TaxTMI 
TaxTMI 
1984 (6) TMI 59
X X X X Extracts X X X X
X X X X Extracts X X X X
.... import duty was doubled to the level of Rs. 1.50p per gross. Soon after, a number of small factories were established all over the country. The Swedish Match Company Limited, whose associates had then a near International monopoly in matches and which had been importing practically the country's entire requirements from its parent concern in Sweden setup the Western India Match Company Limited (WIMCO) with factories all over India. Another company, namely, ASSAM MATCH COMPANY was also established in 1926 with its factory at Dhurbi (Assam). The claim of the match industry for protection was considered by the Tariff Board during 1926-28 and protection was granted in 1928 for an indefinite period. The import duty of Rs. 1.50 per gross was converted into a protective duty. With this protection, a large number of medium sized factories manufacturing matches mostly by manual labour came into being. A particularly large concentration grew in and around the towns of Sivakasi, Sattur and Kovilpatti in Tamilnadu. 3.Excise duty was levied on matches for the first time in 1934. Up to 1948-49, match factories were classified for purposes of excise into two types, viz., factories producing n....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Except for making veneers and splints, in manufacturing matches, the use of machines is not indispensable. For the purpose of levy of central excise duty, a unit is deemed to be non-mechanised and thus eligible for concessional rates, if it does not use power in two processes, namely, dipping of splints in the composition for match heads and for filling of boxes with matches. As a result, the non-mechanised units can employ machines for (i) making boxes (ii) filling up the frames with splints, (iii) side painting, (iv) grinding match composition, and (v) affixing labels and banderolls to the match boxes without losing the excise duty concession. 5.The petitioners herein are manufacturers of matches. In respect of manufacture of matches, as and from 1-8-1981, three notifications bearing notification Nos. 40/81, 41/81 and 42/81, all dated 1-3-1981 had been issued by the Government of India, Ministry of Finance, in exercise of their powers conferred under sub-rule (1) of rule 8 of the Central Excise Rules, 1944. Though the tariff rate in respect of matches was Rs. 10-40 p per gross for box of 50 matches each, the said three notifications fixed three different effective rates of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oxes, either wholly or partly as under : S.No. Description of matches Rate of duty Rs. per gross of boxes of 50 matches each 1 2 3 1. Matches packed in boxes in which the outer slide alone is made of cardboard 5-50 2. Matches packed in boxes in which the inner slide alone is made of cardboard 5-26 3. Matches packed in boxes in which both the outer slide as well as inner slide are made of cardboard 4-90 In the Notification No. 22 of 1982, dated 23-2-1982, fixing the effective rate of excise duty in non-mechanised cottage units was at Rs. 1-60p per gross, the second proviso provided that the exemption contained in the notification shall not apply to matches packed in boxes in which the outer slide or the inner slide, or both are made of cardboard. The explanation to that notification also provided that the following processes unless carried on mechanically, they shall not be deemed to be a process ordinarily carried on with the aid of power. 6.By a further Notification 97 of 1982, dated 23-2-1982, certain amendments were carried out to the earlier Notification No. 137 of 1981, dated 2nd July, 1981 and Notification No. 40 of 1981, dat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urers if they used bamboo for manufacture of sticks instead of soft wood. But, we are not concerned with that aspect of the case, for, all the cases before us deal with the question of withdrawal of exemption based on the use of cardboard for manufacture of match boxes in certain contingencies. Later, the Government of India had appointed an Expert Committee on Tax Measures to promote more employment and that Committee found that the exemptions granted or the revenue foregone has not resulted in the additional employment of labour, and that some of the match manufacturing units, particularly medium category, to whom the concessions had been shown in the levy of excise duty, are using power operated machines for a number of processes which were quite labour-intensive, with consequent displacement of labour, such as frame-filling, that is to say, arranging splints in rectangular wooden frames for dipping in the composition for match heads. Labour displacement from the use of power in this process is as high as 10:1. Thus, the user of power-operated machines had resulted in reducing the labour strength to 1/10. Similar labour displacement was also found to take place though not to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ufacture of match boxes only if they do not adopt a mechanical process in the manufacture of boxes or in the process of affixing labels by pasting or otherwise on match boxes. In these cases, it is not in dispute that all the petitioners herein are using cardboards which are already printed with the labels for the manufacture of match boxes. Thus, as the petitioners are using cardboard in which labels have been printed already, the respondents have taken the view that they are not entitled to the duty concession based on the user of cardboard for the manufacture of match boxes, and they have begun demanding excise duty at the effective rate and not at the concessional rate which will be available to them as per Notification No. 43 of 1981 before its amendment. Aggrieved by the amendment brought into notification No. 41 of 1981 by notification No. 140 of 1981 which exposes them to a higher excise duty, the petitioners have come before this court. 8.According to the petitioners, the changes made by the impugned notifications are arbitrary and irrational and bear no nexus to the object sought to be achieved, for the following reasons. (1) If it is necessary to preserve the differen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Notification No. 137 of 1981 is to encourage the use of more cardboard. Some of the petitioners before us are cottage or tiny units which are governed by the Notification No. 99 of 1980, dated 19th June, 1980, which provided for an effective duty of Rs. 1.60 p per gross boxes of 50 matches each provided those units use cardboard in the manufacture of match boxes. That notification was also amended by notification No. 137 of 1981, dated 2-7-1981 which introduced a fifth proviso wherein the benefit of concessional rate of tax was not made available if those cottage and tiny units adopt a mechanical process either in the manufacture of box or in the affixing of labels. Similarly, the result was, those cottage and tiny units which used cardboards in which labels had already been printed were not allowed the benefit of the concessional rate of duty based on the user of cardboard for the manufacture of boxes. The said notification has also been questioned by the concerned petitioners on the same grounds as have been raised by the medium units. 9.The further submissions made by the petitioners are as follows --- The match manufacturing units having been regarded as separate category, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (supra) upholding the validity of the notification this court can go into the validity of the impugned notifications once again. 11.According to the learned Counsel for the petitioners, the present writ petitions will not be barred by the principle of res judicata because of the judgment of the Division Bench in 1983 (12) E.L.T. 58 (supra) because the grounds raised in these writ petitions were not raised in the earlier cases and the petitioners were also different. According to him a new ground can be raised and a new prayer can be made even by the same petitioners who failed at the earlier stage in a subsequent writ petition. In support of the said submission, reliance has been placed on the decisions reported in Ramakrishna Ramnath v. State of Maharashtra (AIR 1964 Bombay 51) and Hoshnak Singh v. Union of India and Others (AIR 1979 SC 1328). The learned Counsel also refers to the decision of the Supreme Court in Chandra Dhawan Boarding and Lodgings, Bangalore v. State of Mysore and Another (AIR 1970 SC 2042) wherein the petitioners who had earlier challenged the provisions as violating Article 19 of the Constitution and failed in 1955 before the Supreme Court, had been permi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rocesses of manufacture is arbitrary and irrational and therefore the Notification No. 42 of 1981 should be held to be bad, the court expressed the view that since the policy of the Government varies and differs depending on various economic factors, the courts have neither the wherewithal nor the equipment to decide the wisdom of their policy and that the concession granted with reference to the materials used or the process employed in making the boxes cannot be said to be irrelevant or inconsistent with the provisions of the Act, and that an exemption notification issued under Rule 8 cannot be questioned on the ground that the policy of the Government was not static. Therefore, since the identical points which were urged before us were not urged before the learned Judges, it is not open for us to say that the petitioners are barred from raising the points urged in these writ petitions. Therefore, we proceed to consider the contentions urged by the petitioners on merits. 14.According to the petitioners, the Government has been following a uniform policy of encouraging the user of cardboard for making match boxes with a view to conserve timber by giving concession in payment of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... changed their policy and decided to give the concession in the rate of excise duty for the user of cardboard in the manufacture of match boxes only to units which had not used labour saving devices, and therefore, they have chosen to take away the benefit of the concessional rate of excise duty for units which use a mechanical process for affixing labels. As the petitioners are admittedly using cardboards on which the labels have already been printed, they have been held not entitled to the concession as they have used a mechanical process or device for affixing labels which has resulted in the displacement of labour. As pointed out by the Division Bench in Jayaprakash Match Works Kovilpatti and Others v. Union of India and Others [1983 (12) E.L.T. 58], the policy of the Government cannot always be static and it has naturally vary depending upon number of economic factors. It is no doubt true, the Government had earlier granted concession for match making units based on their user of cardboard for manufacture of match boxes. But, later the Government has chosen to restrict the benefit only to those units which did not use a mechanical process in the affixing of labels on the boxes....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... employ mechanical process in any one of the processes for the manufacture of matches resulting in the displacement of labour do not get the usual concession given for the user of cardboard instead of veneer. Thus, the first contention advanced by the learned Counsel that the Government cannot depart from the earlier policy and that the materials do not justify a change in the policy cannot be sustained. 15.It is also not possible to agree with the learned Counsel for the petitioners that since the earlier policy was based on the directive principles of State policy, it should be taken to be reasonable and it should have been continued without modification. As we have already stated, securing employment to citizens within its economic means is also one of the directive principles of the State policy set down in Part IV of the Constitution and therefore the new policy also should be taken to be reasonable. According to the learned Counsel, the new policy of taking away the benefit of concession in excise duty in the case of units using cardboard boxes in which the labels are already printed, will amount to violation of Article 14, in that, unequals will be treated alike. It is tr....