# MURTHY MATCH WORKS, ETC. ETC v. THE ASSTT. COLLECTOR OF CENTRAL EXCISE, ETC

- **Citation:** [1974] 3 S.C.R. 121
- **Court:** Supreme Court of India
- **Decided:** 1974-01-11
- **Bench:** V. R. Krishna Iyer, R. S. Sarkaria
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/murthy-match-works-etc-etc-v-the-asstt-collector-of-central-excise-etc-6228
- **Pages:** 12

## Headnote

Cemral Excise &: Salt Act, 1944-S. 37 and the ,notification issued thereunderwhether court Cll/I review legislative Judgment-Constitution of India-Reasonable
classification of principles for determining.
The match industry in India has grown· over the decides. From the p:>int of
view of manufacturing techniques the safety match industry comprises of two distinct categork-:s: the machanised soctor occupied by a few big manufacturen and
the non-mechanised sector comprising varying sizes of production units.
The
Government classified the safety match manufacturers into four categories depending
on the quantitY turn out and other relevant factors. But the Tariff rommis<;ion
recommended the abolition of sulrclassification for the purpose of levying eKcise
duty and s1,1ggested separate scales of excise duty to be levied for four classes· of units,
namely, A, B, C and D. Based on these recommendations the slab system of excise
duty was abandoned by the Government and the category wise rate wa'l adopted,
As a mutt of the adoption of the differential duty scheme the advantages offered
to the •c• group went to the 'B' group which in turn resulted in fall in production.
It also generated pscudo-C category producers from out of the erstwJ.ile B category
which ultimately eliminated C category producers. The Government, therefore,
withdrew the tax concession to C category and eq:J.1ted it with B category.
The Government of India had from time .to time issu::d notifications under s. 37
of the Central Excise and Salt Act, 1944. The notification issued in 1967 levied
excise duty on the basis of manufacture of matches of which "any process is ordiM
narily carried on with the aid ·of power". As a result of this notification the B and
C categories of old were now treated equally. The change in classification of the
manufacturers was based on the use of power which in turn had a rational relation
to the techniques and processes of production and their ability to bear the burden
of the levy, This was done on th~ basis of recom'll'!ndations of the Central Excise
Re-organisation Committee.
The High Court refused to strike down the notification. It was contended in
this Court that this unsocialistic step had left the small producers in the cold and
virtually compelled them to retire from the industry and is thus discriminatory.
Dismissing t,he appeals to this Court,
HELD ; This is a criticism of legislative judgment, not a ground of judicial
review. The Court is being invited to compel the legislative and executive wings to
classify but from the judicial insPection -tower the court may only search for arbitrary and irrational classification and its obverse, namely, capricious uniformity
of treatment where a crying dissimilarity exists in reality. Unconstitutionality and
not unw~dom of a legislation is the narrow area of judicial review. [129 EJ
The question of classification is primarily for legislative judgment and ordinarily does not become a judicial question. The power to classify being extremely
broad and based on diverse considerations of executive pragmatism the judicature
cannot rush in where even the legislature warily treads. All these operational
restraints on judicial power must weigh more emphatica1Iy where the subject
is taxation. [130 E]
It is equally well settled that merely because there is room for classifkation it
does not follow that legislation without classification is always unconstitutional.
The court cannot strike down a law because it 1i8.s not made the classification which
commends to the court as proper. Nor can the legislative power be said to have
been unconstitutionally exercised because within the class a sub-classification was
reasonable but has not been made. [130 HJ
122
SUPREME COURT REPORTS
l 19741 3 s.c.a.
ln the ~resent ca"t:, a pertinent prir.ciple of differentiation, which is vi.>ibl;' linked
to production prowe~s. has been adopted in the broad classification of power-users
and manual manufacturers. It is irrat

## Text

A
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121
MURTHY MATCH WORKS, ETC. ETC.
v.
THE ASSTT. COLLECTOR OF CENTRAL EXCISE, ETC.
January 11, 1974
[V. R. KRISHNA IYER AND R. S. SARKARIA, JJ.]
Cemral Excise &: Salt Act, 1944-S. 37 and the ,notification issued thereunderwhether court Cll/I review legislative Judgment-Constitution of India-Reasonable
classification of principles for determining.
The match industry in India has grown· over the decides. From the p:>int of
view of manufacturing techniques the safety match industry comprises of two distinct categork-:s: the machanised soctor occupied by a few big manufacturen and
the non-mechanised sector comprising varying sizes of production units.
The
Government classified the safety match manufacturers into four categories depending
on the quantitY turn out and other relevant factors. But the Tariff rommis<;ion
recommended the abolition of sulrclassification for the purpose of levying eKcise
duty and s1,1ggested separate scales of excise duty to be levied for four classes· of units,
namely, A, B, C and D. Based on these recommendations the slab system of excise
duty was abandoned by the Government and the category wise rate wa'l adopted,
As a mutt of the adoption of the differential duty scheme the advantages offered
to the •c• group went to the 'B' group which in turn resulted in fall in production.
It also generated pscudo-C category producers from out of the erstwJ.ile B category
which ultimately eliminated C category producers. The Government, therefore,
withdrew the tax concession to C category and eq:J.1ted it with B category.
The Government of India had from time .to time issu::d notifications under s. 37
of the Central Excise and Salt Act, 1944. The notification issued in 1967 levied
excise duty on the basis of manufacture of matches of which "any process is ordiM
narily carried on with the aid ·of power". As a result of this notification the B and
C categories of old were now treated equally. The change in classification of the
manufacturers was based on the use of power which in turn had a rational relation
to the techniques and processes of production and their ability to bear the burden
of the levy, This was done on th~ basis of recom'll'!ndations of the Central Excise
Re-organisation Committee.
The High Court refused to strike down the notification. It was contended in
this Court that this unsocialistic step had left the small producers in the cold and
virtually compelled them to retire from the industry and is thus discriminatory.
Dismissing t,he appeals to this Court,
HELD ; This is a criticism of legislative judgment, not a ground of judicial
review. The Court is being invited to compel the legislative and executive wings to
classify but from the judicial insPection -tower the court may only search for arbitrary and irrational classification and its obverse, namely, capricious uniformity
of treatment where a crying dissimilarity exists in reality. Unconstitutionality and
not unw~dom of a legislation is the narrow area of judicial review. [129 EJ
The question of classification is primarily for legislative judgment and ordinarily does not become a judicial question. The power to classify being extremely
broad and based on diverse considerations of executive pragmatism the judicature
cannot rush in where even the legislature warily treads. All these operational
restraints on judicial power must weigh more emphatica1Iy where the subject
is taxation. [130 E]
It is equally well settled that merely because there is room for classifkation it
does not follow that legislation without classification is always unconstitutional.
The court cannot strike down a law because it 1i8.s not made the classification which
commends to the court as proper. Nor can the legislative power be said to have
been unconstitutionally exercised because within the class a sub-classification was
reasonable but has not been made. [130 HJ
122
SUPREME COURT REPORTS
l 19741 3 s.c.a.
ln the ~resent ca"t:, a pertinent prir.ciple of differentiation, which is vi.>ibl;' linked
to production prowe~s. has been adopted in the broad classification of power-users
and manual manufacturers. It is irrational to castigate this b:isis a" unre.11. [131 CJ
K.T. Moopi/ A'air v. Start of Kera/a, [19611 3 S.C.R. 77, State of K·?rala v. Haii
K. Haji Kuuy }/aha, C. As Nos. 1052 etc. of 1968; iudgment daud August 13, 1968
and Khandige Shain Bitar v. The Agricultural Income Tax Officer, [1963] 3 S.C'.R.
809, 817, followed.
Clv1L APPELLATE JURISDICTION: Civil Appeals Nos. 1752 to 1769.
of 1970
From the Judgment and Order dated the 24th April, 1970 of the
Mardas High Court in Writ Petitions No;. 239, 346, 999, 1000, 1007,
1030, 1071, 1101, 1102, 1223, 1242, 1270, 1271, 172.4, 1725, 1748,
2640 and 3252 of 1969.
Y. S. Chitle, V. M .. Ganpule, K. R. Choudhury and K. Rajendra
Choudhury, for the appellants.
L. N. Sinha, Solicitor General of India, S. P. Nayar, and M. N.
Shroff, for the respondents.
The Judgment of the Court was delivered by
KRISHNA IYER, J.-The core of the contention urged by the appellants in these various appeals filed by certificate under art. l33(l)(a)
& ( c) of the Constituticm is that the excise duty on matches sought to
be levied on these medium-sized manufacturers of Shivakashi wears
the mask of equality but in its true face bears the marks of unequal
justice violative of art. 14 of the Constitution of India.
.>hri Chitale, learned counsel for the appellants, has focused his
arguments on one grievance only and, we think, with good reason
that the discriminatory fiscal treatment of his clients is unconstitutional, the vice being treatment of dissimilar categories similarly. To
co1npress his \\'hole argument in a single sentence, it is that the appellants, small n1anufacturers of matches, ha\'e been subjected by the impugned notification to excise duty at the san1e onerus rate as has been
applied to larger producers, wilfully indifferent to a historically well
recognised classification between the smaller and the larger group of,
n1atch manufacturers, and the injury sustained flows from this failure
to classify and deal differentially with sets of producers who are unequal in their economic capabilities in the matter of production and
marketing -
a sort oftrau111atic egality. Jn brief, equal treat1nent of
unequal groups n1ay spell invisible yet substantial discri1nination with
consequences of unconstitutionality. That dissimilar things should not
be treated similarly in tho name of equal justice is of Aristotelian
vintage and has been, by in1plication, enshrined in our Constitution.
The facts which unfold the case of the appellants may now be set
out. The match industry in India has grown over the decades anJ
Shivakashi occupies an important place in the production geography
of matches. From the point of view of manufacturing techniques, the
safety match industry in our country comprises two distinct categories
the mechanised sector occupied by a few big whales and the nonB
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MURTHY MATCH WORKS v. COLLECTOR, EXCISE (Krishna Iyer, J.) 12.3>
mechanised sector co1nprising va1y1ue, :oi1Lt::oi u1 production units ranging.
from the small fry organised on a cottage industry basis to considerable
producers \\lho have developed 1nanufacturing and marketing muscles
sufficient to compete with the power-using big four-the WIMCO,
the AMCO, the ESAVI, and the Pioneer. The Tariff commission.
Report on rhis industry has stated :
"llnlike units in the mechanised sector \Vhich have power·
driven equipment for carrying out all the imp.Jrtant operations.
including manufacture of splints and veneers, fra1ne filling
dipping, box making, etc., those in categories 'B' and ·c follow
alniost identical 1nanufacturing process, obtaining their splints
and veneers from outside suppliers and getting such important
operations as box-making and frame tilling done by outside
don1estic labour on piece~rate basis. Only such of the processes
as dipping, box tilling, banderolling and packing which under
-'!xcise or Explosive Act regulations cannot be entrusted to outside
labour are carried out in the factory sheds of the units and the
workers employed for these also are mostly paid on piece-rate
basis. All the operations, whether, undertaken in the factory premises or passed on to outside piece-work labour to be carried out
in the homes of the latter conjointly with other members of
the family. are done by manual process. The same system is followed by 'D' category units as well, except those spon ored by
K. & V. I. C. some of which manufacture their own splints
and veneers."
Classified on the basis or quantity turn-out and other germane
factors, a fourfold categorisation into 'A', 'B', 'C' and 'D' was extent
in the industry roughly corresponding to the techniques of production
and the use of power adopted by each. The Tariff Commission explained
this aspect and reported on the operation of the differential excise levy
system on producticn and trade practices. Counsel for the appellants·
has rested his case of discrimination by subversive equality or rather
non-discrin1ination where a deserving differentiation is the desideratum,
on the findings of the Tariff Commission report. We might as well
give copious but relevant excerpts from it to discern the foun<lationi
of the argument. The Report runs on to state :
"As indicated in Appendix II, according to the excise tariff
classification units in the match industry now stand grouped
intofourclas5:es,na1nely 'A', 'B', 'C'and'D' not on any technological differentiation but on the basis of output-'A' class
comprising factories whose annual output exceeds 4,000 million
match_ sticks,' B' class co1nprising factories whose annual output
exceeds 500 million match sticks but does not exceed 4,000 million match sticks, 'C' class comprising factories whose annual
output exceeds 50 million match sticks but does not exceed 500
million 111atch sticks and 'D' class comprising factories whose
ann- ·al output does not exceed 50 million match sticks. According
to this classification the factories belonging to WIMCO, AMCO
and ESA VI fall under category 'A', the rest comprising the units
:124
SUPREME COUl<.T REPORTS
[ 1974 l 3 S.C.R.
in the non-mechanised sector fall under the other three cateA
gories, namely 'B', 'C', and
4D' ~
"Selling systen1 :
(iv) Small producers.-The system of selling adopted by
these n1anufacturers varied according to their status and financial
resources. The system almost universally followed by such producers is to make outright sales, without any discount or commission to wholesalers, both out-station and local. The bigger,
among such producers belonging to category 'B' are reported in
some cases to sell as well through dealers and sole selling agents.
Many of them have also got their own depots and regular
stockists in a li1nited ·number of out-station centres. As regards
'C' and 'B'class producers, the system of sales covers the following variants according to facilities available to them : (i) outright
sales to wholesale merchants, local or out-station; (ii) sales
through joints schemes of depots which stock different brands
from several producers; (iii) sales by sending goods in their own
vans in bulk to distributors and dealers in nearby states: and (iv)
sales through their own salesman who deliver goods in local
markets on the shopkeepers on bicycles (a special feature of 'D'
class units).
From the replies received by us from units in the small
scale ser.:tor it \VOuld appear that those in category 'B' situated in
the Shivakasi/SatturiKovilpatti area have over somt years in the
past established contacts and <level oped a fairly wide selling
system enabling them to cater to the markets in distant States including West Bengal, U.P., Delhi, Gujarat and practically all the
States in the South. The size of their operations has all along
enabled them to undertake supply in wagon loads at the concessional rates, which is an in1portant consideration for developing distant markets to be served by rail transport."
"Although they are not comparable to WIMCO in having
a country-,vide distributive organisation, these units evinced till
recently all the symptoms of a steady and healthy development, some of them having reached the maximum limit (4,000
million sticks) of Category 'D' with a reputation for their brands
in far olf markets. They had the resources to support this
progressive development and a few of them have represented that
with an imprO\·ernent of !he climate of the trade which has been
completely vi!iated by the slab system of excise duties (see paragraph 11) and given necessary facili!ies they would be able to reestablish the markets ihey had assiduously b11ilt up and even initiate a schen1e of gradual mechanisation of important processes
in their fac!orie's for the betterment of the quality of their products, In the present context, it is worth taking no!c of the fact
that the credit for an expanding market for matches produced in
the non-meclrnnised sector is attributable largely lo the sales
~rtdeavours of factories \.vhich had gro\vn to be "B' class units that
had riecessary resources for the purpose .and \Vere able the
nmintain quality."
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MURTHY MATCH WORKS v. COLLECTOR, EXCISE (Krishna Iyer, l.) 125
A
"In contrast to the 'B' class units, the selling system of those in
category 'C' betokens a position of serious weakness. Except
the ·C' class units which have been brought into existence by
fragmentation of bigger units and still operate under the protecting wing of the sponsor (see paragraph l l), the new-comers in
this class who have no tradition, functions mostly with meagre
financial resources and have no comparable advantage. Unable
B
to sell their output in wagon loads they are compelled to dispose
of it to local financing-cum-trading agencies at rock bottom
prices dictated by the latter for what has now come to be called
consignments of
1'assorted labels". This, in effect, involves a
complete surrender by the 'C' class producers to the benefit of
differential excise rebate allowed to them to the detriment of
others a1 well. The low purchase prices of the goods enable
C
such agencies to send consignments of mixed brands to distant
places in wagon-loads and find a market by offering to the
wholesalers there extren1ely competitive rates ris-a-vis the
usual rates charged by 'B' class units, the retail selling prices being
the same for both. Our examination of the problem of the small
scale units in category 'C' indicates that basically their problem
is not different from other small industdes suffering similar
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exploitation by middlemen. As in other cases they can best be extricated from the grip of the middlemen by the establishment
of suitable sales co-operatives. We dra\\' the attention of the State
Governn1ents to th.is· problem for initiating necessary measures
for the purpose, particularly of the Govern1nent of Madras, as
the concentration of such units is in that State where the problem
presents itself in the most acute forn1, but offers favourable
E
prospects for the establishment of several full-fledged sales cooper.:i.tives \vith adequate niembership."
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'There is sufficient eviderice to indicate that the effects have
been quite widespread and recourse has been taken to fragmentation on a fairly extensive scale."
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"The Sivakasi Chamber has stated as follows "Jn the face
of such unhealthy competition from 'C' factories and the disadvantages over 'A', the 'B' is unable to market its production
resulting in heavy accumulation of stocks. It is now felt by 'B' ·
class factories that there is no other salvation for them except to
convert "B' into 'C' class factories in benami names. as fev.' have
since done. It may be pointed out that 16 long established 'B'
factories have reduced themselves to 'C' class with effect from
]st April, 1963 in this Division alone in addition to the numerous
factories \Vho have already converted fron1 'B' to 'C'." As regards
similar fragmentation of the larger units in category 'C'
almost identical views have been expressed by the Tirunelevely
Match Association, representing 150 'C' class match factories,
in the following words :'"In view of the vast difference of excise
duty between !st and 3rd slab of excise duty in 'C' Class there is
a tendency and prectice among the manufacturers to work
in the first slab only and to stop therewith. Jn this way starting of
small new units with the motive to enjoy rebate in the first slab
126
SUPREME COURT REPORTS
[ 1974 J 3 S.C.R.
of excise duty has become common and_this has clearly resulted
A
in loss of revenue, as well as working of units in less than the permitted c101city. It h~s been brought to our notice that the situation has deteriorated to such an ex1ent as a result of the slab system
that some erstwhile 'B' units have suspended their manufacturing
activities altog<ther and instead found it more profitable to
pltronise a number of newly established 'C' class units. Their
taking over the products of the latter in their new role as a tradingB
cum-financing agency has been facilitated by their established
market connections and
resourcefulness.
Instances of 'B'
category units owned by individual proprietors downgrading
themselves into category 'C' and having a number of 'C' class
units set up in the name of near relations have also been noticed
by us in the course ofour visits to factories in the Sivakasi/Sattur/
Kovilpatti area. The allegations about extensive fragmentation
C
were not denied by anybody at the public inquiry."
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"The volume of evidence, both direct and indirect, that we
have received in this connection fully testifies to the fact that
large scale fragmentation of 'B' and 'C' class units has taken
place directly as a result of the slab system-all motivated by the
attraction offered by the large duty differential of 65 np for the
lowest slab rate under category 'C'" .
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"From the evidence received by us "B" and "C" class units
have to·offer their match boxes generally at a discount of Rs. 2
to Rs. 3 per bundle of 5 gross boxes, i.e. at about 40 to 60 nP. per
·gross less than the price charged by WIMCO. While the quality
<Jf matches produced by 'B' class manufacturers has the reputation of being generally good and comparable to WIMCO's
matches, the 'C' class units do not have such reputation in the
market. The 'C' class manufacturers are handicapped by a further disadvantage on account of the lower scale of their production, inasmuch as they cannot usually offer a wagon-load of
matches at a time for despatch to the upcountry markets for sale
·and have generally to bear the central sales tax. After carefully
·considering all aspects of the case including estimates of costs of
the manufacturers, we are of opinion that a differential of 20 nP.
in the rates of excise duty per gross of match boxes between 'A'
and 'B' class units and a differential of 30 nP. between 'B' and 'C'
-class manufacturers 'Yould be quite adequate to safeguard their
resp~ctive interests. On similar considerations a differential of
35°nP. between 'C' and 'D' class units would also be justified. For
reasons stated in paragrap~1 11 and as stressed therein. we are
definitely against continuance of the slabs introduced in classes
"A', 'B' and 'C' carrying differential rates of excise duty,
~·hich
have. entailed serious repercussions on the entire industry.
We, therefore, recommend the following scales of excise duty to
b, levied for the" four classes respectively :
For 'A' cla~s
Rs.4.60
For 'B' class
R~.4.40
For 'C' class
Rs.4.10
For •o• class
. .
Rs.3. 75
per gross
b3xcs
per gross boxes
per
gross boxes
per
gross boxes
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MURTHY MATCH WORKS v. COLLECTOR, EXCISE (Krishna Iyer, J.)121
The Tariff Commission recommended the abolition of sub-classification for the purposes of excise duty and suggested separate scales of
excise duty to be levied for the four classes of units, namely, 'A', 'B';
'C' and 'D'. Based on these recommendations, the slab svstem of excise
duty was abandoned by Government and the category-wise rate was
adopted. The impact on production of the differential duty fCheme was
a process of splintering of the 'B' group to inhale the advantages offered
to the 'C' group resulting in a reduction in total production, thanks to
the thinning tendency in the 'B' group. Indeed, the fiscal misdirection,
by showing concessional rates to the 'C' category as against 'B' category, generated pseudo-'C' category producers from out of the erstwhile 'B' category so that the bona fide small scale manufacturers falling in the 'C' category were flooded out. Moreover, the genuine 'C'
category manufacturers were exploited by the middlemen who snapped
up the margin of tax concession for themselves, defeating the object of
concessional duty for the small producer. This dilemma induced
Government to revise its fiscal thinking and led to the impugned notification which withdrew the tax concession to the 'C' category and
equated it with the 'B' category.
Section 3 of the Central Excise and salt Act, 1944 empowers the levy
and collection of duties on goods produced or manufactured in the
State, the rate being set forth in the First schedule to the Act. Item 38
in the First Schedule relates to matches. Section 37 contains the rulemaking power and s. 37(1) confers power on the Central Government
by· rules to exempt any goods from the whole or any part of the duty
imposed by the Act. Under this power the Central/Government issued
a notification adopting a "classification" approach for extending concessional rates. Originally, a broad classification was made as between
matches manufactured by use of machinery and those~y other means.
Among the second category a sub-classification was made as 'B', 'C'
and 'D' for the purposes of concessional rates. In 1966,!a uniform leavy
of Rs. 4· 15 per gross of match boxes was made doing away with 'B'
to '0' classes. In 1967 this position was revised by notification No.
162 of 1967, which is challe~ged before us. It reads :
"In ,exercise of the powers conferred by sub-rule (I) of rule 8
of the Central Excise Rules, 1955, and in supersession of the
Notification of the Government of India in the Ministry of
Finance (Department of Revenue and Insurance) No. I l 5/67
Central Excise, dated the 8th June, 1967, the Central Government
hereby exempts matches specified in column (2) of the Table
below, falling "under Item No. 3t! of the First Schedule to
the Central Excise and Salt Act, 1944 (I of l 944) and cleared
by any manufacturer for home consumption, from so much
of the duty of excise leviable thereon as is in excess of the
rate spocified in the corresponding entry in column (3) of.the said
table :
128
category.
I.
SUPREME COURT REPORTS
[ 19741 3 S.C.L
TABLE
Description of matches'
Rate (Rs per gross
of boxes 50
mat~
cho1 each)
Matches in or in relation to the manufacture
· of which any process is ordinarily carried
on with the aid of power
4 ·60
B
2.
Matches in or iTI relation to the manufacture
of which no process is ordinarily carried
on with the aid of power
Provided that--
4·30
(!) Matches referred to in category 2 and cleared for home
consumption during the financial year from a factory fr~m
which the total clearance of matches d'uring that year is not, as per
declaration made by the manufacturer under this notification,
estimated to exceed 75 million matches, shall be allowed to be
cleared at the rate of Rs. 3 ··75 per gross of boxes 30 matches each,
upto 75 million matches and the quantity of matches, if any,
cleared in excess, and upto 100 million matches shall be allowed
to be cleared at the rate of Rs. 4 · 30 per gross of . boxes of 50
matches each; and if the clearance in such factory exceeds 100
million matches during the financial year, tile manufacturer.shall
be required to pay at the rate of Rs. 4 · 30 per gross of boxes of
50 matches each, on the entire quantity cleared during the
:financial year . ..... "
The upshot of this system of duty is that 'B' and 'C' categories of
old will now be treated equally and the grievance of the petitioners,
who are 'C' category manufacturers is that clubbing them together
with the far stronger 'B' type manufacturers is virtually condemning
them to gradual extinction. Treating unequals as equals and compelling both lo bear equal burdens is to show the 'C' type manufacturers
the way out. It is urged that the test of capacity of each group in the
industry to bear the levy, recognised in the past and approved in the
Tariff Commission Report, is given the go-bye now.
The contention, in reply, by the State is that at present the classification of the manufacturers is based on the use of power which in
turn has a rational relation to the techniques and processes of production and their ability to bear the burden of the levy. It is further argued
that the Government did give effect to the recommendations of the
Tariff Commission regarding the four-fold classification but, finding
certain evils developing, the Central Excise Re-organisation Committee
went into the subject and suggested methods to re-orient the scale and
scope of excise duty. This Committee's report led to the current notification and the dichotomy between mechanised and non-mechanised
industry proceeds on a rational differentia which has a substantial
relation to the legislative end.
There is no doubt that in the past among the non-mechanised
manufacturers of matches a further classification based ori viability
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MURTHY MATCH WORKS v. COLLECTOR, EXCISE (Krishna Iyer, /.} 129
had b~en made. It is also true that the financial resources, the capacity
to command a market on their own without depending on intermediaries, etc., marked off the 'B' category from the 'C' category. But then
experience gathered subsequently disclosed certain evils which the State
took note of and endeavoured to set right. Ultimately, the present
notification was issued obliterating the distinction which gave a concessional edge to the 'C' group over the 'B' group.
The learned counsel for the appellants persuasively pleaded that this
unsocialistic step has left the small producers like his clients in the
cold and virtually compelled them to retire from the industry. May be,
there is force in this grievance. Instead of protecting the tiny manufacturer from the injurious intermediary and inhibiting the larger producer from resorting to the device of self-division and other makebelieve tactics, the State has resorted to a policy of equal levy from
both which, according to the counsel, hits the poor and helps the
better-off. This is a criticism of legislative judgment, not a ground of
judicial review.
We agree that bare equality of treatment regardless of the inequality
of realities is neither justice nor homage to the constitutional principle.
Anatole France's cynical statement comes to our mind in this context :
"The law, in its majestic equality, forbids the rich as well as
the poor to sleep under bridges, to beg in the streets, and to steal
bread."
·
The forensic focus turns on unconstitutional non-classification of
the 'B' and 'C' categories and the vice of lugging an non-mechanised
producers together into one mass. The Court is being invited to compel
the legislative and executive wings to classify, but we feel that from
the judicial inspection tower the Court may only search for arbitrary
and irrational classification and its obverse, na1nely, capricious unifonnity of treatment where a crying dissimilarity exists in reality.
Right at the threshold we must warn ourselves of the limitations
of judicial power in this jurisdiction. Mr. Justice Stone of the Supreme
Court of the United States has delineated these limitations in United
States v. Butler(') thus :
"The power of courts to declare a statute unconstitutional is
subject to two guiding principles of decision which ought never to
be absent from judicial consciousness. One is that courts are concerned only with the power to enact statutes, not with their wisdom. The other is that while unconstitutional exercise of power
by the executive and legislative branches of the government is
subject to judicial restraint, the only check upon our exercise of
power is our own sense of self-restraint. For the removal of unwise laws from the statute books appeal lies not to the courts but
to the bcllot and to the processes of democratic government."
In short, unconstitutionality aitd not unwisdom of a legislation is
the narrow area of judicial review. Jn the present case unconstitu-
(IJ 297 U.S. 1=56 Sup.Ct.312=80 L.cd.477 (1936)=Amcrican Constitutioftal
Law-4hird cdn. by Trcsolini and Shapiro.
IO-M852 SupC!/74
130
SUPREME COURT llEPOllTS
[ 1974 l 3 s.c.11.
tiooality is alleged as springing from lugging together two dissimilar
A
categories of match manufacturers into one compartment for like
treatment.
C.Crtain principles which bear upon classification may be mentioned
here. It is true that a State may classify persons and objects for the
purpose of legislation and pass laws for the purpose of obtaining
revenue or other ot•jects. Every differentiation is not a discrimination.
ll
But classification can be sustained only if it is founded on pertinent
and real differences as distinguished from irrelevent and artificial ones.
The constitutional standard by which the sufficiency of the differentia
which form a valid basis for classification may be measured, has been
repeatedly stated by the courts. If it rests on a difference which bears
a fair and just relation. to the object for which it is proposed, it is con··
stitutional. To put it differently, the means must have nexus with
C
the ends. Even so, a large latitude is allowed to the State for classification upon a reasonable basis and what is reasonable is a question
of practical details and a variety of factors which the court will be re-
.Juctant and perhaps ill-equipped to iqvestigate. Jn this imperfect world
.perfection even in grouping is an ambition hardly ever accomplished.
In this contest, we have to remember the relationship between the
legislative and judicial departments of government in the detem1inaD
tion of the validity of classification. Of course, in the last analysis courts
possess the power to pronounce on the constitutionality of the acts of
the other branches whether a classification is based upon substantial
<lifferences or is arbitrary, fanciful and consequently illegal, At the same
time, the question of classification is primarily for legislative judgment
and ordinarily does not become a judicial question.· A power to classify
being extremely broad and based on diverse considerations of executi\'e
£
praiimatism, the judicature cannot rush in where even the legislature
warily treads. All these operational restraints on judicial power must
weigh more emphatically where the subject is taxation.
One facet of the equal protection clause, upheld by the Indian
Courts and relevant to the present case, is tha.t while similar things
must be treated similarly, dissimilar things should not be treated simiF
larly. There can be hostile discrimination while maintaining a facede
of equality. Procrustean cruelty cannot be equated with guarantee of
<Constitutional equality, and we have to examine whether such is the lot
-0f the appellants.
This Court has in several rulings highlighted this sensitive under-
~ide of equal protection. Indeed, the complaint of the petitioners is
G
that by abolition of the difference in fiscal burden between categories
·a· and 'C' an insidious subversion of equal treatment has been effected.
Another proposition which is equally settled is that merely because
there is room for classification it does not follow that legislation without classification is always unconstitutional. The court ·cannot strike
down a law because it has not made the classification which commends
H
to the court as proper. Nor can the legislative power be said to have
,been unconstitutionally exercised because within the class a sub-classi·
licatiou was reasonable but has not been made.
A
B
c
D
E
F
~!CRlHY MATCH WORKS"· COLLECTOR, EXCISB (Krislz11a Iyer, I.) 131
!tis well-established that the modern State, in exercising its sovereign
power of taxation, has to deal with complex factors relating to the
objects to be taxed, the quantum to be levied, the conditions subject
to which the levy has to be made, the social and ec-0nomic policies
which the tax is designed to subserve, and what not. In the famous
words of Holmes, J., in Bai11 Peanut Co. v. Pinson( I):
"We must remember that the machinery of Government would
not work if it were not allowed a little play in its joints."
In the present ease, a pertinent principle of differentiation, which
is visibly linked to productive prowess, has been adopted in the broad
classification of power-users and manual manufacturers. lt is irrational
to castigate this basis as unreal. Indeed, the soundness of this distinction is not denied. The challenge is founded on the failure to miniclassify between large and small sections of manual match manufacturers. But ours is not to reason why, that being a policy decision of
Government dependent on pragmatic wisdom playing on imponderable forces at work. Our jurisdiction halts where the constitutional
touchstone of a rational differentia having a just relation to the legislative and of revenue raising is satisfied. Gratuitous judicial advice on the
socialistic direction of fiscal policy is de trop. We desist from that enterprise and leave the petitioners and men of his ilk to seek other dcmooratic remedies in that behalf, it being beyond our area nonnaliy
to demolish the tax structure because
micro~classification among a
Jarge group has not been done by the State.-. Absolute ju~til:c to ,,;\~ry
producer is a self~dcfeating adventure for any adn1inistration and genera I
direction, not minute classification, is aH that can he attc1nptcd. For
these reasons v.·e find oursel\'cs in agreement 'vith t11e High Court in
its rufusal to strike dO\Vn the notification under S. 3 of the Central
Excise and Salt Act, 1944.
Before concluding 've n1ay 1nakc a passing reference to the
l~\V
decisions' cited by appellants' counsel. In K. T. Moopil Nair Y. Slate
o/'Kera/a(2), Sinha, C.J., emphasized that art. 14 may be violated C\'eti
though the law may, on the face, be equal if in substance unequal things
are treated equally. In Stare of Kera/av. Haji K. Haji K11tty Nalwl'),
Shah J., observed :
'"There objects, persons or transactions essentially dissi1nHar
arc treated by the imposition of a uniforn1 tax, <liscrin1ination
1nay result, for, in our Yie\\', refusal to make a ratjonal classlfioation may itself in some cases operate as denial of equality.')
G
A similar view has been taken in Kilandige Slzam Bhat v. Tile Agri<'11it11ra/
Income Tax Officer(').
It is sound law that refusal to 1nakc rational classification '~here
grossly dissimilar subjects are treated by the law violates the mandate
of art. 14. Ev·en so, where the limited classification adopted in the prc-
:;ent case is based upon a reieyt.!nt differcntia \Vhich has a nexus to tliG
H
ilJ [19301 1s2 us 49'J; 501.
t~) [1961] 3 S.C.R. i7.
(3) C.As. Nos. 105:! etc. of 1968; judgm;:nt datl!J ,\ugLht 13, 1968.
(4) [1963) 3 S.C.R. 809, 817.,
132
SUPREME COURT REPORTS
[ 1974 J 3 S.C.R.
legislative and of taxation, the court cannot strike down the law
A
on the score that there is room for further classification. Refusal to
classify is one thing and it bears on constitutionality, not launching
on micro-classification to work out perfect justice is left to executive
expediency and legislative judgment and not for forensic wisdom.
"The relationship· between the legislative and judicial departments of
go1·ernme11t in the determination of the validity of classification is wellsettled ...... the authorities state with unanimity that the question
B
of classification is primarily for the legislature and that it can never
become a judicial question except for the purpose of determining, in
any given situation, whether the legislative action is clearly unreasonable.
The legislative classification is subject to judicial revision only to the
extent of seeing that it is founded on real distinctions the subjects
classified, and not on artificial or irrelevant ones used for the purpose
of ~vading the constitutional prohibition." (Ame•ican Jurisprudence
C
2d : vol. 16; para 496).
"In a classification for governmental purposes there cannot be an
exact exclusion or inclusion of persons and things. The constitutional
command for a state to afford equal protection of the law sets a goal
not attainable by the invention and application of a precise formula.
Classification in law, as in the other dapartments of knowledge
D
or practice, is the grouping of things in speculation or practice because they ag1ee with one another in certain particulars, and
differ from other things in those partic.ulars. It is ahnost impossible in
some matters to foresee and provid,e for every imaginable and exceptional case, and a legislature ought not to be required to do so at
the risk of having its legislation declared void, although appropriate
and proper upon the general subject upon which such legislation is to
E
act, so long as there is no substantial and fair ground IQ say that the
'tatute makes an unreasonable and unfounded general classification,
and thereby denies to any. person the equal protection of the
laws. Hence, a large latitude is allowed to the states for classification upon any reasonable basis, and what is reasonable is .a
question of practical details into which fiction cannot enter." (ibid:
para 504).
F
We have said enough to delineate the finer frontiers of the jurisdic;
tion of the court and the legislature. Having sensitive regard to the
obligation of the State to bring the law, including the tax law, into
pulsing relationship with life, including the life of the country's economy,
we.see nothing so grossly unfair as to attract the lethal power of the
court to strike down the notification under challenge.
G.
We dismiss the appeals but in the circumstances without costs to
the respondents.
P.B.R.
Appeals dismissed