9911796707
TMI Blog1980 (9) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... "The Central Government may from time to time, by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such goods." Sub-rule (2) of Rule 8 is not relevant for the purpose of the present case. Under sub-rule (1) of Rule 8, the Central Government issued on 1st April, 1977 the following notification - "G.S.R. 183 (E). — 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, Ministry of Finance (Department of Revenue), No. 105/61 Central Excises, dated the 20th April, 1961, the Central Government hereby exempts clinical samples cleared by a manufacturer of patent or proprietary medicines, being medicines falling under Item No. 14E of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from the whole of the duty of excise leviable thereon : Provided that- (i) such clearances in any month are limited to a quantity not exceeding four per cent by value of the total duty-paid clearances during the preceding month of all types ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether two sub-clauses of clause (a) in the Explanation are conjunctive or disjunctive. In other words, can it be said that in order to be entitled to the benefit of the exemption notification, a company not only must not hold share in the capital of any foreign company but that no foreign company should hold share in the capital of the company registered under the Companies Act, 1956. Clause (a) in Explanation clearly contemplates companies, incorporated in India under the Companies Act, 1956. The petitioner company is one such company. Except those which fall under the exception, all companies which are incorporated under the Companies Act, 1956, and which are pharmaceutical manufacturers are entitled to the benefit of the impugned exemption notification. The exception is carved out by two circumstances. If there is a company which holds a share in the capital of a foreign company and in the capital of which a foreign company or a foreigner holds a share, it is not a "manufacturer" for the purposes of the exemption notification. In other words the definition of "manufacturer" draws a clear distinction between companies incorporated in India which do not have any capital from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctively because the two negative conditions which are joined by the expression "and appear to us to suggest the mutuality of foreign element in regard to a company incorporated in India. 5. The next decision to which our attention has been invited is in Hansraj Gordhandas v. H.H. Dave, AIR 1970 S.C. 755 = 1978 E.L.T. (J350). It was a case under the Central Excises and Salt Act, 1944. The question of interpreting a notification issued under that Act arose in that case. The principle which the Supreme Court has laid down is that a notification be judged not by the object which the rule-making authority had in mind but by the words by which it has used in order to effectuate the legislative intent. The Supreme Court has further observed that it is well established that, in a taxing statute, there is no room for any intendment. The entire matter is governed wholly by the language of the notification. Therefore, if the tax payer is within the plain terms of the exemption, it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. We have borne in mind this principle while interpreting the exemption notification with which we are concerned. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss in India. The second contention which Mr. Nanavaty has raised, therefore, fails and is rejected. 7. The third contention which Mr. Nanavaty has raised is that the exemption notification goes beyond the scope of Rule 8 of the Central Excise Rules, 1944 read with Article 14. We have quoted sub-rule (1) of Rule 8 hereinabove. The only contention which Mr. Nanavaty has raised is that the expression "subject to such conditions as may be specified in the notification" connotes a reasonable condition and not any condition whatsoever. There is no doubt about the fact that any condition which the Central Government may specify in an exemption notification issued under Rule 8 must be reasonable and rational in order that it satisfies the constitutionality test under Article 14. We are required to examine this aspect not only in the context of Rule 8 but also in the context of Articles 14 and 19(1)(g) under which clause (a) in the Explanation appended to the exemption notification is being challenged. The argument which Mr. Nanavaty has raised is that the Explanation treats unequals as equals and is, therefore, unreasonable. According to him, therefore, it is violative of the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .M. Mehta who appears on behalf of the respondents has asked us not to discern any other object from the exemption notification because the petitioner has not pleaded it. We are unable to accede to this argument raised by Mr. Mehta. In our opinion, it is open to a Court of law either to discern from the pleadings the object of a notification or to discern it from the notification itself even if such object as is discernible from the notification has not been pleaded. In order to discern the real object which the exemption notification seeks to serve, it is necessary to have a fresh look at the notification itself which we have reproduced in the foregoing parts of this judgment. It exempts only clinical samples of a patent or proprietary medicine which a manufacturer manufactures and which otherwise is liable to payment of excise duty. In other words, exemption has been granted to the manufacturer from payment of excise duty in respect of nothing else except clinical samples of its patent or proprietary medicine. This exemption is also subject to certain conditions. The first condition is that the value of such tax-free clinical samples shall not exceed in value four per cent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rietary medicines by making them known to the medical practitioners which objective can be achieved by enabling the manufacturer to supply a certain quantity of their patent or proprietary medicines in the form of free clinical samples to the medical practitioners. Therefore, whereas the primary object of the exemption notification is to serve the patients and the ailing humanity, its secondary object is to encourage trade and business therein. 11. Now, if the primary object of the exemption notification is to render service to the patients by enabling a manufacturer to make his patent or proprietary medicines known to the medical world, can we say that such object will be better served by dividing in two classes the manufacturers of patent or proprietary medicines—the wholly indigenous companies and the companies having foreign element in them? On this hypothesis, we are unable to see any rational nexus which this classification may have with the primary object of serving the patients in the society. A patient may need as much a new patent or proprietary medicine manufactured by a wholly indigenous company as he may need a patent or proprietary medicine manufactured by a company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the legislative field than to the judicial field. As clause (a) in the Explanation to the exemption notification stands, it excludes from the class of manufacturers companies which may be holding even a very small share in the capital of a foreign company or even a very small share of whose capital may be held by a foreigner or a foreign company. It is the foreign element associated with the Indian-incorporated company which distinguishes it from other companies and not the extent of such foreign element. It is difficult for us to come to the conclusion that merely because the impugned exemption notification does not specify the extent of foreign element in an Indian-incorporated company that it should be struck down on the ground of vagueness. 14. In Municipal Committee, Amritsar and Another etc. v. The State of Punjab and Others, AIR 1969 S.C. 1100, the Supreme Court has observed that the rule that an Act of a competent Legislature may be "struck down" by the Courts on the ground of vagueness is alien to Indian constitutional system. A law may be declared invalid by the superior Courts of law if the Legislature has no power to enact the law or that the law violates any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefit of the exemption notification to all companies which are engaged in the manufacture of patent or proprietary medicines. 17. In the result, we allow the petition and declare that clause (a) in the Explanation to the exemption notification - G.S.R. 163(E) issued under Central Excise Rules, 1944 on 1st April 1977 - is ultra vires Article 14 of the Constitution and Rule 8 of the Central Excise Rules, 1944. A writ of mandamus shall issue direction to the respondents to desist and forbear from implementing it. Rule is made absolute accordingly with costs. 18. Mr. H.M. Mehta who appears on behalf of the respondents makes an oral application under Article 133(1) of the Constitution for a certificate of fitness in order to enable the respondents to appeal to the Supreme Court against this decision. Since we have struck down a part of the exemption notification, we think it raises a substantial question of law of all India importance. We, therefore, grant the respondents the certificate of fitness under Article 133 (a) of the Constitution. The implementation of the writ issued by us shall be stayed for a fortnight pending interim orders from the Supreme Court in that behalf. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
