Judgment:
1. Challenge in this writ petition is the Notification dated 1st of March, 1975 issued under Rule 8(1) of the Central Excise Rules, 1944, hereby exemption has been granted to certain categories of factories but not to the factory like the one which is run by the petitioner.
2. The petitioner carries on the business of manufacturing agricultural implements. During the 12 months prior to 1st of March, 1975 the petitioner, during same period, had employed more than 49 workmen at its factory. According to the petitioner w.e.f. 17th of December, 1974, the number of workmen at this factory were not more than 38. It has been the admitted case that the factory of the petitioner works with the aid of power.
3. By the Finance Act of 1975 a new Tariff Item No. 68 was inserted in the first schedule to the Central Excises and Salt Act. The said item read as follows :
'68. All other goods, not elsewhere specified, manufactured in a factory but excluding :
(a) alcohol all sorts including alcoholic liquors for human consumption,
(b) opium, Indian hamp and other narcotic drugs and narcotics; and
(c) dutiable goods as defined in Section 2(c) of the Medicinal and Toilet preparations (Excise Duties) Act, 1955.
Explanation : In this item, the expression 'factory' has the meaning assigned to it in Section 2(m) of the Factories Act, 1948.'
The effect of the incorporation of the aforesaid item in the Schedule was that every commodity manufactured by the factory, as defined by the Factory Act, became liable to excise duty at the rate of 1% ad valorem if that item, when manufactured, was not covered by any other item of the Schedule. According to the petitioner the Finance Minister in his speech, while introducing this new item in the Central Excise Tariff Schedule, had proposed that for the sake of administrative convenience those factories would be except from the operation of this item where not more than 49 workers in the case of power operated factories and not more than 99 workers in the case of non-power operated factories were employed. My attention has been drawn by the learned counsel for the petitioner to the following extract from the Budget Speech of then Finance Minister : '2.22. I now come to a new concept in Central Excise Taxation. Hitherto the Central Excise Tariff covered only certain specified goods. With a view to widen the coverage of taxable goods and to prove a more dependable information base for future revenue raising exercises, I propose to introduce a new item in the Central Excise Tariff Schedule which, with a few exceptions, will cover all goods produced for sale or other commercial purpose not elsewhere specified in the Schedule. Goods covered under this new item will be chargeable to a nominal duty at the rate of 1 per cent ad valorem. While the tariff item will cover the production of all factories as defined in the Factory Act, 1948, I propose for the sake of administrative convenience to exempt the production of those factories which employ not more than 49 workers in the case of power-operated factories and not more than 99 workers in the case of non-power operated factories. To further simplify the levy, I also propose to exempt from duty intermediate products and component parts falling within this item produced in and consumed within the same factory for manufacture of finished goods. No countervailing duty will be levied on imported goods corresponding to this new item.'
4. Rule 8 of the Central Excise Rules gives the power of the Central Government to exempt the excise duty in special cases. In exercise of this power a notification dated 1st of March, 1975 had been issued which was in the following terms :
'In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts all goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), and produced in any factory, including the precincts thereof, whereon not more than forty-nine workers are working, or were working with the aid of power, or not more than ninety-nine workers are working or were working without the aid of power, on any day of the preceding twelve months, from the whole of the duty of excise livable thereon.'
The grievance of the petitioner is that this notification does not exempt those factories from the levy of excise duty under Item No. 68 where within the period of last 12 months more than 49 workers have worked with the aid of power. It is the latter part of this notification which is sought to be challenged in this petition.
5. The first contention of the learned counsel for petitioner is that this notification, inasmuch as it does not give exemption to the factories like the petitioner which had employed more than 49 workers during the twelve months preceding the notification, is contrary to the speech of the Finance Minister. It is submitted by the learned counsel that the then Finance Minister had categorically stated that the exemption from the levy under Item 68 was sought to be given to those factories which were employing not more than 49 workers in the case of power operated factories as on that day. In this speech there was no reference to factories employing more than 48 workers on any day in the twelve preceding months.
6. It is true that in the speech of the Finance Minister it is stated that exemption will be granted from the operation of Item 68 to those factories which employed not more than 49 workers in the case of power operated factories. But the speech of the Finance Minister cannot be regarded as a piece of legislation, subordinate or delegated. The Finance Minister in the speech merely indicated that some relief was going to be given to those factories which employed less than 49 workers in the case of power operated factories. The full details regarding the conditions on which the exemption was to be granted were never stipulated and were neither necessary nor intended to be stipulated in the speech. Exemption cannot be granted from the imposition of excise duty on the basis of the speech of the Finance Minister. Exemption from levy of excise duty can only be granted if a notification to that effect is issued under Rule 8 of the Central Excise Rules. It is only if a factory falls under the provisions of such a notification that it can avail the benefits thereof.
7. The validity of a notification issued under Rule 8 has to be adjudged not with relation to a speech of the Finance Minister. It has to be adjudged with reference to the provisions of the Excise Act and the Rules framed there under. What has to be seen is whether the notification has been made in exercise of the powers conferred by the Rules or is in any other way arbitrary or discriminatory. The Rule gives the power to the Central Government to grant exemption from the levy of excise duty. This power has been exercised by the Government. No manufacturer can claim exemption as of right. The petitioner is admittedly covered by Item 68 of the Schedule of the Central Excises and Salt Act, and, to my mind, one can make no grievance of the fact that exemption has not been extended to it under the impugned notification.
8. It will be seen that Item 68 of the First Schedule makes a reference to the factories as defined by the Factories Act. Under Section 2(m) a factory means any premises including the precincts thereof wherein 10 or more workers are working or were working on any day of the preceding twelve months where the manufacturing process was carried on with the aid of power. It will thereforee, be seen that when one is examining the question as to whether the premises is a factory or not what has to be taken into consideration is not only the number of workers working on that particular date but what is relevant is the number of workers who worked in the twelve preceding months. It is this concept which has been incorporated in Item No. 68. It is the same basis which has been incorporated in the impugned notification where the requirement is that there should be not more than 49 workers on any day in the preceding twelve months. To put it differently, the concept of having the number of workers 'on any day of preceding twelve months' has been adopted by the impugned notification from the definition of the word factory contained in Section 2(m) of the Factories Act, 1948. To my mind the impugned notification cannot be regarded as discriminatory, as has sought to be contended by the learned counsel for the petitioner, because there is a reasonable classification apparent on the face of the notification. The notification seems to me to grant exemption to a particular class of factories which could be regarded as small scale industries. Any factory which employed 49 or more workers on any day in the preceding twelve months would fall under one category while those employing less than 49 workers would fall under a separate category. As the petitioner's factory falls under the first category it is caught by the net of excise duty. The classification with reference to the number of workers which are working is a valid classification. Reference may at this stage to be made to a decision of the Supreme Court in the case of British India Corporation Ltd. v. Collector of Central Excise, Allahabad and others, : 1978(2)ELT307(SC) . This case dealt with the validity of Item No. 17 of the Schedule to the Central Excises and Salt Act. This item reads as follows :
'17 FOOTWEAR, produced in any factory including the precincts thereof where fifty or more workers are working or were working on any day of the preceding twelve months, and in any part of which manufacturing process is being carried on with the aid of power or is ordinarily so carried on, the total equivalent of such power exceeding two horse-power.'
The Supreme Court held that it was a fallacy to assume that there could be no classification of manufacturers on the basis of the number of workers or the employment of power above a particular horse power. Manufacturers who employed 50 or more workers could be said to form a well defined class. The impugned notification in the present case is in pari materia with the aforesaid Item No. 17 of the First Schedule which was examined by the Supreme Court in British India Corporation's case. Just as Item No. 17, referred to a factory employing 50 or more workers 'on any day of preceding twelve months' similarly the impugned notification also refers to a factory employing 49 or more workers 'on any day of preceding twelve months'. For the purpose of Excise Act it appears that the scheme of the Act and Rules have always been, while determining whether a factory is liable to tax or not, to see the number of workers employed on any one day in the preceding twelve months. Viewed in this light the impugned notification has apparently been drafted in a manner which is not unknown to the excise law.
9. It was sought to be contended by the learned counsel for the petitioner that by referring to the number of workers in the preceding twelve months the effect is that there is a levy of excise duty with retrospective effect. There is no force in this contention. The levy of excise duty is not by virtue of the notification. The levy of excise duty is by virtue of the insertion of Item 68 in the First Schedule to the Act. The notification grants exemption. Furthermore, the exemption is not granted with retrospective effect. The levy and exemption is w.e.f. 1st of March, 1975. A levy would have been regarded as retrospective if it had been sought to be levied from the date earlier than the first of March, 1975. That is not the case here. The levy in the present case is w.e.f. 1st of March, 1975 and the same cannot be regarded as retrospective levy.
10. No other contentions have been raised before me. For the aforesaid reasons I do not find any merit in the writ petition. The same is accordingly dismissed with costs.