TMI Blog1994 (1) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... types viz., industries producing not more than 100 gross boxes per day and the rest with a higher output. It was then felt that such classification put the medium sized factories at a disadvantage as they came within the higher category and had to pay duty at the full rate. With duty at this rate, they could not compete with the fully mechanised big factories. Hence a second preferential category was introduced comprising factories whose output did not exceed 5 lakhs gross boxes per year but exceed 100 gross boxes per day. Subsequently representation was made to Govt. for enlarging the scope of preferential excise tariff for cottage match factories. Need was felt for giving encouragement to cottage/small units in view of their employment potential in rural areas. Accordingly, in 1954, a new class of factories, with production not exceeding 25 gross boxes per day was created and a very substantial rebate in duty was allowed to them. The total number of units in 1955-56 was classified as A, B, C and D on the basis of the output intimated by the Planning Commission at (234 in `A' class, 103 in `B' class, 81 in `C' class and 42 in `D' class). The aggregate capacity was estimated at 35. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before proceeding further to deal with all the three notifications it is useful to reproduce Notificaion No. 40 of 1981 which reads as follows : ******* The said notification deals with mechanised sector and the effective rate of duty for matches manufactured with the aid of power is Rs. 7.20 per gross boxes of 50 matches each. However, by the proviso of the said notification, the concession was granted to matches manufatured by those manufacturers using power if the matches were packed in card-board boxes, the rate will be Rs. 6.60 or Rs. 6.90 as the case may be per gross. 8.Notification No. 41 of 1981 is reproduced here as under : ******* The above notification deals with semi-mechanised sector reduced the effective rate of duty for matches to Rs. 5.50 per gross. By the proviso to the said notification, a concessional rate was made in respect of matches packed in card-board boxes being Rs. 4.90 and Rs. 5.26 as the case may be, by provisos 1 and 2. 9.Notification No. 42 of 1981 is reproduced as under : ******* The above notification deals with non-mechanised sector under which the Central Government exempts matches in or in relation to the manufacture of which none ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of card-board, a duty of Rs. 4.90 per gross of boxes of 50 matches each was levied. This was subject to the further condition that the sum total of the value of the capital investment made from time to time on plant and machinery installed in the industrial unit in which the said matches are manufactured was not more than Rs. 20 lakhs. 11.It is pertinent to notice at this stage that persons like the petitioners have raised similar contentions before this Court in W.P. No. 10045/81 and a Division Bench of this Court consisting of Hon'ble Mr. Justice V. Ramasamy (as he then was) and Hon'ble Mr. Justice Singaravelu [reported in 1983 (12) E.L.T. 58] in Jayaprakash Match Works, Kovilpatti and Others v. Union of India and Others has rejected the same and sustained the validity of the impugned notification. 12.Another group of manufacturers belonging to the non-mechanised sector filed W.P. No. 1119/82 etc., batch for an identical relief and a Division Bench of this Court consisting of Hon'ble Mr. Justice Ramanujan and Hon'ble Mr. Justice Ratnam by their common order dated 21-6-1984 dismissed the Writ Petitions by rejecting the contentions advanced by the petitioners and also have agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmity and that the notifications are legally valid and therefore, the petitioners are liable to pay excise duty on the basis of the two notifications. He has also held that the challenge to tax law on the mere ground that it imposed a heavy tax even if it is true, cannot be entertained, and that the rates of duty on matches produced in the non-mechanised sector without using cardboard are not excessive if all the factors are taken into consideration. However, in the concluding para of his order, a suggestion was given to the Government for reconstructing the rates of excise duty on matches produced by different sectors in the light of the fresh facts, if any, which may be produced before it and any change in duty rates, if and when made, would only have prospective effect and will not alter the duty liability of the petitioners for the past period. Aggrieved by the order of the Secretary (Revenue) Ministry of Finance, Department of Revenue dated 24-1-1985, the above-said Writ Petitions have been filed for the aforesaid relief. 15.The Union of India filed counter-affidavits stating that the order of the Secretary (Revenue) Ministry of Finance does not suffer from any of the vices, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty to the petitioners who belong to Non-Mechanised Sector when they use card-boards for packing matches while the said benefit is continued to be given in the case of Mechanised and semi-mechanised match manufacturers is discriminatory and violative of Article 14 of the Constitution. The classification of the manufacturers of matches for the(ii) purpose of granting concession in the rate of excise duty as reflected in the impugned notification is unreal and has no nexus to the policy or object underlying the grant of concession and therefore violative of Article 14 of the Constitution. The Impugned Notification read with Notification No. 137/81(iii) dated 2-7-1981 has the effect of treating the Semi-Mechanised Sector and Non-Mechanised Sector (to which category the petitioners belong) who are un-equals as equals in the matter of levy of duty and therefore violative of Article 14 of the Constitution. The Impugned notification which denies the concessional rate(iv) of duty to the non-mechanised sector match manufacturers is un-reasonable and arbitrary and appears to have been brought about on account of extraneous and irrelevant factors besides being vitiated by non-applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... card-board boxes in order to extend the benefits to them and deny the same benefit to the petitioners. In the circumstances, when the concession is extended to the other two sectors where labour force is lesser when card-board boxes are used, to deny the same benefit to the petitioners cannot be justified and the reason for classification therefore has no nexus to the object sought to be achieved. 17.The contention of the respondent through its Addl. Central Government Standing Counsel Mr. P. Venkatasubramanian is that the non-mechanised sector is not equal to the mechanised sector and therefore, the question of discrimination would not arise. It cannot be denied that the mechanised sector and the non-mechanised sector are different classes of manufacturers. The non-mechanised sector which belongs to weaker group have therefore been conferred with better benefits like reduced duty. The question in issue is the extension of concessional rate of tariff to various classes of manufacturers. The complaint by the petitioners is that while extending this benefit the respondents have discriminated the non-mechanised sector on the basis of irrelevant factors which have no nexus to the ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-mechanised sector use card-board boxes which is without any valid basis. The Govt. appears to have taken into account that printed card-boards are used and therefore manual labour relating to affixing of label on card-board boxes would not be involved. Criticising the stand of the Govt., the learned Senior Counsel would submit that the assumption of the Government is without substance. The petitioner can use unprinted or plain card-board boxes and affix labels in the said card-board boxes involving the same labour process as in the case of Veneer boxes, and that the denial of the benefit of the concession to the peti- tioners and requiring them to pay a higher duty at the rate of Rs. 5.50 per gross when they use card-board boxes would therefore be wholly unreasonable and arbitrary. Thus, according to the petitioners the impugned notification which denies the concession to the non-mechanised sector while continuing to extend the benefit to other sectors is unreasonable and based on irrelevant factors. 20.Lastly, it was contended that the mechanised sector and the semi-mechanised sector have been fixed with an effective duty of Rs. 7.20 and Rs. 5.50 respectively, and when they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rs. 5.26 Inner and outer Rs. 4.90 24.Notification 140/81 stipulated the following conditions for enjoying Notification 42/81 by non-mechanised sector. The following changes were effected in Notification 42/81 : The process of giving the Veneer flats or strips of the(a) configuration of a match box including the outer slide or the inner slide with the use of match paper, should be done without the aid of power. The process of affixing labels, by pasting or any other means(b) on match boxes or veneers should be done without the aid of power. The concession extended for using card-board components in(c) the match box was omitted. Nothing contained in Notification 42/81 would be applicable(d) to matches packed in boxes in which card-board components were used. 25.From the foregoing, we are able to see the real intention of the Legislature. The Government treated the matches packed in boxes consisting of card-board constituents as not belonging to hand-made sector for which alone the benefit of Notification 42/81 was meant. This above policy stems from the simple fact that by using card-board boxes, the manufacturers reduce the labour force fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same were withdrawn with the observation of the Court that the wisdom of policy could better be decided by the Government after giving sufficient opportunity to the petitioners. As per the observations of the Supreme Court on 24-9-1984, 63 units were given chance to represent their case before the Secretary (Revenue), Ministry of Finance, Department of Revenue, Govt. of India, who, after considering all the materials placed before him, in his order F. No. 109/38/84 Cx dated 24-1-1985 passed the impugned order, which is challenged in some writ petitions. The Central Government dismissed the claims of the petitioners and observed that restructuring of the duty may be made if it is found necessary, but the same will be prospective only. The order, in our view, reiterates the soundness of the policy. 29.It is brought to our notice by the learned Addl. Central Govt. Standing Counsel appearing for the respondent, that during the budget proposals 1985, the matches produced in fully mechanished sector regulated by Notification 40/81 has been superseded by Notification 71/85 and the rate of duty has been prescribed as Rs. 6.85 per gross of 50's matches. Notification 137/81, exclusively is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used by them. In effect, they want 60 paise concession as originally envisaged in Notification 42/81 and would pay Rs. 3.90 only for card-board boxes. This contention, in our opinion, is not sustainable for the following reasons : Notification 137/81 was rescinded in Notification 83/85.(a) Hence, there was no concession for semi-mechanised sector either for use of card- board boxes. Notification 40/81 was rescinded by Notification 71/85 and no(b) concession has been extended for mechanised sector also for using card-board boxes. Effective rates for all the boxes in respect of(c) mechanised/semi-mechanised sectors have been reduced whereas such reduction is given to them cannot be a ground for them to get concession for card-board boxes. The claim of the petitioners that they would pay only Rs.(d) 3.90 on the boxes has no legal force. The Government by Notification 117/85 have reduced the rate of duty. The period of dispute in these writ petitions is from 17-3-1985 to 7-5-1985. For this period also the petitioners cannot question the reduction of duty for semi-mechanised sector. No concession was extended on the ground that they were using card-board boxes. 32.We may also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment in the matter of granting exemptions, any particular order could be questioned if it was contrary to the provisions of the Act or that the conditions imposed thereunder for getting the concessions are neither germane nor relevant to the particular item in respect of which the condition was imposed or that it was not consistent with the operative provisions of the Act itself. It was also brought to the notice of the Division Bench of number of instances where the exemption was based on the process of manufacture, as, for instance, those manufactured in the mechanised sector and those manufactured in the non-mechanised sector and that when the validity of such exemption was questioned, the Supreme Court upheld the same in Orient Weaving Mills v. Union of India (A.I.R. 1963, S.C. 98) and also in a decision of the Kerala High Court reported in Western India Plywood Ltd. v. Union of India (I.L.R. 1972 (2) Kerala, 157). 33.In that case, the Division Bench has accepted the contentions of the learned counsel for the Revenue as well-founded. The Division Bench, in the concluding part of the judgment has observed as follows :- "The learned counsel for the revenue contended that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to see that persons who employ mechanical process in any one of the processes for the manufacture of matches resulting in displacement of labour do not get the same concession given for the user of the card-board instead of veneer. Further, we are of the view, that the petitioners cannot question the policy of the Government in classifying the match units and the purpose of giving effect to their policy of encouraging the use of card-board. 36.The challenge made on the ground of hostile discrimination in these cases has no merit. The decision in Indian Express Newspapers (Bombay) Pvt. Ltd., v. Union of India (A.I.R. 1986, S.C. 515) turned on the peculiar fact situation of the case and also the direct impact of the notification felt on the exercise of the fundamental right secured under Article 19(1)(a) of the Constitution of India, which ultimately was found to adversely affect the advancement of public interest involved in publishing facts and opinions for educating the mass of the country. As a matter of fact, in the very decision, the Apex Court while declaring the position that a subordinate legislation may be struck down as arbitrary or contrary to statute or the constitutio ..... 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