Case: Union of India &amp; Another Vs. M/s. Parameswaran Match Works Etc

was no difference between the two classes of manufacturers from the point of view of revenue as they were all engaged in production of matches and as none of them was expected to produce in the financial year more than 75 million matches on an estimate.8. We do not think that the reasoning of the High Court is correct. It may be noted that it was by the proviso in the notification dated July 21, 1967, that it was made necessary that declaration should be filed by a manufacturer that the total clearance from the factory during a financial year is not estimated to exceed 75 million matches in order to earn the concessional rate of Rs. 3.75 per gross boxes of 50 matches each. The proviso, however, did not say, when the declaration should be filed. The purpose behind that proviso was to enable only bona fide small manufacturers of matches to earn the concessional rate of duty by filing the declaration. All small manufacturers whose estimated clearance was less than 75 million matches would have availed themselves of the opportunity by making the declaration as early as possible as they would become entitled to the concessional rate of duty on their clearance from time to time. It is difficult to imagine that any manufacturer whose estimated total clearance during the financial year did not exceed 75 million matches would have failed to avail of the concessional rate on their clearances by filing the declaration at the earliest possible date. As already stated, the respondent filed its application for licence on September 5, 1967 and made the declaration on that date. The concessional rate of duty was intended for small bona fide units who were in the field when the notification dated September 4,1967, was issued; the concessional rate was not intended to benefit to benefit the large units which had split up into smaller units to earn the concession. The tendency towards fragmentation of the bigger units into smaller ones in order to earn the concessional rate of duty has been noted by the Tariff Commission in its report (See the extract from the report given at p. 500 in M. Match Works v. Asst. Collector, Central Excise, AIR 1974 SC 497 .) The whole object of the notification dated September 4,1967, was to prevent further fragmentation dated September 4,1967, was to prevent further fragmentation of the bigger units into smaller ones in order to get the concessional rate of duty intended for the smaller units and thus defeat the purpose which the Government had in view. In other words the purpose of the notification was to prevent the larger units who were producing and clearing more than 100 million matches in the financial year, 1967-68 and who could not have made the declaration, from splitting up into smaller units in order to avail of the concessional rate of duty by making the declaration subsequently. To achieve that purpose, the Government chose 4-9-1967, as the date before which the declaration should be filed. There can be no doubt that any date chosen for the purpose would, to a certain extent, be arbitrary. That is inevitable.9. Rule 8 of the Central Excise Rules, 1944 made under Sections 6, 12 and 37 of the Act reads:"Power to authorise exemption from duty in special cases - (1) 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.(2) The Central Board of Revenue may by special order in each case exempt from the payment of duty, under circumstances of an exceptional nature on excisable goods."10. The concessional rate of duty can be availed of only by those who satisfy the conditions which have been laid down under the notification. The respondent was not a manufacturer before September 4, 1967, as it had applied for licence only on September 5, 1967 and it could not have made a declaration before September 4, 1967, that its total clearance for the financial year 1967-68 is not estimated to exceed 75 million matches. In the matter of granting concession or exemption from tax, the Government has a wide latitude of discretion. It need not give exemption or concession to everyone in order that it may grant the same to some. As we said, the object of granting the concessional rate of duty was to protect the smaller units in the industry from the competition by the larger ones and that object would have been frustrated if by adopting the device of fragmentation the larger units could become the ultimate beneficiaries of the bounty. That a classification can be founded on a particular date and yet be reasonable, has been held by this Court in several decisions (see M/s. Hathisingh Mfg. Co. Ltd. v. Union of India, (1960) 3 SCR 528 at p. 543 = (AIR 1960 SC 923 at p. 931) Dr. Mohammad Saheb Mahbood Medico v. Deputy Custodian General, (1962) 2 SCR 371 at p. 379 = (AIR 1961 SC 1657 at p. 1661), M/s. Bhikusa Yamasa Kshatriya (P) Ltd. v. Union of India (1964) 1 SCR 860 at p. 880 = (AIR 1963 SC 1591 at p. 1599) and Daruka and Co. v. Union of India. AIR 1973 SC 2711 . The choice of a date as a basis for classification cannot always be dubbed as arbitrary even if no particular reason is forthcoming for the choice unless it is shown to be capricious or whimsical in the circumstances. When it is seen that a line or a point there must be and there is no mathematical or logical way of fixing it precisely, the decision of the legislature or its delegate must be accepted unless we can say that it is very wide of any reasonable mark. See Louisville Gas and E. Co. v. Coleman. (1927) 277 US 32 per Justice Holmes.

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

Explanation:
0[ds]7. The High Court was of the view that the classification was unreasonable inasmuch as the fixation of the date for making the declaration, namely, September 4, 1967, as the basis of the classification between those who are entitled to the benefit of the concessional rate of duty and those who are not so entitled, has no nexus with the object of the Act. The High Court said that all manufacturers whose estimated production would not exceed 75 million matches in the financial year 1967-68 would fall under one class and the fact that some among them filed the declaration before September 4, 1967, is not a differential having a nexus with the object of the Act for putting them in a different class. The High Court, therefore, came to the conclusion that there was no difference between the two classes of manufacturers from the point of view of revenue as they were all engaged in production of matches and as none of them was expected to produce in the financial year more than 75 million matches on an estimate.8. We do not think that the reasoning of the High Court is correct. It may be noted that it was by the proviso in the notification dated July 21, 1967, that it was made necessary that declaration should be filed by a manufacturer that the total clearance from the factory during a financial year is not estimated to exceed 75 million matches in order to earn the concessional rate of Rs. 3.75 per gross boxes of 50 matches each. The proviso, however, did not say, when the declaration should be filed. The purpose behind that proviso was to enable only bona fide small manufacturers of matches to earn the concessional rate of duty by filing the declaration. All small manufacturers whose estimated clearance was less than 75 million matches would have availed themselves of the opportunity by making the declaration as early as possible as they would become entitled to the concessional rate of duty on their clearance from time to time. It is difficult to imagine that any manufacturer whose estimated total clearance during the financial year did not exceed 75 million matches would have failed to avail of the concessional rate on their clearances by filing the declaration at the earliest possible date. As already stated, the respondent filed its application for licence on September 5, 1967 and made the declaration on that date. The concessional rate of duty was intended for small bona fide units who were in the field when the notification dated September 4,1967, was issued; the concessional rate was not intended to benefit to benefit the large units which had split up into smaller units to earn the concession. The tendency towards fragmentation of the bigger units into smaller ones in order to earn the concessional rate of duty has been noted by the Tariff Commission in its report (See the extract from the report given at p. 500 in M. Match Works v. Asst. Collector, Central Excise, AIR 1974 SC 497  .) The whole object of the notification dated September 4,1967, was to prevent further fragmentation dated September 4,1967, was to prevent further fragmentation of the bigger units into smaller ones in order to get the concessional rate of duty intended for the smaller units and thus defeat the purpose which the Government had in view. In other words the purpose of the notification was to prevent the larger units who were producing and clearing more than 100 million matches in the financial year, 1967-68 and who could not have made the declaration, from splitting up into smaller units in order to avail of the concessional rate of duty by making the declaration subsequently. To achieve that purpose, the Government chose 4-9-1967, as the date before which the declaration should be filed. There can be no doubt that any date chosen for the purpose would, to a certain extent, be arbitrary. That is inevitable.The concessional rate of duty can be availed of only by those who satisfy the conditions which have been laid down under the notification. The respondent was not a manufacturer before September 4, 1967, as it had applied for licence only on September 5, 1967 and it could not have made a declaration before September 4, 1967, that its total clearance for the financial year 1967-68 is not estimated to exceed 75 million matches. In the matter of granting concession or exemption from tax, the Government has a wide latitude of discretion. It need not give exemption or concession to everyone in order that it may grant the same to some. As we said, the object of granting the concessional rate of duty was to protect the smaller units in the industry from the competition by the larger ones and that object would have been frustrated if by adopting the device of fragmentation the larger units could become the ultimate beneficiaries of the bounty.