1962 (8) TMI 2 - SC - Central Excise

Imposition of Excise Duty on the petitioner by virtue of Item No. 17 Foot-wear of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) with effect from 28th day of February, 1954, and the calculation of the duty ad valorem by including in the price, charges for freight, packing and distribution challenged Held that - In imposing the Excise Duty, there was a definite desire to make an exemption in favour of the small manufacturer who is unable to pay the duty as easily, if at all as the big manufacturer. Such a classification in the interests of co-operative societies, cottage industries and small manufacturers has often to be made to give an impetus to them and save them from annihilation in competition with large industry. It has never been successfully assailed on the ground of discrimination. Appeal dismissed.

Issues:
Challenge to imposition of Excise Duty on petitioner under Article 32 of the Constitution based on Item No. 17 "Foot-wear" of the First Schedule to the Central Excises and Salt Act, 1944 and calculation of duty ad valorem including freight, packing, and distribution charges.

Detailed Analysis:

1. Imposition of Excise Duty and Calculation Method:
The petitioner, a Public Limited company, challenged the imposition of Excise Duty on footwear by the Central Government. The duty was levied under Item 17 of the Schedule, which differentiated between manufacturers based on the number of workers and power used in the manufacturing process. The petitioner argued that such differentiation was discriminatory and violated Article 14 of the Constitution. Additionally, the petitioner contended that the duty calculation should be based on the ex-factory price, excluding charges for freight, packing, and distribution. The Collector of Central Excise rejected this contention, leading to the petitioner's appeal and subsequent petition under Article 32.

2. Constitutional Challenges:
The petitioner further argued that the Excise Duty imposed created a disadvantage for larger manufacturers, affecting their ability to compete due to the burden of the duty. This challenge was based on Articles 19(1)(f) and (g) and 31 of the Constitution, claiming that the duty led to a breach of these provisions. The petitioner also contended that the duty collection before the Finance Act, 1954 became law was illegal. However, these arguments were addressed in previous court decisions, limiting their scope in the present case.

3. Classification and Reasonable Differentiation:
The Court analyzed the classification of manufacturers based on the number of workers and power used, concluding that such a classification was reasonable and not discriminatory. The exemption for smaller manufacturers was deemed necessary to protect them from the burden of the duty and maintain competition in the industry. The Court cited previous cases where similar classifications were upheld, emphasizing the need to support small concerns through such exemptions. Ultimately, the Court found the classification in Item 17 to be valid and based on a reasonable distinction, leading to the dismissal of the petitioner's challenge under Articles 19 and 31.

4. Conclusion:
The Court dismissed the petition, stating that the challenge failed based on the valid classification in the Schedule. The petitioner's arguments regarding discrimination, constitutional violations, and duty calculation method were not upheld. The petition was rejected with costs, affirming the legality of the Excise Duty imposition under Item 17 of the Schedule.

This detailed analysis outlines the key legal arguments, constitutional challenges, and the Court's reasoning behind upholding the classification and validity of the Excise Duty imposition in the case.

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