1994 (1) TMI 272 - SC - Central Excise

Issues Involved:
1. Validity of Section 52 of the Finance Act, 1982
2. Retrospective operation of Notification No. 22 of 1982
3. Discrimination between cottage units and other non-mechanised units
4. Superseding of judicial decisions by legislative actions
5. Violation of Articles 14 and 19(1)(g) of the Constitution

Detailed Analysis:

1. Validity of Section 52 of the Finance Act, 1982:
The appellants questioned the validity of Section 52, which gave retrospective effect to Notification No. 22 of 1982. They argued that Parliament was not competent to supersede the mandamus issued by the Madras High Court in Devi Match Factory. The Supreme Court, however, held that the retrospective operation provided by Parliament was within its plenary power and was a permissible legislative action to remove the basis of the judgment. The Court noted that once Notification No. 99 of 1980 was withdrawn and superseded with effect from 1-1-1982, the judgment of the High Court became inoperative. The retrospective effect was given to retain the duty collected and frustrate claims of refund.

2. Retrospective Operation of Notification No. 22 of 1982:
Notification No. 22 of 1982 introduced new criteria for availing the lesser rate of duty, based on the quantum of clearances. The appellants argued that this retrospective operation was arbitrary and confiscatory, violating their fundamental rights. The Court found that the retrospective operation was justified and necessary to address the financial implications arising from the High Court's judgment. The retrospective operation was provided by Parliament, not the Central Government, and was deemed valid.

3. Discrimination Between Cottage Units and Other Non-Mechanised Units:
The appellants contended that the classification made by Notification No. 22 of 1982, based on the quantum of production and clearances, was discriminatory and violated Article 14. The Supreme Court rejected this argument, stating that the classification was reasonable and based on intelligible differentia. The Court noted that the distinction made by the earlier notifications was to promote the production of matches in the non-mechanised sector and to provide additional concessions to smaller units.

4. Superseding of Judicial Decisions by Legislative Actions:
The appellants argued that Parliament assumed the powers of an appellate court by superseding the Madras High Court's mandamus. The Supreme Court clarified that the legislature has the power to remove the basis of a judgment by altering the law retrospectively. The Court emphasized that the mandamus issued by the High Court did not prevent the Central Government from withdrawing and superseding the notification. The retrospective operation of Notification No. 22 of 1982 effectively rendered the High Court's judgment inoperative.

5. Violation of Articles 14 and 19(1)(g) of the Constitution:
The appellants claimed that Section 52 and Notification No. 22 of 1982 violated their fundamental rights under Articles 14 and 19(1)(g). The Supreme Court rejected these claims, stating that the retrospective operation of the notification was a valid legislative action. The Court noted that the appellants could not claim any prejudice or loss due to the retrospective operation, as they were liable to pay the higher duty applicable to non-mechanised units until the High Court's judgment. The Court found no substance in the argument that the retrospective operation was confiscatory or violated the appellants' fundamental rights.

Separate Judgment by Hansaria, J.:
Justice Hansaria dissented, holding that the appeals should be allowed. He argued that the legislature cannot assume judicial power and nullify a judgment that has become final. He emphasized that the retrospective operation of Notification No. 22 of 1982 aimed to nullify the High Court's judgment, which was impermissible. Justice Hansaria concluded that Section 52 of the Finance Act, 1982, was invalid and constituted an exercise of judicial power by the legislature.

Order:
Given the importance of the issues raised, the matters were directed to be placed before a Bench of three Hon'ble Judges, with the benefit of the two recorded points of view.

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