Arbitrary excise classification based on licence date failed equal protection review and made duty collections refundable.

Clauses 4, 6 and 7 of the excise notification were found to create arbitrary duty differences between match factories in the same production category solely because the licence application date was on or after 1-4-1964. The classification already adopted under the excise scheme was displaced without any reasonable basis, nexus, or justification, resulting in hostile discrimination unrelated to the object of the levy. On that reasoning, the clauses were treated as violative of Article 14, and the duty collected under them was regarded as unauthorised and refundable.

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Issues: Whether clauses 4, 6 and 7 of the excise notification, by making the duty rate depend on the date of application for licence and by treating factories of the same production category differently, were arbitrary and violative of Article 14 of the Constitution of India, and whether the duty collected under those clauses was liable to be refunded.

Analysis: The duty scheme under the Central Excises and Salt Act, 1944 and the Central Excise Rules, 1944 classified match factories on the basis of their output in the relevant base year. The impugned clauses, however, displaced that classification for factories in the same category merely because the licence had been applied for on or after 1-4-1964, although the goods and the production category remained the same. The Court found no reasonable basis, nexus, or justification for such differential treatment and treated it as a hostile discrimination unrelated to the object of the levy. The higher incidence of duty on similarly placed factories was therefore arbitrary and could not be sustained under the constitutional guarantee of equal protection.

Conclusion: Clauses 4, 6 and 7 were held void as violative of Article 14, and the excise duty levied and collected under them was held to be unauthorised and refundable.

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