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TMI Blog1992 (7) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... scale manufacturer manufacturing aerated waters by using a brand name `CAMPA'. For this purpose necessary agreement has been arrived at between the petitioner-Company and the Campa Beverages Private Ltd. The petitioner-Company purchased syrup (concentrate) from the above-named company for the manufacture of soft drinks. It is further contended that except the agreement (Annexure `C') the petitioners are not having any relationship with the said company and therefore, as the petitioner is a small scale company, the petitioner is entitled to have exemption benefit as per the Notification No. 175 of 1986, dated 1st March, 1986, but the said benefit is arbitrarily withdrawn by the impugned notification. 2.Mr. Joshi, learned Advocate appearing on behalf of the petitioners, vehemently submitted that by the Notification No. 175 of 1986 the petitioners were exempted from payment of the excise duty and that exemption is withdrawn by Notification No. 223 of 1987, dated 22nd September, 1987 by adding paragraph 7 to the Notification No. 175 of 1986. It is his contention that the withdrawal Notification is arbitrary and discriminatory inasmuch as even though the petitioner is small scale unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder clauses (a) and (b) of paragraph 1, shall not exceed rupees thirty lakhs and sixty lakhs respectively : Provided that the aggregate value of clearances of the specified goods from any factory by one or more manufacturers in any financial year in terms of clause (a) and clause (b) of paragraph 1, taken together, shall not exceed rupees seventy-five lakhs. Nothing contained in this notification shall apply if the3. aggregate value of clearances of all excisable goods for home consumption : by a manufacturer, from one or more factories, or(a) from any factory, by one or more manufacturers, had exceeded rupees one hundred and fifty lakhs in preceding financial year[Emphasis added] ." It would also be necessary to refer to Notification No. 223 of 1987, dated 22nd September, 1987 which reads as under : "In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules 1944, the Central Government hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 175 of 1986 Central Excise, dated 1st March, 1986, namely : In the said Notification : after para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs in the preceding financial year. Therefore, the basis of grant of exemption or concessional rate of excise duty is total value of clearances of specified goods. Hence it would be amply clear that the purpose of giving exemption was to see that the manufacturer of specified goods beyond the particular value is not entitled to get the exemption. 5.A manufacturer with a brand name or a trade name who is not eligible for grant of exemption under the Notification is not permitted by the Notification No. 223 of 1987 to get the exemption of excise duty by backdoor entry of manufacturing the goods through other manufacturers. It cannot be said that the classification by this Notification of manufacturers who were affixing the specified goods with a brand name or a trade name of another person for grant of exemption and a manufacturer who does not affix such brand name or trade name is in any way irrational. The classification is clear. The object is to see that the company having a brand name or a trade name which is not entitled to get exemption under the Notification does not get it by manufacturing specified goods through different units. 6.Even the agreement between the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation based between manufacturers who use the brand name or trade name of another company which is not entitled to get the benefit of the Notification and other manufacturers who are not using such brand name is in any was unreasonable or without any nexus with the object which is sought to be achieved. 8.In the case of Union of India v. P.M. Works, AIR 1974 SC 2349, the Court dealt with the similar contention. The Court observed that the purpose of granting exemption was to see that small bona fide units who were in the field when the Notification was issued get benefit. The concessional rate was not intended to benefit the large units which had split up into smaller units to earn the concession. The tendency towards fragmentation of the bigger units into smaller ones in order to earn the concessional rate of duty has been noted by the Tariff Commission in its report. The Court further observed that in the matter of granting concession or exemption from tax the Government has a wide latitude of discretion. It need not give exemption or concession to everyone in order that it may grant the same to some. It is also held that the concessional rate of duty can be availed of only by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved stereotypes so as to be amenable to predetermined solutions.....' `The lack of perfection in a legislative measure does not necessarily imply its unconstitutionality. It is rightly said that no economic measure has yet been devised which is free from all discriminatory impact and that in such complex arena in which no perfect alternative exists, the Court does well not to impose too rigorous a standard of criticism, under the equal protection clause reviewing fiscal services. In G.K. Krishnan v. State of Tamilnadu, this Court referred to, with approval, the majority view in Sanantonio Independent School District v. Rodriguz speaking through Justice Steward (SCC p. 389 para 38). `No scheme of taxation, whether the tax is imposed on property, income or purchases of goods and services, has yet been devised which is free of all discriminatory impact. In such a complex arena in which no perfect alternative exits, the Court does well not to impose too rigorous a standard of scrutiny lest all local fiscal schemes become subject of criticism under the Equal Protection clause." and also the dissent Marchall, J. who summed up this conclusion thus (SSC 389, para 38) : "In summary, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing No. 110 which provided that application is to be made on or after 9th November, 1963 was not produced on the record of the High court; the High Court judgment does not throw any light on the nature of the Notification No. 110 and the learned Counsel could not draw any inference about its provisions from the judgment. Even at the time of hearing of the appeal the learned Counsel for the Government of India was not in a position either to produce it or tell to the court what it was about and therefore, the Court observed that no explanation for the choice of the date in clause (a) was forthcoming. In that set of circumstances, the Court held that as the benefit of concessional rate was bestowed upon the entire group of assessees referred therein and by clause (a) of proviso (3) the group was divided into two classes without adopting any differentia having a rational relation to the object of the Notification and the benefit to one class was withdrawn while retaining it in favour of the other. Therefore, the Court held that clause (a) of proviso 3 of the impugned Notification was ultra vires. The judgment would have no bearing in the present case. As discussed above, the classi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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