NAME> that 494 high denomination notes out of those encashed in January 1946 were received from a Bank in Calcutta in realization of a cheque for Rs. 4,94,000/- drawn in September 1945 by <NAME> her eldest son; that there was reason to doubt that statements referred to in his order by the Appellate Assistant Commissioner were made by <NAME> or her attorney; and that in any event opportunity to "clear up the discrepancies" between the statement made at the time of the disclosure of the high denomination notes and the statements said to have been made before the Income-tax Officer or before the Appellate Assistant Commissioner ought to have been given to her. Holding that the (1) 20 I.T.R 484.

order of the <ORG> suffered from those infirmities the learned Judges of <ORG> answered the question in the affirmative.

In our, judgment the order of <ORG> cannot be sus- tained. The statement that out of 584 high denomination notes disclosed by <NAME> 494 notes were received in realization of a cheque drawn by <NAME> at Rajkot was made for the first time in a petition under s. 66(1) : it did not find place in the statement before the Income-tax Officer, nor in the grounds of objection raised before the Appellate Assistant Commissioner, and. not even in the affidavit filed before the <ORG>. The <ORG> was never apprised of that part of the case, and had no opportunity to test the correctness of that statement. On the statements made before the Income-tax Officer and in the affidavit there can be no doubt that it was the case of <NAME> that she had encashed high denomination notes which she had received from her husband. No fault can therefore be found with the observations of the <ORG> that it was "a peculiar fact that all the money stated to have been received and found in the cupboard was all in high denomination notes and the entire amount had to be exchanged under the High Denomination Bank Notes (Demonetisation) Ordinance".

In the question which was referred under the direction of <ORG>, it was assumed that the <ORG> had before it the statement about the receipt of 494 currency notes of Rs. 1,000/each from a Bank at Calcutta in realization of a cheque. But that evidence was not before the <ORG>, and the order of the <ORG> was not open to the objection that it had decided the appeal before it on a partial review of the evidence. Even in the application made to the <ORG> under s. 66(1) in the large number of, questions which it was claimed arose out of the order of the <ORG> it was not suggested that the finding of the <ORG> was vitiated because some relevant evidence was ignored. If the <ORG> refuses to state a case under sub-s. (1) of s. 66 on the ground that no question of law arises, and <ORG> is not satisfied with the correctness of that decision, <ORG> -nay in exercise of the power under s. 66(2) require the <ORG> to state a case, and refer it. When the <ORG> is not invited to state a case on a question of law alleged to arise out of its order, <ORG> cannot direct the <ORG> to state it on that ques- tion: see <CITATION> . (1). The reason of the rule is clear: <ORG> cannot hold that the decision of the <ORG> refusing to state a case on a particular question is incorrect if the <ORG> was not asked to consider whether the question arose out of its order, and whether it was a question of law.

(1) 42 I.T.R. 589.

<NAME>

We find it difficult to uphold the view of <ORG> that if an order is passed by <ORG> calling upon the <ORG> to state a, case on a question which does not arise out of the order of the <ORG>, <ORG> is bound to advise the <ORG> on that question even if the question does not arise out of the order of the <ORG>. <ORG> may only answer a question referred to it by the <ORG> : <ORG> is however not bound to answer a question merely because it is raised and referred. It is well-settled that <ORG> may decline to answer a question of fact or a question of law which is purely academic, or has no bearing on the dispute between the parties or though referred by the <ORG> does not arise out of its order. <ORG> may also decline to answer a question arising out of the order of the <ORG>, if it is unnecessary or irrelevant or is not calculated to dispose of the real issue between the tax-payer and the department. If the power of <ORG> to refuse to answer questions other than those which are questions of law directly related to the dispute between the tax-payer and the department, and which when answered would determine qua that question the dispute, be granted, we fail to see any ground for restricting that power when by, an erroneous order <ORG> has directed the <ORG> to state a case on a question which did not arise out of the order of the <ORG>. We are unable therefore to hold that at the hearing of a reference pursuant to an order calling upon the <ORG> to state a case, <ORG> must proceed to answer the question without considering whether it arises out of the order of the <ORG>, whether it is a question of law, or whether it is academic, unnecessary or irrelevant.

We are of the opinion that the very basis of the question on which the <ORG> was called upon to submit a statement of the case did not exist. The <ORG> cannot in this case be charged with recording its decision without considering all the evidence on the record : the decision of the <ORG> was clearly based on appreciation of evidence on the record before it, and <ORG> was, in our view, incompetent to direct the <ORG> to state the case on- the question which was directed to be, referred and dealt with by <ORG>. We are also unable, to agree with the observation of <ORG> that the explanation which the Assistant Commissioner says was made by <NAME> was not made by her or by her attorney. No such plea was apparently raised before the <ORG>. There is also no ground for believing that <NAME> was not given an opportunity to " clear up the discrepancies" between the statements made by her or on her behalf from time to time in connection with the encashment of the high denomination notes. That plea was not raised before the <ORG>, and the validity of the conclusion of the <ORG> on appreciation of evidence cannot be assailed before <ORG> on the ground that departmental authorities had violated the basic rules of natural justice without raising that question before the <ORG>. Counsel for <NAME> requested that in any event the question which has been referred by the <ORG> in pursuance of the order of <ORG> may be reframed and a supplementary statement may be ordered to be submitted by the <ORG>. But power to reframe a question may be exercised to clarify some obscurity in the question referred, or to pinpoint the real issue between the tax- payer and the department or for similar other reasons : it cannot be exercised for reopening an enquiry on questions of fact which is closed by the order of the <ORG>. Again, a supplementary statement may be ordered only on the question arising out of the order of the <ORG>, and if the <ORG> is satisfied that the statements are not sufficient to enable the <ORG> to determine the question raised thereby, and when directed may be only on such material and evidence as may already be on the record but which has not been included in the statement initially made: <CITATION> (1). We do not think that the judgment of this <ORG> in <CITATION> (2) lays down any general proposition that <ORG> hearing a reference is entitled to amend or reframe a question and call for a supplementary statement so as to enable a party to lead evidence which has not been led before the <ORG> or the departmental authorities. In <ORG> case(2) this <ORG> merely reframed the question so as to bring out the real issue between the parties.

Finally counsel for <NAME> submitted that the <ORG> was bound to state a case on the following question which was. set out in the application under s. 66 (1) :

6. "Whether there is any material before the Tribunal to hold that the said sum of Rs. 5,84,000/representing the value of the encashed high denomination notes was the income of the deceased <NAME> of the period of the year 1944-45 prior to his death ?"

Counsel submitted that since the <ORG> had failed to raise and state a case on that question, and <ORG> had also in directing that a statement of case be submitted, ignored that question, in the interest of justice and for a final and satisfactory disposal of the case this <ORG> may order a statement on that question. Counsel said that merely because on the findings-of (1) 56 I.T.R. 365. (2) 26 I.T. R. 765.

<ORG> was on April 30, 1944, possessed of a large sum of money it could not be assumed that the whole amount was earned after April 1, 1944, and was on that account taxable in its entirely in the year of assessment 1945-46.

The question whether the amount of-Rs. 5,84,000/- was taxable in the proceeding for assessment for the year 1945- 46 was considered by the Income-tax Officer and by the Appellate Assistant Commissioner. The Income-tax Officer observed that by the explanation submitted on behalf of <NAME> before him, contrary to what was stated at the time of encashment of the high denomination notes, it was attempted "as an afterthought, to spread over the amount over a number of years". The contention that the amount of Rs. 5,84,000/- was not taxable in the .year of assessment 1945-46 was rejected. The Appellate Assistant Commissioner observed that on the statement made by <NAME> that she had received the amount from her husband in the year of account 1944-45 and that it was unfortunate that there was ' no complete record of the "earnings and withdrawals" .,of Amritlal from the various businesses in which he was interested, and that in the absence of such a record all that was to be done was to examine whether the explanation was credible. He observed that "the accounting year was very favourable for all types ..of business, and in all probability the sum represented some income earned by the deceased in some ventures which were not known to the <ORG> and therefore the sum could be treated as income of Amritlal from undisclosed sources". The <ORG> observed that they were unable to believe the version of <NAME> that the amount was accumulated by her husband during a long period, and since the assessee and his legal representatives had failed to prove the source of the fund, it "must be considered as of income character". Apparently, no argument was raised before the <ORG> that the amount though taxable was not income of the year of account 1944-45 and could obviously not he referred.

<ORG> may answer only those questions which are ,actually referred to it. New questions which have not been referred cannot be raised and answered by <ORG>. If the <ORG> refuses to refer a case under S. 66(1) which arises out of its order, the proper course is for the aggrieved party to move <ORG> to require the <ORG> under S. 66(2) to refer the same. The question whether Rs. 5,84,000/- represented income of the year of account 1944-45 was not submitted by the, <ORG> to <ORG>. Even if it be assumed that <ORG> was moved to direct the <ORG> to state a case on the sixth question which was set out in the, application filed

-'before the <ORG> under S. 66(1) , the application must be deemed to have been rejected, and the order of rejection has become final. We have no power, without an appeal by the assessee, to set aside that order of <ORG> and to direct the <ORG> to state a case on that question. The appeal must therefore be allowed, and the order passed by <ORG> set aside. The answer to the question will be in the negative.

This case discloses a very disturbing state of affairs prevailing in <ORG>. It is a startling revelation that the entire record of an assessee's case both before the Income-tax Officer and the Appellate Assistant Commissioner was found missing, and has not been traced thereafter. Even if collusion be ruled out, the persons concerned in looking after the safety of the important record of proceedings of assessment cannot escape a charge of gross negligence. In the circumstances of the case. -we think there shall be no order as to costs in <ORG> and in this Court.

Appeal allowed.

V.P.S.


JUDGMENT <NAME>, J.

1. The learned Judge from whose judgment in O.P. No. 5049 of 1981 this Appeal arises, rejected the petitioner's prayer for a writ of certiorari to quash Exts. PI and P3 demanding additional duty in the sum of Rs. 10,75,050.66 under Section 3 of the Customs Tariff Act, 1975 and for a direction to refund a sum of Rs. 1,62,517.11 alleged to have been excess paid by the petitioner as auxiliary duty under Section 47 of the Finance Act, 1981. Dismissing the Original Petition, the learned Judge held that the petitioner was liable to pay duties of customs as per the rates in force on 28-3-1981 which was the date on which the bill of entry was filed.

2. The admitted facts are : The vessel carrying 260 MT Aluminium ingots consigned to the petitioner reached Cochin Port on 25-3-1981. The inward entry for the vessel was granted on 26-3-1981. The bill of entry for the clearance of the goods was presented on 28-3-1981. With effect from 27-3-1981 auxiliary duty at 5 per cent became payable and additional duty was enhanced from 12.5 percent to 40 percent plus 10 per cent SED.

3. Duties of customs are levied under Section 12 of the Customs Act, 1962 (the "Act") at the rates specified under the Customs Tariff Act , 1975 (the " Tariff Act ") or any other law for the time being in force, on goods imported into or exported from India. The date for determination of rate of duty is that which is specified under Section 15 of the Act. Section 25 of the Act has conferred power on <ORG> to exempt specified goods from the whole or any part of the customs duty leviable thereon. The rates at which duties of customs are levied under the Customs Act are specified in the 1st and 2nd Schedules of the Tariff Act (See Section 2 of the Tariff Act). Section 3 of the Tariff Act charges additional duty on articles imported into India. Such duty is equal to the excise duty for the time being leviable on like articles if produced or manufactured in India. The provisions of the Customs Act , 1962 and the rules and regulations made thereunder are, so far as may be, applicable to the duty chargeable under Section 3 of the Tariff Act as they apply in relation to the duties chargeable under the Customs Act . Section 47 of the Finance Act levies, at the rates specified therein, auxiliary duties of customs on goods mentioned in the 1st Schedule to the Tariff Act . The provisions of the Customs Act and the rules and regulations made thereunder are, so far as may be, applicable to the levy and collection of auxiliary duties of customs under the Finance Act .

4. By Notification No. 186/F. No. 355/160/79-Cus. I (G.S.R. No. 531-E), published in <ORG>. Extraordinary, Part II, Section 3(i) , dated 9-9-1980, <ORG>, in exercise of its power under Section 25(1) of the Act, exempted Aluminium ingots falling within Chapter 76 of the 1st Schedule to the Tariff Act from the whole of the duty of customs leviable thereon as fromi the date of the publication of the notification. This notification was to remain in force up to and inclusive of 31-3-1981. As a result of this notification, the basic duty of customs payable during the relevant period ending oa31-3-1981 was Nil. By Notification No. 176/F. No. 355/160/79-Cus. I (G.S.R. No. 505-E), published in <ORG>, Extraordinary, Part II, Section 3(i) , dated 29-8-1980, <ORG>, in exercise of its power under Section 25(1) of the Act exempted Aluminium ingots from so much of the additional duty leviable thereon under Section 3 of the Tariff Act as was in excess of 12.5 per cent ad valorem. However this notification was, in exercise of the power under Section 25(1) of the Act, rescinded by <ORG> by a subsequent Notification No. 76/F. No. 355/8/81-Cus. I, published in <ORG>, Extraordinary, Part II, Section 3(i) , dated 27-3-1981, as a result of which additional duty became payable at-the full rate mentioned under Section 3 of the Tariff Act. By Notification No. 41/F. No. 334/5/80 : TRU (G S.R. 122-E), published in <ORG>, Extraordinary, Part II, Section 3(i) , dated 25-3-1980, <ORG>, in exercise of its power under Section 25(1) of the Act read with Section 4(4) of the Finance Act, 1980, granted a general exemption in respect of the goods specified in the 1st Schedule to the Tariff Act from the whole of the auxiliary duty leviable under the Finance Act . However by a subsequent Notification No. 75/F. No. 355/8/81-Cus. I, published in <ORG>, Extraordinary, Part II, Section 3(i) , dated 27-3-1981, <ORG>, in exercise of its powers under Section 25(1) of the Act read with Section 47(4) of the Finance Bill, 1981 (read with Act 16 of 1931), exempted Aluminium ingots (and certain other articles) from so much of auxiliary duty as was in excess of 5 per cent of its value. As a result of this later notification, the earlier Notification dated 25-3-1980 granting the general exemption was impliedly superseded in so far as the goods in question were concerned, and consequently 5 per cent auxiliary duty became payable on such goods. The effect of these notifications as from 27-3-1981 is that, in respect of Aluminium ingots, additional duty was raised from 12.5 per cent to 40 per cent plus 10 per cent SED and auxiliary duty became payable at 5 per cent. The basic customs duty at the relevant time was however Nil. Prior to 27-3-1981 and subsequent to that date during the relevant period duties of customs payable on imported Aluminium ingots may therefore be tabulated as follows :

Prior to 27-3-1981 From 27-3-1981 Basic duty Nil Nil Auxiliary duty Nil 5% Additional duty 12.5% 40+10% SED

5. Counsel for the appellant <NAME> submits that the goods in question were imported into India as soon as the vessel carrying them entered the territorial waters of this country. Importation of the goods materialised at that point of time. The duties of customs, he says, were attracted as soon as the goods were so imported and the subsequent quantification of the duties ought to be made with reference to the rates in force at that time. Referring to the decision of <ORG> in <NAME> v. Syl-vania and Laxman, 1975 Bom. L.R. 380 and other cases, counsel submits that chargeability in respect of levy of customs duty arises from the import of goods. The provisions of the Act do not postpone chargeability till the bill of entry is presented. The goods in the present case having been admittedly brought into Indian territorial waters prior to 27-3-1981, the enhanced rates, which became effective only as from that date, are not applicable in respect of those goods. He further submits that the notifications enhancing the rates by cancellation or reduction of the exemptions granted under the earlier notifications being not retrospective, the rates which applied at the point of time when the vessel entered the territorial waters remain unaffected and govern the levy in respect of these goods.

6. The sovereignty of India extends beyond its land territory and internal waters to an adjacent belt of sea described as the territorial waters and the limit of which is the line, every point of which is at a distance of 12 nautical miles from the nearest point of the appropriate baseline. Subject to the right of "innocent passage" through the territorial sea, all foreign merchant ships while in the territorial or internal waters of India fall under the jurisdiction of this country. This jurisdiction of India extends beyond and adjacent to the territorial sea over an area described as the contiguous zone, the limit of which is the line every point of which is at a distance of 24 nautical miles from the nearest point of the baseline from which the breadth of the territorial sea is measured. <ORG> is entitled to exercise such powers and take such measures in or in relation to the contiguous zone as it may deem necessary with respect to the security of India and immigration, sanitation, customs and other fiscal matters or any other matter as the Government may specify by notification. <ORG> is also entitled to exercise sovereign rights of or certain specified purposes in an area beyond and adjacent to the territorial waters and described as the exclusive economic zone, the limit of which is 200 nautical miles from the baseline from which the breadth of the territorial sea is measured.

7. The Customs Act contains various provisions answering the authorities under that Act to exercise jurisdiction over ships and persons not only in the internal waters, i.e. water in ports, harbours, roadsteads and mouths of rivers, but also in the territorial sea and the contiguous zone. These waters are described as the "Indian customs waters" under Section 2(28) of the Act. Power is conferred on the authorities to confiscate any vessel which is or has been within the Indian customs waters while constructed, adopted, altered or fitted in any manner for the purpose of concealing goods or while engaged in the commission of any of the offences mentioned under the Act ( Section 115 ). The proper officer is authorised under the Act to stop and search any such conveyance within these waters and seize goods, documents and things on board ( Sections 106 and 110 ). The police power of the authorities under the Act to prevent smuggling and other illegal activities extends over the Indian customs waters. The Act contains specific provisions relating to the levy of customs duties on imported or exported goods. No vessel entering India from any place outside is allowed to call for the first time after arrival in Indian waters, or at any time while carrying passengers or cargo, at any place other than a customs port, except in cases of distress ( Section 29 ). The customs port is specially appointed by <ORG> for the purpose of unloading imported cargo or loading cargo for export [ Section 2(12) and Section 7 ]. "Customs area" is the area meant for keeping imported goods or goods for export before clearance by the authorities [ Section 2(11) ]. Any goods imported by sea and unloaded or attempted to be unloaded at any place other than a customs port are liable to be confiscated. Any goods attempted to be exported from any place other than a customs port are likewise liable to be confiscated ( Sections 111 and 113 ). The person in charge of a vessel carrying imported cargo must within 24 hours after its arrival at a customs port deliver to the concerned officer an import manifest in the prescribed form ( Section 30 ). The master of the vessel must not permit the unloading of any imported goods until an order has been given by the concerned officer granting "entry inwards" to such vessel ( Section 31 ). No such order is ordinarily made in the absence of an import manifest and no unloading of imported cargo, not mentioned in the manifest, is ordinarily allowed ( Sections 31 and 32 ). Unloading of imported cargo or the loading of export cargo is not allowed except in an approved place in the customs port and under the supervision of the Customs Officer ( Sections 33 and 34 read with Section 8 ). All imported goods unloaded in a customs area have to remain in the custody of an authorised person until they are cleared for home consumption or warehoused or transhipped ( Section 45 ). The importer of any goods, other than goods intended for transit or transhipment, has to make entry thereof by presenting to the proper officer a "bill of entry" for home consumption or warehousing in the prescribed form. The bill of entry may be presented at any time after the delivery of the import manifest. It may be presented even before the delivery of such manifest if the vessel by which the goods have been shipped for importation into India is expected to arrive within a week from the date of such presentation. The importer has to make and subscribe at the foot of the bill of entry a declaration as to the truth of the contents of that document and must, in support of such declaration, produce to the concerned officer the invoice, if any, relating to the imported goods ( Section 46 ). If the concerned officer is satisfied that the goods entered for home consumption are not prohibited goods and the importer has paid proper duty thereon, including charges, if any, the officer may make an order permitting clearance of the goods for home consumption ( Section 47 ). If the goods brought into India from outside are not cleared for home consumption or warehoused or transhipped within two months from the date of their unloading at a customs port, or with such further time as the officer may grant, or if they are abandoned, the person having custody of the goods may, after due notice to the importer and with the permission of the officer, sell the same ( Section 48 ). These and other provisions in the Act regulate the manner in which and the place at which imported goods are allowed to be unloaded. Although the expression "import" is defined to mean "bringing into India from a place outside India", and "India" includes the "territorial waters of India", Section 2(23) and 2(27) , the unloading of imported cargo is not permitted anywhere in the Indian customs waters except within the specified portions of the port. This restriction is essential to maintain tight control over vessels and persons and things thereon while in Indian waters in order that any attempt to smuggle goods or commit any other offence within these waters is effectively prevented. It is for this purpose that the place at which cargo can be loaded or unloaded is specified under the Act.

8. Duties of customs are levied in relation to goods brought into India from a place outside India. It is the act of import that attracts customs duty in respect of these goods. As stated by <ORG> in In Re : Sea Customs Act, Section 20(2) , AIR 1963 SC 1760,1776 :

"... Truly speaking, the imposition of an import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers, i.e., before they form part of the mass of goods within the country. Such a condition is imposed by way of the exercise of the power of the <ORG> to regulate the manner and terms on which goods may be brought into the country from a foreign land."

The payment of duties of customs is a condition precedent to the grant of permission to allow the imported goods to mix with the "mass of goods" in the country. <ORG> duties are charged on commodities on their being imported into or exported from the country. To constitute an import within the <ORG> laws for the purpose of levy it is necessary that goods be brought into a proper port of entry with an intent to unload them. The act of importation therefore implies, in the context of levy, bringing goods into an Indian port for the purpose of discharge. There is no importation to attract customs duty if the cargo is in transit or is intended for transhipment. The goods which are brought into the country for the purpose of discharging them at an Indian port cease to be imported goods after they are cleared for home consumption. The mere act of bringing goods into the port therefore does not constitute an importation, although unexplained it may be evidence of that fact. "If goods, however, are brought into their port of destination for the purpose of being there discharged, the act of importation is complete" per <NAME> in <NAME> v. <ORG> (1925-26) 38 C.L.R. 131. As stated by Lord <NAME> in Canada <ORG> v. <NAME>, (1898) A.C. 735 (P.C.), in the context of the <ORG> Act , 1886 and the <ORG> Tariff Act , 1894 of Canada, "the words 'Imported into Canada', must, in order to give any rational sense to the clause, mean imported at the port of discharge, -...". It may be that in a general sense the course of import commences at the time the vessel carrying goods intended to be discharged at an Indian port enters the territorial waters for the purpose of proceeding to the port, but the act of import for the purpose of levy does not materialise until the goods have been brought into the port of discharge and the vessel is granted "entry inwards" and the bill of entry has been presented. The levy of duty is made with reference to that particular point of time, and the rates applicable are those then in force.

9. We shall now examine the relevant provisions concerning the levy of duty.

10. Section 12 which is a charging section reads :

"12. Dutiable goods.- (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act , 1975 , or any other law for the time being in force, on goods imported into, or exported from India.

The Section begins by saying "except as otherwise provided in this Act, etc." indicating that the levy is subject to the other provisions of the Act or any other law for the time being in force. The duties of customs are those specified under the Tariff Act or any other law for the time being in force. They would thus include the additional duty levied under the Tariff Act and the auxiliary duty under the Finance Act . Section 14 speaks of valuation of goods for the purpose of assessment where duty is chargeable by reference to value. Section 12 merely refers to the rates of levy under the relevant enactments. It does not refer to the point of time to which the rates are related. This is done by Section 15 which specifies the date for determination of rate of duty and tariff valuation of imported goods. This section reads :

"15. Date for determination of rate of duty and tariff valuation of imported goods. - (1) The rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force, -

(a) In the case of goods entered for home consumption under Section 46 , on the date on which a bill of entry in respect of such goods is presented under that section;

(b) in case of goods cleared from a warehouse under Section 68 , on the date on which the goods are actually removed from the warehouse;

(c) in the case of any other goods, on the date of payment of duty. Provided that if a bill of entry has been presented before the date of entry inwards of the vessel by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards.

(2) The provisions of this section shall not apply to baggage and goods imported by post."

This is an important Section which contains a guide to determine which is the duty that is applicable on the relevant date. In respect of goods entered for home consumption under Section 46 , the rates applicable are those in force on the date on which the bill of entry is presented. However, if the bill of entry has been presented before the date of entry inwards of the vessel, the bill of entry is deemed to have been presented on the date of such entry inwards. This shows that the actual or deemed date of the bill of entry is the point of time with reference to which the rates are determined. In the case of goods cleared from a warehouse under Section 68 , the rates applicable are those in force on the date on which the goods are actually removed from the warehouse. In the case of any other goods it is the date of payment that determines the rate of duty. These provisions indicate that the importer is liable to pay duty at the rate in force as specified in Section 15 . This Section thus fills up the lacuna of Section 12 which, without the aid of the former, cannot operate and they must therefore be read together. It is with reference to those two Sections that an assessment of duty is made under Section 17 .

11. Section 25 confers power on <ORG> to grant exemption from duty. It reads;

"25. Power to grant exemption from duty. - (1) If <ORG> is satisfied that it is necessary in the public interest so to do it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance), as may be specified in the notification, goods of any specified description from the whole or any part of duty of customs leviable thereon.

It is in exercise of the power under Section 25 that the notifications referred to earlier were issued exempting the goods completely or partially from duties or cancelling or altering the exemption as a result of which excess duties became payable by the petitioner.

12. It is futile to enquire for the purpose of levy at what point of time the vessel entered the territorial waters of India, for, as pointed out by <ORG> in <CITATION> . [1983 (14) E.L.T. 1688 (Del.)], it is difficult for determination with exactitude. It is an uncertain time and place for imposition of duty, although all ships in the "Indian customs waters" which include the territorial sea and the contiguous zone, fall under the control of the <ORG> authorities for the various purposes mentioned in the Act. Levy of duty, in respect of the goods imported, is pectulated only with reference to the time and space specified under the relevant provisions. There is no levy until the necessary documents such as the import manifest, the invoice and the bill of entry are presented to the concerned officer and the vessel is granted entry inwards at the place of unloading within the port. It is at this stage that the goods are charged with duty at the rates then in force. Only such goods as are legally brought into the country for the purpose of import by presenting the bill of entry on payment of proper duties, penalties, rent, interest, etc., for clearance for home consumption, or by keeping them in a bonded warehouse under Section 68 for subsequent clearance on furnishing the bill of entry and paying proper duties, etc., can be said to have been imported into the country. Discharge of goods in any other manner or at any other place is illegal and such goods are liable to seizure and confiscation. The importation of the goods therefore materialises or its process becomes complete and the goods become qualified to be cleared to merge with the mass of goods in the country only at the time and place of presentation of the bill of entry and payment of the duties and other charges. What is referred to as the "imported goods" ( Section 15 ) or the "goods imported" Section 12 are goods which are still not released from the stream of import, but have completed the course and are awaiting release by clearance to become part of the mass of goods within the country. The chargeability and the computation of the charges are both centred at that point of time and space as provided in Sections 12 and 15 . Any other construction of these provisions so as to separate chargeability from computation by relating chargeability to the time of entry into the territorial waters and computing the duties with reference to the rates then in force is to construe the Sections artificially and contrary to the legislative intent. The general scheme of the Act does not permit the computation to be related to an anterior date. It is intended to be made, in the case of goods entered for home consumption, with reference to the duty payable on the actual or deemed date of presentation of the bill of entry, or in the case of warehoused goods, on the date of their renewal from the warehouse, or, in the case of any other goods, on the date of payment of duty. What is payable is what was in force on the relevant date. That a different rate of duty was payable at the time of entry of the vessel into the territorial waters of India or at any time prior to the dates specified under Section 15 is immaterial. The legisjative intent is to charge the goods with the duty payable on the relevant date and not any other date. This is the most convenient method of fixing the duties and collecting the same. The space and time are both certain, and the enforcement of collection is easiest at that point. That is the relevant stage for the purpose of chargeability, computation and collection. A similar method of imposition computation and collection is provided under Section 16 read with Section 12 for export cargo. The construction of the provisions which we have adopted is fully justified by the legislative history of these provisions. In discussing the relevant provisions of the Sea <ORG> Act, 1878 such a Sections 37 , 57 , 86 and other provisions in <CITATION> . - AIR 1966 SC 1577, and in Asstt. <CITATION> . - AIR 1972 SC 1747, <ORG> held that duty was payable as per the rates in force on the actual or deemed date of presentation of the bill of entry. A like construction of Section 15 of the present Act was adopted by <ORG> in <CITATION> , AIR 1979 SC 675, where the court held that for goods falling under Section 15(l)(b) the rate of duty applicable was the rate in force on the date on which the warehoused goods were actually removed from the warehouse. A similar construction was adopted by <ORG> in G.N. Agarwal v. <NAME>,  in regard to levy on cargo entered for export. The court held that the duty was to be calculated with reference to the rates in force on the date on which the shipping bill was presented in terms of Section 16 .

13. In the light of what we have stated above, the reasoning of <ORG> in <CITATION> - (1975) 72 Bom. L.R. 380 ( <CITATION> ., 1981 (8) E.L.T. 414 (Bom.) and <CITATION> , 1981 Tax. L.R. 2673, and that of <ORG> in <CITATION> . Collector of Customs [1983 II M.L.J. 92] where the learned Judge did not follow his earlier decision to the contrary in <CITATION> , (1981) M.L.J. 162, and other decisions relied on by the appellants' counsel does not appear to us, with great respect, to be in accord with what seems to us to be the proper construction or the relevant provisions of the Act or with the decisions of <ORG> cited above. We respectfully agree with the views expressed on the point by <ORG> in <CITATION> . [1983 (14) E.L.T. 1688 (Del.)] and by <ORG> in <CITATION> . Collector of Customs and Ors.- 1981 (8) E.L.T. 298 (Cal).

14. There is no substance in the contention that the rates have been applied retrospectively. The rates applied were those in force on the date on which they were determined in terms of Section 15 .

15. In the light of what we have stated, we are of the view that the learned Judge has correctly held that the duties payable by the petitioner were those which were in force on the date of filing the bill of entry, i.e. 28-3-1981. In the circumstances we see no merit in the challenge against the impugned notices. The appeal is unsustainable. It is accordingly dismissed. The parties will, however, bear their respective costs.


JUDGMENT <NAME>, J.

1. This is an appeal by the first defendant against the preliminary decree for partition passed by the learned Subordinate Judge in O.S. No. 24 of 1943. It is unnecessary to set out the facts of the case elaborately and it will be sufficient to confine the facts in so far as they are relevant to the disposal of the contentions that have been raised in this appeal. The first defendant and one <NAME> were brothers being members of an undivided Hindu joint family. The family owned properties specified in the various schedules attached to the plaint. <NAME> died in June, 1942, leaving behind him the plaintiff, his widow and an unmarried daughter, the second defendant. The widow instituted the present suit for partition and separate possession of a half share in the family properties basing her claim on the rights conferred upon her by the Hindu Women's Rights to Property Act , 1937. It has now been finally decided by <ORG> that this Act as it then stood does not operate to regulate succession to agricultural land in the Governors' Provinces and also that it does not operate to regulate devolution by survivorship of such agricultural land. This Act so far as this Presidency is concerned was amended by the Madras Hindu Women's Rights to Property (Extension to Agricultural Land) Act, 1947 (Madras; Act XXVI of 1947) The amending Act does not help the plaintiff in respect of the agricultural lands involved in this suit as the amending Act applies only to the property of a Hindu dying intestate after the 26th November, 1946. As <NAME> died in June, 1942, the rights in the agricultural lands are governed by the ordinary Hindu law and not by the Act of 1937.

2. The learned Subordinate Judge decreed the claim of the plaintiff in respect of the non-agricultural property, but disallowed the claim with regard to the agricultural lands. In this appeal by the first defendant the main and the most important question that was raised on his behalf by his learned advocate relates to the share decreed in favour of the plaintiff by the learned Subordinate Judge in items 1, 2, 17 and 18 of Schedule II to the plaint. These items represent the produce of the land cultivated and harvested after the death of <NAME>. That is the finding of the learned Subordinate Judge and has not been seriously challenged before lis. The learned Subordinate Judge decreed a share in these items on the ground that the rights to property should be determined as on the date on which the plaintiff claimed a share by instituting the present suit for partition of the items and not as on the date of the death of her husband. Under the Act , as it would be seen from the language of Section 3(2) the right is created in favour of the widow of a deceased coparcener in the property governed by the Act, her interest being the same as that of her husband. As it has now been finally settled by <ORG> that the Act does not apply to agricultural land in the Governors' Provinces, it must be taken that when <NAME> died in June, 1942, his interest in the agricultural land survived to the other coparcener, namely, the first defendant and that thereafter he became the sole and exclusive owner of the agricultural lands. The produce of the lands thereafter belongs exclusively to the first defendant. If on the date of the death of her husband the plaintiff had acquired no interest in the agricultural lands by virtue of the provisions of the Act, it is difficult to see how she could claim a share in the produce of the lands which upon the death of her husband became the sole and exclusive property of the first defendant. The right of succession or of survivorship must be determined as on the date of the death of the husband of the plaintiff and not as on the date of the institution of this suit for partition. If no interest in the agricultural lands devolved on the widow, i.e., the plaintiff, on the death of <NAME> in the income that subsequently accrued from such property the plaintiff gets no share or interest. The reasoning therefore of the learned Judge on the basis of which he granted the decree for partition of these items of the second schedule to the plaint seems to lis to be entirely wrong. Some light is thrown on this question by the decision of <ORG> in Mst. <CITATION> . <NAME> (1947) 1 M.L.J. 127 : 1946 F.L.J. 110 though the question was not specifically raised in the form in which it arises for consideration before lis. In that case one <NAME> obtained possession of certain "agricultural lands" as a mortgagee. The mortgage contained no covenant to pay. <NAME> died leaving behind him surviving a widow and a predeceased son's widow. The mortgage was redeemed after his death and the widow received the entire amount due under the mortgage. The son's widow thereafter claimed a half share in the mortgage money and instituted a suit to recover that share from the widow or in the alternative from the legal representatives of the mortgagor. She based her claim on Section 3 of the Hindu Women's Rights to Property Act , 1937. The main question that was considered in that case by <ORG> was whether the expression " agricultural land" occurring in entry 21 of List II of the VII Schedule of the Government of India Act, 1935, included also rights in agricultural land and whether a mortgage of the description which was then in dispute before <ORG> could be deemed to be agricultural land within the meaning of that list. It was held by <ORG> that the expression " agricultural land " included also a limited right such as that of a mortgage particularly when there was no covenant to pay and the only means by which the debt could be discharged was by remaining in possession of the lands and to receive the rents and profits until the mortgage money was repaid to the mortgagee. The contention, however, that the money that was collected after the death of <NAME> by his widow became property in which the son's widow acquired an interest under the provisions of Section 3 of the Act was not raised and if the argument that the rights should be determined as on the date of partition was permissible--even if it was not raised--their Lordships of <ORG> would not have omitted to consider and give effect to it However, on the plain language of Section 3 of the Act we have no hesitation in holding that the rights should be determined whether claimed by succession or survivorship as on the date of the death of the husband of the plaintiff and not on the date of the partition suit. If as stated above by reason of the death of <NAME>-swami <NAME> no interest devolved on the widow, the plaintiff, in the agricultural lands, under the ordinary Hindu law which continues to operate the first defendant acquired the entire rights in the agricultural lands by survivorship and the income of such lands would also partake the same character. The Act merely modified the right of succession and survivorship of Hindu law to the extent to which it is indicated in the Act. It does not abrogate and repeal the Hindu law relating to succession and survivorship. In this view we think that the learned Subordinate Judge was wrong in allowing a share to the plaintiff in those items. We think therefore that the decree of the learned Subordinate Judge should be modified by excluding those items from partition.

3. The next question for consideration is whether the house, item No. 2 of Schedule I is the exclusive property of the first defendant. The learned Subordinate Judge-on the evidence before him found that the first defendant failed to establish that the house which stands in his name and which was purchased in 1939 was acquired without the aid of the joint family funds. He was the manager of the family and was receiving rents and profits of the joint family property. The burden is entirely upon him to show by clear and cogent evidence that the property was acquired by his separate funds. The first defendant failed to discharge the burden that lies on him and we think that the finding of "the learned Subordinate Judge on this question is correct and must be upheld. It was faintly argued that the provision of Rs. 2,000 for the marriage expenses of the second defendant is too high. In view of the fact that at least Rs. 1,000 would be required for jewels and another Rs. 1,000 for other expenses, on the evidence in the case it is difficult to agree with this contention. We think that the provision made by the learned Subordinate Judge for the marriage expenses of the second defendant is reasonable and does not call for interference by this Court.

4. There is also another contention relating to the pledge of jewels and it is alleged that the pledge really belongs to the sixth defendant. The sixth defendant himself has not appealed against the finding of the learned Subordinate Judge and the case of the first defendant rests entirely upon the oral testimony of himself and of the sixth defendant. For reasons given by the learned Subordinate Judge in paragraph 26 of the judgment we see no reason to differ from his conclusion on the point. We think therefore that this contention also must be disallowed.

5. In the result the appeal is allowed to the extent of directing the exclusion of items 1, 2, 17 and 18 of Schedule II to the plaint from partition. The rest of the appeal is dismissed. The parties will pay and receive proportionate costs.

6. The direction regarding payment of Rs. 2,000 for the marriage expenses of the second defendant should, we think, be modified by directing the first defendant to pay the amount to the mother soon after the marriage of the second defendant is fixed.


PETITIONER: THE STATE OF MADHYA PRADESH Vs. RESPONDENT: G. C. MANDAWAR. DATE OF JUDGMENT: 13/05/1954 BENCH: <NAME>, T.L. VENKATARAMA BENCH: <NAME>, T.L. VENKATARAMA MAHAJAN, <NAME> (CJ) MUKHERJEA, B.K. BOSE, VIVIAN BHAGWATI, NATWARLAL H. CITATION: 1954 AIR 493 1955 SCR 158 CITATOR INFO : F 1963 SC 222 (24) R 1966 SC 976 (21) F 1973 SC 231 (16) RF 1973 SC1461 (1191) R 1987 SC2117 (14) RF 1989 SC 100 (33) ACT: Constitution of India, Art. 14- Scale of dearness allowance fixed by Provincial Government-Different from the scale fixed by <ORG>-Whether discriminatory-Rule 44 of Fundamental Rules-Grant of dearness allowance-Whether a right or a matter of discretion-Mandamus or any other Writ under Art. 226 of the Constitution. HEADNOTE: <ORG> (Now <ORG> of Madhya Pradesh) fixed in 1948 a scale of dearness allowance for its servants which though practically identical with the scale of dearness allowance fixed by <ORG> in respect of salaries over Rs. 400 per mensem was less than it in respect of salaries for Rs. 400 per mensem or less. The petitioner-<ORG> government servant-challenged the validity of the order of <ORG> on the ground that his fundamental right under Art. 14 of the Constitution had been violated inasmuch as he had a right to be equally treated with the <ORG> Servants similarly situated. Held, that under the provisions of Rule 44 of the Fundamental Rules it is a matter of discretion with the local Government whether it will grant dearness allowance to any Government servant and if so how much. It imposes no duty on the <ORG> to grant it and therefore no mandamus can issue to compel the <ORG> to grant it nor can any other writ or direction be issued in respect of it as there is no right in the Government servant which is capable of being protected or enforced. Article 14 does not authorise the striking down of a law of one <ORG> on the ground that in contrast with a law of another <ORG> on the same subject its provisions are discriminatory. Nor does it contemplate a law of the <ORG> or of the <ORG> dealing with similar subjects being held to be unconstitutional by a process of comparative study of the provisions of two enactments. The sources of authority for the two statutes being different, Article 14 can have no application. Therefore 'the scale of dearness allowance sanctioned by the <ORG> can furnish no ground for holding that the allowance sanctioned by <ORG> is repugnant to Article 14. The <ORG> Government was entitled to fix the Government of India rates for one slab and <NAME>; different rates for another slab, 600 <CITATION> ( F.C.R. 89), and <CITATION> ( S.C.R. 786) distinguished. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2 of 1954. Appeal under article 132 (1) of the Constitution of India from the Judgment and Order dated the 10th September, 1953, of <ORG> at Nagpur in Miscellaneous Petition No. 123 of 1953.

<NAME>, Attorney-General for India (<NAME> and <NAME>, with him) for the appellant. <NAME> (<NAME>, with him) for the respondent.

<NAME> and <NAME> for the Intervener (State of West Bengal).

1954. May 13. The Judgment of the Court was delivered by <NAME>-The point for decision in this appeal is whether a Resolution of <ORG>, now Madhya Pradesh, dated 16th September, 1948, fixing a -scale of dearness allowance to be paid to its servants is repugnant to article 14 of the Constitution. The circumstances under which the above Resolution came to be adopted may be briefly mentioned. Consequent on the war, there was a phenomenal rise in the price of foodstuffs and of other essential commodities, and among the persons worst hit by it were the Government servants. As a measure of relief to them, the <ORG> and the <ORG>s sanctioned a grant of grain allowances to them under various Resolutions passed in 1940. The scheme adopted by the <ORG> Government was that its employees stationed in various Provinces received the same benefit as the respective <ORG> employees. But this scheme was found to be unsuitable for employees of the <ORG> Government, as the allowances granted by the <ORG>s were not uniform. On 10th May, 1946, the <ORG> Government appointed a <ORG> Pay <ORG>, hereinafter referred to as the <ORG>, to enquire into and

-report on the conditions of service of its employees with particular reference to I 'the structure of their pay scales 'and standards of remuneration with the object of achieving a rationalisation, simplification and uniformity to the fullest degree possible." The <ORG>, which was presided over by Sir <NAME>, recommended by its report dated 3rd May, 1947, the grant of dearness allowance on a specified scale. On 27th May, 1947, <ORG> appointed <ORG>, hereinafter referred to as the <ORG>, "to examine the recommendations of the Central Pay <ORG> and to report the extent to which and the modifications subject to which these recommendations should be accepted by <ORG>, so far as <ORG> servants under its rule- making control are concerned." By its report dated 22nd June, 1948, the <ORG> recommended the grant of dearness allowance on a scale which, though practically identical with that adopted by the <ORG> in respect of salaries above Rs. 400 per mensem, was less than it as regards salaries of Rs. 400 per mensem or less. These recommendations were accepted by the <ORG> by its Resolution dated 16th September, 1948. This difference in the result between the two scales not unnaturally caused considerable dissatisfaction among the employees concerned, and after unsuccessful attempts to get redress on the executive side, they filed through their representative, the respondent, the present application under article 226 of the Constitution.

In the petition it was alleged that "the <ORG> should have uniformly adopted the <ORG> rates for all its servants and the discrimination in making the two-fold slab and accepting the <ORG> rates for one slab, i.e., for servants receiving salary over Rs. 400, and not accepting them in respect of the other slab, i.e., of servants drawing below Rs. 400, is highly discri- minatory," that "the <ORG> servant has a right to be treated equally with the <ORG> servant similarly situated," and that "every servant has these fundamental and natural rights and  the petitioner and the members of <ORG> have a right to demand from the respondent the Dearness Allowance at the <ORG> rates." The petitioner then prayed:

"That declaring that all ministerial servants are entitled to the <ORG> rates of Dearness Allowance or in any case adequate Dearness Allowance, <ORG> should be directed by a writ of mandamus or by any other suitable writ or direction to cancel the discriminatory rules of Dearness Allowance and adopt the <ORG> rates to all servants without discrimination or in any case, to provide with adequate rates of Dearness Allowance sufficient to provide reasonable subsistence for them." The Government contested the petition on the grounds, firstly, that the claim for dearness allowance was not justiciable, and secondly, that the difference in the scales of dearness allowance adopted by the <ORG> and by the Committee did not violate article 14. The learned Judges (<NAME> and <NAME>) held that under the rules dearness allowance was placed on the same footing as pay, and that the claim relating thereto was therefore justiciable; and that the differentiation made between the employees of <ORG> and of <ORG> in the matter of the grant of dearness allowance rested on "no intelligible and reasonable basis," and that the Resolution dated 16th September, 1948, was therefore bad. They accordingly issued a direction to <ORG> that they do reconsider the question of dearness allowance payable to the employees concerned. It is against this judgment that the present appeal has been preferred by <ORG> on a certificate granted under article 132(1) of the Constitution.

It is argued on behalf of the appellant firstly that grant of dearness allowance is a matter ex gratia and not justiciable, and that neither a writ of mandamus nor any direction could be issued with reference thereto, and secondly, that the Resolution dated 16th September, 1948, is not hit by article 14 of the Constitution. In our opinion, both these contention are well founded On the first question, Rule 44 of the Fundamental Rules runs as follow: "Subject to any restrictions which the Secretary of State in Council may by order impose upon the powers of the Governor-General in Council or the Governor in Council, as the case may be, and to the general rule that the amount of a compensatory allowance should be so regulated that the allowance is not on the whole a source of profit to the recipient, a Local Government may grant such allowance to any Government servant under its control and may make rules prescribing their amounts and the conditions under which they may be drawn."

Under this provision, it is a matter of discretion with the local Government whether it will grant dearness allowance and if so, how much. That being so, the prayer for mandamus is clearly misconceived, as that could be granted only when there is in the applicant a right to compel the performance of some duty cast on the opponent. Rule 44 of the Fundamental Rules confers no right on the Government servants to the grant of dearness allowance; it imposes no duty on the <ORG> to grant it. It merely confers a power on the <ORG> to grant compassionate allowance at its own discretion, and no mandamus can issue to compel the exercise of such a power. Nor, indeed, could any other writ or direction be issued in respect of it, as there is no right in the applicant which is capable of being protected or enforced.

The learned Judges of <ORG> relied on certain rules which put dearness allowance on the, same footing as pay for certain purposes, and held on the authority of the decision in The Punjab Province v. pandit <NAME>) that the present claim was justiciable. <CITATION> was an action for recovery of arrears of salary, land it was held that under the law of this country which differed in this respect from that of England, arrears of salary were a debt due by the Government, that they could be attached in execution of a decree under section 60, Civil Procedure Code, as a debt, and that on that basis an action to recover the same was (1)  F.C.R. 89.

maintainable. This decision was quite recently approved by this Court in <CITATION> (1), wherein it was pointed out that salary was not in the nature of a bounty, and that whatever was recoverable by a Petition of Rights in England could be recovered by action in this country. This question may therefore now be taken to be settled beyond controversy. But we are not concerned in the present proceedings with any debt payable by the <ORG>. The claim is not to recover arrears of dearness allowance which had accrued due under the rules in force relating thereto. The claim now put forward its to compel the <ORG> to grant dearness allowance at a particular rate, and under Rule 44 of the Fundamental Rules, such a claim is a matter of grace and not a matter of right. In England, no petition of right will lie in respect of such a claim. The position is thus stated in Halsbury's Laws of England, Volume IX, page 688, Note (s) @:

" It is erroneous to suppose that a petition of right will lie for matters which are of grace and not of right. [De <NAME> (Baron) v. R.(2).]"

That is also the law in this country where an action is a substitute for a petition of right. In the result, we must hold that the matters raised in the petition are not justiciable.

Mr. <NAME>, the learned counsel for the respondent, did not dispute the correctness of this position. But he argued that when once the Government passed 'a Resolution fixing a scale of allowance under Rule 44, that would be law as defined in article 13(3)(a) of the Constitution, and if that law infringed, article 14 , it could be declared void. That is a contention which is clearly open to him, and the question therefore that falls to be decided is whether the Resolution dated 26th September, 1948, is bad as infringing article 14.

Now, the scheme which has been adopted in the impugned Resolution is firstly that dearness allowance if; to I be paid to the employees on a scale graded according to pay, different rates being adopted for different slabs and there being a progressive reduction (1) [1954] S.C.R. 786.

(2) 13 Q. B- 364 Ex. Ch. at P- 387-

of the rate from the lowest to the highest category. No contention is raised that fixing different rates of dearness allowance for different slabs of pay is obnoxious to article

14. Secondly, within any given slab, the scheme places all the employees in the same position, except that in the lowest ranks a slightly higher rate is fixed for residents in the cities of Nagpur and Jubbulpore, which again has not been attacked as discriminatory. These being the features of the scheme, there can be no room for the contention that it has made any discrimination.

Mr. <NAME> does, not contend that there is anything in the scheme or in the Resolution adopting it, which bring s it within the prohibition enacted in article 14. His contention is that the <ORG> whose recommendations were accepted by the <ORG> adopted the rates suggested in the report of the <ORG> as regards <ORG> servants who drew a monthly salary of. over Rs. 400, but when they came to those employees who drew a monthly salary of Rs. 400 or less, they discarded the rates fixed by the <ORG>, and, instead, adopted different and lower rates, and that this was discrimination hit by article 14. In other words, the impugned Resolution, though valid in itself as not infringing article 14 , becomes void under that provision when it is taken in conjunction with the report of the <ORG>. We do not find anything in article 14 which supports this somewhat startling contention. Under the Constitution, the <ORG> and the <ORG> are distinct entities, each having its own executive and <ORG>, with their powers well-defined. Article 12 defines "the <ORG>" as including the <ORG> and the <ORG> of each of the <ORG>. Article 13(2) enacts that the <ORG> shall not make any laws taking away, or abridging the rights conferred by Part III, and article 14 enacts that, "The <ORG> shall not deny to any person equality before the law or the equal protection of the laws within the territory of India."

On these provisions, the position is that when a law is impugned under article 13 , what the <ORG> has to decide is whether that law contravenes any of the provisions of Part III. If it-decides that it does, it has to declare it void; if it decides that it does not, it has to uphold it. The power of the <ORG> to declare a law void under article 13 has to be exercised with reference to the specific legislation which is impugned. It is conceivable that when the same <ORG> enacts two different laws but in substance they form one legislation, it might be open to the <ORG> to disregard the form and treat them as one law and strike it down, if in their conjunction they result in discrimination. But such a course is not open where, as here, the two laws sought to be read in conjunction are by different <ORG>s and by different <ORG>s. Article 14 does not authorise the striking down of a law of one <ORG> on the ground that in contrast with a law of another <ORG> on the same subject its provisions are discriminatory. Nor does it contemplate a law of the <ORG> or of the <ORG> dealing with similar subjects being held to be unconstitutional by a process of comparative study of the provisions of the two enactments. The sources of authority for the two statutes being different, article 14 can have no application. The result, therefore, is that the scale of dearness allowance recommended by the <ORG> and sanctioned by <ORG> can furnish no ground for holding that the scale of dearness allowance recommended by the <ORG> and adopted by the appellant is repugnant to article 14. It may no doubt ,sound hard that <ORG> servants doing work of a similar kind and working, it may be, even in the same place, should receive different allowances; but the rights of the parties have to be decided on legal considerations, and it is impossible to hold that the Resolution in question is bad under article 14. It was argued on behalf of the appellant that the assumption underlying the argument of the respondent -with reference to article 14 that the <ORG> had adopted the Report of the <ORG> in part and rejected it in part was itself without foundation. In the view we have taken on the applicability of article 14 , this question has no practical importance; but as all the materials have been placed before us, we may briefly express our opinion thereon. In paragraph 80 of the Report the <ORG> observed that while the <ORG> based its scale on the cost of living index, they themselves adopted the current level of prices as the basis for fixation of dearness allowance. In paragraph 83 they further observed that in fixing the scale on the basis of the cost of living index the element of pay had also been taken into account, but that as they had revised the scale of basic pay, they were not including it in fixing the dearness allowance. In paragraph 31, they observed that unlike the <ORG> they were taking into consideration the financial resources of the <ORG> in fixing the scale. Thus, the <ORG> approached the problem from a different angle, and applied different principles in fixing the scale of dearness allowance; and if the two schemes produced the same results at some stages, that was due to coincidence and not to adoption of the report of the <ORG> by the '<ORG>. Mr. <NAME> also referred us to two Resolutions of the appellant dated 4th January, 195 1, and 6th October, 195 1, adopting the scale fixed by the <ORG> in respect of certain other categories. That has no bearing on the question whether the <ORG> whose recommendations were approved by the <ORG> had adopted in part the Report of the <ORG> so as to result in discrimination. The facts stated above show that the <ORG> went into the matter independently, and viewed the question from a different standpoint; and in formulating the scheme which they did, they did not adopt the Report of the <ORG>, though they derived considerable assistance from it. In the result, this appeal must be allowed and the petition of the respondent dismissed; but in the circumstances, there will be no order as to costs either here or in the <ORG> below.

Appeal allowed.