Case: Orient Weaving Mills (P) Ltd Vs. The Union Of India

petitioners, asking for a declaration that the levy of excise duty on the piece-goods produced by the petitioners be declared to be unconstitutional. It is one thing to attack the constitutionality of the provisions of the Act authorising the levy of the excise duty on the petitioners; it is quite a different thing to complain of the exemption granted in respect of the goods produced by the 5th respondent. As the vires of the Act itself has not been challenged, we need not say anything more on that aspect of a possible controversy which has not been actually raised in the petition.8. The petition is substantially based upon the contention that R. 8 suffers from the vice of excessive delegation of powers to the Central Government to exempt partly or wholly any excisable goods, and, secondly, that the power even if constitutional has been invalidly exercised in so far as the notifications aforesaid containing the exemption operating in favour of the 5th respondent have been made. In our opinion there is no substance in either of the two contentions. Rule 8 is as much a part of the statute as S. 37(2) cl. (xvii). It is always open to the State to tax certain classes of goods and not to tax others. The legislature is the best judge to decide as to the incidence of taxation as also to the amount of tax to be levied in respect of different classes of goods. The Act recognises and only gives effect to the well established principle that there must be a great deal of flexibility in the incidence of taxation of a particular kind. It must vary from time to time, as also in respect of goods produced by different processes and different agencies. The same principle has been recognised in S. 23 of the Sea Customs Act (VIII of 1878), which has been applied to excise duty also, by virtue of S. 12 of the Act. The latter section has authorised the Central Government to apply the provisions of the Sea Customs Act to excise duty imposed by the Act with such modifications and alterations as it may consider necessary or desirable to adapt them to circumstances. It is a function of the State, in order to raise revenue for State purposes to determine what kind of taxes shall be levied and in what manner. Its function, therefore, is to raise revenues for public purposes. The State naturally is interested in raising all the revenue necessary for public purposes, without sacrificing the legitimate interests of persons and groups, who deserve special treatment at the hands of the State for reasons, which the State may determine, entitling them to be placed in a special class. The Directive principles of the Constitution contained in Part IV lay down the policies and objectives to be achieved, for promoting the welfare of the people. In the context of the present controversy the following words of Art. 43 are particularly apposite:"- - - - - and in particular, the State shall endeavour to promote cottage industries on an individual or co-operative basis in rural areas."It has rightly been pointed out in the affidavit filed on behalf of the respondents 1-4 that the exemption, granted by the impugned notifications is meant primarily for the protection of petty producers of cotton fabrics not owning more than four power looms from unreasonable competition by big producers, like the petitioner Company. The State has therefore, made a valid classification between goods produced in big establishments and similar goods produced by small power loom weavers in the mofussil who are usually ignorant, illiterate and poor and suffer from handicaps to which big establishments like the petitioner Company are not subject. It has also been pointed out that the exemption was available to individual weavers, who employed not more than five looms on their own account. The fact that they have banded together in a co-operative effort to increase their efficiency and to take advantage of State aid should not count against them. It must therefore, be held that there is no room for the contention that there has been excessive delegation of power to exempt.9. It was next contended that even if it were held that R. 8 is valid and constitutional, the notifications are bad in so far as they exempt certain classes of persons and not classes of goods from the excise duty. It is argued that the tax is a duty of excise on "any goods", and item 19 has reference to a particular variety of goods namely, cotton fabrics; the exemption if any could have been granted in respect of any particular specified variety of cotton fabrics and not with reference to the persons producing the same variety of those fabrics. There is apparently a fallacy in this argument. The tax is on the production of any goods, but it is payable by persons producing such goods, the exemption also is with reference to such goods as come within the description of excisable goods. The respondent No. 5 has been exempted from payment of excise duty in respect of goods produced by the weavers. It has not been exempted from the payment of a personal tax like Income Tax. The exemption must therefore, have reference to the same kind of tax which would otherwise have been leviable but for the exemption. From the notifications set out above, it is manifest that the Government has exempted cotton fabrics produced on power looms owned by a co-operative society, and in the present instance owned by the members of the Cooperative Society. It has not been contended before us that the conditions laid down for granting the exemption have not been fulfilled by the members of the Co-operative Society, the respondent No 5. Hence, the exemption granted is within the terms of the notifications aforesaid which have effect as if enacted as a part of the Statute. The vires of the Statute, as already indicated, has not been questioned.

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

Explanation:
0[ds]7. In pursuance of the powers conferred on the Central Government by sub-r. (1) of R. 8, the notifications referred to above were issued by the Central Government. By virtue of S. 38 of the Act, all rules made and notifications issued by the Central Government as aforesaid, are required to be published in the official Gazette, and thereupon those rules and notifications "shall have effect as if enacted in this Act". Thus, it is manifest that the notifications and the rule impugned in this case have been incorporated into the Act itself, and have become part of the taxing statute. It is also noteworthy that the petitioners have not challenged the vires of the Act. The petition is directed against R. 8 and the notifications aforesaid, exempting the goods produced by the cooperative societies, like the 5th respondent, from the payment of the excise duty. That being so, it is a little difficult to appreciate the first prayer of the petitioners, asking for a declaration that the levy of excise duty on the piece-goods produced by the petitioners be declared to be unconstitutional. It is one thing to attack the constitutionality of the provisions of the Act authorising the levy of the excise duty on the petitioners; it is quite a different thing to complain of the exemption granted in respect of the goods produced by the 5th respondent. As the vires of the Act itself has not been challenged, we need not say anything more on that aspect of a possible controversy which has not been actually raised in the petition.The petition is substantially based upon the contention that R. 8 suffers from the vice of excessive delegation of powers to the Central Government to exempt partly or wholly any excisable goods, and, secondly, that the power even if constitutional has been invalidly exercised in so far as the notifications aforesaid containing the exemption operating in favour of the 5th respondent have been made. In our opinion there is no substance in either of the two contentions. Rule 8 is as much a part of the statute as S. 37(2) cl. (xvii). It is always open to the State to tax certain classes of goods and not to tax others. The legislature is the best judge to decide as to the incidence of taxation as also to the amount of tax to be levied in respect of different classes of goods. The Act recognises and only gives effect to the well established principle that there must be a great deal of flexibility in the incidence of taxation of a particular kind. It must vary from time to time, as also in respect of goods produced by different processes and different agencies. The same principle has been recognised in S. 23 of the Sea Customs Act (VIII of 1878), which has been applied to excise duty also, by virtue of S. 12 of the Act. The latter section has authorised the Central Government to apply the provisions of the Sea Customs Act to excise duty imposed by the Act with such modifications and alterations as it may consider necessary or desirable to adapt them to circumstances. It is a function of the State, in order to raise revenue for State purposes to determine what kind of taxes shall be levied and in what manner. Its function, therefore, is to raise revenues for public purposes. The State naturally is interested in raising all the revenue necessary for public purposes, without sacrificing the legitimate interests of persons and groups, who deserve special treatment at the hands of the State for reasons, which the State may determine, entitling them to be placed in a specialhas rightly been pointed out in the affidavit filed on behalf of the respondents 1-4 that the exemption, granted by the impugned notifications is meant primarily for the protection of petty producers of cotton fabrics not owning more than four power looms from unreasonable competition by big producers, like the petitioner Company. The State has therefore, made a valid classification between goods produced in big establishments and similar goods produced by small power loom weavers in the mofussil who are usually ignorant, illiterate and poor and suffer from handicaps to which big establishments like the petitioner Company are not subject. It has also been pointed out that the exemption was available to individual weavers, who employed not more than five looms on their own account. The fact that they have banded together in a co-operative effort to increase their efficiency and to take advantage of State aid should not count against them. It must therefore, be held that there is no room for the contention that there has been excessive delegation of power to exempt.9. It was next contended that even if it were held that R. 8 is valid and constitutional, the notifications are bad in so far as they exempt certain classes of persons and not classes of goods from the excise duty. It is argued that the tax is a duty of excise on "any goods", and item 19 has reference to a particular variety of goods namely, cotton fabrics; the exemption if any could have been granted in respect of any particular specified variety of cotton fabrics and not with reference to the persons producing the same variety of those fabrics. There is apparently a fallacy in this argument. The tax is on the production of any goods, but it is payable by persons producing such goods, the exemption also is with reference to such goods as come within the description of excisable goods. The respondent No. 5 has been exempted from payment of excise duty in respect of goods produced by the weavers. It has not been exempted from the payment of a personal tax like Income Tax. The exemption must therefore, have reference to the same kind of tax which would otherwise have been leviable but for the exemption. From the notifications set out above, it is manifest that the Government has exempted cotton fabrics produced on power looms owned by a co-operative society, and in the present instance owned by the members of the Cooperative Society. It has not been contended before us that the conditions laid down for granting the exemption have not been fulfilled by the members of the Co-operative Society, the respondent No 5. Hence, the exemption granted is within the terms of the notifications aforesaid which have effect as if enacted as a part of the Statute. The vires of the Statute, as already indicated, has not been questioned.