Existing countervailing duty survives constitutional change, but post-Constitution enhancement fails free trade and taxation limits.

A pre-Constitution countervailing duty was treated as existing law continued by the Constitution, so the levy already fixed at Rs. 40 per L.P. gallon remained valid and enforceable. The later enhancement under the 31 March 1961 notification was a fresh post-Constitution fiscal burden and had to satisfy constitutional limits on State taxation and trade freedom. As no similar liquor was manufactured in the State, the increase could not be justified under the parity-based exception and was held invalid and unenforceable. The result was that only the post-Constitution enhancement was struck down, while the earlier duty continued to operate.

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Issues: (i) Whether the countervailing duty already in force under the existing excise law remained valid after the Constitution came into force. (ii) Whether the enhancement of the duty by the notification dated 31 March 1961 was constitutionally valid.

Issue (i): Whether the countervailing duty already in force under the existing excise law remained valid after the Constitution came into force.

Analysis: The pre-Constitution levy was treated as part of the existing law saved by the constitutional continuance provisions. The statutory scheme authorising excise and countervailing duty on imported excisable articles was not dependent on proof that similar goods were actually manufactured in the State. The earlier notification, which had fixed the duty at Rs. 40 per L.P. gallon, continued to operate unless displaced by a valid constitutional or legislative change.

Conclusion: The existing levy at Rs. 40 per L.P. gallon remained valid and enforceable.

Issue (ii): Whether the enhancement of the duty by the notification dated 31 March 1961 was constitutionally valid.

Analysis: The enhanced levy was a new fiscal burden imposed after the Constitution came into force and had to conform to the constitutional guarantees governing trade and taxation. Since no similar liquor was manufactured in the State, the enhancement could not be justified under the relevant constitutional exception for parity-based taxation and was inconsistent with the protection of free trade. The increase was therefore beyond what was preserved by the existing-law clauses.

Conclusion: The enhancement of Rs. 30 per L.P. gallon by the notification dated 31 March 1961 was invalid and unenforceable.

Final Conclusion: The appeal succeeded only to the extent that the post-Constitution enhancement was struck down, while the pre-existing duty remained unaffected.

Ratio Decidendi: A pre-Constitution excise or countervailing duty continues as existing law under the Constitution, but any post-Constitution enhancement imposing a fresh burden must independently satisfy the constitutional restrictions on State taxation and trade freedom.

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