1980 (12) TMI 190 - HC - Central Excise

Summary

Issues Involved:
1. Classification of match manufacturing units.
2. Validity of the conditions imposed by the Khadi and Village Industries Commission (KVIC).
3. Compliance with the conditions for concessional excise duty.
4. Discrimination in granting benefits under Notification No. 99 of 1980.

Issue-Wise Detailed Analysis:

1. Classification of Match Manufacturing Units:
The petitioners are small-scale match manufacturing units seeking the benefit of Notification GSR No. 99 of 1980 without reference to its first and second provisos. Historically, match factories were classified based on production output into four classes: 'A', 'B', 'C', and 'D'. In 1967, this classification was replaced by a distinction based on manufacturing technique, creating two categories: mechanized and non-mechanized units. The Supreme Court upheld this two-fold classification in Murthy Match Works v. Assistant Collector of Central Excise, emphasizing that the classification was linked to the productive process and was not irrational.

2. Validity of the Conditions Imposed by the KVIC:
The KVIC imposed several conditions for a unit to be recommended as a bona fide cottage unit, including an annual production limit of 100 million match sticks and compliance with specific operational guidelines. The Court held that the KVIC's conditions, particularly the production limit, were not authorized by the Notification and were unrelated to determining the bona fide nature of a unit. The Court noted that the Notification did not confer power on the KVIC to prescribe its criteria for determining whether a factory is a cottage unit.

3. Compliance with the Conditions for Concessional Excise Duty:
Notification No. 99 of 1980 provided a larger concession if certain conditions were met, such as obtaining a recommendation from the KVIC or being a member of a cooperative society and marketing the matches through these entities. The Court found that the KVIC had not issued any bona fide certificates due to marketing difficulties and financial losses. Consequently, the petitioners were unable to obtain the necessary certificates or sell their products through the KVIC, making it impossible to comply with the provisos of the Notification.

4. Discrimination in Granting Benefits Under Notification No. 99 of 1980:
The Court addressed the issue of discrimination, noting that units holding certificates under previous Notifications (No. 162 of 1967 and No. 154 of 1975) were deemed to be recommended for the purpose of Notification No. 99 of 1980. This created a disparity, as new units or those without prior certificates could not obtain the same benefits. The Court concluded that this discrimination was unjust and that the petitioners should be granted the benefit of the Notification without reference to the first and second provisos, provided they were bona fide units.

Judgment Summary:
The Court issued a writ of mandamus directing the respondents to give the benefit of Notification No. 99 of 1980 to the petitioners without reference to the first and second provisos. This order applies only to the petitioners who filed the writ petitions and is subject to the Government's right to reject the concession if it is determined that a petitioner is not a bona fide unit. The writ appeals and writ petitions were allowed, with no order as to costs.