K.K. Mathew, J.@mdashIn these appeals, the facts are similar and the question for consideration is same. We will take up for consideration the
appeal filed by the writ petitioner in Writ Petition No. 3838 of 1968 (hereinafter called the ''respondent'') against the common order in all the writ
petitions.
2. The respondent filed the writ petition before the High Court of Madras questioning the validity of Clause (b) of notification of the Government of
India, Ministry of. Finance (No. 205/67-CE dated September 4, 1967) on the ground that Clause (b) is Violative of the fundamental right of the
respondent under Article 14. The High Court allowed the petition and this appeal, by special leave, is filed against the order.
3. Section 3 of the Central Excise and Salt Act, 1944 (for short, ''the Act'') imposes excise duty on manufacture in respect of items mentioned in
Schedule I of the Act. Match boxes are mentioned in item 38 of the said schedule and duty is leviable on the manufacture of match boxes at the
rates specified therein. For the purpose of levy of excise duty, match factories were classified on the basis of their production during a financial
year and, matches produced in different factories were subject to varying rates of duty-a higher rate being levied on matches produced in factories
having a higher output. In 1967, the classification of match factories on the basis of production was abandoned and they were classified as
mechanised units and non-mechanised units and by notification No. 115 of 1967 dated June 8, 1967, two rates of levy were prescribed i.e., Rs.
4.60 per gross boxes of 50 matches each cleared in mechanised units and Rs. 4.15 per gross boxes of 50 matches each cleared in non-
mechanised units. A concessional rate of duty of Rs. 3.75 per gross up to 75 million matches was allowed in respect of units certified as such by
the Khadi and Village Industries Commission or units set up in the cooperative sector. Notification No. 162 of 1967 dated July 21, 1967
superseded the earlier notification and the rate of duty in respect of non-mechanised units was raised from Rs. 4.15 to Rs. 4.30 per gross boxes.
This notification contained a proviso to the effect that if a manufacturer were to give a declaration that the total clearance from the factory will not
exceed 75 million matches during a financial year, the manufacturer would be entitled to the concessional rate of duty of Rs. 3.75 per gross boxes
of 50 matches each up to 75 million matches, and the quantity of matches, if any, cleared in excess up to 100 million matches will be charged at
Rs. 4.30 per gross, and, if the clearance exceeds 100 million matches, the entire quantity cleared during the financial year will be charged to duty at
Rs. 4.30 per gross. This notification, however, enabled the manufacturers with a capacity to produce more than 100 million matches and who were
clearing more than 100 million matches during the previous years to avail of the concessional rate of duty at Rs. 3.75 per gross by filing a
declaration as visualized in the proviso to the notification by restricting their clearance to 75 million matches. This would have defeated the very
purpose of the notification, namely, the grant of concessional rate of duty only to small manufacturers. In order to avert this tendency on the part of
the larger units, the notification dated July 21, 1967 was amended by notification No. 205 of 1967 dated September 4, 1967. The notification
reads:
In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby makes the
following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue and Insurance) No. 162/
67, Central Excises dated the 21st July, 1967, namely:
In the proviso to the said notification after Clause (i) the following shall be inserted, namely:
(ia) nothing contained in the foregoing clause shall apply to any factory other than the factories:
(a) whose production during the financial year 1966-67 did not exceed 100 million matches;
(b) whose total clearance of matches during the financial year 1967-68, as per declaration made by the manufacturer before the 4th September,
1967 in pursuance to this proviso is not estimated to exceed 75 million matches;
(c) which fall under category D under notification No. 75/66-Central Excises dated the 30th April, 1966, but had no production till the 4th
September, 1967;
(d) whose production during any financial year does not exceed or is not estimated to exceed 100 million matches and are recommended by the
Khadi and Village Industries Commission for exemption under this notification as a bona fide cottage unit or which is set up by a cooperative
society registered under any law relating to cooperative societies for the time being in force.
4. The purpose of this notification was to give to bona fide small manufacturers whose total clearance, according to the declaration, was not
estimated to be in excess of 75 millions for the financial year 1967, the concessional rate of duty prescribed under the notification dated July 21,
1967. The manufacturers who came to the field after September 4, 1967 were entitled to concessional rate of duty if they satisfied the condition
prescribed in Clause (d) of the aforesaid notification.
5. The respondent applied for a licence for manufacturing matches on September 5, 1967 stating that it began the industry from March 5, 1967,
and also filed a declaration that the estimated manufacture for the financial year 1967-68 would not exceed 75 million matches. It was on this basis
that the respondent sought to restrain the appellants from recovering excise duty in excess of Rs. 3.75 per gross of boxes of 50 matches each up to
75 million matches by challenging the validity of Clause (b) of the notification.
6. The contention of the respondent before the High Court was that it has been denied the benefit of the concessional rate of duty on the ground
that it applied for licence and filed the declaration only on September 5, 1967, a day after the date mentioned in Clause (b) of the aforesaid
notification and that was discriminatory.
7. The High Court was of the view that the classification was unreasonable inasmuch as the fixation of the date for making the declaration, namely,
September 4, 1967 as the basis of the classification between those who are entitled to the benefit of the concessional rate of duty and those who
are not so entitled, has no nexus with the object of the Act. The High Court said that all manufacturers whose estimated production would not
exceed 75 million matches in the financial year 1967-68 would fall under one class and the fact that some among them filed the declaration before
September 4, 1967 is not a differential having a nexus with the object of the Act for putting that in a different class. The High Court, therefore,
came to the conclusion that there was no difference between the two classes of manufacturers from the point of view of revenue as they were all
engaged in production of matches and as none of them was expected to produce in the financial year more than 75 million matches on an estimate.
8. We do not think that the reasoning of the High Court is correct. It may be noted that it was by the proviso in the notification dated July 21, 1967
that it was made necessary that a declaration should be filed by a manufacturer that the total clearance from the factory during a financial year is not
estimated to exceed 75 million matches in order to earn the concessional rate of Rs. 3.75 per gross boxes of 50 matches each. The proviso,
however, did not say, when the declaration should be filed. The purpose behind that proviso was to enable only bona fide small manufacturers of
matches to earn the concessional rate of duty by filling the declaration. All small manufacturers whose estimated clearance was less than 75 million
matches would have availed themselves of the opportunity by making the declaration as early as possible as they would become entitled to the
concessional rate of duty on their clearance from time to time. It is difficult to imagine that any manufacturer whose estimated total clearance during
the financial year did not exceed 75 million matches would have failed to avail of the concessional rate on their clearances by filing the declaration
at the earliest possible date. As already stated, the respondent filed its application for licence on September 5, 1967 and made the declaration on
that date. The concessional rate of duty was intended for small bona fide units who were in the field when the notification dated September 4,
1967 was issued, the concessional rate was not intended to benefit the large units which had split up into smaller units to earn the concession. The
tendency towards fragmentation of the bigger units into smaller ones in order to earn the concessional rate of duty has been noted by the Tariff
Commission in its report (see the extract from the report given at p. 500 in 283142 The whole object of the notification dated September 4, 1967
was to prevent further fragmentation of the bigger units into smaller ones in order to get the concessional rate of duty intended for the smaller units
and thus defeat the purpose which the Government had in view. In other words, the purpose of the notification was to prevent the larger units who
were producing and clearing more than 100 million matches in the financial year 1967-68 and who could not have made the declaration, from
splitting up into smaller units in order to avail of the concessional rate of duty by making the declaration subsequently. To achieve that purpose, the
Government chose September 4, 1967, as the date before which the declaration should be filed. There can be no doubt that any date chosen for
the purpose would, to a certain extent, be arbitrary. That is inevitable.
9. Rule 8 of the Central Excise Rules, 1944, made under Sections 6, 12 and 37 of the Act reads:
Power to authorise exemption from duty in special cases- (1) The Central Government may from time to time, by notification in the Official
Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable
on such goods.
(2) The Central Board of Revenue may by special order in each case exempt from the payment of duty, under circumstances of an exceptional
nature an excisable goods.
10. The concessional rate of duty can be availed of only by those who satisfy the conditions which have been laid down under the notification. The
respondent was not a manufacturer before September 4, 1967 as it had applied for licence only on September 5, 1967 and it could not have made
a declaration before September 4, 1967 that its total clearance for the financial year 1967-68 is not estimated to exceed 75 million matches. In the
matter of granting concessions or exemption from tax, the Government has a wide latitude of discretion. It need not give exemption or concession
to everyone in order that it may grant the same to some. As we said, the object of granting the concessional rate of duty was to protect the smaller
units in the industry from the competition by the larger ones and that object would have been frustrated, if, by adopting the device of fragmentation,
the larger units could become the ultimate beneficiaries of the bounty. That a classification can be founded on a particular date and yet be
reasonable, has been held by this Court in several decisions (see 290103 289079 265296 and 282967 . The choice of a date as a basis for
classification cannot always be dubbed as arbitrary even if no particular reason is forthcoming for the choice unless it is shown to be capricious or
whimsical in the circumstances. When it is seen that a line or a point there must be and there is no mathematical or logical way of fixing it precisely,
the decision of the legislature or its delegate must be accepted unless we can say that it is very wide of the reasonable mark. See Louisville Gas
Co. v. Alabama Power Co.-240 u/s 30 at 32 (1927) per Justice Holmes.
11. We set aside the orders of the High Court, dismiss the writ petitions and allow the appeals with costs.
