Judgment

BHAGWATI, J.:- These appeals by special leave are directed against the judgment of the Karnataka High Court allowing 12 writ petitions filed by different respondents. Each of the respondents owned at the material time not more than 4 powerlooms and carried on business of manufacturing cotton fabrics on those powerlooms. The case of the respondents was that each of them acquired his powerlooms from persons who were or had been licensees and started manufacturing cotton fabrics on those powerlooms prior to 1st April, 1961. The respondents claimed that since each of them had not more than 4 powerlooms in his factory, no excise duty was payable on the cotton fabrics manufactured by him and this claim for exemption was based on a notification dated 5th January, 1957 issued by the Government of India in exercise of the powers conferred upon it by Rule 8 (1) of the Central Excise Rules, 1944. The Superintendent of Central Excise, however, rejected the claim for exemption on the ground that though the powerlooms owned by each of the respondents were not more than 4, manufacture of cotton fabrics on them had started after 1st April, 1961 and none of the respondents was, therefore, entitled to exemption from payment of excise duty on the cotton fabrics manufactured by him. The excise duty was accordingly levied on each of the respondents by the Superintendent of Central Excise and this levy was confirmed in appeal by the Assistant Collector and in further appeal by the Collector of Central Excise. Each of the respondents thereupon preferred a writ petition in the Karnataka High Court challenging the levy of excise duty and praying that a writ of mandamus may be issued against the Excise Authorities directing them not to enforce the notice demanding excise duty. The writ petitions were allowed by the High Court and hence the Union of India preferred the present appeals after obtaining special leave from this Court.

2. Before we proceed to examine the rival contentions of the parties in regard to the controversy arising in these appeals, it is necessary to set out briefly the relevant provisions of law having a bearing on this controversy. The Central Excises and Salt Act, 1944 by Sec. 3 read with Item 19 provided for levy of excise duty on all varieties of cotton fabrics including cotton fabrics manufactured on powerlooms. Section 37 sub-sec. (2) of the Act conferred power on the Central Government to make Rules providing for a number of matters including inter alia clause (xvii) which was in the following terms :

"Exempt any goods from the whole or any part of duty imposed by this Act."

The Central Government in exercise of this rule-making power made the Central Excise Rules, 1944 of which Rule 8, clause (1) provided that "the Central Government may from time to time by notification in the Official Gazette exempt, subject to such conditions as may be specified in the notification, any excisable goods from the whole or any part of the duty leviable on such goods." In exercise of this power of exemption conferred under Rule 8, clause (1), the Central Government issued a notification dated 5th January, 1957 exempting certain varieties of cotton fabrics from the whole of the excise duty leviable thereon and one of such varieties set out in Item 7 was as under :

"Cotton fabrics produced in factories commonly known as powerlooms (without spinning plants) provided that the number of powerlooms producing cotton fabrics in such factories does not exceed four."

This item was later substituted by another item by a notification of the Central Government dated 19th Jan. 1957 and the substituted item was as follows :

"Cotton fabrics manufactured by or on behalf of the same person in one or more factories commonly known as powerlooms (without spinning plants), in which less than 5 powerlooms in all are installed."

The scope of the exemption granted under this item was restricted by the addition of the following proviso by a Central Government notifi