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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE KANAKARAJ
S. Pannadevi - Appellant
Versus
Government of India - Respondents
Writ Petition Nos. 1940, 5010, 5011 and 6315 of 1981 and 7761 of 1982
Decided On : 06 April 1990
CENTRAL EXCISE ACT - NOTIFICATION - VALIDITY - EXEMPTION - LOAN LICENSEES - AGGREGATE VALUE OF CLEARANCES - ARTICLE 14 AND 19(1)(G) OF THE CONSTITUTION OF INDIA - NOT VIOLATED.
Fact of the Case:
The petitioners, manufacturers of patent or proprietary medicines, challenged the validity of a notification amending an earlier notification granting exemption from excise duty on clearances of specified goods up to an aggregate value of Rs. 7.5 lakhs in a financial year. The amended notification introduced a proviso limiting the aggregate value of clearances from any factory by or on behalf of one or more manufacturers to Rs. 7.5 lakhs in a financial year.
Finding of the Court:
The court held that the impugned notification was not ultra vires Section 3 of the Central Excise Act as it did not levy any excise duty but only modified the criteria for determining the availability of the exemption. The court also held that the notification did not violate Article 14 of the Constitution as the basis of classification had a rational relationship with the purpose of the Act. Further, the court held that the notification did not violate Article 19(1)(g) of the Constitution as the petitioners' fundamental rights to carry on business were not hampered and the exemption was based on the economic policy of the Union of India to give relief only to genuine small manufacturers.
Issues: 1. Whether the impugned notification was ultra vires Section 3 of the Central Excise Act? 2. Whether the impugned notification violated Article 14 of the Constitution of India? 3. Whether the impugned notification violated Article 19(1)(g) of the Constitution of India?
Ratio Decidendi: 1. The impugned notification did not levy any excise duty but only modified the criteria for determining the availability of the exemption, hence it was not ultra vires Section 3 of the Central Excise Act. 2. The basis of classification had a rational relationship with the purpose of the Act, hence the impugned notification did not violate Article 14 of the Constitution. 3. The petitioners' fundamental rights to carry on business were not hampered and the exemption was based on the economic policy of the Union of India to give relief only to genuine small manufacturers, hence the impugned notification did not violate Article 19(1)(g) of the Constitution.
Final Decision: The writ petitions were dismissed.
The point involved in all these writ petitions relates to the validity of the Notification No. 73/81-C.E., dated 25-3-1981, being a notification issued under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 amending an earlier Notification 80/80-C.E., dated 19-6-1980 and therefore, I am passing a common order in the above writ petitions.
2.I will set out the facts in writ petition No. 1940 of 1981: The petitioner is a manufacturer of patent or proprietary medicines. The petitioner does not own a factory of her own for manufacture. She has obtained a licence under the Drugs Act known as "loan licence" enabling her to use the factory premises of another factory owner. Actually, the petitioner is using the factory of M/s. Medhopharm at Thiru-Vi-Ka Nagar, Madras-6. It is stated that there are other loan licensees attached to the said factory. The produce manufactured by the petitioner falls under Tariff Item 14-E of Schedule I to the Central Excise Act which attractsad valoremduty, the prescribed rate of duty being 12 /2%ad valoremtogether with a special excise duty of 5%.
3.In and by Notification No. 80/80-C.E., dated 19-6-1980 exemption was granted on all excisable goods cleared for home consumption on or after the first day of April in any financial year by or on behalf of a manufacturer from one or more factories. The notification in respect of the actual exemption is as follows:-
"(a) in the case of first clearance of the specified goods up to an aggregate value not exceeding rupees seven and a half lakhs, from the whole of the duty of excise leviable thereon; and
(b) in the case of the clearance (being clearances of the specified goods of an aggregate value not exceeding rupees seven and a half lakhs) immediately following the said first clearances of the value specified in clause (a), from so much of the duty of excise leviable thereon under the said item [read with any relevant notification issued under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, and in force for the time being] as is in excess of seventy-five per cent of such duty.'The petitioner was happy with this Notification.
4.By the impugned notification, dated 25-3-1981, certain vital changes are made to the Notification 80/80-C.E., dated 19-6-1980. It is necessary to quote the impugned notification:" *
In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 80/80-Central Excises, dated the 19th June, 1980, namely :-
In the said notification -
(a) in Paragraph 1, for the provisions, the following proviso shall be substituted, namely :-
'Provided that the aggregate value of clearances of the specified goods from any factory by or on behalf of one or more manufacturers -
(i) at nil rate of duty in terms of clause (a) of this paragraph, or
(ii) at reduced rate of duty in terms of clause (b) of this paragraph, shall not in either case exceed rupees seven and a half lakhs in any financial year.'
The petitioners were hurt by the portion of the notification which fixes a limit on the basis of the aggregate value of clearance of the specified goods from any factory by or on behalf of one or more manufacturers. In other words, if there are three or four loan licensees manufacturing the specified goods from one factory and if the aggregate value of clearances by all the loan licensees, put together, in the financial year exceeds 71/2lakhs, the exemption will not be available to any one of the loan licensees. Similarly, the second limb of the exemption will also apply to the aggregate value of clearances.
5.Mr. Elamurugan, learned counsel appearing for the petitioners argued the Writ Petition Nos. 1940, 5010, 5011 and 6315 of 1981. Mr. R. Subramanian and A. Rafeeq Ali, learned counsel who filed Writ Petition No. 7761 of 1982 have not made any ind
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