Skip to content


K. Mohideen HussaIn Jaffer, Licencee Andavar Match Works, Kovilpatti, Tirunelveli Dt and ors. Vs. Assistant Director (Match), Directorate of Marketing (Match Division), Khadi and Village Industries Commission, Sattur and anr. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtChennai High Court
Decided On
Case NumberW.P. Nos. 980 to 983, 1006, 1021 to 1024 and 1012 of 1980
Judge
Reported in1983(12)ELT763(Mad)
ActsCentral Excise Rules, 1944 - Rule 8 and 8(1); Central Excise Act, 1944 - Sections 2 and 4
AppellantK. Mohideen HussaIn Jaffer, Licencee Andavar Match Works, Kovilpatti, Tirunelveli Dt and ors.
RespondentAssistant Director (Match), Directorate of Marketing (Match Division), Khadi and Village Industries
Appellant AdvocateK.A. Jabbar, Adv. for ;M.R.M. Abdul Kareem and ;S.A. Kareem, Advs.
Respondent AdvocateK.N. Balasubramaniam, Addl. Central Government Standing Counsel
Excerpt:
.....by the commission. the superintendent of excise reported to the first respondent that some of the match units were situated in the same compound and the licencees were relatives. the label sued by those units were also common labels. on this ground the commission issued the impugned order stating that the certificate will be withdrawn if they do nt supply the entire productions of khadi and village industries commission using label owned by khadi and village industries commission at the rate and t he specifications fixed by the commission from time to time.;the question that arose for consideration was whether the commission has jurisdiction to impose such condition and whether the notice is legal.;held, as may be seen from the impugned notice it is not an evasion of central excise duty..........that the superintendent of central excise reported to the first respondent, that some of the match units, a list of which was furnished to the commission, are situated in the same compound and the licensees are relatives. the labels used by these units were also common labels. on this ground, the commission issued the impugned notice which reads as follows :-"directorate of marketing (match division) khadi and village industries commission, sattur-626203.tn/cmi/depot/7/4490 date : 18-12-1979 b.c. no. 1329 dated 4-6-79toshri k. mohideen hussain jaffer, andavar match factory, l. 4. no. 26/m/62 kovilpatti, tirunelveli dt.sir,it is reported that the match units as per list including the one owned by you are situated in the same compound and the licencees are relatives. the labels used.....
Judgment:
1. In this batch of cases the petitioners have prayed for the issue of a writ of certiorari to quash the order of the first respondent, viz, Khadi and Village Industries Commission (hereinafter referred to as the 'Commission') dated 18th December, 1979. The petitioners are manufacturers of safety matches under relevant licences issued under the Central Excises and Salt Act 1944. By Notification No. 154 of 1975 dated 3rd June, 1975 issued under Rule 8 of the Central Excise Rules, 1944, the Central Government exempted matches in or in relation to the manufacture of which no process is ordinarily carried on with the aid of power and cleared by any manufacturer for home consumption, from so much of the duty of excise leviable thereon as is in excess of Rs. 4.30 per gross boxes of 50 matches each. But there is a proviso to this notification which reads that in the case of matches referred to in category 2 and cleared for home consumption during a financial year by a manufacturer from a factory which is recommended by the Khadi and Village Industries Commission for exemption under this notification as a bona fide cottage unit, or which is a member of a co-operative society, including a marketing or service industrial co-operative society, registered under any law relating to co-operative societies for the time being in force, the amount of exemption shall be increased by 55 paise per gross of boxes of 50 matches each, (a) if the manufacturer makes a declaration under this proviso that the total clearance of matches from such factory during the financial year is not estimated to exceed 75 million matches. There are certain other provisions but it is unnecessary to refer to them for the purpose of this case.

2. The Commission is a Commission established by the Central Government under Section 4 of the Khadi and Village Industries Commission Act, 1956. One of the functions of the Commission is as mentioned in Section 15(1) to plan, organise and implement programmes for the development of Khadi and Village Industries. Cottage match industry is one of those industries which is mentioned in the Schedule as a Village Industry within the meaning of Section 2(h) thereof.

3. The petitioners have obtained such a certificate from the Commission as a bona fide cottage unit in respect of the financial year 1979-80, subject to certain conditions which are prescribed by the Commission. One of the conditions was that such units are to give an undertaking that they would supply to the Commission directly or through such agencies as are stipulated from time to time, 75 bundles (seventy-five bundles) per month out of their production affixing such labels as are decided upon from time to time by the Commission at a price to be fixed by the Commission. All these petitioners were supplying the Commission 75 bundles per month with the labels decided upon by the Commission as required by the conditions and there is no dispute about the same. It appears that the Superintendent of Central Excise reported to the first respondent, that some of the match units, a list of which was furnished to the Commission, are situated in the same compound and the licensees are relatives. The labels used by these units were also common labels. On this ground, the Commission issued the impugned notice which reads as follows :-

"Directorate of Marketing (Match division) Khadi and Village Industries Commission, Sattur-626203.

TN/CMI/Depot/7/4490 Date : 18-12-1979 B.C. No. 1329 dated 4-6-79

To

Shri K. Mohideen Hussain Jaffer, Andavar Match Factory, L. 4. No. 26/M/62 Kovilpatti, Tirunelveli Dt.

Sir,

It is reported that the match units as per list including the one owned by you are situated in the same compound and the licencees are relatives. The labels used by these units are also common labels.

It seems that the profit of all these units goes to one family and hence it is evident that the same family has set up small match units in the same compound or building instead of having a bigger unit to evade Central Excise duty thereby misusing the bona fide certificate. As such your certificate is liable to be cancelled or withdrawn. Anyhow, with a view to helping the small units, your bona fide certificate may not be withdrawn if you supply the entire production to Khadi and Village Industries Commission with effect from 1-1-1980 using labels owned by Khadi and Village Industries Commission and (sic) the rate and the specifications fixed by the Commission from time to time. If at any time it is found that your match unit is not independently producing matches, action will be taken to withdraw your certificate.

If the above conditions are acceptable to you, the same may please be informed to this office along with the application for approval of labels owned by the Commission.

Yours faithfully,

Sd./- N. C. Agarwal,

Assistant Director (Match)"

As may be seen from the notice, which is termed as an order here, the Commission required the petitioners to supply the entire production to the Khadi and Village Industries Commission with effect from 1-1-1980 using the labels owned by the Khadi and Village Industries Commission, at the rate and specifications to be fixed by the Commission from time to time. The contention of the petitioners in this case is that the Commission has no jurisdiction to impose these conditions and the notice is illegal. We think that the learned counsel for the petitioners are well-founded in this contention.

4. As may be seen from the impugned notice, it is not an evasion of Central Excise duty that seemed to have bothered very much rather than the desire of the Commission to purchase the entirety of the production from the manufacturers. It is true that the Government of India suggested this condition of procuring the entirety of the stock in order to avoid any evasion of Central Excise duty by one family creating a number of units in the same compound but producing it under the same labels and marketing the same. Since the benefit of a concessional rate should really reach a bona fide cottage unit, the view of the Central Government that the manufacturer should be required to sell the entire stock may be in public interest and a so would avoid evasion of Central Excise duty. However, we are unable to see how the Commission could impose this condition. If any such condition is to be imposed it should be done by the Central Government under the notification issued under Rule 8(1) of the Central Excise Rules when they give concessional rate. In fact, we find that in the subsequent year, by Notification No. 99 of 1980, dated 19th June, 1980, the Central Government provided the following two conditions in order to become eligible for obtaining the concessional rate :

"Provided that the matches are cleared for home consumption by a manufacturer from a factory which is recommended by the Khadi and Village Industries Commission for exemption under this Notification as a bona fide cottage unit, or which is a member of a co-operative society (including a marketing or service industrial co-operative society but excluding a co-operative bank) registered under any law relating to co-operative societies for the time being in force and assisting exclusively manufacturers of such matches;

provided further, that the matches are sold or marketed through the Khadi and Village Industries Commission or a Co-operative Society (including a marketing or service industrial co-operative society but excluding a co-operative bank) aforesaid or an agency established by a State Government".

The second proviso brings the need for selling the matches through the Commission or a co-operative society or an agency established by the State Government. Though it is unnecessary for us to consider this proviso in these writ petitions it appears to us prima facie that even this second proviso cannot be put as a condition for the issue of a bona fide certificate by the Commission because it is unnecessary for a manufacturer to get the concession to sell it to the Commission alone and the concession is available even if the manufacturer sells it to an agency established by a State Government. We believe that the validity of this Notification No. 99 of 1980 is also questioned in some other writ petitions. We are referring to this only as an answer to the claim of the Commission for imposing these conditions.

5. Learned Counsel for the Commission could not bring to our notice any other provision or law under which they can impose such a condition of sale in order to enable a person to get the bona fide certificate.

6. In the result, the impugned order or notice is held to be not valid and is liable to be quashed. Accordingly it is quashed and these writ petitions are allowed (W.P. No. 980 to 983, 1006, 1021 to 1024 of 1980). The rule nisi is made absolute. Though in form we have stated that the rule nisi is made absolute, it is made clear that this order will relate only to the financial year 1979-80 and no writ of certiorari or mandamus should be deemed to have been issued in respect of and for the period after 31st March, 1980. No costs.

7. W.P. 1012 of 1980. - In this writ petition the petitioner has questioned the circular dated 9th January 1980 issued by the Commission which reads as under :-

"In accordance with the advice of Government of India, the Khadi and Village Industries Commission, has decided to procure with immediate effect 100% matches produced by the Cottage Match Units to whom the Commission has issued bona fide certificates (Contd.... 12)

2. All the certified Collage Match Units are therefore advised to hand over their entire production to the Commission's procurement centres through their respective Associations/Institutions.

3. With this decision of the Commission no matches produced by the Certified Collage Match units shall be marketed by the units directly outside the procurement channel of the Commission.

Sd/-

Director

29-1-1980"

8. Though this circular is differently worded, the effect is the same as in the other writ petitions (mentioned above) and for the reasons stated by us, this writ petition is also allowed and the circular is quashed. But it is made clear that this order would have effect only for the period to 31-3-1980. No costs.


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