1970 (8) TMI 30 - SC - Income Tax

Government overreach in imposing excise duty through notifications rather than legislation.

Bimal Chandra Banerjee Versus State Of Madhya Pradesh And Others

The Supreme Court addressed the validity of a notification by the Government of Madhya Pradesh imposing duty on excise contractors for failure to take ... Whether the Government of Madhya Pradesh was entitled to amend its rules and add the impugned clause as a part of the licence conditions? Held that:- No tax can be imposed by any bye-law or rule or regulation unless the statute under which the subordinate legislation is made specially authorises the imposition even if it is assumed that the power to tax can be delegated to the executive. The basis of the statutory power conferred by the statute cannot be transgressed by the rule-making authority. A rule-making authority has no plenary power. It has to act within the limits of the power granted to it. We are of the opinion that the impugned rule as well as the demands are not authorised by law. Hence we allow these appeals as well as the writ petitions from which these appeals arise and quash the impugned notification as well as the demand notices. Issues:Validity of notification prescribing minimum quantity of liquor for excise contractors and imposing duty for failure to take delivery.Analysis:The judgment by the Supreme Court addressed the validity of a notification issued by the Government of Madhya Pradesh, which prescribed a minimum quantity of liquor for excise contractors and imposed duty for failure to take delivery. The appellants, who were excise contractors, challenged the notification on the grounds that excise duty can only be levied based on a valid law enacted by the legislature and not through contracts or executive orders. The key question was whether the government was entitled to amend its rules and add the disputed clause as part of the license conditions.The court examined the relevant provisions of the Madhya Pradesh Excise Act, specifically focusing on the definitions of excise duty, countervailing duty, manufacture, transport, and export. It was highlighted that excise duty is imposed on goods manufactured or produced in the state, and the power to levy such duty is limited to specific circumstances outlined in Section 25 of the Act. The court emphasized that the rule-making authority, in this case, the State Government, does not have the power to levy duty on articles that do not fall within the scope of Section 25.Furthermore, the judgment emphasized that no tax can be imposed through bye-laws, rules, or regulations unless specifically authorized by the statute. The court concluded that the impugned rule and the demand notices issued by the government were not authorized by law. As a result, the appeals and writ petitions challenging the notification and demand notices were allowed, and the impugned notification and demand notices were quashed. The State of Madhya Pradesh was directed to bear the costs of the appellants in both appeals.