R. KEMPANNA AND CO. v. STATE OF KARNATAKA — 1988 DIGILAW 149 (KAR)

K. A. SWAMI, J. ( 1 ) THE petitioners in all these petitions were the Arrack Contractors in the various Taluks of the state during the Excise year 1985-1986 commencing from 1-7-1985 and ending on 30-6-1986. At the time when the excise contract was given to the petitioners, the rate per bulk litre for supply of arrack was Rs. 4/ -. However, it was tried to be raised to Rs. 6/- per bulk litre and it was tried to be collected from 1-7-1985 at that rate. Therefore these petitioners along with several others filed Writ Petitions Nos. 13061 to 13065 of 1985 and other connected Writ Petitions (Karnataka Excise Contractors Association (Regd) Bangalore v. The State of Karnataka) All those Writ Petitions were heard and decided on 2nd September 1987 in the following terms : "7. Whatever that may be, as far as these petitions are concerned, all that is necessary to say is that though undoubtedly the message (Annexure-D) issued by the Excise Commissioner directing the collection of excise duty at the enhanced rate fixed under the notification dated 26-7-85 publishing the draft of the Rules (Annexure-A) gave a cause of action, to these petitions, the said cause of action ceased to exist on the date on which the amended rule was published as per the notification dated 19-8-1985 and as a consequence, the question of collection of excise duty at the enhanced rate pursuant to the message does notarise. 8. The collection of excise duty at the enhanced rates is possible only under the Rules as amended by notification dated 19-8-1985. 9. Faced with the notification dated 19-8-1985 the petitioners in W. P. No. 13215 to 13235/1985 filed today an application for amendment of the petitions, praying for striking down the notification dated 19-8-1985 but later their learned Counsel sought permission to withdraw the same stating that the petitioners would consider as to whether the validity of the notification dated 19-8-1985 should be challenged in a separate Writ Petition. The prayer was not opposed by the learned Government Advocate, but without prejudice to raising ail objections open to the state to any Writ Petition, if filed by the petitioner challenging the validity of the Rules. 10. The prayer was not opposed by the learned Government Advocate, but without prejudice to raising ail objections open to the state to any Writ Petition, if filed by the petitioner challenging the validity of the Rules. 10. In the result, I make the following order ; (i) All the Writ Petitions are disposed of in terms of paragraph 7 of this order; (ii) The respondent shall be entitled to collect excise duty from the petitioners at Rs. 6-00 per bulk litre of arrack in accordance with the rules as amended by notification dated 19-8-1985. (iii) The application for amendment filed in W. P. Nos. 13215 to 13235 of 1985 is dismissed as withdrawn without expressing any opinion on the point raised therein. ( 2 ) SUBSEQUENT to the notification dated 19-8-1985, there is another notification issued on 26th october 1987 bearing No. HD 210 EDC 85 produced as Annexure-E amending the relevant rule. The said amendment reads thus: "title and commencement; (1) These rules may be called the Karnataka Excise Duties (Amendment) Rules 1987. (2) They shall be deemed to have come into force on the first day of July 1986. Amendment of Schedule-A:- In the Schedule-A of the Karnataka Excise (Excise Duties) Rules 1968 in the entries relating to Sl. No. 1 in column 3 for the letters figures and words "rs. 6-00 per bulk litre. " the letters, figures and words "rs. 4-00 per bulk litre" shall be substituted. " ( 3 ) ON the basis of the aforesaid amendment effected by the Notification dated 19-8-1985 all these petitioners are now issued with the notices in the month of December 1987 which are produced as Annexures 'f' and 'g' in Writ Petitions Nos. 5744 and 5745 of 1988 and Annexure 'f' in Writ Petitions Nos. 5501 to 5508 of 1988 directing them to pay the excise duty at the rate of rs. 6-00 per bulk litre from 1-8-1985 to 30-6-1986. On that basis various sums are demanded from the petitioners. ( 4 ) SRI G. S. Visveswara, learned Counsel for the petitioner in Writ Petitions Nos. 5744 and 5745 of 1988 and Sri C. V. Guruve Gowda, learned Counsel for the petitioners in Writ Petitions nos. 5501 to 5508 of 1988 contend that the respondents are not justified in law in demanding the excise duty at the rate of Rs. ( 4 ) SRI G. S. Visveswara, learned Counsel for the petitioner in Writ Petitions Nos. 5744 and 5745 of 1988 and Sri C. V. Guruve Gowda, learned Counsel for the petitioners in Writ Petitions nos. 5501 to 5508 of 1988 contend that the respondents are not justified in law in demanding the excise duty at the rate of Rs. 6-00 per bulk litre from 1-8-1985 to 30-6-1986 inview of the karnataka Excise Duties (Amendment) Rules 1987, in asmuch as the Rule has been amended by substitution, therefore it must be deemed to have been in force during the period from 1-7-1985 to 30-6-1986. Hence, the petitioners are only liable to pay excise duty at the rate of Rs. 4-00 per bulk litre and not at the rate of Rs. 6-00 per bulk litre. It is also submitted that Karnataka (Excise duties) (Amendment) Rules 1985 are not placed before the Legislature as required by sub-section 4 of Section 71 of the Karnataka Excise Act. Therefore the said amendment which enhanced the excise duty from Rs. 4-00 per bulk litre to Rs. 6-00 per bulk litre is invalid and inoperative. Therefore, the respondents are not entitled to demand and collect the excise duty at the rate of Rs. 6-00 per bulk litre. As far as the excise duty payable at the rate of Rs. 4-00 per bulk litre is concerned, the petitioners have paid the same already. It is also further submitted that having regard to the provisions contained in Sections 22, 23 and 24 of the Karnataka Excise Act, it is not open to the respondents to increase the excise duty during the subsistence of the contract. ( 5 ) ON the contrary Sr. Abdul Khadar, learned High Court Government Pleader contends that these contentions are no more res-integra and they are covered by the decisions of the Supreme court and of this Court. He submits that the demand made is in accordance with law and the amendment of the Karnataka (Excise Duties) (Amendment) Rules 1985 does not suffer from any infirmity. It is also further submitted that failure to place the said Rules before the Legislature does not vitiate the Rules nor does it affect the validity and enforceability of the Rule. 5a. He submits that the demand made is in accordance with law and the amendment of the Karnataka (Excise Duties) (Amendment) Rules 1985 does not suffer from any infirmity. It is also further submitted that failure to place the said Rules before the Legislature does not vitiate the Rules nor does it affect the validity and enforceability of the Rule. 5a. Having regard to the aforesaid contentions, the points that arise for determination are : (1) Whether the Karnataka (Excise Duties) (Amendment) Rules 1985 are invalid because the same are not laid before the Legislature? (2) Whether the Karnataka Excise Duties (Amendment) Rules 1987 enable the petitioners to claim benefit of reduction in the excise duty rate for the period 1-8-1985 to 30-6-1986? (3) Having regard to the provisions contained in Sections 22, 23 and 24 of the Karnataka Excise act, whether it is open to the first respondent to increase the excise duty during the subsistence of the contract? ( 6 ) POINT NO. 1 :- Sub-section (4) of Section 71 of the Karnataka Excise Act 1965 provides that every rule made under this Section shall be laid, as soon as may be after it is made, before each house of the State Legislature. It is submitted on behalf of the State that in terms of Subsection (4) of Section 71 of the Act, rules have not been laid before each House of the State Legislature, as there was delay in laying the said rules before each House of the State Legislature. The learned High Court Government Pleader has argued even assuming that the rules are not laid before each House of the State Legislature, the same cannot at all be held to affect the validity of the Rule. This contention is no more res-integra. In the case of JAN MOHAMMAD NOOR mohammad BAGBAN v. THE STATE OF GUJARAT AND ANR. , AIR1966 SC 385 , [1966 ]1 SCR505 it is held thus : "finally, the validity of the Rules framed under the Bombay Act 22 of 1939 was canvassed. By section 26 (1) of the Bombay Act the State Government was authorised to make rules for the purpose of carrying out the provisions of the Act. , AIR1966 SC 385 , [1966 ]1 SCR505 it is held thus : "finally, the validity of the Rules framed under the Bombay Act 22 of 1939 was canvassed. By section 26 (1) of the Bombay Act the State Government was authorised to make rules for the purpose of carrying out the provisions of the Act. It was provided by Sub-section (5) that the rules made under Section 26 shall be laid before each of the Houses of the Provincial Legislature at the session thereof next following and shall be liable to be modified or rescinded by a resolution in which both Houses concur and such rules shall, after notification in the Official gazette be deemed to have been modified or rescinded accordingly. It was urged by the petitioner that the rules framed under the Bombay Act 22 of 1939 were not placed before the legislative Assembly or the Legislative Council at the first session and therefore they had no legal validity. The rules under Act 22 of 1939 were framed by the Provincial Government of bombay in 1941. At that time there was no legislature in session, the legislature having been suspended during the emergency arising out of World War. The session of the Bombay legislative Assembly was convened for the first time after 1941 on May 20, 1946 and that session was prorogated on May 24, 1946. The second session of the Bombay Legislative assembly was convened on July 15, 1946 and that of the Bombay Legislative Council on september 3, 1946 and the rules were placed on the Assembly Table in the second session before the Legislative Assembly on September 2 1946 and before the Legislative Council on September 13, 1946. Section 26 (5) of Bombay Act 22 of 1939 does not prescribe that the rules acquired validity only from the date on which they were placed before the Houses of Legislature. The rules are valid from the date on which they are made under Section 26 (1 ). It is true that the legislature has prescribed that the rules shall be placed before the Houses of Legislature, but failure to place the rules before the Houses of Legislature does not affect the validity of the rules, merely because they have not been placed before the Houses of the Legislature. It is true that the legislature has prescribed that the rules shall be placed before the Houses of Legislature, but failure to place the rules before the Houses of Legislature does not affect the validity of the rules, merely because they have not been placed before the Houses of the Legislature. Granting that the provisions of Sub-section (5) of Section 26 by reason of the failure to place the rules before the houses of Legislature were violated, we are of the view that Sub-section (5) of Section 26 having regard to the purpose for which it is made and in the context in which it occurs cannot be regarded mandatory. The rules have been in operation since the year 1941 and by virtue of section 64 of the Gujarat Act 20 of 1964 they continue to remain in operation. " ( 7 ) AGAIN in ATLAS CYCLE INDUSTRIES LTD. AND ORS. v. STATE OF HARYANA, 1992 (3 ) SCALE477 , 1993 Supp (2 )SCC278 , [1992 ]supp3 SCR699 the same view is reiterated and the decision in Jan Mohammad Noor Mohammad Bagban's case, AIR1966 SC 385 , [1966 ]1 SCR505 is quoted with approval. This court also had an occasion to consider in AVALA REDDY RAMAPPA v. THE STATE OF mysore, 1960 KLJ 315 in respect of the Rules framed under the Mysore Village Panchayats and local Boards Act (10 of 1959) and it was held that "the Rules made under Section 210 of the Act became law soon after they were made and published as required. Section 246 does not provide that the Rules do not come into force until after the expiry of the 30 days referred to in that section. What it only provides is that if during the period of those thirty days, either House of the state Legislature makes any modification to any rule or directs that any Rule shall not have effect and if such modification or direction is consented to by the other House the Rule shall thereafter have effect only in such modified form or be ineffective, as the case may be. " ( 8 ) THUS, it is clear that the provision relating to placing the Rules before either House of the State legislature is not mandatory and is only directory. Failure to comply with the same does not affect the validity and enforcibility of the Rules. " ( 8 ) THUS, it is clear that the provision relating to placing the Rules before either House of the State legislature is not mandatory and is only directory. Failure to comply with the same does not affect the validity and enforcibility of the Rules. Learned Counsel for the petitioner has placed reliance on a decision of the Supreme Court in N. K. PAPIAH and SONS v. THE EXCISE commissioner AND ANR. , AIR1975 SC 1007 , (1975 )1 SCC492 , [1975 ]3 SCR607 , [1975 ]35 STC537 (SC ). This decision is not of any assistance to the petitioner. Firstly, in that decision the effect of non compliance with the provision regarding laying the rules before each House of the State Legislature is not considered. Secondly, in that decision, it is held that the provisions like that ensure the Legislative control on the delegated authority. In para 2 of the Judgment, it is held as follows : "contentions raised by Counsel for the appellant before this Court were that no excise duty can be levied on a licensee in respect of the quantity of arrack purchased by him from Government depots, that the power to fix the rate of excise duty conferred under Section 22 of the Mysore excise Act of 1965 on the Government was bad for the reason that it was an abdication by the state Legislature of its essential legislative function and that no sales tax could be levied on the price for sale of arrack since Section 19 of the Mysore Sales Tax Act, 1957 under which the tax was levied was beyond the Legislative competence of the State Legislature. " that being so, it is not possible to hold that the decision in N. K. Papaiah's case, AIR1975 SC 1007 , (1975 )1 SCC492 , [1975 ]3 SCR607 , [1975 ]35 stc537 (SC ) is on the point. In that case the rules framed under the Act are held to be valid. One of the reasons given for holding that the rules are valid is that Section 71 of the Act provides for the rule making authority to lay the rules before each House of the State Legislature and thereby the Legislature has retained its control over it. Thus, it is clear that in that decision the effect of not laying the rules before the State Legislature is not considered. Thus, it is clear that in that decision the effect of not laying the rules before the State Legislature is not considered. Whereas the same is considered in the two other decisions referred to earlier. Hence, it is not possible to hold that the decision in N. K. Papaiah and sons, AIR1975 SC 1007 , (1975 )1 SCC492 , [1975 ]3 SCR607 , [1975 ]35 STC537 (SC ) is of any assistance to the petitioners. Point No. 1 is accordingly answered in the negative and against the petitioners. ( 9 ) POINT NO. 2 :- It is contended on behalf of the petitioners that the Karnataka (Excise Duties) (Amendment) Rules 1987 substitute Rs. 4/- for Rs. 6-00 per bulk litre and such amendment must be deemed to have been in force even during the year 1985-86 and as such they are not liable to pay the excise duty at the rate of Rs. 6-00 per bulk litre. In support of this submission, the learned counsel for the petitioners have placed reliance on two Division Bench decisions of this Court in sha CHUNNILAL SOHANRAJ v. T. GURUSHANTAPPA, 1972 (1) KLJ 327 and sarvothama CHOORYA v. G. M. GOPALA BHAT, 1983 (1) KLJ 123. In the first decision an amendment effected to Section 21 (2) to the Mysore Rent Control Act (22 of 1961) by way of substitution by Mysore Act 14 of 1969 was considered. It was held by this Court that "the said sub-section was amended by substitution of a new provision set out in the earlier part of this order, Where a section of a statute is amended the original ceases to exist and the new section supersedes it and becomes part of the law just as if the amendment has always been there. An amending Act is not regarded as an independent statute. " It was also further held that unless a contrary intention was clearly indicated, the amended statute should be regarded as if the original statute had been repealed and the whole statute reenacted with the amendment. The principle laid down in SHAMRAO v. DISTRICT MAGISTRATE, THANA, AIR1952 sc 324 , 1952 Crilj1503 , [1952 ]1 SCR683 was followed. In Sarvothama Choorya's case, 1983 (1) KLJ 123 an amendment effected to the Karnataka Land Reforms Act 1961 by way of substitution by Karnataka Act 1 of 1974 was considered. The principle laid down in SHAMRAO v. DISTRICT MAGISTRATE, THANA, AIR1952 sc 324 , 1952 Crilj1503 , [1952 ]1 SCR683 was followed. In Sarvothama Choorya's case, 1983 (1) KLJ 123 an amendment effected to the Karnataka Land Reforms Act 1961 by way of substitution by Karnataka Act 1 of 1974 was considered. It was held that the newly substituted section 116 which brought about alteration only in procedural matters was retrospective in effect and governed execution and enforcement of the orders made under Section 42 before its substitution. Section 91 of the Amendment Act 1 of 1974 lent support to this view. The scheme of Section 91 which applied only to pending proceedings indicated the intention of the legislature that it should be given effect to with effect from 1-3-1974 and all such proceedings should be governed by the amended provisions of the Act. ( 10 ) THE distinction between the aforesaid two amendments effected by way of substitution and the rules in question amended by way of substitution is that the Karnataka Excise Duties (Amendment) Rules 1987 framed and published under a notification dated 26th October 1987 specifically provide that these rules must be deemed to have come into force from 1st day of July 1987. If the rules had not provided as to from what date they must be deemed to have come into force probably there was some scope for applying the principles laid down in the aforesaid two decisions. Further, the aforesaid two decisions construed the amendments effected by way of substitution relating to procedural matters. The rules in question relate to fiscal matter and further they specifically provide as to from what date they must be deemed to have come into effect In such a case there is no scope for placing the interpretation as to the retrospectivity of the Rules beyond what the Rules themselves state in that regard. Therefore, there is no scope to apply the principle that is applied in the aforesaid two decisions of this Court, when the rules themselves provide that substitution shall be given effect to from a particular date. Therefore, it is not possible to hold and accept the contention of the petitioners that the amendment effected by way of substitution to Schedule A by the Karnataka Excise Duties (Amendment) Rules 1987 in respect of the entryat serial No. 1 in column 3 by substituting the words "rs. Therefore, it is not possible to hold and accept the contention of the petitioners that the amendment effected by way of substitution to Schedule A by the Karnataka Excise Duties (Amendment) Rules 1987 in respect of the entryat serial No. 1 in column 3 by substituting the words "rs. 6-00 per bulk litre" with the words and figures "rs. 4-00 per bulk litre" must be deemed to have been in force during the period from 1-8-1985 to 30-6-1986. Accordingly point No. 2 is answered in the negative and against the petitioners. ( 11 ) POINT NO. 3 :- Sections 22, 23 and 24 occur in Chapter V of the Karnataka Excise Act, relating to the excise duty or countervailing duty on excisable articles. The learned Counsel for the petitioners has placed reliance on Sub-section (1) of Section 22 of the Act, which reads thus: "an excise duty at such rate or rates as the State Government may prescribe shall be levied on any excisable article manufactured or produced in India, outside the State and imported into the state under a licence or permit granted under this Act. " thus, from the aforesaid provision, it is clear that it is open to the State Government to prescribe excise duty at certain rate as leviable on any excisable article manufactured or produced in India, outside the State and imported into the State under a licence or permit granted under the Act. Therefore, it is open to the State Government to frame rules for imposition of excise duty as it deems it necessary. Section 23 of the Act, deals with the ways of levying excise duty or countervailing duty on excisable articles. Thus it goes along with Section 22 of the Act and provides for the ways of levying such duties. ( 12 ) SECTION 24 of the Act deals with a separate topic of legislation in as much as it deals with the excise duty in respect of grant of leases. It reads thus : "notwithstanding anything contained in Sections 22 and 23, the sum accepted in consideration of the grant of any lease relating to any excisable article under Section 17, shall be the excise duty or countervailing duty payable in respect of such excisable article in addition to any duty payable under Sections 22 and 23. It reads thus : "notwithstanding anything contained in Sections 22 and 23, the sum accepted in consideration of the grant of any lease relating to any excisable article under Section 17, shall be the excise duty or countervailing duty payable in respect of such excisable article in addition to any duty payable under Sections 22 and 23. " the learned Counsel for the petitioners want the Court to read Section 24 as providing that the excise duty levied under Sections 22 and 23 of the Act is also part of the consideration of the grant of a lease and therefore it cannot be varied to the disadvantage of the licensee during the relevant period. A plain reading of Section 24 makes it clear that the sum payable in respect of grant of lease is in addition to the excise duty or countervailing duty payable in respect of such excisable articles under Sections 22 and 23. The section opens with the non-obstante clause "notwithstanding anything contained in Sections 22 and 23. " In addition to this it further provides that it is "in addition to any duty payable under Sections 22 and 23. " It has already been pointed out that Sections 22 and 23 relate to the excise duty or countervailing duty on excisable articles. Whereas Section 24 relate to the sum accepted in consideration of the grant of lease and such sum is also treated or regarded as excise duty in addition to the excise duty payable under sections 22 and 23. These two topics are independent. The sum payable in respect of grant of leases during the period of the lease though regarded as excise duty it is governed by the terms of the contract and as such the learned Counsel may be justified in contending that it cannot at all be altered to the disadvantage of the lessee during the subsistence of the lease. Whereas the excise duty or countervailing duty on excisable articles payable under Sections 22 and 23 is not governed by the terms of the licence or lease. It is the power given to the State Government to impose excise duty by framing proper rules. It is a legislative power that has been delegated to the State Government. Therefore, the legislative power cannot be restricted or limited by the terms of the contract. It is the power given to the State Government to impose excise duty by framing proper rules. It is a legislative power that has been delegated to the State Government. Therefore, the legislative power cannot be restricted or limited by the terms of the contract. Moreover the area covered by Section 24 of the Act is not covered by sections 22 and 23. That being so, it is not possible to read Section 24 of the Act in the manner the learned Counsel for the petitioners want the Court to read. ( 13 ) LASTLY it is contended that the Karnataka Excise Duties (Amendment) Rules 1985 were published only on 19th August 1985 and as such the respondents could claim the excise duty at the enhanced rate from 19-8-1985 only and not from 1-8-1985 as claimed in the impugned notices. The aforesaid rules specifically provide that the rules shall be deemed to have come into force w. e. f. 1st August 1985. Further, Section 71 of the Act also enables the State Government to frame the Rules with retrospective effect. However, the contention of the petitioners is that in the event the State Government frames the rules with retrospective effect, it has to give reasons for making the rules retrospectively and place the same before both the Houses of State Legislature. As no reasons are assigned in the amendment rules of 1985 as published, it is not open to the respondents to make a demand with effect from 1-8-1985. It appears to me that as far as the petitioners are concerned it is not possible to give them the relief on this point as they were the petitioners in the batch of Writ Petitions Nos. 13061 to 13065 of 1985 and other connected Writ petitions, wherein it was held that the respondent shall be entitled to collect excise duty from the petitioners at Rs. 6-00 per bulk litre of arrack in accordance with the rules as amended by notification dated 19-8-1985. That declaration made and the mandamus issued are still operating and have become final also. Therefore, it is not possible to uphold this last contention. Hence, point No. 3 is also held in the negative and against the petitioners. In the result, for the reasons stated above, these Writ Petitions fail and the same are dismissed.