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TMI Blog1978 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ired for its manufacture under Rule 174 of the Central Excise Rules, 1944 (thereinafter referred to as the Rules). The petitioner applied for such a licence and obtained it on May 28, 1968. The petitioner held the licence till March 31, 1973, and paid excise duty on the worsted yarn produced by him. 4. The Woollen Textile (Production and Distribution) Control Order, 1962 (hereinafter referred to as the Order), prohibits the acquisition or installation or sale or disposal otherwise and change of location of any spindle worked by power and its use for manufacturing worsted yarn without the prior permission in writing of the Textile Commissioner. It is so provided in clause 3 of the Order. The petitioner did not take the requisite permission of the Textile Commissioner for installation and use of the spindles for manufacturing worsted yarn which is included in the definition of "woollen yarn", as given in clause 2(f) of the order. Many other parties had similarly installed unauthorised spindles and worked them. The licence under Rule 174 of the Rules continued to be issued in respect of unauthorised spindles because nothing was contained in it debarring the proprietors thereof from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad similarly installed unauthorised converted cotton spindles capable of manufacturing worsted yarn and except the petitioners in CWP Nos. 743 and 4380 of 1974 applied for regularisation in pursuance of the Press Note (Annexure `B'). The Textile Commissioner refused their prayers on the sole ground that the unauthorised spindles installed by them were converted cotton spindles and not original worsted yarn spindles. The writ petitions were placed before a learned Single Judge, who vide order dated February 27, 1974, referred them to a Division Bench because an important point about the vires of Clause 3 of the Order likely to arise in a large number of cases is involved. It is under these circumstances that the writ petitions have come up before us. 6. The respondents, in their written statements, denied that the petitioners are entitled to the benefit of regularisation of spindles under the Press Note because they are converted cotton spindles being used for manufacturing worsted yarn and are not original worsted spindles. According to them, clause 3 of the Order and the second proviso to Rule 174 of the Rules are not ultra vires. 7. The points that arise for consideration a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) or worsted mule (for short wools)." The other para which deals with cotton reads :- "Cotton. - 1, bale breaking, mixing and opening (scutching), 2, carding and combing, 3, drawing and passage through speed frames—slubbing, intermediate and roving, 4, spinning on mules or ring frame." It is clear that a gill which is a component of the spindle is required in the spindle for making woollen worsted yarn and not in the spindle for making cotton yarn. The learned Counsel for the respondents has contended that a gill is not essential even in a worsted spindle and it can be substituted by a procupine drawbox and it is so stated in Chambers' Encyclopaedia under the heading "worsted". It is not so. According to Chambers' Encyclopaedia, a gill and a spindle drawbox is a substitute for spindle drawbox and not a gill. A comparative study of the worsted spinning and cottonspinning given in Volumes 23 and 6 respectively, of Encyclopaedia Britannica also confirms this inference. 11. Under sub-clause (1) of clause 3 of the Order, prior permission in writing of the Textile Commissioner is necessary for acquiring, installing, or selling or otherwise disposing of any spindle worked by powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment (Central Excise) substituted the second proviso to Rule 174 of the Rules, vide Notification No. G.S.R. 918, dated June 5, 1971, which reads : "Provided further that no licence for the manufacture of cotton fabrics, or rayon or artificial silk fabrics, or woollen yarn including wool blended yarn), or woollen fabrics, or silk fabrics shall be granted to an applicant or renewed unless he holds the written permission of the Textile Commissioner for installation and working of spindles (worsted, woollen or shoddy) or powerlooms or both for the manufacture of such cotton fabrics or rayon or artificial silk fabrics, or woollen yarn (including wool blended yarn), or woollen fabrics or silk fabrics as the case may be." The second proviso as amended in 1971 related to the `grant' of a licence whereas vide amendment made in 1975, `renewal' of the licence was also added therein. The amendment in 1975, was obviously made to include or clarify that the holding of a written permission of the Textile Commissioner was necessary both for grant and renewal of a license under Rule 174 of the Rules. The second proviso as amended vide Notification dated 5th June, 1971, was likely to create ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a matter of right. 4. The application in the prescribed form shall be accompanied by the following documentary evidence in original : (i) The Central Excise Licence in Form L-4. (ii) Evidence regarding production and sale of worsted products. (iii) Evidence regarding the payment of excise duty on worsted yarn. (iv) Evidence regarding the actual number and installation and physical working of the worsted spindles and Gill boxes as on 17th February, 1971. 5. No unauthorised installation of worsted spindles will be condoned in future." The petitioners, except those in C.W.P. Nos. 743 and 4380 of 1974 applied for regularisation of their unauthorised spindles under the Press Note within the stipulated period. A study team visited the factories and ultimately the Textile Commissioner informed the petitioners that they did not qualify for regularisation in terms of the Press Note. Communication dated March 13, 1973 (copy annexure `D') sent to the petitioner in C.W. 2498 of 1973, informing him about the decision declining regularisation of the unauthorised spindles reads as under :- "Sub : Regularisation of unauthorised worsted spindles per Press Note dated 19-2-1971. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... component of a cotton spindle but it is so of a worsted spindle. The manufacturers of spindles would, therefore, necessarily provide a gill box in an original worsted spindle. If the intention of the Press Note was to make it applicable to original worsted spindles only then why a specific condition was laid that the spindles must have a gill box for becoming eligible for regularisation. This condition brings the Press Note at par with sub-clause (1) of clause 3 of the Order which is applicable to both original worsted spindles and converted cotton spindles manufacturing worsted Yarn. It will thus be reasonable to infer that the converted cotton spindles with a gill box were as well intended to be covered by the Press Note because they could produce worsted yarn. It is further stated in para 3(ii) of the Press Note that the applicant shall have to satisfy the Textile Commissioner about the actual installation and physical working of the spindles and gill boxes and under para 4 that evidence shall have to be produced regarding the actual number and installation and physical worsted spindles and gill boxes as on 17th February, 1971. The text and tenor of the Press Note supports the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rfere. In view of the fact that the Press Note does not admit two equally tenable views, the rule laid down in Delhi Cloth and General Mill's case (supra), will not apply. 17. The learned Counsel for the respondents has laid stress on annexure `I' wherein technical implications of the difference between "worsted spindles" and "cotton converted spindles" are detailed. The author of this technical opinion is not known. In para No. 2 of this opinion, it is mentioned that a gill box is a part of worsted spindle. Para Nos. 4, 5 and 6 of this annexure, which have been pressed by the learned Counsel for the respondents, read : "4. When application had been called for from unauthorised owners of worsted spindles for regularisation, it is only the original worsted ring frames which were meant specifically for the purpose of spinning worsted yarn that was intended to be regularised. When we say `cotton converted spindles', we mean the spinning frames originally intended for spinning cotton yarn and sold as such, but which were subsequently modified for spinning of woollen yarn or worsted yarn. Therefore, to ensure that the raw material is put into proper use, it was considered desirable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly to such spindles or that it will not be economical and convenient to use them for the manufacture of worsted yarn. And the alleged misutilisation of the imported material is irrelevant for an added reason that it is specifically provided in para 3(v) of the Press Note that the regularised worsted spindles will not be entitled to a quota of imported raw wool as a matter of right. 18. The Textile Commissioner laid conditions in the Press Note, annexure `B', for regularisation of unauthorised worsted spindles. He could decline the regularisation of converted cotton spindles if such prescribed conditions were not complied with but not on the ground per se that the converted cotton spindles manufacturing worsted yarn are not original worsted spindles. 19. In view of discussion above, point No. 1 is replied in the affirmative, in favour of the petitioners. 20. The learned Counsel for the petitioners have argued that the impugned sub-clause (1) of Clause 3 of the Order does not lay down guidelines for the exercise of power by the Textile Commissioner thereunder, and therefore, is violative of the Fundamental Rights guaranteed under Articles 14 and 19(1)(g) of the Constitution. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Property (Requisitioning) Act (15 of 1947) was under scrutiny. It was held that it conferred arbitrary powers for requisitioning of movable property upon the authorities and no guidelines whatsoever had been prescribed for the exercise of the powers of requisitioning. The total absence of guidelines for the exercise of power of requisitioning of movable property vitiates Section 2 of the Act. Arbitrariness and the power to discriminate are writ large on the face of the provision of the Act and it, therefore, fell within the mischief which Article 14 of the Constitution designed to prevent. In Mohan Industries and others v. Deputy Director, Industries and Commerce and others, A.I.R. 1973 Kerala 59, Clause (5) of the Paraffin Wax (Supply, Distribution and Price Fixation) Order, 1972, was struck down being violative of Article 14 because its conferred unguided and absolute power of allotment in an executive officer without requiring him to give reasons for grant or refusal of allotment and also without subjecting his order to an appeal. 23. The consistent ratio of the various authorities is that where an absolute, unguided and uncontrolled power is conferred on an executive authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Section 15 of that Act and Rule 22 of the U.P. Sugarcane (Regulation of Supply and Purchase) Rules, 1954 made by the U.P. Government in exercise of the rule making power conferred by Section 28(2) of the Act laid down the factors which were to be taken into consideration by the Cane Commissioner in reserving an area for or assigning an area to a factory or determining the quantity of cane to be purchased from an area by a factory. It was in this background that the Supreme Court held that the contention that the impugned Act infringed the Fundamental Right guaranteed under Article 14 inasmuch as very wide powers were given to the Cane Commissioner which could be used in a discriminatory manner was without any foundation since his powers under Section 15 of the impugned Act were well defined and the Act and the Rules framed thereunder give a cane grower or a cane growers Co-operative Society or the occupier of a factory the right of appeal to the State Government against an order passed by him and it was sufficient safeguard against the arbitrary exercise of those powers. In the present cases, no guidelines are prescribed for the exercise of power under the impugned sub-clause. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The learned Counsel for the respondents has urged that an arbitrary order passed by the Textile Commissioner under the impugned sub-clause may be liable to be struck down but the apprehension that such arbitrary orders may be passed by him would not make the sub-clause unconstitutional because some discretion shall be exercised by the Textile Commissioner even in the presence of guidelines. This contention is again without merit. While examining the constitutional validity of the impugned sub-clause the real test is the potential power of the Textile Commissioner to pass an arbitrary and discriminatory order. It would be wrong to hold that merely because an arbitrary order if passed can be struck down, the Court cannot look into the constitutional validity of the impugned sub-clause itself. In our view, the impugned sub-clause is violative of and ultra vires Articles 14 and 19(1)(g) of the Constitution because it gives unguided and absolute power to the Textile Commissioner. Point No. 2 is replied in the affirmative and again in favour of the petitioner. 28. That brings us to the last point relating to the vires of the second proviso to Rule 174 of the Rules. The learned Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X
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