PETITIONER:
GOVT. OF INDIA, REPRESENTED BY SECRETARY,MINISTRY OF FINANCE
Vs.
RESPONDENT:
DHANALAKSHMI PAPER AND BOARD MILLSTIRUCHIRUPALLI
DATE OF JUDGMENT12/12/1988
BENCH:
SHARMA, L.M. (J)
BENCH:
SHARMA, L.M. (J)
MUKHARJI, SABYASACHI (J)
CITATION:
1989 AIR 665 1988 SCR Supl. (3)1051
1989 SCC Supl. (1) 596 JT 1988 (4) 677
ACT:
Central Excises and Salt Act, 1944 Central Excise Rules
1944: First Schedule Item No. 17(3)/Rule 8(1) and
Notification dated March 1, 1964 Strawboard and pulpboard--
Exemption from duty--Clause (a) proviso (3) of Notification
held Ultra vires--Choice of date-- Relevancy of.
HEADNOTE:
The respondent-assessee built up a factory for the
manufacture of paper and paper boards, which started
production on 7.5.1964. The respondent claimed that the duty
in respect of the paper boards manufactured in the factory
during the period 7.5.1964 to June 1966 was payable at the
concessional rates allowed by the Government of India
notification dated 1st March, 1964. The claim was however
rejected by the Revenue on the ground that the factory had
not come into existence on or before the 9th day of
November, 1963 as stipulated in clause (a) of Proviso (3) of
the said notification.
The respondent's writ application before the High Court
was allowed by the Single Judge and the appellant's Letters
Patent appeal was dismissed in limine. The High Court has
accepted the respondent's contention that the date '9th of
November, 1963' mentioned in the notification was arbitrary.
On behalf of the Revenue it was contended that the date
(9.11.1963) was selected because an earlier notification
bearing No. 110 had required applications to be made on or
after 9.11.1963. It was further contended that a statutory
provision had necessarily to be arbitrary in the choice of
date and it could not be challenged on that ground.
On behalf of the respondent it was contended that the
said date did not have any significance whatsoever and did
not bear any rational relationship to the object sought to
be achieved by the notification.
PG NO 1051
PG NO 1052
Dismissing the appeal, it was
HELD: 1. A rule which makes a difference between past
and present cannot be condemned as arbitrary and whimsical.
[1056D]
2. In cases where choice of the date is not material for
the object to be achieved. the provisions are generally
made prospective in operation. [1056D]
3. The Revenue has not been able to produce notification
No. l 10. Unless the nature and contents of notification No.
110 and its relevance with reference to the present
notification are indicated, it is futile to try to defend of
the choice of the date in clause (a) on its basis.
[1055A;1056E]
4. In the present case, the benefit of concessional rate
was bestowed upon the entire group of assesses referred
therein and by clause (a) of Proviso (3) the group was
divided into two classes without adopting any differentia
having a rational relation to the object of the
Notification. [1057F]
5. Clause (a) of the Proviso (3) of the Notification was
ultra vires and the benefit allowed by the Notification
would be available to the entire group including the
respondent. [1057G]
Union of India v. M/s. P. Match Works [1975]2 SCR 573
Jagdish pandey v. The chancellor, University of Bihar.
[19681 I SCR 237 and U.P. M. T. S.N.A. Samiti, Varanasi
v. State of U.P.,[1987]2 SCR 453, distinguished.
Dr .Sushma Sharma v. State of Rajasthan, [1985] Supp.SCC
45; and D.S. Nakara v. Union of lndia, [1983] I SCC 365
referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6 of
1976.
From the Judgment and Order dated 12.11.1973 of the
Madras High Court in Writ Appeal No. 390 of 1969.
V.C. Mahajan, C.V. Subba Rao and K.M.M. Khan for the
Appellants
K.N. Bhat and Vineet Kumar for the Respondent.
PG NO 1053
The Judgment of the Court was delivered by
SHARMA, J. This appeal arises out of a writ application
allowed by the Madras High Court striking down Clause (a) of
the Proviso (3) of the Notification dated the 1st March,
1964 issued by the Union of India in the Ministry of
Finance, under Rule 8(1) of the Central Excise Rules, 1944
and granting consequential relief. The aforesaid
notification granted certain exemptions from payment of
excise duty, but the benefit was denied to the writ
petitioner, respondent before this Court, in view of the
impugned clause.
2. The respondent assessee, a business concern
functioning under the name of M/s. Dhanalakshmi Paper and
Board Mills, decided to set up a factory for the manufacture
of paper and paper boards and allied products, and obtained
a lease of certain premises in June 1963 and put up a
suitable structure for the factory by August 1963. The
necessary machineries for running the factory, however, were
received in April 1964 and application for licence therefor
was filed on 27.4.1964. The licence was granted on 6.5.1964
and production in the factory started the next day, i.e.
7.5.1964.
3. The respondent claimed that the duty in respect of
the paper boards manunactured in the factory during the
period 7.5.1964 to June 1966 was payable at the concessional
rate allowed by the Notification, relevant portion whereof
reads as follows:
GOVERNMENT OF lNDIA
MINISTRY OF FINANCE (DEPARTMENT
OF REVENUE)
NEW DELHI,THE 1ST MARCH, 1964/PHALGUNA
11, 1885 (SAKA)
NOTIFICATION
CENTRAL EXCISE
CSR: In exercise of the powers conferred by Sub-rule (1)
of Rule 8 of the Central Excise Rules, 1944, and in
supersession of the notification of the Government of India
in the Ministry of Finance (Department of Revenue) No. 57/60
Central Excise dated 20th April. 196() and No. 37/63 Central
Excise dated the 1st March, 1963 the Central Govt. hereby
exempts strawboard and pulpboard including, greboard,
calling under Sub-item (3) of Item No. 17 of the First
PG NO 1054
Schedule to the Central Excises and Salt Act, 1944 (1 of
1944), takes together up to the quantity prescribed in
column (1) of Table 1 (omitted), cleared by any manufacturer
for home consumption during any financial year, from so much
of the leviable thereon as is in excess of the amount
specified in the corresponding entry in column (2) of the
same Table:
TABLE- 1 (being not relevant, omitted)
Provided that–
(1)…………………………..
(2) …………………………………
TABLE-2 (being not relevant, omitted)
(3) nothing contained in this notification shall apply
to a manufacturer who applied or applies for a licence on
or after the 9th day of November 1963, unless he satisfies
the Collector of Central Excise–
(a) that the factory for which the licence was or is
applied for was owned on the 9th day of November, 1963, by
the applicant;”
The benefit of the Notification claimed by the
respondent assessee was denied by the appellants on the
ground that the factory did not come into existence on or
before the 9th day of November, 1963, the date mentioned in
the impugned clause (a). The respondent moved the High
Court in its writ jurisdiction under Article 226 of the
Constitution, and the application was allowed by a learned
Single Judge. An appeal therefrom under Clause 15 of the
Letters Patent was dismissed in limine. The appellants have
by special leave challenged the decision before this Court.3. The ground urged on behalf of the assessee which
found favour with the High Court is arbitrary nature of the
date, ‘9th of November, 1963’ mentioned in the impugned
clause (a). It has been contended that the said date does
not have any significance whatsoever and does not bear any
rational relationship to the object sought to be achieved by
the Notification. The learned counsel for the appellant
defended the validity of the impugned provision on the
ground that the date (9.11.1963) was selected because an
PG NO 1055
earlier notification bearing no. 110 had required
applications to be made on or after 9.11.1963. This
notification is not on the records of the case and the
learned counsel has stated th8t he has also not been able to
examine the same inspite of his unsuccessful request to the
Department concerned for a copy thereof. He has mentioned
about this notification in his argument on the basis of the
reference in the judgment of the High Court. The High Court
judgment does not throw any light on the nature of the
notification no. 110, and the learned counsel could not draw
any inference about its provisions from the judgment. It is
not claimed that the said notification was before the High
Court or the Judges had any occasion to examine it. The
present appeal was filed in 1976 and even now the learned
counsel for the appellants is not in a position either to
produce it or to tell us what it was about. The result is
that no explanation for the choice of the date in clause (a)
is forthcoming.4. Sri V.C. Mahajan, learned counsel for the appellants,
contended that a statutory provision has necessarily to be
arbitrary in the choice of date and it cannot be challenged
on that ground. He relied upon the observations of this
Court in Union of India v. M/s Parmeswaran Match Works etc.,
119751 2 SCR 573 (at page 578) as quoted below:“To achieve that purpose, the Government chose
September 4, 1967, as the date before which the declaration
should be filed. There can be no doubt that any date chosen
for the purpose would to a certain extent, be arbitrary.
That is inevitable”Reliance was also placed on Jagdish Pandey v. The
Chancellor, University of Bihar and Another, [1968] 1 SCR
237 and U.P.M. T.S.N.A. Samiti, Varanasi v. S ate of U. P.
and Others, [1987] 2 SCC 453. We are afraid, the argument
has no merit and has to be rejected.5. In Union of India v. M/s P. Match Works, (supra) the
question related to concessional rate of excise duty
leviable on the manufacture of match boxes. Match factories
were classified on the basis of their output during the
financial year and matches produced in different categories
of factories were subject to varying rates of dutyhigher
rate being levied on matches produced in factories having
higher output. In pursuance of a change in the policy, the
match factories were later classified as mechanised units
and non-mechanised units and by a notification dated July ‘
PG NO 1056
l, 1967 a concessional rate of duty was allowed in respect
of units certified according to the provisions therein.
The notification also contained a proviso. The purpose
of these provisions was to grant the benefit of
concessional rate of duty only to small manufacturers. This
Court while analysing the notification observed that the
proviso “would have defeated the very purpose of the
notification, namely, the grant of concessional rate of
duty only to small manufacturers”. In order to cure this
self-defeating position, the notification dated July 21,
1967 was amended by Notification No. 205 of 1967 dated
September 4, 1967. The latter notification mentioned the 4th
September, 1967 as the cut-off date. The attach on the
choice of this date was met by the observations relied upon
by the learned counsel for the appellants and quoted
earlier. It will be observed that the date, September 4,
1967, was the date on which the amending Notification itself
was issued. The crucial date, therefore, could not be
condemned as one “taken from a hat’ . It was the date of the
notification itself. A rule which makes a difference between
past and present cannot be condemned as arbitrary and
whimsical. In cases where choice of date is not material
for the object to be achieved, the provisions are generally
made prospective in operation. In that sense this Court
observed in M/s P. Match Works case that the date chosen
would to a certain extent be arbitrary and this was
inevitable. In the present case the relevant Notification
was dated March 1, l964 and not 9.11.1963. It is true that
as mentioned in the High Court judgment some other
notification required applications referred therein to be
made on or after ‘,h 11.1963, but unless the nature and
contents of that notification and its relevance with
reference to the present notification are indicated, it is
futile to try to defend the choice of the date on its basis.
The appellants have miserably failed to do so. inspite of
more than a decade available to them6. The other two cases relied upon On behalf of the
appellants instead of supporting their case. indicate that
the view taken by the High Court is correct in
U.P.P.M.T.S.N.A. Samiti,Varanasi v. State of U.P.. and
Others (supra) this Court observed in paragraph l of the
judgment: “The legislature could not arbitrarily adopt
January 1984, as the cut-off date ……” After examining
the circumstances of the case it was held in paragraph 2:“We agree with the High Court that fixation of the date
January 3 1984 for purposes of regularisation was not
arbitrary or irrational but had a reasonable nexus with the
object sought to be achieved.”PG NO 1057
Similarly in Jagdish Pandey v. The Chancellor,
University of Bihar and Another it was held:“There is no doubt that if the dates are arbitrary, s. 4
would be violative of Art. 14 for then there would be no
justification for singling out a class of teachers who were
appointed or dismissed etc. between these dates and applying
s.4 to them while the rest would be out of the purview of
that section .The Court then proceeded to examine the purpose of the
legislation and the attendant circumstances and upheld the
section7. Another learned counsel who appeared on behalf of the
appellants for the final reply placed reliance on paragraphs
38, 44 and 45 of the judgment in Dr. Sushma Sharma and
Others v. State of RaJasthan and Others, [1985] SUPP. SCC45. In paragraph 38 it was said that wisdom or lack of
wisdom in the action of Government or Legislature is not
justiciable by the Court, and to find fault with the law is
not to demonstrate its invalidity. We are afraid, this
aspect is wholly irrelevant in the case before us. In
paragraph 44, the Case of Union of India v. M/s. P. .Match
Works Ltd., already discussed above. was mentioned. In
paragraph 45 the case of D.S.Nakara v. Union of India,
[1983] I SCC 305, was distinguished in the following words:“But as we have mentioned hereinbefore, Nakara case
dealt with the problem of benefit to all pensioners. The
choice of the date of April l. 1979 had no nexus with the
purpose and object of the Act. The facts in the instant case
are, however, different.”In the present case also benefit of concessional rate
was bestowed upon the entire group of assesses referred
therein and by clause (a) of Proviso (3) the group was
divided into two classes without adopting any differentia
having a rational relation to the object of the
Notification, and the benefit of one class was withdrawn
while retaining it in favour of the other. It must,
therefore, be held that the impugned clause (a) of the
Proviso (3) of the Notification in question is ultra vires
and the benefit allowed by Notification is available to the
entire group including the respondent.8. We, therefore, hold, There is no merit in this appeal
which is dismissed without costs.R.S.S. Appeal dismissed.