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1995 Supreme(Gau) 249
GAUHATI HIGH COURT
S.Barman Roy, A.K.Patnaik, JJ.
Bajrang Tea Manufacturing Company (Pvt) Ltd. -Appellant
Versus
Union of India and Another -Respondent
Writ Appeal No. 31 of 1995
Decided On : 23-11-1995
P.K.Goswami, K.N.Choudhary, M.Hazarika
The Central Government has the power to impose conditions for exemption from excise duty, and a classification based on the object of ensuring a better income for small growers of tea is not unreasonable and violative of Article 14 of the Constitution.
Headnote:
CENTRAL EXCISE - EXEMPTION - NOTIFICATION - CLASSIFICATION - VALIDITY - ARTICLE 14 - ARTICLE 19 (1) (G) - CENTRAL EXCISE & SALT ACT, 1944 - SECTION 3 - CENTRAL EXCISE TARIFF ACT, 1985 - SCHEDULE - SUB-HEADING 0902.19, 0902.29, 0902.90 - CENTRAL EXCISE RULES, 1944 - RULE 8 - NOTIFICATION NO.32/1986 CENTRAL EXCISE DATED 10.2.86 - NOTIFICATION NO.32/1986 CENTRAL EXCISE DATED 29.10.87 - CONSTITUTION OF INDIA - ARTICLE 14 - ARTICLE 19 (1) (G).
Fact of the Case:
The appellant, a private limited company manufacturing tea, challenged the notification dated 29.10.87, which amended the explanation in the earlier notification dated 10.2.86, granted exemption from central excise duty to bought leaf factories. The appellant argued that the impugned notification was ultra vires the power of the Central Government under Rule 8 of the Central Excise Rules, 1944, discriminatory and violative of Article 14 of the Constitution, and unreasonable and violative of fundamental rights under Article 19 (1) (g) of the Constitution.
Finding of the Court:
The court held that the impugned notification was within the power of the Central Government under Rule 8 of the Central Excise Rules, 1944, and did not impose a duty on excisable goods in excess of the statutory duty. The court further held that the classification between manufacturers who purchased green leaf from bigger growers and those who purchased green leaf from small growers holding land not exceeding 10 hectares had a rational nexus with the object of ensuring a better income for small growers of tea, and therefore, the notification was not violative of Article 14 of the Constitution. The court also held that the impugned notification did not put an unreasonable restriction on the right of the appellant to carry on business under Article 19 (1) (g) of the Constitution.
Issues: 1. Whether the impugned notification was ultra vires the power of the Central Government under Rule 8 of the Central Excise Rules, 1944? 2. Whether the impugned notification was discriminatory and violative of Article 14 of the Constitution? 3. Whether the impugned notification was unreasonable and violative of fundamental rights under Article 19 (1) (g) of the Constitution?
Ratio Decidendi: 1. The Central Government has the power under Rule 8 of the Central Excise Rules, 1944, to impose conditions subject to which exemption from excise duty would be available to a manufacturer. 2. A classification based on the object of ensuring a better income for small growers of tea is not unreasonable and violative of Article 14 of the Constitution. 3. A notification that does not prohibit manufacturers from purchasing green leaf from any grower of tea holding land exceeding 10 hectares, but only denies them the exemption of 10% of Rs. 1.30 available to manufacturers of bought leaf factory, does not put an unreasonable restriction on the right to carry on business under Article 19 (1) (g) of the Constitution.
Final Decision: The appeal was dismissed, but parties were directed to bear their own costs.
In this writ appeal, the appellant has challenged the judgment and order dated 19.12.94 of the learned Single Judge, dismissing Civil Rule No.732 of 1988 filed by the appellant, following an earlier judgment dated 17.9.93 in Civil Rule No.733 of 1988.
2. Facts very briefly are that the appellant is a private limited company incorporated under the Companies Act, 1956 and carrying on business of manufacturing tea. Since the appellant has no tea garden of its own, it buys tea leaves from others and manufactures tea in its factory at Rupai Siding, Doomdooma in the district of Dibrugarh. Manufacture of tea was subject to levy of central excise duty at the rate of Rs.2/- per Kg under Central Excise & Salt Act, 1944 (for short the Act) read with sub-heading No.0902.19, 0902.90 of the Schedule appended to the Central Excise Tariff Act, 1985 (for short the Tariff Act) at the relevant time. But by notification issued by the Central Government in exercise of its powers under sub-rule (1) of the Rule 8 of the Central Excise Rules, 1944 (for short the Rules) read with Rule 96F of the said Rules numbered as notification No.32/1986 Central Excise, dated 10.9.86, however, tea manufactured in Zone V comprising of districts of Dibrugarh, Lakhimpur, Sibsagar, Jorhat and Sonitpur, but excluding Borsola Circle in the district of Sonitpur was exempted from so much of excise duty as was in excess of Rs.1.30 and under proviso (iv) (a) of the said notification, it was further stipulated that where the tea manufactured in a bought leaf factory is assessed according to the rate specified in the said notification the duty leviable on such tea in respect of all areas including in Zones, I, II and V to VII was to be reduced by 10% of such rate. In the explanation appended to the notification, the expression 'bought leaf factory' was explained to mean, a tea factory which has purchased not less than 2/3rd's of its green leaf from outside sellers during the financial year 1983-84 and in the financial year immediately proceeding in which the duty was levied. But by a subsequent notification dated 29.10.87, the explanation in notification No.32/1986 Central Excise dated 10.2.86 was substituted by a new explanation which is quoted herein below :
"Explanation : For the purpose of this notification the expression "bought leaf factory" means a tea factory which :
(i) has worked for atleast six months during the financial year immediately preceding the financial year in which the duty is levied, and (ii) has purchased not less than two-thirds of the green leaf processed by the factory in the preceding financial year from any grower who has a holding not exceeding 10 hectares of land under cultivation of tea plants."
The result was that while the appellant as a 'bought leaf factory' was entitled to a relief of excise duty at the rate of 10% from the rate of Rs. 1.30, the appellant's factory being situated in Dibrugarh District, after the notification dated 29.10.87, the appellant would be entitled to the said relief of 10% only if it purchased its green leaf from a grower holding not exceeding 10 hectares of land under cultivation of tea plants. It is this notification dated 29.10.87 which was challenged in Civil Rule Nos.732 and 733 of 1988 and upheld by the learned Single Judge in the impugned judgment and order.
3. Mr. PK Goswami, learned counsel for the appellant, submitted'that the impugned notification in so far as it puts a restriction on a manufacturer of tea in a bought leaf factory to purchase green leaf from a grower holding not exceeding 10 hectares of land under cultivation of tea plants for the purpose of availing exemption of 10% under the earlier notification dated 10.2.86 is ultra vires the power of the Central Government under Rule 8 of the Rules, According to Mr. Goswami, the explanation brought in by the impugned notification dated 29.10.87, in effect, amends the rate of duty that was leviable on the manufacturers of tea in a bought
