The Central Government, while granting exemption, in exercise of its power under Rule 8 (1) of the Rules could not make a non-manufacturer of a footwear its manufacturer by mere use of its brand or trade name or by its purchases under the deeming provision contained in the impugned explanation.

K. B. N. Singh, J.

1. In this writ application the petitioner has prayed for quashing the Explanation appended to Notification No.88/77, dated the 9th May, 1977, of the Government of India, Department of Revenue and Banking (Annexure 4), as also the directions, Trade Notice, and Demand Notice contained in letters dated the 31st May, 1977 (Annexure6), 16th June, 1977 (Annexure 5), 17th June, 1977 (Annexure 8), 13th July, 1977 (Annexure9), and the 14th July, 1977 (Annexure 10) demanding excise duty on jalsa brand footwears purchased by the petitioner, in pursuance of Annexure 4.

2. The petitioner is a well-known public limited company, Bata India Limited, with headquarters at Calcutta, which carries on business of manufacture, sale and purchase of footwears and parts thereof. It has factories of its own in the States of West Bengal and Haryana as well as a factory at Bataganj, Patna, in the State of Bihar, in which it manufactures footwears and parts thereof. Besides manufacturing footwears in its factories, it also purchases jalsa brand footwears, manufactured by Respondents Nos.4, 5, 6 and 7, who are small manufacturers, and sells the same to public through various retail shops located throughout the country. The petitioners case is that Respondents Nos.4 to 7 have factories of their own, where they manufacture footwears of different descriptions by employing their own machines and labour and each one of them is duly licensed to carry on the business of manufacture of footwears and are separate entities These respondents do not manufacture footwears exclusively for the petitioner and their products are also sold by them to other customers. The footwears purchased by the petitioner from the aforesaid respondents are marked as jalsa and bata which are the trade names of the petitioner. The petitioner produces other descriptions of footwears in its own factories and no process of manufacture in respect of jalsa footwears is carried on in any factories owned by the petitioner.

3. The petitioners case is that under the provisions of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act), excise duty is levied on footwears or parts thereof at the rates set out in Item No.36 of the First Schedule to the said Act. The Central Government, in exercise of the powers conferred under Rule 8 (1) of the Central Excise Rules, 1944 (hereinafter referred to as the Rules), issued a Notification No.93/67, dated the 26th May, 1967 (Annexure 2) exempting footwears from the whole of the excise duty leviable thereon, if such footwears were being produced in any factory where not more than 49 workers were or had been working on any day during the preceding 12 months, or, where the toal equivalent Of power used in the process of manufacturing footwears did not exceed two horse power. This was with a view to help the small manufacturers. The exemption was further modified by another Notification No.103/76, dated the 16th March, 1976 (Annexure 3) by which factories employing less than 50 workers and also using power equivalent to two horse power for the purpose of manufacture, were eligible for exemption. It is the petitioners case that at all relevant periods the four respondents (Respondents Nos.4, 5, 6 and 7) qualified for exemption and were being allowed exemption on footwears manufactured by them, and the jalsa footwears manufactured by Respondents Nos.4 to 7 and purchased by the petitioner were not subject to excise duty. The trouble started with the issuance of the impugned Notification No.88/77, dated the 9th May, 1977 (Annexure 4), by the Central Government, which superseded the earlier Notification (Annexure 3), and which, while allowing exemption to small manufacturers as before, added an explanation stating that where a footwear, manufactured by a small manufacturer, is affixed with the brand or trade name of another manufacturer, or is purchased by another manufacturer, it shall be deemed to have been manufacture