1988 (12) TMI 114 - SC - Central Excise

Supreme Court Invalidates Clause in Excise Rules Notification

GOVERNMENT OF INDIA AND OTHERS Versus DHANALAKSHMI PAPER & BOARD MILLS

The Supreme Court upheld the Madras High Court's decision to strike down Clause (a) of the Proviso (3) of a Notification dated 1st March, 1964, under Rule ... Striking down Clause (a) of the Proviso (3) of the Notification dated the 1st March, 1964 issued by the Union of India in the Ministry of Finance, under Rule 8(1) of the Central Excise Rules, 1944 and granting consequential relief Held that:- In the present case benefit of concessional rate was bestowed upon the entire group of assessees referred therein and by Clause (a) of Proviso (3) the group was divided into two classes without adopting any differentia having a rational relation to the object of the Notification, and the benefit to one class was withdrawn while retaining it in favour of the other. It must, therefore, be held that the impugned Clause (a) of the Proviso 3 of the Notification in question ultra vires and the benefit allowed by the notification is available to the entire group including the respondent. Appeal dismissed. Issues:1. Validity of Clause (a) of the Proviso (3) of the Notification dated 1st March, 1964 under Rule 8(1) of the Central Excise Rules, 1944.2. Denial of benefit of concessional rate of excise duty to the respondent due to the mentioned clause.3. Arbitrariness of the date '9th of November, 1963' in the impugned clause (a).4. Interpretation of the choice of date in a statutory provision.5. Comparison with previous cases regarding the choice of dates in statutory provisions.6. Justiciability of the wisdom of legislative actions.7. Ultra vires nature of the impugned clause (a) of the Proviso 3 of the Notification.Analysis:The judgment concerns the appeal arising from a writ application allowed by the Madras High Court, which struck down Clause (a) of the Proviso (3) of a Notification dated 1st March, 1964, issued by the Union of India in the Ministry of Finance under Rule 8(1) of the Central Excise Rules, 1944. The respondent, a business concern, claimed the benefit of the notification for a factory set up after the specified date in the clause, leading to the denial of the concessional rate of excise duty. The High Court found the date mentioned in the clause arbitrary, leading to the appeal before the Supreme Court.The primary issue revolves around the arbitrariness of the date '9th of November, 1963' in the impugned clause (a) of the Notification. The appellants failed to provide a satisfactory explanation for the choice of this date, leading to the contention that it lacked rationality and relevance to the objective of the Notification. The High Court's decision to strike down the clause was based on the arbitrary nature of the date selection, which was not adequately defended by the appellants.The judgment delves into the interpretation of the choice of date in statutory provisions, citing previous cases to analyze the validity of such selections. Comparisons with cases like Union of India v. M/s. P. Match Works highlight the significance of the chosen date in relation to the purpose of the provision. The Court emphasized that the date selection should have a reasonable nexus with the objective sought to be achieved, which was found lacking in the present case.Furthermore, the judgment addresses the justiciability of the wisdom of legislative actions, emphasizing that the arbitrary nature of a statutory provision can be subject to judicial review if it lacks a rational relationship to the legislative purpose. The Court rejected the argument that statutory provisions must necessarily be arbitrary in the choice of dates, highlighting the importance of coherence between the date selection and the objective of the provision.Ultimately, the Court held that the impugned clause (a) of the Proviso 3 of the Notification was ultra vires, declaring the benefit allowed by the notification applicable to the entire group of assessees, including the respondent. The appeal was dismissed without costs, affirming the High Court's decision to strike down the arbitrary clause.