# ORIENT WEAVING MILLd (P) LTD v. THE UNION OF INDIA

- **Citation:** [1962] Supp. 3 S.C.R. 481
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** B. P. Sinha, J. L. Kapur, M. Hidayatullah, J. c. SHAH, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/orient-weaving-milld-p-ltd-v-the-union-of-india-2394
- **Pages:** 15

## Headnote

Central Excise-Power of Central Government to grant
exemption-Rule-Notification granting exemption to co-operah'.ve
society-Constitutional mlidity-Central Excises and Salt Act,
1944 (1of1944), ss. 37(2), cl. (xvii)-Central Excise Rules,
1944, r. 8(1)-Constitution of India, Arts, 14, 19(1)(/) and
(g), 43.
By r. 8 (1) of the Central Excise Rules, 1944, framed by
the Central Government in exercise of its Power under s. 37(2)
cl. xvii of the Central Excises and Salt Act, 1944, "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 for
the whole or any part of the duty leviable on such go'.>ds."
By two notifications issued under the said rule the Central
Government exempted cotton· fabrics
produced on po,ver
looms owned Dy co-operative societies ti'om the duty leviable
thereon subject to certain conditions.
Under s 38 of the Act ·
the said rule and notifications on publication in the Official
Gazette had effect as if enacted in the Act. The petitioners,
apprehending loss of business in competition with the fifth
respondent, a co-operative society, chal1enged the rule and the
notifications on the grounds( I) that the power of exemption
conferred on the Union Government violated Arts. 14, 19(l)(fl
and (g} of the Constitution and (2) that assuming that it did
196!
K. Simrathmull
'.
S. Nanjalingioh
Gowder
Shah J.
1962
Ftb~uary 38.
llMI
Orittil W talting
Mills (P) Lld.
y,
1 lu Union of lndi4
482 SUPREME COURT REPoRTs (1962] SUPP·
not do so, the exemption granted by the notifications \Vas in
excess of the power granted by r. 8(1).
field, that the contentions were \Vithout substance a1.d
must fail.
Rule 8 of the Rules was as much a part of the Act as
s. 3712) cl. (xvii~ and it was always open to the State to tax
certain classes
of goods and not to tax others.
It wa5 the
function of the State to .determine what hind of taxes should
be levied and in what manner.
R•gard being had to the
directive principles contained in Art. 43 of the Constitution,
there was no doubt that the State in differentiating between
goods produced in big establishments and similar gocds pro·
duccd by small power·loom weavers iu a co-oprrative societ',
had made a classification
that was constitutiona!Jy valid.
There could, therefore, be no excessive dr.kgation of the power
to grant exemption.
It \\•as fallacious to contend that exemption, if at all,
had to be granted in respect of any particular specified variety
of 'cotton fabrics', an<l not with reference to persons producing
them.
The tax was on the production of the goods but was
payable by pcnons producing them.
The exemption granted
was, therefore, \vithin the ternls of the notifications.
ORIGINAL JuruSDlCTION : Petition Ko. llO of
of 1961.
Petition under Art. 32 of the Constitution of
India. for enforcement of Fundamonta.I Rights.
A. V. Viswanatha Sastri and R. Gopalakrishnan,
for the Petitioners.
K. N. Rajagopal SaBtri,P. K. Ghatterje.e and P. D.
Menan, for the respondents.
1962. February 28.
The Judgment of the
Court wa.s delivered by
SINHA, C. J.- By this petition, under Art. 32
of the Constitution, tho petitioners cha.Henge the
constitutionality of certain provisions of the Central Excises and Sa.It Act (l of 1944) which will be
referred in the course of this judgment as the Act,
read with r.8 of the Central Excise Rules, 1944
( 1!}60) and the notifioations thereunder, to be hereinafter set out. The first petitioner is the Orient
3 s.c.R. SUPREME COURT REPORTS
48:!
Weaving Mills Private Ltd. (which will be termed
hereinafter as the Company), and the second petitioner is a director of the Company. The respondents .to the petition are (1) Union of India, through
the Secretary to Government of India, Ministry
of Finance (Department of Revenue), New Delhi,
(2)
Secretary, Central Board
of Revenue, New
Delhi, (3) Superintendent, Central Excise, Cuttack,
(4) Collector, Central Excise, Ca

## Text

3 S.C.R.
SUPREME COURT REPORTS
481
conveying the property when a mere loan was intended on the security of the property. It is unfortunate, having regard to the provision of s. 58(c) of
the Transfer of Property Act, that the plaintiff is
debarred from proving that the transaction was
in the nature of a mortgage. In the circumstances
we direct that there will be no order as to costs
throughout.
Appe,al allowed.
ORIENT WEAVING MILLd (P) LTD.
v.
THE UNION OF INDIA
(B. P. SINHA, c. J., J. L. KAPUR, M. HIDAYATULLAH,
J. c. SHAH and J. R. MUDHOLKAR, JJ.)
Central Excise-Power of Central Government to grant
exemption-Rule-Notification granting exemption to co-operah'.ve
society-Constitutional mlidity-Central Excises and Salt Act,
1944 (1of1944), ss. 37(2), cl. (xvii)-Central Excise Rules,
1944, r. 8(1)-Constitution of India, Arts, 14, 19(1)(/) and
(g), 43.
By r. 8 (1) of the Central Excise Rules, 1944, framed by
the Central Government in exercise of its Power under s. 37(2)
cl. xvii of the Central Excises and Salt Act, 1944, "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 for
the whole or any part of the duty leviable on such go'.>ds."
By two notifications issued under the said rule the Central
Government exempted cotton· fabrics
produced on po,ver
looms owned Dy co-operative societies ti'om the duty leviable
thereon subject to certain conditions.
Under s 38 of the Act ·
the said rule and notifications on publication in the Official
Gazette had effect as if enacted in the Act. The petitioners,
apprehending loss of business in competition with the fifth
respondent, a co-operative society, chal1enged the rule and the
notifications on the grounds( I) that the power of exemption
conferred on the Union Government violated Arts. 14, 19(l)(fl
and (g} of the Constitution and (2) that assuming that it did
196!
K. Simrathmull
'.
S. Nanjalingioh
Gowder
Shah J.
1962
Ftb~uary 38.
llMI
Orittil W talting
Mills (P) Lld.
y,
1 lu Union of lndi4
482 SUPREME COURT REPoRTs (1962] SUPP·
not do so, the exemption granted by the notifications \Vas in
excess of the power granted by r. 8(1).
field, that the contentions were \Vithout substance a1.d
must fail.
Rule 8 of the Rules was as much a part of the Act as
s. 3712) cl. (xvii~ and it was always open to the State to tax
certain classes
of goods and not to tax others.
It wa5 the
function of the State to .determine what hind of taxes should
be levied and in what manner.
R•gard being had to the
directive principles contained in Art. 43 of the Constitution,
there was no doubt that the State in differentiating between
goods produced in big establishments and similar gocds pro·
duccd by small power·loom weavers iu a co-oprrative societ',
had made a classification
that was constitutiona!Jy valid.
There could, therefore, be no excessive dr.kgation of the power
to grant exemption.
It \\•as fallacious to contend that exemption, if at all,
had to be granted in respect of any particular specified variety
of 'cotton fabrics', an<l not with reference to persons producing
them.
The tax was on the production of the goods but was
payable by pcnons producing them.
The exemption granted
was, therefore, \vithin the ternls of the notifications.
ORIGINAL JuruSDlCTION : Petition Ko. llO of
of 1961.
Petition under Art. 32 of the Constitution of
India. for enforcement of Fundamonta.I Rights.
A. V. Viswanatha Sastri and R. Gopalakrishnan,
for the Petitioners.
K. N. Rajagopal SaBtri,P. K. Ghatterje.e and P. D.
Menan, for the respondents.
1962. February 28.
The Judgment of the
Court wa.s delivered by
SINHA, C. J.- By this petition, under Art. 32
of the Constitution, tho petitioners cha.Henge the
constitutionality of certain provisions of the Central Excises and Sa.It Act (l of 1944) which will be
referred in the course of this judgment as the Act,
read with r.8 of the Central Excise Rules, 1944
( 1!}60) and the notifioations thereunder, to be hereinafter set out. The first petitioner is the Orient
3 s.c.R. SUPREME COURT REPORTS
48:!
Weaving Mills Private Ltd. (which will be termed
hereinafter as the Company), and the second petitioner is a director of the Company. The respondents .to the petition are (1) Union of India, through
the Secretary to Government of India, Ministry
of Finance (Department of Revenue), New Delhi,
(2)
Secretary, Central Board
of Revenue, New
Delhi, (3) Superintendent, Central Excise, Cuttack,
(4) Collector, Central Excise, Calcutta, (5) Board of
Directors, Madhunagar Powerloom Weavers' Co~
operative Society Ltd., through its President (to
be hereinafter referred to as the Society).
The petition is founded on the following
allegations. The Company is incorporated under
the Indian Companies Act, 1913, with its head
office
at Nayabazar, Cuttack. The second petitioner is the director of the Corn pany, which runs
a weaving mill (Lt Nayabazar in Cuttack. There
are 160 looms operating in the mill, and nearly
300 employees are employed in the factory, which
produces, on the average, about 45 Jakh yards of
cloth (4 1/2 million yards). The paid-up capital
of the Company is Rs, 7, l0,000, divided into 7,100
shares of the value of Rs. 100 each. It has 8
directors, including a representative of the Government of Orissa. The Company commenced production on Octobt>r 1, 1955, and has been sustaining
losses
eversince
it started
functioning
"due to adverse circumstances in the State of
Orissa and due to the heavy taxation and duties".
Eversince the Company started production, it has
been paying excise duty~Rs. 2,16,670 for the year
1958- 59, Rs. l,82,529 for the year 1959-60 and
Rs. 2,15,500 for the year 1960-61. "Cotton fabrics"
is one of the items in the first schedule of the Act,
which sets out the description of goods and the
rate of duty leviab!e under s. 3 of the Act.
The
petitioner's chief grievance is that the respondent
No. 5, the Society, is being granted exemption
1962
Oritrd Weaving
Milla (P) Lfd,'
Vo
'1·_.1-,
The Union of Indi.~.
..-:,.l
Sinha <':7-J.
"'l ·~
1962
··-
on.ni.JY .... .,
Millo (P) Ltd.
. .. .•
n. Ullia of Indio
--
sa..c.J.
484
SUPREME COURT REPORTs (1962] SUPP.
from the excise duty, though, it is contended, it
has installed I 00 looms in the same premises and
100 workmen are employed therein. The autho·
rised capital of the aforesaid Society is lts.2,40 ,000,
divided into shares of the value of Rs. 100 each.
It is said to be a profit earning concern, whose
profit is disposed of in accordance with its byelaw 35. The Society, it is further contended, is
for all practical purpose~ aimilarly situated alongwith the petitioner Company in the
matter of
production, distribution and marketing of their
produce. It is further stated that the weavers of
the Society stand on the same or similar footing
as the shareholders of the Company. The exemption was granted to the Society in virtue of the
Central Government Notification Xo. 74 of 1959,
dated July 31, 1959, and .N'otifioation Xo. 70 of
1960, dated April 30, 1960, iBBued by the Ministry
of Finance, Government of India, (Department of
Revenue). The notifications are in these terms :
"Government of India, Ministry of Finance
(Dep1i.rtment of Revenue) ~ew Delhi. The
31st July, 1959.
G. S. R. In pursuance of sub-mle (I) of
rule 8 of the Central Excise Rules 1944 as in
force in India and as applied to the State of
Pondicherry, the Central Govt. hereby exempt
cotton fabrics produced by any co-operative
society formed of owners of cotton power•
looms, which iB registered or which may be
registered on or before the 31st March, I 961
un.der any law relating t0 co-operative societies, from the whole of the duty leviable
thereon, subject to the following conditions:-
(a) that every member of the co-operative societies had been exempt from excise
duty for three years immediately precedin'g
the date of his joining such society;
I
3 S,C.R.
SUPREME COURT REPORTS
485
(bl that the total number of cotton
power!ooms owned by the co-operative society is not mere than four times the number
of members forming such society;
( c) that a certificate is produced by each
member of the co-operative society from the
State Govt. concerned or such Officer as may
be nominated by the State the number of
cotton powerloons in his ownership and actually operated by him does not exceed four
and did not tixceed four at any time during
the
three
years
immediately
preceding
the date of his joining the society, and that he
would have been. exempt from excise duty
even if he had not joined the co-operative
society; and
( d) that the exemption shall be available ...
(i) for a period ending on the 31st July,
1962 in respect of registered co-operative
societies which have commenced production
prior to the date of this notification; and
(ii) for a period of three years from the
dat.e of commencement of production in respect of co-operative societies
which have
been registered "but have not commenced
production or which may be registered on or
before the :Hst March, 1961.
(No. 74/59)
Sd/-Illegible
S. K. Bhattacharjee,
Deputy Secretary to Govt. of India.
F. N'. 74/59/F. No. 13/59-CXIII".
"Government of
India, Ministry
of
.Finance (Department of Revenue) New Delhi.
'.J.'he 10th April. 1960,
01Uni W1aViftR
Mi/11 (P) Lid.
_,
' "· ' -
Thi Union of lna11
Sinha o.J.
1~62
Orit'11 I\' to-Vint
, , Milli (P) L<d.
'
~"!t_t ~n.ion 3( India
Sin~a C • ./,
486 SUPREME COURT REPORTS [1962] SUPP.
N otifiwtion
Central Exciso
GSR.
In pursuance of 8Uh-rule (I) of
rule 8 of the Central Excise Rules, 1944 as in
force ii) India and as applied to the State of
Pondicherry and in supersession of the Notifi·
cation of the Govt. of India llinistry of
Finance (Department of Revenue) No. 74/59Central Excise dated the 31st July 1959 the
Central Govt. hereby exeU1pts cotton fabrics
produced on powerloom owned by any cooperative 8ociety or owned by or allotter! to
the members of the society, which is registered
or which may bo register:·d on or before the
:n st :lfarch 1961 under any law relating to
co.operative societies from the wholo of the
duty lcviable thereon, ~nbjr•rt to the following
conditions :-
(a) that every memher of the co-operative sociPtV who has been a manufacturer of
cotton fab~ics on powerlooms has been exempt
from excise dut.r for three years immediatB!y
precl·ding the date of his jnininir such society;
(b)
that tho total number of cotton
powerlooms owned by the co-operative society
or owned by or allotted to its members is not
more than four times the number of members
forming such society.
(cl that each member of the co-uporativc society pro<lu<'.e a certificate from the
Stat<> Govt. concerned or such ofticer as may
be nominated by the State Govt. that he is a
houafide m"mber of the society and that the
num bcr •lf cotton powerlooms owned b.v or
allotted to him and actually opt1rated bv him
doe8 not "xceed four and did not exceed four
at any time during the three years immediawir preceding the date of his joining
t~e
3 S.C.R.
SUPREME COURT REPORTS 487
society, and that he would have been e~e:°1pt
from excise duty even if h"' had not Jomed
the co-operative societies and
( d) that , the exemption shall be available ...
(i)
for a period ending on the 3 lst
July 1962 in respect of registered co·
operative societies which have commenced production prior to the date of the
notification; and
(ii) for a period of three years from
the date of commencement of production
in respect of co-operative societies which
have been registered but have not commenced production or which may be
registered on or before 31st March, 1961.
No. 70/60
Sd./Illegible
G. P. Durairaj,
Under Secretary to the Govt. of ifndia
No. 70/60/P. No. 13/1/59 CXIII"
The Company made a representation to the
relevant authorities but to no purpose. As the
Company is to pay excise duty on the "cotton
fa 1Jrics" produced l;y it, its cost of production, as
compared to that of the Society, was higher by
l :?.5% in 1958 and 10% in 1959, with the result that
the Company is at a disadvantage, as compared to
tho Society, in the competitive market of Orissa.
Due to heavier taxation on fine cloth, the Company
has abandoned the production of that quality and
ha" restricted its production to coarse and medium
cloth. The apprehension of the Company is that
on account of the exemption granted to the Society,
the Company's bn.iiness
will be very adverselJ
aifecteq. It is contended tqat r. 8 of the CeIJtr~l
1962
Orient Weaving
Mills (f) Ltd.
Vo
The Union of India
Sinha C. J.
1962
Orient lft2i.rin(
Mills ,P) Lid.
v.
Tlit U11io1l of India
Sinha C . ./.
488 SUPREME COURT REPORTS [1962] SUPP.
Excise Rules, l!l44,
under the Act, vests the
Government with ungui<led power wholly or partially to uxempt. any goo<ls from the <luty lcviable
under the Act ancl is, thernfore, dearly discrimina-
'
.
tory as against the petitioner. The Government
notifications exr.>mpting the Society, or such other
similar societies as may horcitfter come into existence, have the effPCt of viol<J,ting the petitioners'
funrfa.mcntal rights under Arts, 14 and 19(l)(f) & (g)
of the Constitution. It is also conten<lc<l that th"
power conferred upon the Government under the
Rules, afore81tid, being ungilidcd and uncontrolled,
goes beyond tho permiHsi ble limits of a vnlid delegation, and is, therefore, voiri. The petitioners
moved the High Court of Orissa under Art. 226 of
thn Constitution, chal!Pnging the constitutionality
of the Govr~rnment measures aforesaid, but the
Court refused to grant any relief on the ground
that it. had no jurisdiction to issue any wriL to the
Union Government in Xew Delhi.
In the premises,
the petitioners prny for a declaration that the lovy
of excise duty on the piece.goods produced by the
pet.itioners be declared to be unconstitutional, and
for a dirertion that tlw respondents 1-4 treat them
on tho S<tme footing as the Sucit:ty and exempt
them from the p/\yment of th<' excise duty, as also
for an appropriate writ or order for the enforcement of their fundamental right guaranteed under ·
Arts. 14 and 19( I )(f) & (g) of the Constitution.
The application was oppoRed on behalf of the
respondents l ·4, and an affidavit sworn to by an
Cnder Secretary, ~Iinistry of Finance (Department
of Revcnnel Govcrnm<'nt of India, was filed in opposit.ion. It was stated on behalf of the Union
Government and the Rev<'UUe that the relevant
provisions of the Act and the Rules, and t.he notifications which have been impugned by the petitioners, did not. infringe any provisionH of tho
Constitution, and that the exemption grant<ld to the
society was in pursuance of the well recognised
3 S.C.R.
SUPREME COURT REPORTS
489
principle, being acted upon by the Government, to
1962
confer self-employment benefits in the interest of
11
d
d
'th
'
t
Orient W11r11'tig
sma
pro ucers, an
w1
a view o encourage
Mills (P}Ltd.
cottage industries and small scale industries em·
v.
ploying· a limited num her of hands.
The Society,
The Union •f India
it was contended,· was not the owner of the powerSinha c. J.
looms, but each weaver was the owner of not more
than 4 powerlooms: the Society was run on a cooperative basis for the benefit of the weavers, who
shared the profits earned hy working on a cooperative basis, by sale of the cloth produced by
each weaver on his looms, after paying for the
services rendered by the Society to its members;
hence it was not correct to characterise the Society
as running a mill with an installed capacity of 100
looms. It is further stated that the ,Society, as
such, is not a profit earning concern, as wrongly
contended on behalf of the petitioners. The
Society, under the sanctioned scheme, purchases ·
the cloth produced by the weaver on his looms at a
price equivalent to the cost of the raw materials, .
cost of the services rendered by the Sc.iciety and
cost of labour of the weaver, plus a margin of profit
for him.
The Society undertakes the sale of the
piece-goods produced by the weaver without mak·
ing any profit to itself, except that it levies handling charges, which nre paid by the buyer. If the
Society makes any savings out of the handling
charges thus realised, the weaver gets a share of
the savings by way of dividend. Unlike the Com- ·
pany, the Society is not the. owner of the looms.
The Society is only a servant of the weaver-owners
and renders them services, which they need, to
help them to market their produce. The Society
is, thus, only an organisation which assists all
individual owners of looms in the production and·
sale of the products of their reBpective looms, for
their exclusive benefit. It is, therefore, claimed
thrtt the exemption granted in respect of the goods
produceq in co-operative societies, of wqich tlj()
1962
Ork11t W "'"; n1
Mill•. (P) Lid.
••
Tiu Union of India
SinAa C. J.
490 SUPREME COURT REPORTS (l!l62] SUPP.
weavers are the owner members, each individual
not possessing more than 4 looms, is in pursuance
of the Notification No. 70/60 dated April :{0, 1960,
issued under r. 8, under the provisions of the Act,
and is based on a valid classification, and docs not
infringe the provisions of Arts. 14 and 19(l)(f) & (g)
of the Constitution.
·
On those pleadings, and on the arguments at
the Bar, the following points ariso for decision in
this case, namely, (I) whether tho power of exemption conferred upon the Union Government violates
Arts. 14 and 19(l){f) & (g) of the Constitution on
the ground that it is uncontrolled and unguided,
and (2) whether. assuming that the power is not
unconstitutional, the exemption granted by tho
notifies tions, aforesaid,. is in excess of the power
granted by r. 8.
Before discussing the vires of the law, or of
the notification issued under the Act, read with r.8
aforesaid, it iA necessary to examine the relevant
provisions of the Act and the Rules. Tho Act consolidatr,s and 11mcnds the law relating to central
duties of excise on goods manufactured or produced
in certain parts of India, and to salt.
Under s.
2( d), ''excisable goods" means "goods specified in
the First Sohedulo as being subject to a duty of
excise and includes salt". The first schedule con·
tains the description of goods anrl rates of duty
leviablo under s. 3, which is the char!!ing section
and is in these words' :
-
"3(1) Th.,re shall be levied and collected
iri such manner as may he prescribed duties of
excise on all excisable goods other than salt
which are produced or manufactured in India
and a duty on salt manufactured in, or impor·
ted by land into,
any part of India, as,
and at the rates, set forth in the }'irst
Schedule.
3 S.C.R.
SUPREME COURT REPORTS
491
{lA) ............................................... .
(2)
..............................•..................
'
( 3)
Different tariff values may be fixed
for different class or description of the same
article."
Item No. 19 in the First Schedule is "cotton
fabrics", and. means all varieties of fabrics manu-
. factured either wholly or partly from cotton, with
certain specified exemptions, including fabrics manufactured on handloom, and then follow the description of different kinds of cotton fabrics, with their
relative rates of duty. Section 37 authorises the
Union Government to make rules to carry into
effect the purposes of the Act. By sub-s. (2) of s. 37,
it is provided that mies may be framed providing
for a number of matters recited therein, including
cl. (xvii), which is in these terms:
"exempt any goods from
the whole or
any part of the duty imposed by this Act.''
In pursuance of this rule making power, the Union
Government has made Rules. For the purposes of
this case, it is only necessary to quote r. 8, which is
as follows:
"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
the duty leviable on such goods,
(2)
Th.e Central Board of Revenue may
by special order in each case exempt from
the payment of duty, under circumstances
of an exceptional nature, any excisable
~oods."
·
l96S
Orhnr W eavini
Mills (P) ~Id.
v.
The Union of India
Sin!M c. J,
19fi2
o,;,.,, w 1aving
Milu (P) W
v.
T. I e Unic.n of India
Sinha C. J.
492 SUPREME OOURT REPORTS (1962] SUPP.
In pursuan<>,e of the powers conferred on the
Cr•ntrnl Governmont by sub-r.(l) of r.8, the notificatious referred t.o above were issued by the Central
Gon,rnment..
By virtue of s. 38 of tho Act, all
rule;; made and notifications iRsued by the Central
Government, as aforesaid, are required to he published in the Official Gazette, and thereupon those
rules and notifications "shall have effect a.~ if enacted in this Act". Thus it is manifest that the
notifications and the rule impugned in this case
h:i.vc been incorporated into th·.1 Act itself, an<l have
bt,c.mie 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 ;rn;J tht' nc>tifications afore8aid, exempting the
goo·!~ prorlucBd by the co-operative societies, like
the 5th respondent, from payment of the excise duty.
That bcin)! so, it is a. little difficult to appreciate
tlie first prayer of the petitionerP, a.skin~ for a
de<:laration that the levy of excise dutv on the piec•·
goods pr•>duceJ by· the petitioners be declar(,~] to be
unconstitutional. It is one thing t,o nttnck tho
constitution1llity of the prn\'isinn8 of the Act :tut.ho·
rising the levy of the excises dut.v on the petitioners;
it is quite a different thing to complain of the exemption grant{ld in respoct of the good~ pro<lt1cecl·
by the 5th re8pundent.
A~ the vi res of th·' Act
itself has not been challenged, we ne1id rnt say
anything more
on that
aspect of a fH>ssible
controvNsy which ha8 not ht••·n actually raised in
the petition.
The petition is substantially based upto the
contention that r.8 suffers from the v ic" of excessive delegation of powers to the C'..entral Gov!'rnment
to exempt partly or wholly an.v excisable good~.
and, secondly, thrit the pow..r even it constitutional
has been invalidlv exercisPrl in so far as the notifi·
cations aforesaid containing the exemplion operating in favour of the 5th rospondent have been
made. Iμ our opinion, there is Qo sllbsta.nce ill
-
•
-
.
3 S.C.R.
SUPREME COURT REPORTS
493
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 as
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 iu
s.23 of the Sea Customs Act (VIII of 187&), which
bas been applied to excise duty also, by virtue of
s. 12 of the Act. The latter section has authorised
the Cen~ral Government to apply the provisions of
the Sea Customs Act, to excise duty imposed by the
Aot, with such modifications and alterations as it
may consider necessary or desirable to adapt them
to <'ircumstances. It is a function of the State
in order to raise revenue for State purposes, to
determine what kind of taxes shall be levid 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 tile 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
1962
o,ient We.avin1
Mill• <nLttJ.
v.
The Union of India
Sinha c, J.
1962
OrUnt Wuoing
Mills (P) Ltd.
v.
Thi Union of India
Sin.A• C. J.
494 SUPREME COURT REPORTS [1962] SUPP.
on an individual or co-oporativc basis in rural
areas."
It has rightly been pointed out in the affidavit filed
on behalf of the respPnucnt8 ; ·4 that the exemption
granted by the impugned notifications iA mrant
primarily for the protctt.iun l•f petty producers of
cot ton fabrics not owning more than four power
looms,
from
unrtasonablc competition by big
produc<•rs, lik" the petitioner Company. The State
has, therefore, made a valid cl11ssification between
goods produced in big establishments and similar
goodB produced by small powcrloom weavers in the
rnofas8-il, who are usually ignorant, illiterate and
poor and suffor from handicaps to which big
ostablishments like the petitioner Cornp1my aro not
subject. It has alHo been pointed out that the ex·
emption was available to individual wcavern, who
employed not more than five looms on their own
account.
The fact thnt they have banded together
in a co.operntive effort to increase their efficiency
and to take advantage of State aid should not count
again~t them. It must, therefore, he h1,ld that there
is no room for the contention that there has been
excessive delegation of power to exempt.
It was next contencJt.d that if it were helrl that
r. 8 is valid an<! constitutional, the notifications are
ba<l in so far as they exempt certain claSBes of
persons and not classes of goods from the excise duty.
It is argued that the tax is a rluty of exoise on "any
goods", and item 12 bas reforcnco to a particular
variety of goods, rnimely,
'cotton fabrics'; the
exemption if any could have been granted iR respect
of any particular specified variety of 'cotton fabrics'
and not with reference to the per8ons producing the
same variety of those fabrics. There is a pparcntly
a fallacy in this argument. The tax is on the
production of any goods, but it is payable by per·
sons producing such goods. The exemption also ia
,,.,,
""'
.,,
:
'• +
3 S.C.R.
SUPREME COURT REPORTS
495
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 tile 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 Co-operative
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 Cooperative 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.
It must, therefore, be held that there is no
merit in this petition. It is, accordingly, dismissed
with costs to the answering respondents.
Pdiflion dismissed.
1961
Orient Wtaft"I
Mills (P) Ltd.
••
Tiit Union of Inrlia
SinhaC. J.