B.N. Lokur, J. - (1.) This petition under Article 226 of the Constitution was originally filed by Messrs. R. R. Steels and Alloys Limited, a public limited company, (hereinafter referred to as "the Company"), who hold a licence for manufacture of steel ingots. The company purchases scrap of iron and steel and after welting it with the aid of an electric are furnace, shapes the molten scrap into steel ingots. Under an agreement made with Messrs R. R. Rolling Mills, a partnership firm, (hereinafter referred to as "the firm"), the company makes over the ingots manufactured by it to the firm for rolling them into different sections of steel, namely, Rounds, Flats etc. which articles fall within the excisable goods mentioned in Tariff item 26-AA (ia) in the First Schedule to the Central Excise Act, 1944. Under that item, these articles are leviable to excise duty at the rate of Rs. 50.00 per metric tonne plus the excise duty leviable on steel ingots under Tariff item 26, which for the purpose of this petition is, Rs. 75.00 per metric tonne. Thus, these articles and other articles covered by Tariff item 26-AA (ia), (hereinafter referred to as steel products") are leviable to excise duty of Rs. 125.00 per metric tonne.
(2.) There are two processes for manufacture of steel products from iron and steel scrap; the scrap is straightaway re-rolled into steel products (hereinafter referred to as "re-rolling process") or the scrap is melted in art electrical are furnace and manufactured into steel ingots which are then re-rolled into steel products (hereinafter referred to as the "melting process").
(3.) Certain exemptions from excise duty have been granted modified and rescinded from time to time by the Central Government in exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, in respect of the steel products. Some of the relevant notifications have been produced as annexures to the petition and the counter-affidavit filed on behalf of the respondents, who are the Union of India, the Collector of Central Excise, Allahabad, and the Assistant Collector of Central Excise, Bareilly; some others were referred to at the time of the hearing of this petition. Notification No. 75 of 1962 dated the 24th April, 1962, partially exempted steel ingots produced from materials specified therein, but reference is made to this notification only to be stated that the exemption was taken away by rescinding the notification on the 1st March, 1964. Another notification deserving notice is notification No. 206 of 1963, dated the 30th November, 1963, which exempted steel products from the whole of the excise duty leviable, if made from any of the following materials or a combination thereof:- (i) fresh unused re-rollable scrap on which the appropriate amount of duty of excise has already been paid, (ii) semi-finished steel including blooms, billets, slabs, sheets, bars, timbers and hoe bars, on which the appropriate amount of duty of excise has already been paid; (iii) old and used re-rollable scrap. Notification No. 63 of 1964 dated the 1st March, 1964, extended partial exemption from excise duty to steel ingots produced from fresh unused steel molten scrap. The combined effect of Notification Nos. 206 of 1963 and 63 of 1964 would be that steel products manufactured by the re-rolling process, whether from fresh unused scrap or from old and used scrap, is wholly exempt from duty while steel products manufactured by the melting process from fresh unused scrap is partially exempt from duty but steel products manufactured by the melting process from old and used scrap is not entitled to any exemption. This situation is challenged by the company on the ground that it entails arbitrary discrimination between manufacturers of steel products by the melting process (hereinafter referred to as "the melters") and manufacturers of steel products by the re-rolling process (hereinafter referred to as "the re-rollers") and also involves unfair competition between the two categories of manufacturers of steel products, resulting in an unreasonable restriction on the right of the melters to carry on business with confiscatory consequences; in other words, the company contends that the situation created by total exemption in favour of the re-rolles and denial there of to the melters is hit by Article 14, 19 (1) (g) and 31 of the Constitution.;