Case: British India Corporation Ltd.  Vs.  Collector Central Excise

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 characteristic. Even if borne by the producer or manufacturer it does not cease to be a duty of excise. The nature of such a duty was explained in the very 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. 9. The contention 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, Chhotabhai Jetha bhai Patel and Co. v. Union of India, AIR 1962 SC 1006 . It is conceded that in view of the above decision the point is no longer open. 10. It is also conceded that the question whether in calculating the duty ad valorem, 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 v. State of U. P., (Civil Misc. Petn. No. 79 of 1959, D/-10-4-1962:) (AIR 1962 SC 1621 ). It may be pointed out that the present petition was filed at a time when the appeal before the Board of Revenue was pending and there was a further right of revision to the Central Government. 11. This leaves over for consideration the challenge under Arts. 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 foot-wear and small manufacturers which is not based on any differentia. 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 under Art. 14 as a discrimination, next it is challenged under Art. 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 Art. 31. 12. 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 H. P. 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 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 economies in their manufacturing process and their out-turn being both large and rapid they are able to undersell small 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 run, 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 on 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. v. Union of India (Petn. No. 110 of 1961), D/- 28-2-1962: (AIR 1963 SC 98 ) 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. The 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 H. P. This affords a protection to small concerns who, if they were made to pay the duty, would have to go out of business. 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 Arts. 19 and 31 must also fail.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]12. 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 H. P. 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 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 economies in their manufacturing process and their out-turn being both large and rapid they are able to undersell small 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 run, 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 on 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. v. Union of India (Petn. No. 110 of 1961), D/- 28-2-1962: (AIR 1963 SC 98 ) 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. The 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 H. P. This affords a protection to small concerns who, if they were made to pay the duty, would have to go out of business. 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 Arts. 19 and 31 must also fail.