# SUPREME COURT REPORTil (1963J BRITISH INDIA COhPORATION LTD v. COLLECTOR OF CENTRAL EXCISE

- **Citation:** [1963] 3 S.C.R. 642
- **Court:** Supreme Court of India
- **Decided:** 1963
- **Bench:** S. K. Das, J. L. Kapur, A. K. Sarkar, M. H:rn, Yatullah, GHUBAR DAY.ll
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/supreme-court-reportil-1963j-british-india-cohporation-ltd-v-collector-of-2653
- **Pages:** 9

## Headnote

E.:cise Duty-Footwear-Levied on factorieB employing fifty
.\
or more workmen and using power exeeding 2 H.P.-If Discriminatory-Central Excises and Salt Act, 1944(1 ~( 1944), Scherlule
Item No 17 Constitution of Inaia, Ari. 14.
Under item No.17 of the Schedule to the Central Exeises
and Salt Act, 1944. excise duty was levied on footwear produced in any factory employing 50 or more workmen and
using power exceeding 2 H.P. The petitioner conten.ded that
the imposition of duty on larger manufacturers only was dis.
criminatory and there was no reasonable basis for differentiat~
ing between manufacturers on the basis of number of workers
or the employment of power above 2 H.P. and that the im.
posit.ion of the heavy duty gave rise to a Competition sufficient
to put the big manufacturers out of business.
Bela, that item 17 of the Schedule is based upon a
rt;asonable classification and is validly enac.ted. Manufacturers
who employed 50 or more workers form a well defined class,
so aiso manufacturers who use power exceeding 2 H.P.
In
imposing the excise duty there is a definite desire to make an
exemption in favour of the small manufacturer who is unable.
to pay the duty as easily, if at all, as the big manufacturer.
Such a classification in the interests of co-operative societies,
ccttage industries and small manufacturers
has often t'l be
made to give
an impetus to them
and save them
from
annihilation in competition with large industry.
·
Orient Weaving Mills (P) Ltrl. v. Union of Iurlia,
(1962) Supp. 3 S.C.R. 481 referred to.
ORIGINAL JURISDICTION :
Petition "No. 94
of 1955.
Petition under Art. 32 of the Constitution of
lnd¥i- for t4e eqforoement of :f'unelamental Rights.
;
'·
3S.C.R:
SUPREME COURT REPORTS
643
Bishan Narain, Rameshwar Nath, 8. N. Andley
and P. L. Vohra, for the petitioner.
H. N. Banyal, Additional Solicitor General· of
·India, N. 8. Bind·ra and P. D. Menon, for
th!'l
respondents.
1962. August 20.
The Judgment of the Court
was delivered by
HrnAYA.TULLAH, J.-This is a petition under Art.
32 of the Constitution challenging the imposition of
Excise Duty on the petitioner by virtue of item No.
l '1 "Footwear" of the First Schedule to the Central Excises and Sa.It Act, 1944 (l of 1944) with effect
from February 28, 1954, and the calculation of the
duty advaloram by including in the price, charges
for freight, packing and distribution.
The petitioner, the British India corporation
Ltd. is a public limited company which was formed
to take-over other companies and to amalgamate
them. Among the companies which the petitioner
took over were Cooper Allan & Company Ltd., and
the North West Tannery Company Ltd., b1th at
Kanpur. These two Companies manufature shoes and
other leather goods and operate as a single unit
manufacturing the well-known brand of "F L E X''
shoes.
As
a result of the financial proposals
of the Central Government
for the financial
·year 11:152-55, a bill (No. 9 of 1954) was introduced
in parliament on February 27,1954. Under cl. 8 of
the Bill foot-wear were proposed to be taxed at 10%
adva.loram if produced in any fatory as defined in
the factories Act, 1948 (63 of 1948). When the
Finance Act, 1954 (l 7 of 1954) was enacted, the
Central Excises and Salt Act, 1954, was amended
by the inclui.ion of item 17 in the Schedule, though
in a slightly different form. The item as finally
~Hacte~ ~eaq as follows ;-
1902
--
Brit i•h. tndia.
Oorporotioti 1Ltd
. " ..
Collector" of Central
' · ·Excise ·.
Hidayat~!lalt J.
1982
· Bril/ah llldia
Corpor(Jeion Ltd.
v.
Coiled" of Cen11'!1
ExOIU
644
SUPREME COURT REPOH.TS (1963)
"17. FOOTWEAR, produced in any factory
in,cluding the precints thereof whereon
fifty or more workers are working or
were working on any day of the preceding
twelve mon£hs, and in any part of which.
manufacturing process .is being carried on
with the aid of power or is ordinarily so
carried on, the total equivalent of such
power exceeding two horse-power.
"Footwear" includes all varie-1 Ten perties of foot

## Text

1962
· A»gud 20.
' .
642
SUPREME COURT REPORTil (1963J
BRITISH INDIA COhPORATION LTD.
v.
COLLECTOR OF CENTRAL EXCISE
(S. K. DAS, J. L. KAPUR, A. K. SARKAR,
M. H:rn&YATULLAH and R.&GHUBAR DAY.ll., JJ.)
E.:cise Duty-Footwear-Levied on factorieB employing fifty
.\
or more workmen and using power exeeding 2 H.P.-If Discriminatory-Central Excises and Salt Act, 1944(1 ~( 1944), Scherlule
Item No 17 Constitution of Inaia, Ari. 14.
Under item No.17 of the Schedule to the Central Exeises
and Salt Act, 1944. excise duty was levied on footwear produced in any factory employing 50 or more workmen and
using power exceeding 2 H.P. The petitioner conten.ded that
the imposition of duty on larger manufacturers only was dis.
criminatory and there was no reasonable basis for differentiat~
ing between manufacturers on the basis of number of workers
or the employment of power above 2 H.P. and that the im.
posit.ion of the heavy duty gave rise to a Competition sufficient
to put the big manufacturers out of business.
Bela, that item 17 of the Schedule is based upon a
rt;asonable classification and is validly enac.ted. Manufacturers
who employed 50 or more workers form a well defined class,
so aiso manufacturers who use power exceeding 2 H.P.
In
imposing the excise duty there is a definite desire to make an
exemption in favour of the small manufacturer who is unable.
to pay the duty as easily, if at all, as the big manufacturer.
Such a classification in the interests of co-operative societies,
ccttage industries and small manufacturers
has often t'l be
made to give
an impetus to them
and save them
from
annihilation in competition with large industry.
·
Orient Weaving Mills (P) Ltrl. v. Union of Iurlia,
(1962) Supp. 3 S.C.R. 481 referred to.
ORIGINAL JURISDICTION :
Petition "No. 94
of 1955.
Petition under Art. 32 of the Constitution of
lnd¥i- for t4e eqforoement of :f'unelamental Rights.
;
'·
3S.C.R:
SUPREME COURT REPORTS
643
Bishan Narain, Rameshwar Nath, 8. N. Andley
and P. L. Vohra, for the petitioner.
H. N. Banyal, Additional Solicitor General· of
·India, N. 8. Bind·ra and P. D. Menon, for
th!'l
respondents.
1962. August 20.
The Judgment of the Court
was delivered by
HrnAYA.TULLAH, J.-This is a petition under Art.
32 of the Constitution challenging the imposition of
Excise Duty on the petitioner by virtue of item No.
l '1 "Footwear" of the First Schedule to the Central Excises and Sa.It Act, 1944 (l of 1944) with effect
from February 28, 1954, and the calculation of the
duty advaloram by including in the price, charges
for freight, packing and distribution.
The petitioner, the British India corporation
Ltd. is a public limited company which was formed
to take-over other companies and to amalgamate
them. Among the companies which the petitioner
took over were Cooper Allan & Company Ltd., and
the North West Tannery Company Ltd., b1th at
Kanpur. These two Companies manufature shoes and
other leather goods and operate as a single unit
manufacturing the well-known brand of "F L E X''
shoes.
As
a result of the financial proposals
of the Central Government
for the financial
·year 11:152-55, a bill (No. 9 of 1954) was introduced
in parliament on February 27,1954. Under cl. 8 of
the Bill foot-wear were proposed to be taxed at 10%
adva.loram if produced in any fatory as defined in
the factories Act, 1948 (63 of 1948). When the
Finance Act, 1954 (l 7 of 1954) was enacted, the
Central Excises and Salt Act, 1954, was amended
by the inclui.ion of item 17 in the Schedule, though
in a slightly different form. The item as finally
~Hacte~ ~eaq as follows ;-
1902
--
Brit i•h. tndia.
Oorporotioti 1Ltd
. " ..
Collector" of Central
' · ·Excise ·.
Hidayat~!lalt J.
1982
· Bril/ah llldia
Corpor(Jeion Ltd.
v.
Coiled" of Cen11'!1
ExOIU
644
SUPREME COURT REPOH.TS (1963)
"17. FOOTWEAR, produced in any factory
in,cluding the precints thereof whereon
fifty or more workers are working or
were working on any day of the preceding
twelve mon£hs, and in any part of which.
manufacturing process .is being carried on
with the aid of power or is ordinarily so
carried on, the total equivalent of such
power exceeding two horse-power.
"Footwear" includes all varie-1 Ten perties of footwear, whether known \_ cent
as boots shoes. sandals, chap- r ''ad
pals, or by any other name." J valorem"
Under the
provisions of the Provisional
Collection of Taxes Act, 193 l, (XVIof lll31 ), the
duty was leviable from February 28, 1954, by virtue
of a declaration in the Bill to that effect.
On the preceding day the Superintendent of Central
Excise, Kanpur, deputed an Inspector of his
department to
obtain
from
the
petitoner
a declaration of all stock of footwear and requested that the Inspector be permitted to verify the
stocks with a view to levying the Excise Duty on and
from February 28, 1954. As a result of the imposition of Excise Duty on footwear the petitioner
was required to pay during the remaining ten
months of 1954 a sum of Rs. 9,47,630/-
as Bxciae
Duty. The petitioner produces in the two units
above-named, footwear for sale to the public and
for supplies to the Government for the use of the
Army and the Police. The petitioner contends that
though the Excise Duty paid by it was capable of
being passed on to the consumer, it could not include it in the price at which shoes were sold to
the public
because of heavy competition by those
free from such duty, though it did include the
Excise Duty in the price of the footwear supplied
to Government. Thus Rs. 2 lacs o(ld were passed
pn to Qoverl!merit bqt Rs. 7 lacs odd were borq~
.\
\
I '
i
3 S.O.R.
SUPREME COURT. REi>ORTS
by the Companv itself. The petitioner contended
before the Collector of Central Ex:cise, Allahabad.
that the calculation of the duty advalorem should
_not be based on price including freight, pa.eking
and distribution charges paid to it by its distribu~
tors in the outlying parts of India. This contention
of the petitioner was not accepted by'the Collector.
The petitioner then took an appeal to the Central
Board of Revenue but before the appeal could be
disposed of, the petitioner filed this -petition under
Art. 32 of the Constitution praying for writ or writs
to quash the order of the Collector of Central
Excise Allahabad, and writ or . writs to prohibit
Union 'Government. The Central Board of Revenue
and the Collector and Superintendent of Central
Excise from enforcing the provisions of item 17
against petitioner and collecting the Excise Duty
therein levied.
·
I
,
I
According to the petitioner, a distinction has
been ·made in Item 17 above-quoted between mannfa.ctur.ers of footwear employingmore than 50 workers
or carrying on the manufacturing process with the
aid of power exceeding 2 H.P. and other manufacturers. According to the petitioner this amounts to
discrimination because there is no reasonable basis
for differentiating between manufacturers on the
basis of number of workers or the employment of
power above 2 H.P. The petitioner contends that
the essentials of the manufacture of footwear are
the same whether one employs 50 or more workers
or less.
The. larger number of workers is merely
needed because the out-turn has to be greater but
th€ number does not change the nature of the operations or the method of production.
Similarly,
the need for than 2 H.P. arises if a larger number
of mecha.nioal units have to be worked and there is
no essential difference between- a large manufacturer
BrUiah IMia
C11rjMation ~'•
\lo
<Jolkotor qf 0"""'11
E:tein
EliilayattiJlilA ! .
-·-
British India .
Corpo1ati0n lid . .
v.
Coaeclo1: -ol C~ritral
Exciu
H iday41ullah J ·
646
SUPREME OOURT REPORTS [1963j
I
and a small manufaoturer by reason of the employ,
ment of more power or less. It is, therefore, contended that . the imposition of 1!.xcise Duty on bigger
manufacturers creats a discriruination in the trade
which is neither just nor discernible and amounts
to a violation of Art. 14 of the Constitution. The
levy of the Exoise Duty in suoh circumstances is
said to be both illegal and unconstitutional. ·
As a corrolary to this it is contended that the
petitioner, which was already carrying on its
business at a loss in view of the competition, is now
further handicapped oy having to bear a he~vy Excise Duty which it cannot pass on to the consumer
due to competition by. those not paying the duty
and is likely to go otit of its businellB and that the levy ..
of the Excise Duty in these circumstances amounts
to a breach also of Art. 19 (1) (f) rmd (g) and 31 of
tlie Constitution.
I
1
.
It is further contended that the duty advalorem
ought to be calculated on the ex.factory price and
not on the price charged to the distributors which
includes within itself the cost of packing and charges
for freight and
distribution commission. .It is
contended that this is' an error apparent on the face
of the order of the Co!leotor of Excise and the order
deserves to be quashed by . the issue of writ of
certiorari or other approprhite writ.
Lastly, it is contended that the Finance Aot,
1954, received the assent of the president on April
27, 1954, and must be deemed to have become law
/
from that date.
Th~ collection of Excise Duty
'
from March, ! 954, before the Finance Bill beca.me
law, is said to be illegal. We shall deal only briefly with these arguments as most of them have by
now been considered and decided in other cases of
.~
this Court.
·I
·
. '
....
-j
\
3 S.O.R.
SUPREME OOURT REPoRTs
The contention that this duty does not amount
· to a duty of excise because it cannot be pal'lsed on by
the petitioner to the consumer was not raised before
us. It was mentioned ir;i the petition. An Excise
Duty is a duty on production and though according
to the economists, it is a.n indirect tax capable of being pasl'led on to the consumer as part of the price yet
the mere passing on of the duty is not its essential
characteristic.
Even if borne by the producer
or manufacturer it does not cease to be a duty of
excise. The nature of such a duty was explained in .
the very first case of the Federal Court and suhsequentl:v in others of the Federal Court, the Privy
Council and this Court, but this ground continues to
be taken and we are surprised that; it was . raised
again.
The contentions that the duty could not be collected before the passing of the Finance Act, 1954,
has been the subject of an elaborate discussion. in
the recently decided case of this Court, M /s. Ohotabhai Jethabhai Patel and Go. vs. Union of India (').
It is conceded that in view of the above decision
the point is no longer open.
It is also conceded that the question whether
in calculating the duty advalorem, the C0llector of
Excise was justified in including in the prire the
cost of packing, charges for freight and commission
for distribution, or not, is a matter for the decision
of the authorities constituted under the Act subject
to such appeals and revisions as might lie but not a
matter for consideration directly under Art. 32 of
the constitution, in view of the recent decision of
this Court in smt. Ujjam Bai vs. State of U.P. (Civil
Misc. Petition No. 79 of 1959) decided on April 10,
1962. It may be pointed out that the present petition was filed at a time when the appeal Lefore 'the
(1) (1962) Supp. 2 S.C.R. I.
Britisli Intlia
Corporation Ltd. ·
..
Collector of Central
lilxciee
Hida,atullah J.,
1962
Brili•h India'
Corp... at ion Ltd.
v,
Col,,.lot of C•nlra/
Eii<ise
648
SUPREME COURT Rtl:PORTS [1963)
Board of Revenue was pending and there was a
fμrther right of revision to the Central Government.
.
This leaves over for consideration tl:e challenge
under Art. 14, 19 and 31 of the constitution. The
argument under each of these Articles is based en
pricisely the same facts viewed from different angles.
It is contended that there is a discrimination
between big manufacturers of footwear and small
manufacturers which is not based on any differential.
This discrimination, it is said, leads to the imposition of a heavy tax on the big manufacturers with
a corresponding exemption in favour of the small
manufacturers giving rise to a competition sufficient
to put the big manufncturers out of the market. The
tax being illegal the levy amounts to a confiscation
of the property of the petitioner. It will thus be
seen that the imposition of the duty is first challenged Art, 14 as a discrimination, next it is challenged
under Article 19 as a deprivation Of the right to acquire, hold and dispose of property or to carry on a
business or trade and lastly the collection of duty
is characterised as a confiscation of property without the authority of law under Art. 31.
-
The argument ~uffers from a fundamental fallacy in that it assumes that there can be no classification of manufacturers on the basis of the number
of workers or the employment of power above a
particular horse-power. Manufacturers who employ
50 or more workers can be said to form a. well-defined class.
Manufacturers whose manufacturing
process is being carried on with the aid of power
exceeding 2 H.P, are also a well-defined class. Legislation of this type depending upon the number
of workers or the extent of power employed, is frequently to be found. The most obvious example is
the Factories Act which defines a factory with reference to the employment of a certain number of
--v
\
.. "
3 S.C.R.
SUPREME OOURT REPORTS
649
workers or the employment of power. The conten"
tion that size makes no difference is not valid. It
is well· known that the bigger manufacturers ar'3 able
to effect economics in their manufacturing prnoese
and their out-turn being both large and rapid they
are able to undersell small manufacturers. If this
were not ilO mass production would lose all its advanta~es. No doubt the manufacturers a.re now required to bear burdens which previously did not exist,
like bonus, ~xpenses on la.hour welfare etc. but still
the manufacturers, provided the business is well run,
can by mass production offer the same commodity
8!t a competitive price as against small manufacturers and bear the burden as well.
Therefore, in
· imposing the Excise Dutv, there was a definite desire to make an exemption in favour of the small
manufacturer who is unable .to pay the duty a.a easily,
if at all, as the big manufacturer. Such a classification in the interests of co-oprative societies,
cottage industries and small manufacturers has often
to be made to give an impetus to. them and save
them from annihilation in competition with large
industry. It .has never been succes"fully assailed
on the ground of discrimination. Recently, this
Court in the Orient Weaving Mills (P) Ltd. v, The
Union of India(') considered a similar argument in
relation to an exemption granted to societies working .
a few looms on co-operative basis as against big companies working hundreds of looms. The exemption
was held to be constitutional and the classification
of co-operative societies was held to be reasonable.
A similar consideration applies in the present case,
where the exemption operates in respect of vny
small manufacturers employing not more than 50
workers and carrying on their manufacturing process.
with power not in excess of 2 H.P. This affords a
"'
.....
protection to small concerns who, if they were made
to pay the duty. would have to go out of business.
(1) (1962) Supp. 8 S.C.R. 481.
--
Brillsh India
CtrJora•ion Lid.
••
Citl.,1o, of C1ntral
llJtci11
llitla;otullall J.
Bril•rh lndi.J
Oorptwation Ltl.
v.
CQ/leelo,. of Ctntt•l
ixci••
•
1962
650
SUPREME COURT REPORTS (1963]
In our judgment the Schedule which is characterised
as discriminative is based upon a reasonable classification and is validly enacted. If the law is held
to be valid the attack under Arts. 19 and 31 must
also fail.
In view of what we have sairl above the petition must fail.
It will be dismissed with costs.
Petition dismissed .
THE PROVINCIAL TRANSPORT SERVICE
v.
STATE INDUS:l'RIAL COURT
(P. B. GAJl!INDRAGADKAR and K. C. DAS GUPTA, JJ.)
Industrial Dispute- Dismissal of employee -Finding
that no enquiry held by employer before dismissing -
Finding
per~erse -
Appeal Court confi1ming finding -
Writ Pelition
before
High Court -
Interference by High Court -
C. P. &
Berar Industrial
Disputes Settlement Act, 1~47(C. P. 23 of
1947), •. 16.
The appellant employed K as a temporary motor driver on the express condition that until such time as he was
confirmed his services were liable to be terminated without
notice or compensation and without assigning any reason.
Sometime afterwards, the appellant served a charge sheet
upon K and aftet holding an enquiry dismissed him.
K
made an application before the Labour Commissioner under
s. 16 C. P. & Berar Industrial Disputes Settlement Act, 1947,
praying for reinstatement alleging that
the dismissal was
illegal as it was not preceded by an enquiry. The Labour
Commissioner was doubtful whether any enquiry,·was held
·by the appellant but on the basis of evidence adduced before
him he held the charges proved and accordingly dismissed
the application. On appeal, the Industrial Court held that
the Labour Commissioner had no jurisdiction to hold the en~
quiry and mad~ an order directin9 reinstatement of Kwit!\