1998 (2) TMI 140 - HC - Central Excise

Summary

Issues:
Challenge to Notification No. 34/97 dated 6-6-1997 on grounds of violating Article 14 of the Constitution.

Analysis:
The petitioners, a manufacturing company engaged in producing Partially Oriented Polyester Yarn (POY) and dyeing yarn, challenged Notification No. 34/97, dated 6-6-1997, alleging discrimination. The notification imposed a specific rate of excise duty on units engaged in dyeing operations, resulting in higher duty payments for the petitioners compared to other units. The petitioners contended that the notification favored a specific respondent, creating hostile discrimination. They argued that despite conducting texturising and dyeing operations at one site, they were required to pay higher duty rates, unlike the respondent who had units at different locations. The petitioners claimed that the notification violated Article 14 of the Constitution by unfairly benefiting the respondent at their expense.

In response, the third respondent clarified that the exemption on dyed yarn was withdrawn in the Union Budget of 1997-98, and subsequent notifications were issued to regulate excise duty rates. Units without in-house facilities for producing POY were allowed to clear dyed yarn at a specific duty rate. The fourth respondent, having multiple units, paid duty based on the applicable rates for each stage of production. The respondents argued that the classification was rational and not discriminatory, as it aimed to regulate duty payments based on manufacturing processes and facilities.

The Court reviewed the notifications and submissions, concluding that the exemption for dyed yarn was withdrawn in 1997-98, leading to revised duty rates based on specific conditions. The notifications differentiated duty rates for units based on their production processes and facilities. The Court found the classification to be rational and not discriminatory, as units undertaking the entire manufacturing process were not entitled to exemption. The Court rejected the petitioner's contention that the notification was intended to benefit a specific respondent, emphasizing that the classification was based on valid considerations and not to disadvantage any party unfairly. The Court distinguished previous cases of discrimination, stating that the present circumstances did not demonstrate unjust treatment or favoritism towards any specific entity.

Ultimately, the Court dismissed the Special Civil Application, upholding the validity of Notification No. 34/97 and discharged the notice with no order as to costs.