| SooperKanoon Citation | sooperkanoon.com/800199 |
| Subject | Excise |
| Court | Chennai High Court |
| Decided On | Apr-06-1990 |
| Case Number | Writ Petition Nos. 1940, 5010, 5011 and 6315 of 1981 and 7761 of 1982 |
| Judge | Kanakaraj, J. |
| Reported in | 1991(32)ECC1; 1991(52)ELT347(Mad) |
| Acts | Central Excise Rules, 1944 - Rule 8(1); Central Excise Act, 1944 - Sections 3; Central Excise Tariff Act, 1985 |
| Appellant | Smt. S. Pannadevi |
| Respondent | Govt. of India |
| Appellant Advocate | Mr. Elamurugan, Adv. |
| Respondent Advocate | Mr. P. Narasimhan, Adv. |
| Cases Referred | Jaipur Mills v. Raj |
1. The point involved in all these writ petitions relates to the validity of the Notification No. 73/81-C.E., dated 25-3-1981, being a notification issued under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 amending an earlier Notification 80/80-C.E., dated 19-6-1980 and therefore, I am passing a common order in the above writ petitions.
2. I will set out the facts in writ petition No. 1940 of 1981 : The petitioner is a manufacturer of patent or proprietary medicines. The petitioner does not own a factory of her own for manufacture. She has obtained a licence under the Drugs Act known as 'loan licence' enabling her to use the factory premises of another factory owner. Actually, the petitioner is using the factory of M/s. Medhopharm at Thiru-Vi-Ka Nagar, Madras-6. It is stated that there are other loan licensees attached to the said factory. The produce manufactured by the petitioner falls under Tariff Item 14-E of Schedule I to the Central Excise Act which attracts ad valorem duty, the prescribed rate of duty being 12 1/2% ad valorem together with a special excise duty of 5%.
3. In and by Notification No. 80/80-C.E., dated 19-6-1980 exemption was granted on all excisable goods cleared for home consumption on or after the first day of April in any financial year by or on behalf of a manufacturer from one or more factories. The notification in respect of the actual exemption is as follows :-
'(a) in the case of first clearance of the specified goods upto an aggregate value not exceeding rupees seven and a half lakhs, from the whole of the duty of excise leviable thereon; and
(b) in the case of the clearance (being clearances of the specified goods of an aggregate value not exceeding rupees seven and a half lakhs) immediately following the said first clearances of the value specified in clause (a), from so much of the duty of excise leviable thereon under the said item [read with any relevant notification issued under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, and in force for the time being] as is in excess of seventy-five per cent of such duty.'
The petitioner was happy with this Notification.
4. By the impugned notification dated 25-3-1981, certain vital changes are made to the Notification 80/80-C.E., dated 19-6-1980. It is necessary to quote the impugned notification :
'In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 80/80-Central Excises, dated the 19th June, 1980, namely :-
In the said notification -
(a) in Paragraph 1, for the provisions the following proviso shall be substituted namely :-
'Provided that the aggregate value of clearances of the specified goods from any factory by or on behalf of one or more manufacturers -
(i) at nil rate of duty in terms of clause (a) of this paragraph or
(ii) at reduced rate of duty in terms of clause (b) of this paragraph, shall not in either case exceed rupees seven and a half lakhs in any financial year'.
The petitioners were hurt by the portion of the notification which fixes a limit on the basis of the aggregate value of clearance of the specified goods from any factory by or on behalf of one or more manufacturers. In other words, if there are three or four loan licensees manufacturing the specified goods from one factory and if the aggregate value of clearances by all the loan licensees, put together in the financial year exceeds 7 1/2 lakhs, the exemption will not be available to any one of the loan licensees. Similarly, the second limb of the exemption will also apply to the aggregate value of clearances.
5. Mr. Elamurugan, learned counsel appearing for the petitioners argued the Writ Petition Nos. 1940, 5010, 5011 and 6315 of 1981. Mr. R. Subramanian and A. Rafeeq Ali, learned counsel who filed Writ Petition No. 7761 of 1982 have not made any independent arguments.
6. The first argument of Mr. Elamurugan is that the impugned notification which levies excise duty on a basis other than the value of goods manufactured by a manufacturer is wholly illegal and ultra vires Section 3 of the Central Excise Act. It must be remembered that the impugned notification does not levy excise duty but is only a notification granting exemption under the stated circumstances. Therefore, in my opinion the arguments that it is ultra vires Section 3 of the Central Excise Act cannot be countenanced.
7. It is stated in the counter-affidavit filed on behalf of the respondents that the impugned notification has only modified the criteria for determining the availability of the exemption and not changed the incidence as alleged. It is therefore, contended that the impugned notification is not ultra vires Section 3 of the Central Excise Act. In as much as the impugned notification does not levy any excise duty by itself, the argument that it violates Section 3 has to be rejected. In Match House v. Superintendent of the Central Excise and Another : 1988(35)ELT290(Mad) , Nainar Sundaram, J. has laid down that the notification under Rule 8(1) of the Central Excise Rules, 1944 could be with reference to the process of manufacturing and it could also be with references to very many other contingencies and factors provided the power of exemption is exercised with references to excisable goods.
8. The next argument of Mr. Elamurugan is that if the impugned notification is implemented it would result in infringement of the constitutional guarantee provided under Article 14 of the Constitution of India. While illustrating this point, it is averred that the first loan licence who clears his goods in advances of other would derive benefit of the exemption whereas the other loan licensees are denied the benefit. The method of assessment after the introduction of the impugned notification has been explained by Mr. P. Narasimhan learned Senior Central Government Standing Counsel. According to him if at the end of a financial year the aggregate value of the goods cleared from the factory is more than the prescribed limit, then none of the loan licensees will be entitled to exemption. Thus, the basis of the argument of the counsel for the petitioners is taken away and the complaint of violation of Article 14 of the Constitution of India falls to the ground. In Indian Organic Chemicals Limited v. Union of India and others 1980 (6) ELT 521 (Delhi) it is laid down following certain judgments of the Supreme Court, that if the basis of the classification has some rational relationship with the purpose of the Act, it would be sufficient to satisfy the requirement of Article 14 of the Constitution of India. It is also observed as follows :
'In the context of the economic and tax matters, a classification made by the legislature is almost always sustained because the Court lacks both the expertise and the familiarity with the local problem so necessary for making wise decision with respect to raising and disposing public revenues. A court will not, therefore, be well advised to upset a classification made by the executive in the exercise of its delegated legislation who is more familiar by proximity and study with the problem concerned.'
9. The counsel for the petitioners advances a third argument saying that if the interpretation of the respondents is accepted, then the notification would violate Article 19(1)(g) of the Constitution of India. Here again, the counter affidavit, in answer to the above contention says that the petitioners' fundamental right to carry on business are in no way hampered by the impugned notification. On the other hand, the petitioners are at liberty to do business and discharge their statutory liabilities. While examining the argument of the counsel for the petitioners with reference to Article 19(1)(g) of the Constitution of India, it is necessary to note the purpose of the impugned notification. The counter affidavit in this respect refers to a genuine small unit for the purpose of allowing exemption. According to the respondents, the exemption is based on the economic policy of the Union of India to give relief only to the genuine small manufacturers. References is also invited to Jaipur Mills v. Raj : [1997]1SCR396 where the following observations are found :
'Generally speaking, it is not for the Court to decide whether the policy of exempting certain articles followed by the Governments justified or not. It is for the taxing authorities to take a decision as to which goods should be subjected to taxation and which should be exempted from it.'
The counter also proceeds to narrate how certain big manufacturers exploit the exemption notification in the guise of loan licences by floating benami firms/units and getting the goods manufactures in their factory and accounting them separately for the various benami firms for the purpose of claiming exemption. I am satisfied that the impugned notification does not violate the fundamental rights of the petitioners guaranteed under the Constitution.
10. In Union of India and Another v. M/s. Parmeswaran Match Works [1978 (2) ELT (J 436)] it has been observed as follows :-
'In the matter of granting concession or exemption from tax, the Government has a wide latitude of discretion. It need not give exemption or concession to everyone in order that it may grant the same to some.'
11. For all the above reasons, the writ petitioners are dismissed. There will be, however, no order as to costs.