TMI Blog1962 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been leviable but for the exemption. From the notifications set out above, it is manifest that the Government has exempted cotton fabrics produced on powerlooms owned by a co-operative society, and in the present instance owned by the members of the Co-operative Society. It has not been contended before us that the conditions laid down for granting the exemption have not been fulfilled by the members of the Co-operative Society, the respondent No. 5. Hence, the exemption granted is within the terms of the notifications aforesaid, which have effect as if enacted as a part of the Statute. The vires of the Statute as already indicated, has not been questioned. Appeal dismissed. - 110 of 1961 - - - Dated:- 28-2-1962 - (Constitution Bench) B.P. Sinha, C.J., J.L. Kapur, M. Hidayatullah, J.C. Shah and J.R. Mudholkar, JJ. [Judgment per : Sinha, C.J.]. - By this petition, under Article 32 of the Constitution, the petitioners challenge the constitutionality of certain provisions of the Central Excises and Salt Act, 1944 (1 of 1944) (which will be referred in the course of this judgment as the Act), read with Rule 8 of the Central Excise Rules, 1944 (1960) and the notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuated along with the petitioner Company in the matter of production, distribution and marketing of their produce. It is further stated that the weavers of the Society stand on the same or similar footing as the shareholders of the Company. The exemption was granted to the Society in virtue of the Central Government Notification No. 74 of 1959, dated July 31, 1959, and Notification No. 70 of 1960, dated April 30, 1960, isued by the Ministry of Finance, Government of India (Department of Revenue). The notifications are in these terms : "Government of India, Ministry of Finance (Department of Revenue) New Delhi. The 31st July, 1959. G.S.R. In pursuance of sub-rule (1) of rule 8 of the Central Excise Rules, 1944 as in force in India and as applied to the State of Pondicherry, the Central Government hereby exempts cotton fabrics produced by any co-operative society formed of owners of cotton powerlooms, which is registered or which may be registered on or before the 31st March, 1961 under any law relating to co-operative societies, from the whole of the duty leviable thereon, subject to the following conditions :- (a) that every member of the co-operative societies, has been exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber of cotton powerlooms owned by the co-operative society or owned by or allotted to its members is not more than four times the number of members forming such society; (c) that each member of the co-operative society produce a certificate from the State Government, concerned or such officer as may be nominated by the State Government that he is a bona fide member of the society and that the number of cotton powerlooms owned by or allotted to him and actually operated by him does not exceed four and did not exceed four at any time during the three years immediately preceding the date of his joining the society, and that he would have been exempt from excise duty even if he had not joined the co-operative societies; and (d) that the exemption shall be available — (i) for a period ending on the 31st July, 1962 in respect of registered co-operative societies which have commenced production prior to the date of the notification; and (ii) for a period of three years from the date of commencement of production in respect of co-operative societies which have been registered but have not commenced production or which may be registered on or before 31st March, 1961. (No. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Secretary, Ministry of Finance (Department of Revenue) Government of India was filed in opposition. It was stated on behalf of the Union Government and the Revenue that the relevant provisions of the Act and the Rules, and the notifications which have been impugned by the petitioners, did not infringe any provisions of the Constitution, and that the exemption granted to the society was in pursuance of the well recognised principle, being acted upon by the Government, to confer self-employment benefits in the interest of small producers, and with a view to encourage cottage industries and small scale industries employing a limitted number of hands. The Society, it was contended, was not the owner of the powerlooms, but each weaver was the owner of not more than 4 powerlooms; the Society was run on a co-operative basis for the benefit of the weavers, who shared the profits earned by working on a co-operative basis, by sale of the cloth produced by each weaver on his looms, after paying for the services rendered by the Society to its members, hence it was not correct to characterise the Society as running a mill with an installed capacity of 100 looms. It is further stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the First Schedule as being subject to a duty of excise and includes salt". The First Schedule contains the description of goods and rates of duty leviable under Section 3, which is the charging section and is in these words : "3. (1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set forth in the First Schedule. (1A) ....................................... (2) ....................................... (3) Different tariff values may be fixed for different class or description of the same article." Item No. 19 in the First Schedule is "Cotton fabrics", and means all varieties of fabrics manufactured either wholly or partly from cotton, with certain specified exemptions, including fabrics manufactured on handloom, and then follow the description of different kinds of cotton fabrics, with their relative rates of duty. Section 37 authorises the Union Government to make rules to carry into effect the purposes of the Act. By sub-section (2) of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the petition. 8. The petition is substantially based upon the contention that Rule 8 suffers from the vice of excessive delegation of powers to the Central Government to exempt partly or wholly any excisable goods, and, secondly, that the power even if constitutional has been invalidly exercised in so far as the notifications aforesaid containing the exemption operating in favour of the 5th respondent have been made. In our opinion, there is no substance in either of the two contentions. Rule 8 is as much a part of the Statute as Section 37(2) clause (xvii). It is always open to the State to tax certain classes of goods and not to tax others. The legislature is the best judge to decide as to the incidence of taxation, as also to the amount of tax to be levied in respect of different classes of goods. The Act recognises and only gives effect to the well established principle that there must be great deal of flexibility in the incidence of taxation of a particular kind. It must vary from time to time, as also in respect of goods produced by different processes and different agencies. The same principle has been recognised in Section 28 of the Sea Customs Act (VIII of 1878), whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rule 8 is valid and constitutional, the notifications are bad in so far as they exempt certain classes of persons and not classes of goods from the excise duty. It is argued that the tax is a duty of excise on "any goods", and Item 19 has reference to a particular variety of goods, namely, `cotton `fabrics'; the exemption if any could have been granted in respect of any particular specified variety of `cotton fabrics' and not with reference to the persons producing the same variety of those fabrics. There is apparently a fallacy in this argument. The tax is on the production of any goods, but it is payable by persons producing such goods. The exemption also is with reference to such goods as come within the description of excisable goods. The respondent No. 5 has been exempted from payment of excise duty in respect of goods produced by the weavers. It has not been exempted from the payment of a personal tax, like income-tax. The exemption must, therefore, have reference to the same kind of tax which would otherwise have been leviable but for the exemption. From the notifications set out above, it is manifest that the Government has exempted cotton fabrics produced on powerlooms ..... X X X X Extracts X X X X X X X X Extracts X X X X
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