Assistant Collector of C. Ex. vs Extrusion Processes Private Ltd.

Bharucha, J.—The learned Single Judge allowed the writ petition filed by the respondents. He declared that the proviso to Excise Exemption Notification No. 193/81 dated 3rd December, 1981 was unconstitutional, illegal and null and void. He prohibited the respondents, that is to say, the Union of India and the Excise authorities, from acting upon the said proviso and directed them to refund to the petitioners the amount of excise duty collected from the petitioners on the basis of the said proviso. The learned Judge accepted the argument on behalf of the petitioners that, by virtue of the said proviso, the Union Government had created two classes, namely, a class of manufacturers who had paid higher excise duty on the raw material and a class of manufacturers who had paid less excise duty on the raw material. As a result of the classification, a manufacturer who had paid higher excise duty on the raw material had to pay higher excise duty on the finished product whereas a manufacturer who had paid less excise duty on the raw material had to pay less excise duty on the finished product. This was discrimination between two similarly situated manufacturers. Accordingly, the learned Judge found the said proviso arbitrary.

The Union Government and the Excise authorities are in appeal.

The said exemption notification reads thus :

"NOTIFICATION No. 193/81-Central Excises.

"In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules 1944, the Central Government hereby exempts aluminium of the description specified in Column (3) of the Table hereto annexed and falling under the sub-items specified in the corresponding entry in column (2) of the said Table Item No. 27 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) from so much of the duty of excise leviable thereon as is in excess of the duty specified in the corresponding entry in column (4) of the said Table.

Provided that in respect of goods specified against Serial Nos. 2, 5, 7, 8, 9, 10, 11 and 12 of the said Table and manufactured from aluminium of any description mentioned in Column (3) of the said Table on which the duty of excise or the additional duty leviable u/s 3 of the Customs Tariff Act, 1975 (51 of 1975) has been paid, the exemption contained in this notification in respect of such goods shall apply only if an officer not below the rank of an Assistant Collector of Central Excise is satisfied that the said duty of excise or the additional duty, as the case may be, had been paid at the rates specified in this notification or in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 264-Customs, dated the 3rd December, 1981.

Explanation. - For the purpose of this notification the expression "primary producer" means any person licensed or registered under the Industries (Development and Regulation) Act, 1951 (65 of 1951) who produces aluminium from bauxite or alumina."

It was submitted before us by Mr. R. V. Desai, learned Counsel for the Union Government and Excise authorities, that the said proviso made no classification; that if there was a classification, it was not "palpably arbitrary"; and that, in any event, the learned Judge was in error in striking down the said proviso so as to widen the scope of the exemption.

It was submitted by Mr. Ganesh, learned Counsel for the petitioners, that the said proviso was "thoroughly arbitrary" and brought about discrimination between manufacturers similarly situated; the said proviso was severable; the said exemption notification was workable and rational without the said proviso; and that judicial decisions showed that the benefit of an exemption notification could be expanded by judicial order. Mr. Ganesh added that the classification made by the said proviso was based on the rate of excise duty at which the raw material was acquired. Where there was higher excise duty on the raw material there was higher excise duty also on the finished product and this was irrational. Mr. Diwan, who also appeared for the petitioners, reiterated these submissions and added that those manufacturers who had purchased aluminium by paying the higher rate of excise duty prior to 3rd December, 1981 were consequently, required to pay excise duty on the finished product at the higher rate of 40 plus 4 per cent whereas manufacturers who had used as input aluminium purchased after 3rd December, 1981, upon which the lower rate of excise duty had been paid, were required to clear the end-product only on payment of excise duty at the lower rate. This, in his submission, was clear discrimination. It was submitted by Mr. Diwan that though the said exemption notification reduced the excise duty from 3rd December, 1981 the advantage was, in the case of the petitioners, postponed to some undetermined future date because the petitioners had already purchased large stocks of aluminium inputs prior to 3rd December, 1981.

It will be seen that the said exemption notification, issued under Rule 8 of the Central Excise Rules, exempts aluminium of the description specified in Column (3) of the Table thereto from so much of the excise duty that is recoverable thereon as is in excess of the duty specified in the corresponding entry in Column (4) of the Table. The said proviso states that where the end-products specified in Serial Nos. 2, 5, 7, 8, 9, 10, 11 and 12 of the Table have been manufactured from aluminium mentioned in Column (3) of the Table, the end-products are entitled to the exemption stated in the said exemption notification only provided that the inputs borne excise duty at the rates stated in the said exemption notification and the excise authorities are so satisfied.

What it comes to, therefore, is that all manufacturers of aluminium products are required to pay excise duty upon the finished products specified against the aforestated serial numbers of the Table at the unexempted rate if the same are made from aluminium inputs purchased prior to the date of the said exemption notification, and all manufacturers are entitled to the benefit of the said exemption notification if they have manufactured these finished products from inputs purchased after 3rd December, 1981. The benefit of the exemption granted by the said exemption notification is available in the same circumstances as much to the petitioners as it is to other manufacturers of aluminium products. Equally, the benefit of the said exemption notification is not available in the same circumstances to the petitioners and other manufacturers of aluminium products. There is, therefore, no classification or discrimination between the petitioners and other manufacturers of aluminium products.

Much has been made in the writ petition of the fact that the petitioners had large stocks of aluminium inputs on 3rd December, 1981 but Mr. Ganesh was at pains to tell us that the petitioners had stocks for only about three month''s production and this was the raw stock which would, ordinarily, be carried by all manufacturers of aluminium products. In any event, there can be no finding of discrimination on the basis that one manufacturer chooses to hold larger raw stocks than others.

Since we are quite unsatisfied that there has been any classification or discrimination, and that is the foundation of the petition, we do not find it necessary to go into authorities.

The appeal is allowed. The judgment and order of the learned Single Judge are set aside. The respondents shall pay to the appellants the cost of the petition and of the appeal.

On Mr. Diwan''s application, we direct that the appellants shall not take any steps to recover from the respondents the amount of the alleged excess excise duty, which has already been refunded to the respondents pursuant to the order under appeal, for a period of eight weeks from today.

Certified copies of this order to be furnished to both parties expeditiously.