Sinha, C. J. - (1.) By this petition, under Art. 32 of the Constitution, the petitioners challenge the constitutionality of certain provisions of the Central Excises and Salt Act (1 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 (1960) and the notifications thereunder, to be hereinafter set out. The first petitioner is the Orient 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.)
(2.) 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 Company, which-runs a weaving mill at 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 lakh yards of cloth (41/2 million yards). The paid-up-capital of the company is Rs. 7,10,000, 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 October 1, 1955, and has been sustaining losses ever since it started functioning "due to adverse circumstances in the State of Orissa and due to the heavy taxation and duties." Ever since the Company started production, it has been paying excise duty - Rs. 2,16,670 for the year 1958-59, Rs. 1,82,529 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 leviable under S. 3 of the Act. The petitioners chief grievance is that the respondent No. 5, the Society, is being granted exemption from the excise duty though, it is contended it has installed 100 looms in the same premises and 100 workmen are employed therein. The authorised capital of the aforesaid Society is Rs. 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 bye-law 35. The Society, it is further contended, is for all practical purposes similarly situated along with 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 No. 74 of 1959, dated July 31, 1959 and Notification No. 70 of 1960, dated April 30, 1960, issued by the Ministry of Finance, Government of India, (Department of Revenue). The notifications are in these terms: "Government of India, Ministry of Finance (Department of Revenue) New Delhi. The 31st July, 1959. G. S. R. In pursuance of sub-rule (1) of rule 8 of the Central Excise Rules, 1944 as in force in India and as applied to the State of Pondichery the Central Govt. hereby exempt cotton fabrics produced by any co-operative society formed of owners of cotton powerlooms, which is registered or which may be registered on or before the 31st March, 1961 under any law relating to 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 has been exempt from excise duty for three years immediately preceding the date of his joining such society; (b) that the total number of cotton powerlooms owned by the co-operative society is not more 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 powerlooms in his ownership and actually operated by him does not exceed four and did not exceed 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 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 the 31st March, 1961 (No. 74/59) Sd/-lllegible 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. The 10th April, 1960. Notification Central Excise GSR. In pursuance of sub-rule (1) of rule 8 of the Central Excise Rules, 1944 as in force in India and as applied to the State of Pondichery and in supersession of the Notification of the Govt. of India, Ministry of Finance (Department of Revenue) No. 74/59-Central Excise dated the 31st July, 1959 the Central Govt. hereby exempts cotton fabrics produced on powerloom owned by any co-operative society or owned by or allotted to the members of the society, which is registered or which may be registered on or before the 31st March 1961 under any law relating to co-operative societies from the whole of the duty leviable thereon, subject to the following conditions:- (a) that every member of the co-operative society who has been a manufacturer of cotton fabrics on powerlooms has been exempt from excise duty for three years in immediately preceding the date of his joining such society; (b) that the 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. (c) that each member of the co-operative society produce a certificate from the State Govt. concerned or such officer as may be nominated by the State Govt. that he is a bona fide member of the society and that the number of cotton powerlooms owned by or allotted to him and actually operated by him does not exceed four and did not exceed 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 societies and (b) 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 the notification; and (ii) for a period of three years from the date of commencement of production in respect of cooperative 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/lllegible G. P. Durairaj. Under Secretary to the Govt. of India No. 70/60/P. No. 13/1/59-CXIII"
(3.) The Company made a representation to the relevant authorities but to no purpose. As the Company is to pay excise duty on the "cotton fabrics" produced by it, its cost of production as compared to that of the Society was higher by 12.5% in 1958 and 10% in 1959 with the result that the Company is at a disadvantage, as compared to the Society in the competitive market of Orissa. Due to heavier taxation on fine cloth, the Company has abandoned the production of that quality and has 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 business will be very adversely affected. It is contended that R. 8 of the Central Excise Rules, 1944, under the Act, vests the Government with unguided power wholly or partially to exempt any goods from the duty leviable under the Act, and is therefore, clearly discriminatory as against the petitioner. The Government notifications exempting the Society or such other similar societies as may hereafter come into existence, have the effect of violating the petitioners fundamental rights under Arts. 14 and 19 (1) (f) and (g) of the Constitution. It is also contended that the power conferred upon the Government under the Rules aforesaid, being unguided and uncontrolled, goes beyond the permissible limits of a valid delegation, and is therefore void. The petitioners moved the High Court of Orissa under Art. 226 of the Constitution, challenging the constitutionality of the Government measures aforesaid but the Court refused to grant any relief on the ground that it had no jurisdiction to issue any writ to the Union Government in New Delhi. In the premises the petitioners pray for a declaration that the levy of excise duty on the piece-goods produced by the petitioners be declared to be unconstitutional and for a direction that the respondents 1-4 treat them on the same footing as the Society and exempt them from the payment of the excise duty as also for an appropriate writ or order for the enforcement of their fundamental right guaranteed under Arts. 14 and 19(1)(f) and (g) of the Constitution.;