1963 (10) TMI 9 - HC - Central Excise

Court upholds excise duty exemption for small-scale strawboard manufacturers, deems classification reasonable

The court upheld the constitutional validity of a notification granting excise duty exemption to small-scale manufacturers of strawboard, dismissing ... Exemption - small scale producers of straw-board Issues Involved:1. Constitutional validity of the notification dated 1st March 1963.2. Alleged discrimination under Article 14 of the Constitution.3. Legality of the delegated legislation and the requirement of laying the notification before Parliament.Detailed Analysis:1. Constitutional Validity of the Notification:The petitioners challenged the constitutional validity of the notification dated 1st March 1963, issued by the Union of India, which granted exemption from excise duty on a graduated scale to units manufacturing strawboard below 5000 metric tons. The notification aimed to support small-scale manufacturers by reducing the excise duty progressively based on production quantity. The petitioners argued that the notification was discriminatory and violated Article 14 of the Constitution.2. Alleged Discrimination Under Article 14 of the Constitution:The petitioners contended that the second proviso of the notification, which excluded factories producing more than 5000 metric tons of paper and paperboards, including strawboards, from the exemption, was discriminatory. They argued that this classification had no just and reasonable relationship with the notification's objective, which was ostensibly to help small-scale manufacturers maintain national requirements for strawboard. The petitioners claimed that the difference between the exempted and non-exempted units was arbitrary and lacked a real and substantial criterion, thereby violating the guarantee of equal protection of laws under Article 14.The court examined the arguments and found that the notification was designed to protect smaller producers from unreasonable competition by bigger producers. The court noted that the cost of production varied between different units and that larger units could achieve economies of scale, which smaller units could not. The court concluded that the classification made by the notification was reasonable and had a rational connection with the objective to be achieved, which was to support small-scale manufacturers and maintain national production levels.3. Legality of the Delegated Legislation and Requirement of Laying the Notification Before Parliament:The petitioners also argued that the notification was unconstitutional because it was not laid before Parliament as required by Section 38 of the Central Excises and Salt Act, 1944. The court rejected this argument, stating that the notification was issued under the authority of Rule 8 of the Central Excise Rules, 1944, which empowered the Central Government to grant exemptions by notification in the official gazette. The court held that there was no requirement for the notification to be laid before Parliament before it could be enforced.Conclusion:The court dismissed the petitions, holding that the notification did not violate Article 14 of the Constitution. The classification made by the notification was found to be reasonable and had a rational connection with the objective of supporting small-scale manufacturers. The court also upheld the legality of the delegated legislation and found no requirement for the notification to be laid before Parliament. The parties were directed to bear their own costs.