B.C. Patel, J.@mdashThe petitioner, Gujarat State Textile Corporation Ltd., a Company registered under the Companies Act, has filed these two
petitions, challenging the recovery notice dated 11-3-1992 and 6-11-1992 Annexure ''C'' to Special Civil Application No. 2241 of 1992 and
Annexure ''C'' to Special Civil Application No. 7061 of 1993.
2. The petitioner Corporation is engaged in the business of revival of closed and sick textile undertakings. New Swadeshi Mills of Ahmedabad
Ltd. and Priyalaxami Mills Ltd. of Baroda, were closed on account of financial crisis and the petitioner, with a view to seeing that jobless ex-
workers are provided with the work and to ensure that there is production, commenced activity by restarting the said sick Mills. On 8th
November, 1985, Gujarat Ordinance No. 18 of 1985 came to be promulgated providing, inter alia, for vesting of all the assets of certain textile
undertakings in the State of Gujarat and thereafter in the petitioner Corporation. The said Ordinance has been followed by an Act passed by the
Gujarat Legislative Assembly being Gujarat Act No. 10 of 1986 known as the Gujarat Textile Undertakings (Nationalisation) Act, 1986,
(hereinafter referred to as the ""Nationalisation Act""). The First Schedule to the Act refers to new Swadeshi Mills and other units in the column of
the undertakings and thus in view of this Gujarat Act No. 10 of 1986 textile undertakings with right, title and interest of the owners in relation to
every such textile undertakings are transferred to State Government and the rights are vested absolutely in the State Government.
3. So far as Priyalaxami Mills is concerned, there was an Ordinance No. 18 of 1985 and the Act known as Nationalisation Act, 1986 came to be
enacted by the State Assembly which has been assented to by the Hon''ble President of India on 15th September, 1986. The First Schedule of the
Act includes Priyalaxami Mills, Baroda, as the undertaking and this undertaking with its right, title and interest of the owner is transferred to and
vested absolutely in the State Government.
4. So far as New Swadeshi Mills of Ahmedabad is concerned, Asstt. Collector of Customs Appraising Group No. 3, New Custom House,
Bellard Estate, Bombay, by order dated 7-10-1991 called upon the said Company to pay the amount covered by Bond/Bank guarantee of Rs.
5,28,418/- with interest at the rate of 12% per annum thereon within 7 days and it was indicated that failure will compel the authorities to initiate
action under the provisions of Section 142 of the Customs Act. As the amount was not paid a show cause notice dated 11-3-1992 came to be
issued which is at Annexure-C.
5. So far as Priyalaxami Mills is concerned, the Assistant Collector of Central Excise, Div. III, Baroda, confirmed the demand on forwarding
charges for duties shown against show cause notices issued to M/s. Priyalaxami Mills, Baroda, as indicated on the order. In all there are five items.
The amount of duty confirmed is between Rs. 2,400/- and Rs. 3,800/-. As the amount was not paid in spite of the orders, notice was issued to
Priyalaxami Mills vide Annexure C to the petition. Now it is these orders which are the subject-matter of the writ petition.
6. On behalf of the petitioner, it is submitted that in view of the Act, referred to hereinabove, neither the Corporation nor the State Government is
bound to satisfy the demand in question. According to the petitioner dues can be recovered by making appropriate claims before the
Commissioner of Payment who may, if any surplus remains after disbursement of the dues of the arrears under Category-I, distribute rest of the
amount amongst the dues mentioned in Category-II, or III including Central Excise dues.
7. Mr. Mehta, learned Counsel appearing for the respondents, submitted that in Category-II or III there is a reference to the arrears of excise
duty, but according to his submission, this excise duty means excise duty that may be leviable under any local Act, and not under Central Act. He
submitted that there are local Acts which permit collection of excise duty and for example he pointed out Bombay Prohibition Act, 1949.
According to his submission, in view of Article 248 of the Constitution of India, the Parliament has exclusive power to make law with respect to
any matter which is enumerated in the Union List. Article 248 of the Constitution of India reads as under :
248. Residuary powers of legislation. - (1) Parliament has exclusive power to make any law with respect to any matter not enumerated in the
Concurrent List or State List.
(2) Such power shall include the power of making any law imposing a tax mentioned in either of those Lists.
He submitted that for the matters notified in Concurrent List if there is any provision of law made by the legislature as well as by the Parliament,
then according to his submission, Article 254 will have to be considered.
So far as Central Excise is concerned, it finds its place at Sr. No. 84 in the Union List which reads as under :
84. Duties of excise on tobacco and other goods manufactured or produced in India except -
(a) alcoholic liquors for human consumption;
(b) Opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance
included in sub-paragraph (b) of this entry.
So far as the custom duty is concerned, its finds it place at Sr. No. 83 of the said List which reads as under :
83. Duties of customs including export duties.
These two entries, falling in the Union List, according to Mr. Mehta, only the Parliament has exclusive power and the State Legislature has no
power to make law.
8. As against that, it is submitted by the learned Advocate for the petitioner that Special Civil Application Nos. 2541 of 1986, 3237 of 1986, 712
of 1987 and 713 of 1987 were preferred by the petitioner and the Division Bench of this Court (Coram : A. P. Ravani and R. Balia, JJ.) after
hearing Mr. Mehta, on 30th June, 1994, allowed the petitions and upheld the contentions raised by the petitioners.
9. Mr. Mehta, learned Counsel submitted that he is canvassing the point which was not canvassed earlier and no decision is rendered in this behalf.
He drew our attention to Para 4 of the judgment which reads as under :
4. The learned Counsel for the respondents urges that the Corporation being a successor to the Companies nationalised, it is under an obligation
to discharge the liabilities of the Companies to which it has succeeded if the same are covered by the liabilities to be discharged by it as provided
under Schedule II annexed to the Act. According to him recovery of excise duty is amongst dues to be paid off by the Corporation in terms of
Schedule II. He places reliance on the provisions of Section 11 of the Central Excises and Salt Act, 1944 read with Rules 49 and 230 of the
Central Excises Rules.
10. It is clear from the judgment that there is nothing to show that these submissions were made and the Court rejected the same. In view of the
provisions contained in the local Act, which, if empowers the authorities in the State to recover excise duty, the harmonious construction is required
so as to see that the provisions are not held unconstitutional and Mr. Mehta fairly stated that he does not canvass before this Court that the
provisions made in above referred Acts are unconstitutional. Reading the two Acts it is clear that legislature has not enacted the Acts attracting the
subjects falling in the Union List but law is enacted keeping in mind the subjects not falling in the Union List. In view of entry at Sr. No. 84 of Union
List of Schedule VII to the Constitution of India excise duty can be levied and collected by and under the Act of the State legislature if article falls
within the exception and not otherwise, i.e., on the alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and
narcotics. State legislature can enact the law relating to excise, i.e. to recover or levy the excise on such commodities. In view of this, provisions
contained in Gujarat Act No. 10 of 1986 and 25 of 1986 it can be said that they do not refer to levy of excise which can be levied by and under
the Act of the Parliament but it refers to excise which can be levied by and under the State Act. In view of constitutional provision contained in
Article 246 only Parliament has exclusive power'' to make laws with respect to any of the matters enumerated in List I of Seventh Schedule and
State Legislature has no power to make law. Under the circumstances, it is clear that in view of exception to the entry at Sr. No. 84, of List I
(Union List) the State legislature has power to make law only with respect to articles covered by exception and therefore, merely in Category II of
Schedule Second of Act No. 10 of 1986 ""arrears of excise duty"" is found it does not mean that it refers to excise duty leviable by the Union of
India but would mean excise duty leviable under the State Act. This can be the only interpretation in view of Article 246 of the Constitution of
India. Suggestion that excise duty would include excise duty leviable under the Central Act cannot be accepted. As for the purpose of excise duty
under the Union List only Parliament has power to make law.
11. Rule 230 of Central Excise Rules is the relevant Rule which is required to be considered in these matters which reads as under :
230. Goods, plant and machinery chargeable with duty not paid -
(1) When the duty leviable on any goods is owing from or by any person carrying on trade or business, whether as a producer, manufacturer or as
dealer in such goods, all excisable goods, and all materials and preparations from which any such goods are made, and all plant, machinery,
vessels, utensils, implements and articles for making or manufacturing or producing any such goods, or preparing any materials, or by which the
trade or business is carried on, in the custody or possession of the person carrying on such trade or business or in the custody or possession of any
agent or other person in trust for or for the use of the person carrying on such trade or business, may be detained for the purpose of exacting such
duty; and any officer duly authorised by general or special order of the Central Board of Excise and Customs or the Collector may detain such
goods, materials, preparations, plant, machinery, vessels, utensils and articles until such duties or any sums recoverable in lieu thereof are paid or
recovered.
(2) Where any such person transfers or otherwise disposes of his business in whole or in part, or effects any change in the ownership thereof, in
consequence of which he is succeeded in the business or trade or part thereof by any other person or persons, all excisable goods, materials,
preparations plant, machinery, vessels, utensils, implements and articles in the custody or possession of the person or persons succeeding may also
be detained for the purpose of exacting duty from the producer, manufacture or dealer up to the time of such transfer, disposal or change, whether
such duty has been assessed before such transfer, disposal or change, but has remained unpaid, or is assessed thereafter.
12. Therefore, in view of sub-rule (2) of Rule 230 when there is voluntary transfer or otherwise the owner is disposing of his business, Rule 230(2)
will be attracted, But when there is acquisition of property, or the ownership vests in other person by operation of the Act, can it be said that the
person who acquired the estate or has become the owner, is liable to pay duty ? This question is not considered by the authority and it is necessary
for the authority to examine this point after hearing the petitioner and thereafter to pass appropriate orders in the matters. Similarly, the Customs
authorities will also decide the question in the similar manner after hearing the petitioner and shall pass appropriate order. These authorities will
have to consider the fact that it is an acquisition in view of the specific provision of the Act, and not transfer simpliciter as referred in Rule 230(2)
quoted above.
13. In view of this position, we set aside the recovery order/notice Annexure C in both the petitions and direct the authority concerned, to decide
the question after hearing the petitioner.
14. Mr. Mehta, learned Counsel pointed out from the affidavit filed by Mr. H. G. Meena, Superintendent of Central Excise & Customs, that the
order in original confirming the demand in question is passed by the Assistant Collector of Central Excise, Baroda, on 4-9-1990, i.e. after the
nationalisation of the Priyalaxami Mills, Baroda. Therefore, the authority will have to examine the effect of the taking over.
15. Petition stands allowed accordingly. Rule is made absolute to the aforesaid extent.
