Excise duties-Retrospective Levy-Validity of enactment-Legislative competence of Parliament-Constitutional validity-Finance Act 1951 (23 of 1951), s.7(2)-Constitution of India Arts. 19(1)(f), 31, 265, Seventh Schedule, List 1, Entry 84, List II, Entry 60.

The appellants who were carrying on business in tobacco had in their licenced warehouse considerable quantity of tobacco on February 28, 1951. On the same day a Bill was introduced in the House of the People containing the financial proposals of the Government of India for the fiscal year beginning April 1, 1951. Clause 7 of the Bill made provision for the amendment of the Central Excises and Salt Act, 1944, by way of alteration of duties, inter alia, on unmanufactured tobacco by imposing an excise duty of 8 annas per lb. Under the provisions of the Provisional Collection of Taxes Act, 1931, the duty could become leviable as from the date of the introduction of the Bill and it was so made. In accordance therewith the appellants paid excise duty on tobacco in their possession at the rates mentioned in the Bill and obtained clearance certificates. On April 28, 1951, the Bill was passed and became Finance Act, 1951, but as passed changes were effected as regards the duty proposed in the Bill. Under s. 7(1) of the Finance Act, the duty on unmanufactured tobacco was increased to 14 annas per lb. Section 7 (2) thereof provided that "the amendments made in the Central Excises and Salt Act, 1944, shall be deemed to have, effect on and after March 1, 1951, and accordingly ..... , recoveries shall be made of all duties which have not been collected but which would have been collected if the amendment had so come into force." In pursuance of s. 7(2) a demand was made upon the appellants on June 22, 1951, for payment of the excess of the excise duty payable on tobacco cleared out of the warehouse from March 1, 1951, to April 28, 1951. The appellants challenged the legality of the demand on the grounds, inter alia, that (1) excise duty was a tax on goods which must exist at the time when the tax was levied and it must have been intended and expected by the legislature that it would be passed on to the consumer, and as the retrospective operation of the duties deprived the tax of these qualities they did not fall within the term "duties of excise" in Entry 84, List 1 of the Seventh Schedule to the Constitution of India, and therefore, s. 7(2) of the Finance Act, 1951, in so far as it imposed an excise duty retrospectively before the date of its enactment was beyond the legislative competence of Parliament and (2) the impugned levy contravened Art. 19(1)(f), because a retrospective levy of an excise duty deprived the tax payer of the right of passing it on and recovering it from his buyer, and that this constituted a restraint on the right to hold property, which was not saved by cl.(5) of Art. 19.