94 of 1955
Petition under article 32 of the Constitution of India for the enforcement of Fundamental Rights
643 Bishan Narain Rameshwarnath section N Andley and P L Vohra for the petitioner
H N Sanyal Additional Solicitor General of India N section Bindra and P D Menon for the col respondents
August 20
The Judgment of the Court was delivered by HIDAYATULLAH J
This is a petition under article 32 of the Constitution challenging the imposition of Excise Duty on the petitioner by virtue of item No 17 Footwear of the First Schedule to the 1 of 1944 with effect from February 28 1954 and the calculation of the duty advaloram by including in the price charges for freight packing and distribution
The petitioner the British India corporation Ltd is a public limited company which was formed to take over other companies and to amalgamate them
Among the companies which the petitioner took over were Cooper Allan  Company Ltd and the North West Tannery Company Ltd b that Kanpur
These two Companies manufature shoes and other leather goods and operate as a single unit manufacturing the well known brand of F L E X shoes
As a result of the financial proposals of the Central Government for the financial year 1952 55 a bill No 9 of 1954 was introduced in parliament on February 271954
Under el 8 of the Bill foot wear were proposed to be taxed at 10 advaloram if produced in any factory as defined in the factories Act 1948 63 of 1948
When the Finance Act 1954 17 of 1954 was enacted the Central Excises and Salt Act 1954 was amended by the inclusion of item 17 in the Schedule though in a slightly different form
The item as finally enacted read as follows 644 17
FOOTWEAR produced in any factory including the precints thereof whereon fifty or more workers are working or were working on any day of the preceding twelve months and in any part of which manufacturing process is being carried on with the aid of power or is ordinarily so carried on the total equivalent of such power exceeding two horse power
Footwear includes all varieties of footwearwhether known boots shoes sandals chappals or by any other name Ten percent advalorem Under the provisions of the  XVIof 1931 the duty was leviable from February 28 1954 by virtue of a declaration in the Bill to that effect
On the preceding day the Superintendent of Central Excise Kanpur deputed an Inspector of his department to obtain from the petitioner a declaration of all stock of footwear and requested that the Inspector be permitted to verify the stocks with a view to levying the Excise Duty on and from February 28 1954
As a  result of the position of Excise Duty on footwear the petitioner was required to pay during the remaining ten months of 1954 a sum of RE
947630 as Excise Duty
The petitioner produces in the two units above named footwear for sale to the public and for supplies to the Government for the use of the Army and the Police
The petitioner contends that though the Excise Duty paid by it was capable of being passed on to the consumer it could not include it in the price at which shoes were sold to the public because of heavy competition by those free from such duty  though it did include the Excise Duty in the price of the footwear supplied to Government
Thus Rs 2 lacs odd were passed on to Government but Rs 7 lacs odd were born 645 by the Company itself
The petitioner contended before the Collector of Central Excise Allahabad that the calculation of the duty advalorem should not be based on price including freight packing and distribution charges paid to it by its distributors in the outlying parts of India
This contention of the petitioner was not accepted by the Collector
The petitioner then took an appeal to the Central Board of Revenue but before the appeal could be disposed of the petitioner filed this petition under Art 32 of the Constitution praying for writ or writs to quash the order of the Collector of Central Excise Allahabad and writ or writs to prohibit Union Government
The Central Board of Revenue and the Collector and Superintendent of Central Excise from enforcing the provisions of item 17 against petitioner and collecting the Excise Duty therein levied
According to the petitioner a distinction has been made in Item 17 above quoted between manufacturers of footwear employing more than 50 workers or carrying on the manufacturing process with the aid of power exceeding 2 HP and other manufacturers
According to the petitioner this amounts to discrimination because there is no reasonable basis for differentiating between manufacturers on the basis of number of workers or the employment of power above 2 HP
The petitioner contends that the essentials of the manufacture of footwear are the same whether one employs 50 or more workers or less
The larger number of workers is merely needed because the out turn has to be greater but the number does not change the nature of the operations or the method of production
Similarly the need for than 2 HP arises if a larger number of mechanical units have to be worked and there is no essential difference between a large manufacturer 646 and a small manufacturer by reason of the employment of more power or less
It is therefore contended that the imposition of Excise Duty on bigger manufacturers creates a discrimination in the trade which is neither just nor discernible and amounts to a violation of article 14 of the Constitution
The levy of the Excise Duty in such circumstances is said to be both illegal and unconstitutional
As a corrolary to this it is contended that the petitioner which was already carrying on its business at a loss in view of the competition is now further handicapped by having to bear a heavy Excise Duty which it cannot pass on to the consumer due to competition by those not paying the duty and is likely to go out of its business and that the levy of the Excise Duty in these circumstances amounts to a breach also of Art  19 1 f and g and 31 of the Constitution
It is further contended that the duty advalorem ought to be calculated on the ex factory price and not on the price charged to the distributors which includes within itself the cost of packing and charges for freight and distribution commission
It is contended that this is an error apparent on the face of the order of the Collector of Excise and the order deserves to be quashed by the issue of  writ of certiorari or other appropriate writ
Lastly it is contended that the Finance Act 1954 received the assent of the president on April 27 1954 and must be deemed to have become law from that date
The collection of Excise Duty from March 1954 before the Finance Bill became law is said to be illegal
We shall deal only brie fly with these arguments as most of them have by now been considered and decided in other cases of this Court
647 The contention that this duty does not amount to a duty of excise because it cannot be passed on by the petitioner to the consumer was not raised before us
It was mentioned in the petition
An Excise Duty is a duty on production and though according to the economists it is an indirect tax capable of being passed on to the consumer as part of the price yet the mere passing on of the duty is not its essential Even if borne
by the producer characteristic
or manufacturer it does not cease to be a duty of excise
The nature of such a duty was explained in the very first case of the Federal Court and subsequently in others of the Federal Court the Privy Council and this Court but this ground continues to be taken and we are surprised that it was raised again
The contentions that the duty could not be collected before the passing of the Finance Act 1954 has been the subject of an elaborate discussion in the recently decided case of this Court Ms Chotabhai Jethabhai Patel and Co vs Union of India 1
It is conceded that in view of the above decision the point is no longer open
It is also conceded that the question whether in calculating the duty advalorem the Collector of Excise was justified in including in the price the cost of packing charges for freight and commission for distribution or not is a matter for the decision of the authorities constituted under the Act subject to such appeals and revisions as might lie but not a matter for consideration directly under article 32 of the constitution in view of the recent decision of this Court in Smt
Ujjam Bai vs State of UP Civil Misc
Petition No 79 of 1959 decided on April 10 1962
It may be pointed out that the present petition was filed at a time when the appeal before the 1 1962 Supp 2 SCR 1
648 Board of Revenue was pending and there was a further right of revision to the Central Government
This leaves over for consideration true challenge under article 14 19 and 31 of the constitution
The argument under each of these Articles is based on precisely the same facts viewed from different angles
It is
contended that there is a discrimination between big manufacturers of footwear and small manufacturers which is not based on any differential
This discrimination it is said leads to the imposition of a heavy tax on the big manufacturers with a corresponding exemption in favour of the small manufacturers giving rise to a competition sufficient to put the big manufacturers out of the market
The tax being illegal the levy amounts to a confiscation of the property of the petitioner
It will thus be seen that the imposition of the duty is first challenged article 14 as a discrimination next it is challenged under Article 19 as a deprivation of the right to acquire hold and dispose of property or to carry on a business or trade and lastly the collection of duty is characterised as a confiscation of property without the authority of law under article 31
The argument suffers from a fundamental fallacy in that it assumes that there can be no classification of manufacturers on the basis of the number of workers or the employment of power above a particular horse power
Manufacturers who employ 50 or more workers can be said to form a well defined class
Manufacturers whose manufacturing process is being carried on with the aid of power exceeding 2 HP are also a well defined class
Legislation of this type depending upon the number of workers or the extent of power employed is frequently to be found
The most obvious example is the Factories Act which defines a factory with reference to the employment of a certain number of 649 workers or the employment of power
The contention that size makes no difference is not valid
It is well known that the bigger manufacturers are able to effect economics in their manufacturing process and their out turn being both large and rapid they are able to undersell am all manufacturers
If this were not so mass production would lose all its advantages
No doubt the manufacturers are now required to bear burdens which previously did not exist like bonus expenses on labour welfare etc
but still the manufacturers provided the business is well ran can by mass production offer the same commodity at a competitive price as against small  manufacturers and bear the burden as well
Therefore in imposing the Excise Duty there was a definite desire to make an exemption in favour of the small manufacturer who is unable to pay the duty as easily if at all as the big manufacturer
Such a classification in the interests of co operative societies cottage industries and small manufacturers has often to be made to give an Impetus to them and save them from annihilation in competition with large industry
It has never been successfully assailed on the ground of discrimination
Recently this Court in the Orient Weaving Mills P Ltd vs The Union of India1 considered a similar argument in relation to an exemption granted to societies working a few looms on co operative basis as against big companies working hundreds of looms
exemption was held to be constitutional and the classification of co operative societies was held to be reasonable
A similar consideration applies in the present case where the exemption operates in respect of very small manufacturers employing not more than 50 workers and carrying on their manufacturing process with power not in excess of 2 HP This affords a protection to small concerns who if they were made to pay the duty would have to go out of business
1 1962 Supp
3 SCR 481
650 In our judgment the Schedule which is characterised as discriminative is based upon a reasonable classification and is validly enacted
If the law is held to be valid the attack under articles 19 and 31 must also fail
In view of what we have said above the petition must fail
It will be dismissed with costs
Petition dismissed


Summary:
Under item No17 of the Schedule to the  excise duty was levied on footwear produced in any factory employing 50 or more workmen and using power exceeding 2 HP
The petitioner contended that the imposition of duty on larger manufacturers only was dis criminatory and there was no reasonable basis for differentiating between manufacturers on the basis of number of workers or the employment of power above 2 HP and that the im position of the heavy duty gave rise to a competition sufficient to put the big manufacturers out of business
Held that item 17 of the Schedule is based upon a reasonable classification and is validly enacted
Manufacturers who employed 50 or more workers form a well defined class so also manufacturers who
use power exceeding 2 HP
In imposing the excise duty there is a definite desire to make an exemption in favoui of the small manufacturer who is unable to pay the duty as easily if at all as the big manufacturer Such a classification in the interests of co operative societies cottage industries and small manufacturers has often the made to give an impetus to them and save them from annihilation in competition with large industry
Orient Weaving Mills P Ltd vs Union of India 1962 Supp
3 SCR 
481 referred to