Skip to content


Navjivan Mills Co. Ltd. and ors. Vs. Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtGujarat High Court
Decided On
Case NumberSpecial Civil Application Nos. 3176 and 3289 of 1979
Judge
Reported in1982(10)ELT155(Guj)
ActsCustoms Act, 1962 - Sections 2, 3, 12, 13, 14, 25, 25(1) and 25(2); Central Excise Rules, 1944 - Rule 8; Central Excise Act, 1944 - Sections 3, 6, 9, 37 and 37(1); Customs Tariff Act, 1975
AppellantNavjivan Mills Co. Ltd. and ors.
RespondentUnion of India and ors.
Appellant Advocate I.M. Nanavati,; R.C. Desai and; S.I. Nanavati, Advs.
Respondent Advocate J.M. Thakore, Advocate General,; S.B. Vakil,; S.H. Sanja
Cases ReferredRahimbhai Karimbhai Nagriwala v. B.B. Patel.
Excerpt:
excise - additional duty - sections 2. 3, 12, 13, 14 and 25 of customs act, 1962, rule 8 of central excise rules, 1944, sections 3, 6, 9 and 37 of central excise act, 1944 and customs tariff act, 1975 - notification issued by government for imposition of 'additional duty' on articles imported by petitioners challenged - additional duty imposed as like articles manufactured in india is subjected to excise duty - question arose whether government has power to levy 'additional duty' equivalent to excise duty on articles imported into india if like article manufactured in india is subjected to excise duty - after considering sections 3 and 25 court observed that government has power to issue such notification to levy 'additional duty' - all pre-requisites satisfied - held, notifications.....b.j. divan, c.j. 1. in both these special civil applications the main question that arises for consideration is whether the government of india is under any obligation to levy what is known as 'additional duty' equivalent to excise duty on articles imported into india if a like article manufactured in india is subjected to excise duty. 2. the petitioners in special application no. 3176 of 1979 are two textile mills, one from kalol in north gujarat and another from surat in surat district and they contend that they are the consumers of the viscose staple fibre, that is, a man-made fibre of cellulosic origin. the petitioners themselves are not manufacturers of viscose staple fibre but they utilise the viscose staple fibre manufactured by gwalior rayon silk mfg. (wvg.) co. ltd., the second.....
Judgment:

B.J. Divan, C.J.

1. In both these Special Civil Applications the main question that arises for consideration is whether the Government of India is under any obligation to levy what is known as 'additional duty' equivalent to excise duty on articles imported into India if a like article manufactured in India is subjected to excise duty.

2. The petitioners in Special Application No. 3176 of 1979 are two Textile Mills, one from Kalol in North Gujarat and another from Surat in Surat District and they contend that they are the consumers of the Viscose staple fibre, that is, a man-made fibre of cellulosic origin. The petitioners themselves are not manufacturers of Viscose staple fibre but they utilise the Viscose staple fibre manufactured by Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd., the second respondent herein. The petitioners have filed this petition under the provisions of Order 1 Rule 8 of the Code of Civil Procedure in a representative capacity on behalf of themselves and on behalf of other Textile Mills mentioned in the Schedule to the petition. The list consists of 44 Textile Mills who are all manufacturers of yarn and fabric made of yarn and what is challenged in these proceedings is the validity of the two notifications issued by the Government. They are the notifications of January 5, 1979 and October 30, 1979 and during the pendency of these Special Civil Applications a further notification was issued by the Government of India on June 19, 1980 which is also challenged on the same grounds as the challenge to the earlier two notifications of January 5, 1979 and October 30, 1979.

3. In order to appreciate the contentions involved in these cases it is necessary to refer to a few legal provisions in this connection. Under the Central Excises and Salt Act, 1944, by virtue of Section 3 which is the charging Section, there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India. The rest of the provisions of Section 3 are not necessary for the purposes of this judgment. Under Tariff Item 18 in the Schedule to the Central Excise Act, 'Rayon and Synthetic fibres and yarn including textured yarn, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power' are included. Viscose staple fibre and Acetate staple fibre would be covered by Tariff Item 18. But Acetate staple fibre is not in great demand in India. Non-cellulosic fibres are also man-made fibres and they are polyester fibre, polymite, Acrylic and cellulosic fibres. So far as these man-made fibres are concerned, they are sometimes mixed with cotton and sometimes the yarn is mixed with man-made fibre yarn for the purpose of using the same in the manufacture of cloth. But viscose staple fibre is used for producing cheaper varieties of cloth whereas the non-cellulosic fibres like polyester and others are utilised for manufacturing costlier types of cloth. It may be mentioned at this state that rayon or viscose staple fibre is in some cases mixed with polyester fibres. Generally at the relevant time Viscose fibre was being sold at Rs. 16 per Kg. and non-cellulosic fibre was being sold at between Rs. 80 and 90 per Kg. The tariff rate was Rs. 4/- per Kg. for viscose staple fibre and Rs. 85/- per Kg. for non-cellulosic fibre.

4. Under the Customs Act, 1962 import duty on articles imported into India can be levied and the rate at which the customs duty is to be levied is prescribed from time to time. Under section 12, except as otherwise provided in the Customs Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Indian Tariff Act, 1934, or any other law for the time being in force, on goods imported into, or exported from, India. The Customs Act provides under section 25 for granting exemption from duty. Section 25(1) says that if the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the official gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon. Under sub-section (2) if the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from the payment of duty, under circumstances of an exceptional nature to be stated in such order, any goods on which duty is leviable. We are not concerned with exceptional cases covered by sub-section (2) of section 25. We are concerned with section 25(1) of the Customs Act, 1962. The Customs Tariff Act, 1975 repealed the Indian Tariff Act, 1934 and the Indian Tariff (Amendment) Act, 1949 and it repealed and replaced these two Acts and by section 13 it has been provided that in the Customs Act, 1962, in sub-section (1) of section 12 and in sub-section (1) of section 14, for the words and figures 'Indian Tariff Act, 1934', the words and figures 'Customs Tariff Act, 1975' be substituted. Therefore, for the purpose of the Customs Act, 1962 we have now to read the provisions of Customs Tariff Act, 1975.

5. The Customs Tariff Act, 1975 is an Act to consolidate and amend the law relating to customs duties. Under section 2 the rates at which duties of customs shall be levied under the Customs Act, 1962, are specified in the First and Second Schedules to the Act. Section 3 is the material section for the purposes of this judgment and the relevant portions of that section are as under :-

'(1) Any article which is imported into India shall, in addition, be liable to a duty (here after in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article'.

Explanation to sub-section (1) of section 3 provides :

'In this section, the expression 'the excise duty for the time being leviable on a like Article if produced or manufactured in India' means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India, or, if a like article is not so produced or manufactured, which would be leviable on the class or description of articles to which the imported article belongs, and where such duty is leviable at different rates, the highest duty'.

Sub-section (2) of section 3 provides :

'(2) For the purposes of calculating under this section the additional duty on any imported article, where such duty is leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in section 14 of the Customs Act, 1962, be the aggregate of -

(i) the value of the imported article determined under sub-section (1) of the said Section 14 or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and

(ii) any duty of customs chargeable on that article under section 12 of the Customs Act, 1962, and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but not including the duty referred to in sub-section (1)'.

Under sub-section (3) -

'If the Central Government is satisfied that it is necessary in the public interest to levy on any imported article (whether on such article duty is leviable under sub-section (1) or not) such additional duty as would counter-balance the excise duty leviable on any raw materials, components and ingredients of the same nature as, or similar to those, used in the production or manufacture of such article, it may, by notification in the official gazette, direct that such imported article shall, in addition, be liable to an additional duty representing such portion of the excise duty leviable on such raw materials, components and ingredients as, in either case, may be determined by rules made by the Central Government in this behalf'.

Under sub-section (4) -

'In making any rules for the purposes of sub-section (3), the Central Government shall have regard to the average quantum of the excise duty payable on the raw materials, components or ingredients used in the production or manufacture of such like article'.

and the duty chargeable under section 3 is in addition to any other duty imposed under the Act or under any other law for the time being in force. Sub-section (6) provides -

'The provisions of the Customs Act, 1962, and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties, shall, so far as may be, apply to the duty chargeable under this section as they apply in relation to the duties leviable under the Act'.

6. Under section 6 power has been conferred upon the Central Government to levy protective duties in certain cases and sub-section (1) of section 6 provides -

'Where the Central Government, upon a recommendation made to it in this behalf by the Tariff Commission established under the Tariff Commission Act, 1951, is satisfied that circumstances exist which render it necessary to take immediate action to provide for the protection of the interests of any industry established in India, the Central Government may, be notification in the Official Gazette, impose on any goods imported into India in respect of which the said recommendation is made, a duty of customs of such amount, not exceeding the amount proposed in the said recommendation, as it thinks fits'.

Sub-section (2) then provides -

'Every duty imposed on any goods under sub-section (1) shall, for the purposes of this Act, be deemed to have been specified in the first Schedule as the duty leviable in respect of such goods'.

Section 9, sub-section (1) it has been provided - 'Where any country or territory pays, or bestows, directly or indirectly, any bounty or grant upon the production therein or the exportation therefrom of any article and the article is chargeable with duty under the provisions of the Customs Tariff Act, then, upon the importation of any such article into India, whether the same is imported directly from the country of production or otherwise, and whether it is imported in the same condition as and when exported from the country of production has been changed in condition by manufacture or otherwise, the Central Government may, by notification in the Official Gazette, impose an additional duty equal to the net amount of such bounty or grant'.

What is contended for in these two special civil applications is that whenever the Government imposes an excise duty under the provisions of the Central Excises and Salt Act, 1944, under section 3(1) of the Customs Tariff Act, it is obligatory on the Government to levy a duty called 'additional duty' equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and the challenge to the three notifications is on the ground that the additional duty is not being levied in accordance with the provisions of section 3(1) at a rate equivalent to the rate of excise duty levied on viscose staple fibre manufactured in India.

7. The learned Advocate for the petitioners contended that till some years ago, only two manufacturers of cellulosic fibre in India were manufacturing viscose staple fibre and they were Gwalior Rayon, the second respondent herein and South India Viscose limited but overwhelming portion of the total manufacture was by Gwalior Rayon. Gwalior Rayon was at the relevant time manufacturing 78,000 tonnes of Viscose staple fibre whereas South India Viscose Limited was manufacturing 10,000 tonnes per annum. It has been contended special civil application No. 3176 of 1979 that Kalol Textile mills was using Viscose staple fibre for blending with cotton and that they were suing Viscose fibre of Gwalior Rayon for this purpose and the third petitioner was purely a spinning mill and was manufacturing 100 per cent Viscose Fibre yarn and was receiving its supplies of viscose fibre from Gwalior Rayon Co. It has been pointed out that there are 347 spinning mills in India and 290 composite mills whereas in Gujarat there are 19 spinning Mills and 91 composite mills. Composite mill in this connection means a textile mill which has both a manufacturing section and a weaving section. Special Civil Application No. 3289 of 1979 is on behalf of powerloom factories in the State of Gujarat and it is a representative petition under Order 1 Rule 8 of the Code of Civil Procedure on behalf of all the units in powerloom industry in the State of Gujarat. As regards powerlooms at Surat alone there were one lakh authorised powerlooms and nearly 50,000 unauthorised powerlooms and in all there were about 25,000 powerloom units. So far as the handloom and the powerloom industries are concerned, they consume between them about 67,000 tonnes of Viscose fibre which is supplied to them by the Spinning Mills that manufacture the yarn.

8. The grievance of the petitioners in both the cases is that though Gwalior Rayon was facing stiff competition from imported Viscose staple fibre, the Government of India issued the two notifications, one of January 5, 1979 and the other of October 30, 1979 levying the additional duty of customs at much less than the excise duty which was levied on staple fibre manufactured in India. The notification of January 5, 1979 is part of Annexure 'A' to the petition and it mentions that-

'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 amendment in the notification of the Government of India'.

so far as Central Excise was concerned, on the same day another notification dated January 5, 1979 was issued in exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 exempting Viscose staple fibre and Viscose Tow falling within Chapter 56 of the First Schedule to the Customs Tariff Act, 1975, when imported into India, from so much of that portion of the additional duty leviable thereon under section 3 of the Second mentioned Act as is in excess of one rupee thirty two paise per kilogram. Thus the additional duty leviable on imported Viscose fibre was Rs. 1.32 Ps. per kg. whereas the excise duty leviable on indigenous staple fibre of cellulosic origin was Rs. 3.05 per kg. Before the impugned notification the excise duty was Rs. 1.73 and additional duty was nil. But there was no increase in duty on non-cellulosic man-made fibre. Thus so far as Viscose staple fibre yarn manufactured in India was concerned, additional duty was not equivalent to the excise duty leviable thereon. With effect from January 5, 1979 the central excise duty composing of basic duty and special duty came to Rs. 2.65 per kg. and the effective rate of duty came to Rs. 3.05 kg. whereas so far as additional duty leviable under the Customs Tariff Act, was concerned, it was only Rs. 1.32 ps. per kg. On October 30, 1979, the second notification which has been impugned in these proceedings was issued and as a result of that notification excise duty was increased to Rs. 4.60 but the additional excise duty was not correspondingly increased. It was increased to Rs. 2.38. The petitioners contend that in view of the provisions of section 3(1) of the Customs Tariff Act, the Government of India was bound to recover additional duty or countervailing duty of Rs. 4.60 per kg. on imported staple fibre so as to counter-balance or compensate for the excise duty of Rs. 4.60 per kg. which was being collected after October 30, 1979 on indigenous staple fibre. It was contended that if the Government of India did not propose to levy and collect Rs. 4.60 per kg. as and by way of additional duty or countervailing duty on imported staple fibre but only Rs. 2.37 per kg. as a result of the notification of October 30, 1979, the respondents were not entitled to levy and collect effective rate of excise duty on indigenous staple fibre at Rs. 4.60 per kg. as they were doing as a result of the last notification of October 30, 1979. Similarly, under the third impugned notification of June 19, 1980 the duty was altered again and instead of additional duty being levied at Rs. 2.37 per kg. of imported staple fibre, it was sought to be levied at Rs. 2.57 ps. per kg. Thus the main thrust of the challenge to the three notifications is to seek directions of this court directing the Government of India to levy additional duty under section 3(1) of the Customs Tariff Act exactly at the same rate as the excise duty levied on viscose staple fibre manufactured in India. As we have pointed out above, the petitioners in Special Civil Application No. 3176 of 1979 are the Textile Mills and the petitioners in Special Civil Application No. 3289 of 1979 are the powerloom units who are all consumers of viscose staple fibre manufactured by Gwalior Rayon Company. It was urged before us that the only other unit in India besides Gwalior Rayon which was manufacturing staple fibre, namely, South India Viscose had closed down in the interim period and the Gwalior Rayon is the only Indian unit or company manufacturing Viscose staple fibre.

9. On behalf of the Government of India, respondent No. 1, Mr. S.B. Vakil, the learned counsel, urged the following three preliminary contentions :-

(1) That the petitioners had no locus standi to pray for the reliefs which they have prayed in these petitions, namely, striking down of the three notifications, one of January 5, 1979, the other of October 30, 1979 and the third of June 19, 1980.

(2) The Gujarat High Court had no territorial jurisdiction over areas where Gwalior Rayon and South India Viscose are located. Gwalior Rayon factory is located in Madhya Pradesh whereas Sough India Viscose is located in Kerala and hence this High Court had no jurisdiction regarding the grievances of Gwalior Rayon and South India Viscose.

(3) There was no demand for justice or denial thereof before the petitioners approached the High Court.

10. As regards the first preliminary contention it was urged that the petitioners are no better than purchasers and are consumers rather than manufacturers. They have not paid nor do they pay any excise duty and it was contended that importers of Viscose fibre and manufacturers of yarn from imported fibre were necessary parties. In these petitions they were not joined. It may be pointed out that the relief clause (b) is Special Civil Application No. 3176 of 1979 is to the effect that respondent No. 1, their agents and servants may be directed to collect additional duty under Section 3(1) of the Customs Tariff Act, 1975 equivalent to the excise duty payable by the manufacturers of the indigenous staple fibre of cellulosic origin. The first prayer (a) was for a declaration that the impugned notifications dated January 5, 1979 and October 30, 1979 are illegal, void, beyond the authority, jurisdiction and powers of the Government of India and are violative of Articles 14, 19(1)(g) and 265 of the Constitution and the respondent No. 1, their servants and agents, be directed by a writ restraining respondent No. 1, from collecting the excise duty raised under the impugned Notifications and direct them to refund, the excess excise duty collected by respondent No. 1 under the impugned notifications (Annex. 'A' Collectively) in excess of the pre-existing excise duty prior to January 5, 1979. Now so far as the question of locus standi is concerned, it must be pointed out that under Section 64A of the Sale of Goods Act, excise duty is payable by the purchaser in addition to the stipulated price and if there is increase in the duty, the purchaser is expected to pay even subsequently and if there is decrease he is entitled to recover it from the manufacturer. Therefore, as has been rightly contended on behalf of the petitioners regarding the issue of locus standi, the purchasers of yarn manufactured from Viscose Staple Fibre produced by Gwalior Rayon and other indigenous manufacturers are very much interested in seeing to it that the yarn which they produce or the cloth manufactured out of the yarn which they have purchased from indigenous produce is competitive in price with the yarn of Viscose fibre imported from abroad and that the additional duty is levied at the same rate as the excise duty. In our opinion, the petitioners cannot be said to be strangers. Though no refund as prayed for in relief (a) can be granted to the petitioners so far as this question of locus standi is concerned they cannot be said to be total strangers or busy bodies interfering in matters in which they have no interest, to use the language of the decided cases on this point particularly in the light of the recent decision of the Supreme Court, they have sufficient interest in this dispute to maintain this petition.

11. As regards the question of territorial jurisdiction it is true that the factory of Gwalior Rayon where Viscose staple fibre, which is ultimately utilised by the petitioners in the two petitions before us, is situate at Nagda in Madhya Pradesh. But, though the relief in Clause (a) regarding the excise duty collected in Madhya Pradesh cannot be granted, yet, so far as the relief under Clause (B) is concerned, if that relief is granted, the petitioners will be in a position to stand in competition better as compared to manufacturers of cloth from imported Viscose staple fibre. So, though there may not be any jurisdiction to grant relief (a) of this petition, at least relief under Clause (b) can be granted by this Court and, therefore, to that extent the petition is maintainable.

12. As regards the question of importers of Viscose staple fibre not being joined as parties to the petition, though they may be indirectly affected by the relief granted in these petitions, they are not necessary parties because what the petitioners challenges is the action of the Government in not levying additional duty under Section 3(1) of the Customs Tariff Act at the same rate as the rate of excise duty and what they want the Court is to compel the Government to carry out what they contend to be its legal obligation under Section 3(1) of the Customs Tariff Act, 1975.

13. As regards the demand for justice and denial thereof, it may be borne in mind that the pre-requisite or representation or demand for justice and denial thereof applies only to the writ of mandamus strictly so called but not to any other writ and in these two cases what the petitioners challenge is delegated legislation and not a specific remedy for themselves. Though representations appear to have been made by Spinning Mills and Handloom and Powerloom industry, yet no relief was granted to them so far as the question of additional duty on imported Viscose staple fibre was concerned. It is true that the excise duty is a duty on manufacture as distinguished from duty on sales but the excise duty can always be passed on under the provisions of law to the purchaser by the manufacturer and the purchaser is, therefore, as much interested as the manufacturer himself in seeing to it that the provisions of law are strictly carried out so that the purchaser does not stand to lose as against his competitor who uses imported Viscose staple fibre or yarn made out of imported Viscose staple fibre. In our opinion, therefore, each of the preliminary grounds fails and must be rejected.

14. It may be pointed out that Indian Tariff Act, 1934 was enacted to consolidate the law relating to customs duties on goods imported or exported by sea and to customs duties on goods imported or exported by land. Section 2A was inserted in this Act with effect from 1st February, 1963 and when originally enacted it mentioned levy of countervailing duty. What was then known as countervailing duty is now known as 'additional duty' under the Customs Tariff Act, 1975. Though Section 2A was designated as 'Levy of countervailing duty', in the body of the Section it was provided 'any article which is imported into India shall be liable to customs duty equal to the excise duty.....' but it was designated as countervailing duty. Upto 1975 it was designated as 'customs duty' and thereafter it came to be designated as 'additional duty' when the Indian Tariff Act, 1934 was repealed and the Customs Tariff Act, 1975 was enacted, in 1975, so far as the countervailing duty is concerned, Block's Law Dictionary mentions 'countervail' as to counter-balance; to avail against with equal force or virtue; to compensate for, or serve as an equivalent of or substitute for. It may be mentioned at this stage that in 1969 sub-section (b) was inserted in Section 2A, sub-section (6) of Section 3 of the Customs Tariff Act, of 1975 is equivalent to sub-section (5) of Section 2A of the Indian Tariff Act, 1975.

15. We will first consider the question of challenge on the ground of ultra vires and on the ground of alleged violation of Articles 14, 19(1)(g) and 265 of the Constitution so far as the impugned notifications are concerned. The Supreme Court has permitted a very wide latitude in classification for taxation. The State has a wide discretion in selecting the persons or objects it would tax and a statute is not open to attack on the ground that it taxes some persons and objects and not others. It is only when, within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, it would be violative of Article 14. In this connection we may mention that all the relevant authorities have been discussed in Rahimbhai Karimbhai Nagriwala v. B.B. Patel. - (1974) 4 97 I.T.R. 660. There the challenge was to Section 271(1)(a)(i) of the Income-Tax Act, 1961 on the ground of violation of, Article 14 and Article 19(1)(f) of the Constitution and it was pointed out that in view of the wide discretion which is available to the State in selecting persons or subjects it would tax, it cannot be said that any taxation statute is open to attack on the ground that it taxes some persons and objects and not others. Once this constitutional position is recognised as emerging from the decisions of the Supreme Court mentioned by the Division Bench of this Court in Rahimbhai Karimbhai Nagriwala's case, it follows that the challenge on the ground of Article 14 of the Constitution must fail.

16. As regards challenge on the ground of Article 19(1)(g) of the Constitution, under that Article all citizens have the right to practise any profession, or to carry on any occupation, trade or business. Under sub-article (6) nothing in sub-clause (g) of Article 19(1) shall effect the operation of any existing law in so far as it imposes, or prevents the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause. Therefore, it cannot be said that an unreasonable restrictions are being placed on the right of the petitioners to carry on any trade or business. Since the challenge on the ground of Article 14 fails, it must be held that the power to make exemptions under the provisions of the Central Excise Rules, Rule 8 and under Section 25 of the Customs Act, is reasonable exercise provided the power does exist. But once the existence of the power is held to be established, it cannot be said that these restrictions, if by, or the disadvantage to which the petitioners are put as compared to consumers of imported Viscose staple fibre is a denial of the fundamental right under Article 19(1)(g) of the Constitution.

17. As regards the challenge on the ground of Article 265 of the Constitution is concerned, that Article provides that no tax shall be levied or collected except by authority of law. If it is found that the additional duty is being collected contrary to law or if it is found that excise duty is being collected contrary to law, then those notifications will be struck down and the real controversy in these cases is regarding the power of the Central Government to issue the relevant notifications.

18. Under the Central Excise and Salt Act, 1944 power to make rules is conferred by Section 37 of the Act. Section 37(1) provides that the Central Government may make rules to carry into effact the purposes of the Act and under sub-section (2) in particular, and without prejudice to the generality of the foregoing power, such rules may, under clause (xvii) exempt any goods from the whole or any part of the duty imposed by the Act. Rule 8 of the Central Excise Rules provides that 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. Therefore, so far as the Central Excise Act is concerned, it is open to the Central Government to exempt any excisable goods from the whole or any part of duty leviable on such goods. On the other hand, so far as the Customs Act is concerned as pointed out earlier, under Section 25 if the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in that Official Gazette, exempt generally either wholly or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon.

19. It was emphasised on behalf of the petitioners in the present case that whereas the requirement of satisfaction of the Central Government regarding the necessity in the public interest to grant exemption from customs duty is laid down in Section 25(1) of the Customs Act, Rule 8 of the Central Excise Rules does not lay down any such requirement.

20. The power to exempt from additional duty leviable under Section 3(1) of the Customs Tariff Act is not specifically provided in the Customs Tariff Act itself. However, sub-section (6) of Section 3 provides that the provisions of the Customs Act, 1962, and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties, shall, so far as may be, apply to the duty chargeable under this Section as they apply in relation to the duties leviable under that Act. Therefore, so far as the provisions of the Customs Act, 1962 relating to exemption from customs duty are concerned, they will apply to the additional duty chargeable under Section 3(1) of the Customs Tariff Act. The only qualification is 'so far as may be'. It was urged strenuously on behalf of the petitioners and those supporting respondents that the words 'so far as may be' cannot absolve the Government of India from the obligation which has been laid down in Section 3(1) of the Act to levy a duty equivalent to the excise duty which is for the time being leviable on a like article manufactured in India. It is undoubtedly true that section 3(1) of the Customs Tariff Act is in absolute terms. Looking to the economic and historical background of the additional duty leviable under Section 3(1) is concerned, the origin of what used to be called as 'countervailing duty' and now known as 'additional duty' is that if protection to indigenous industry of a country is delivered by reason of customs duty levied on imported articles, then that protection should not be taken away by the excise duty levied on manufactured articles being raised or being altered from time to time. The wall of protection in the shape of duty on imports will be taken away if the additional duty of countervailing duty to counterbalance the excise duty is not imposed. It was, therefore, contended in the historical and economic background that in order to protect the indigenous industry to the same extent as is contemplated the countervailing duty which is the same thing as additional duty under Section 3(1) must be levied at the same rate as what is being levied by way of excise duty levied on indigenously manufactured articles. This argument on behalf of the petitioners cannot be accepted because a distinction is being made in the Customs Tariff Act between a protective duty and a revenue duty. Additional duty by itself is a revenue measure as distinguished from protection duty or protective measure meant for the benefit of the industry. Section 3(1) speaks of levying of additional duty whereas Section 6(1) speaks of protective duties being levied in certain cases and when one turns to the First Schedule to the Customs Tariff Act, the fourth column indicates that the heading 'Duration when rates of duty are protective' and the rest are 'other rates of duty', that is, duty levied on normal revenue purposes. Ordinarily, whatever protection is offered to the indigenous industry cannot be allowed to be taken away by excise duty being raised without raising the customs duty equivalent. However, since both of these duties are measures resorted to by the Government of India to meet with the day to day situations as they emerge from time to time, it cannot be said that the obligation under Section 3(1) of the Customs Act has to be read irrespective of the power to exempt which has to be read into Section 3 by way of sub-section (6) of Section 3 and Section 25 of the Customs Act, 1962. What the legislature has stated in sub-section (6) of Section 3 of the Customs Tariff Act is very clear, namely, that the same power which exists for granting exemption from customs duty also exists so far as the power to grant exemption from additional duty leviable under Section 3(1) of the Customs Tariff Act is concerned. There is no other meaning which can be attributed to Section 3(6) of the Act and once the power to grant exemption from additional duty also exists, it is for the Central Government to consider whether it is in the public interest to grant such exemption or not because the requirement of Section 25, namely, that the Central Government must be satisfied that it is in the public interest so to do must exist also so far as the exemption from the whole or part of the additional duty is concerned. Moreover, a wide latitude has to be given to the Central Government to make changes in those revenue levies from time to time, so as to deal with changing situations. In this case, in the affidavit-in-reply the circumstances under which the exemption was being granted from time to time as was varied so as to provide for emergent situation. For example, it has been pointed out that when because of draught conditions in India there was acute shortage of cotton produced in India, it became necessary to encourage imports of viscose staple fibre so as to enable the manufacturers to produce cloth manufactured from mixture of imported and indigenous, man-made fibre. Ultimately, therefore, in view of Section 3(6) it must be held that the Central Government had the power to issue the necessary notification. In the affidavit-in-reply filed on behalf of the Government, it has been pointed out in paragraph 10.2 in the affidavit of Mrs. Vijay Zutshi, Deputy Collector, Central Excise, Ahmedabad, that there had been vagaries in cotton production in India and there has been a need for allowing imports of this fibre in view of the vagaries in cotton production. It has also been necessary to adjust the level of customs duty so that imports could still come in and bring to bear, as a result, a salutary effect on the prices of indigenous viscose staple fibre, the major production of which was controlled by a single unit, namely, Gwalior Rayon, while enabling, at the same time, the cotton growers to get a remunerative price for their produce. In has been pointed out that when changes were made in the excise duty as well as additional duty, full consideration was given to the prices of cotton, as well as imported and indigenous Viscose staple fibre and also the relative costs of cotton yarn of counts comparable to Viscose and viscose blended yarn. The decision in the matter was taken after deliberation at high-levels of decision making and it was pointed out that the levy of additional duty higher than the levels mentioned in the two impugned notifications would run counter to the basic approach of making the viscose fibre freely available to the textile industry and it would stop the import of Viscose staple fibre. This would not be in the interest of the clothing needs of the country, since it will be desirable to keep the import window open so that in a period of cotton shortage or the shortage of any other fibre imports of Viscose staple fibre would provide the industry with a substitute for material. As may be pointed out that after the changes were made in January 1979, imports which were earlier at the rate of about 7500/8000 tonnes per month clamped to only 3000 tonnes per month, owing mainly to the increase in the final price of imported fibre. So, it has been pointed in the affidavit-in-reply that conditions in the international market of Viscose fibre and the prices at which cloth can be sold to the consumers in India are some of the different factors which are to be borne in mind by the decision-makers when deciding to levy the excise duty or to levy the additional duty and fixing the rates at which the excise duty and the additional duty are to be levied.

21. It was urged on behalf of the petitioners that no responsible officer of the Central Government had made any affidavit regarding what went on at the decision-making level. In our opinion, since Mrs. Zutshi is a responsible officer of the Government of India, she would be in a position to know what went on at the decision-making level and what factors were taken into consideration as shown by the papers of her Department and from her knowledge of those papers she should be in a position to depose to the different factors that went into the decision making when the impugned notifications were issued.

22. Mr. Nanavati contended before us that though changes were made from time to time in the duties on Viscose Staple fibre, similar changes were not made in duties on non-cellulosic fibres like polynosic or polyester etc., and to that extent consumers of viscose staple fibre were much worse off comparatively to consumers of non-cellulosic fibre. As we have pointed out earlier, it is in the context of numerous factors which ultimately affect the comparative prices of cloth made from Viscose staple fibre and non-cellulosic fibre that ultimately the decision is taken by the Government of India. It cannot, therefore, be said that any irrelevant factors have been taken into consideration by the Government of India in arriving at its decision. It is in the light of various factors that the Government has recorded the satisfaction that it is necessary in the public interest to do so, and once it is satisfied that public interest was required, it can act under the power conferred upon it by section 3(6) of the Customs Tariff Act and read with section 25 of the Customs Act.

23. Very elaborate arguments covering a wide range of fields were addressed before us but in view of our conclusion regarding the interpretation to be placed on section 3(6) of the Act and the powers of the Government to be derived therefrom other arguments are not required to be considered and, therefore, though very elaborate submissions have been made by Mr. Nanavati before us and elaborate arguments were advance running for a number of days, it is not necessary for us to go into all these arguments.

24. The main arguments advanced on behalf of the petitioners were on the language of section 3(1) of the Customs Act but section 3 must be read as a whole and section 3(6) is as much a part of section 3 sub-section (1) and if the power is given to the Central Government under section 25 of the Customs Act read with section 3(6) of the Customs Tariff Act, then the impugned notifications must be held to be valid. It is not for the courts to pronounce on the wisdom of the Government policy and to pronounce on the propriety or otherwise of the decision taken in the economic field and, therefore, while considering the challenge to the impugned notifications, all that we are concerned with is whether the power to issue the impugned notification exists and if there is such power, whether the exercise of power is bona fide or malafide. No other aspect of the case is required to be considered and hence we have confined ourselves only to considering the constitutional validity and to the question of the existence of power and seeing that the necessary pre-requisites to be satisfied by the Central Government can be said to exist.

25. Under these circumstances the challenge to the three impugned notification must fail. Both the petitions are, therefore, dismissed. In view of the special circumstances, there will be no order as to costs.

26. The learned Advocate on behalf of the petitioners applies for leave to appeal to Supreme Court under Article 133(1) of the Constitution. In this case, the interpretation that we have put on section 3(6) read with section 25 of the Customs Act, has not been put anywhere else. In our opinion, the question involved is a substantial question of law of general importance needed to be decided by the Supreme Court. Leave is, therefore, granted.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //