1990 (4) TMI 65 - HC - Central Excise

Summary

Issues:
Validity of Notification No. 73/81-C.E. dated 25-3-1981 under Rule 8 of Central Excise Rules, 1944 affecting exemption for manufacturers of specified goods.

Detailed Analysis:

Issue 1: Notification Amendment Impact
The judgment addresses the validity of Notification No. 73/81-C.E. dated 25-3-1981, amending an earlier notification, affecting the exemption for manufacturers of specified goods. The impugned notification introduced changes to the exemption criteria, particularly limiting the aggregate value of clearances for manufacturers. This change impacted loan licensees manufacturing specified goods from a shared factory, potentially denying exemption if the total value exceeded the set limit.

Issue 2: Legality under Central Excise Act
The petitioner argued that the notification's basis for levying excise duty was illegal and ultra vires Section 3 of the Central Excise Act. However, the court clarified that the notification did not levy excise duty but granted exemption under specific circumstances. Citing precedent, the court held that notifications under Rule 8(1) of the Central Excise Rules could be based on various contingencies related to excisable goods, thus not violating Section 3.

Issue 3: Constitutional Challenge
The petitioner contended that the notification infringed on the constitutional guarantee of Article 14, citing unequal benefit distribution among loan licensees. The court rejected this argument, stating that the classification had a rational relationship with the Act's purpose. It referenced previous judgments emphasizing that economic and tax classifications by the legislature are generally upheld unless arbitrary.

Issue 4: Violation of Fundamental Rights
Another argument raised was the potential violation of Article 19(1)(g) of the Constitution. The court disagreed, noting that the notification did not impede the petitioners' right to conduct business or meet statutory obligations. It highlighted the exemption's intent to support genuine small manufacturers and prevent abuse by larger entities through benami units.

Precedent and Conclusion
The judgment cited precedents emphasizing the government's discretion in granting tax concessions and exemptions. Ultimately, the court dismissed the writ petitions, upholding the validity of the impugned notification. It concluded that the notification did not violate the Central Excise Act or constitutional provisions, ensuring relief for genuine small manufacturers while preventing misuse by larger entities.