Murthy Match Works Vs. The Asstt.
Collector of Central Excise  INSC 13 (17 January 1974)
SARKARIA, RANJIT SINGH
CITATION: 1974 AIR 497 1974 SCR (3) 121 1974
SCC (4) 428
CITATOR INFO :
RF 1974 SC2349 (8) R 1975 SC 583 (36) RF 1975
SC1146 (18) RF 1979 SC 478 (117) F 1980 SC 286 (44,45,46) RF 1984 SC1562 (11) R
1987 SC2117 (28)
Central Excise & Salt Act, 1944--S. 37
and the notification issued there under whether court can review legislative
judgment--Constitution of India--Reasonable classification of principles for
The match industry in India has grown over
From the point of view of manufacturing
techniques the safety match industry comprises of two distinct categories:
the machanised sector occupied by a few big
manufacturers and the non-mechanised sector comprising varying sizes of
production units. The Government classified the safety match manufacturers into
four categories depending on the quantity turn out and other relevant factors.
But the Tariff commission recommended the abolition of sub-classification for
the purpose of levying excise duty and suggested separate scales of excise duty
to be levied for four classes of units, namely, A, D, C and D. Based on these
recommendations the slab system of excise duty was abandoned by the Government
and the category wise rate was adopted.
As a result of the adoption of the
differential duty scheme the advantages offered to the 'C' group went to the
'B' group which in turn resulted in fall in production. It also generated
pseudo--C category producers from out of the erstwhile B category which
ultimately eliminated C category producers. The Government, therefore, withdrew
the tax concession to C category and equated it with B category.
The Government of India had from time to time
issued notifications under s. 37 of the Central Excise and Salt Act, 1944. The
notification issued in 1967 levied excise duty on the basis of manufacture of
matches of which "any process is ordinarily carried on with the aid of
power". As a result of this notification the B and C categories of old
were now treated equally. The change in classification of the manufacturers was
based on the use of power which in turn had a rational relation to the techniques
and processes of production and their ability to bear the burden of the levy.
This was done on the basis of recommendations of the Central Excise
The High Court refused to strike down the
notification. it was contended in this Court that this unsocialistic step had
left the small producers in the cold and virtually compelled them to retire
from the industry and is thus discriminatory.
Dismissing the appeals to this Court,
HELD This is a criticism of legislative
judgment, not a ground of judicial review. The Court is being invited to compel
the legislative and executive wings to classify but from the judicial
inspection tower the court may only search for arbitrary and irrational
classification and its obverse, namely, capricious uniformity of treatment
where a crying dissimilarity exists in reality. Unconstitutionality and not
unwisdom of a legislation is the narrow area of judicial review. [129 E] The
question of classification is primarily for legislative judgment and ordinarily
does not become a judicial question.
The power to classify being extremely broad
and based on diverse considerations of executive pragmatism the judicature
cannot rush in where even the legislature warily treads. All these operational
restraints on judicial power must weigh more emphatically where the subject is
[130 E] It is equally well settled that
merely because there is room for classification it does not follow that
legislation without classification is always unconstitutional. The court cannot
strike down a law because it has not made the classification which commends to
the court as proper. Nor can the legislative power be said to have been
unconstitutionally exercised because within the class a subclassification was
reasonable but has not been made. [130 H] 122 In the present cage, a pertinent
principle of differentiation, which is visibly linked to production prowess,
has been adopted in the broad classification of power-users .and manual
manufacturers. It is irrational to castigate this basis as unreal. [131 C] K.T.
Moopil Nair v. State of Kerala,  3 S.C.R. 77, State of Kerala v. Haji K.
Hail Kutty Naha. C. As Nos 1052 etc. of 1968; judgment dated August 13, 1968
and Khandige Sham Bhat v. The Agricultural Income Tax Officer,  3 S C.R.
809, 817, followed.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 1752 to 1769 of 1970 From the Judgment and Order dated the 24th April,
1970 of the Mardas High Court in Writ Petitions Nos. 239, 346, 999, 1000, 1007,
1030, 1071, 1101, 1102, 1223, 1242, 1270, 1271, 1724, 1725, 1748, 2640 and 3252
Y. S. Chitle, V. M. Ganpule, K. R. Choudhury
and K. Rajendra Choudhury, for the appellants.
L. N. Sinha, Solicitor General of India, S.
P. Nayar, and M. N. Shroff, for the respondents.
The Judgment of the Court was delivered by
KRISHNA IYER, J.-The core of the contention urged by the appellants in these
various appeals filed by certificate under art. 133(1)(a) & (c) of the
Constitution is that the excise duty on matches sought to be levied on these
mediumsized manufacturers of Shivakashi wears the mask of equality but in its
true face bears the marks of unequal justice violative of art. 14 of the
Constitution of India.
Shri Chitale, learned counsel for the
appellants, has focused his arguments on one grievance only and, we think, with
good reason that the discriminatory fiscal treatment of his clients is
unconstitutional, the vice being treatment of dissimilar categories similarly.
To compress his whole argument in a single sentence, it is that the appellants,
small manufacturers of matches, have been subjected by the impugned
notification to excise duty at the same onerus rate as has been applied to
larger producers, wilfully indifferent to a historically well recognised classification
between the smaller and the larger group of, match manufacturers, and the
injury sustained flows from this failure to classify and deal differentially
with sets of producers who are unequal in their economic capabilities in the
matter of production and marketing a sort of traumatic egality. In brief, equal
treatment of unequal groups may spell invisible yet substantial discrimination
with consequences of unconstitutionality. That dissimilar things Should not be
treated similarly in the name of equal justice is of Aristotelian vintage and
has been, by implication, enshrined in our Constitution.
The facts which unfold the case of the
appellants may now be set out. The match industry in India has grown over the
decades and Shivakashi occupies an important place in the production geography
of matches. From the point of view of manufacturing techniques, the safety
match industry in our country comprises two distinct categories the mechanised
sector occupied by a few big whales and the non123 mechanised sector comprising
varying sizes of production units ranging from the small fry organised on a
cottage industry basis to considerable producers who have developed
manufacturing and marketing muscles sufficient to compete with the power-using
big four-the WIMCO, the AMCO, the ESAVI, and the Pioneer. The Tariff
commission, Report on this industry has stated "Unlike units in the
mechanised sector which have powerdriven equipment for carrying out all the
important operations including manufacture of splints and veneers, frame
filling dipping, box making, etc., those in categories 'B' and 'C' follow
almost identical manufacturing process, obtaining their splints and veneers
from outside suppliers and getting such important. operations as box-making and
frame filling done by outside domestic labour on piece-rate basis. Only such of
the processes, as dipping, box filling, banderolling and packing which under
Excise or Explosive Act regulations cannot be entrusted to outside labour are
carried out in the factory sheds of the units and the workers employed for
these also are mostly paid on piece-rate basis. All the operations, whether,
undertaken in the factory premises or passed on to outside piece-work labour to
be carried out in the homes of the latter conjointly with other members of the
family, are done by manual process. The same system is followed by 'D' category
units as well, except those sponsored by K. & V. 1. C. some of which
manufacture their own splints and veneers," Classified on the basis of
quantity turn-out and other germane factors, a fourfold categorisation into
'A', 'B', 'C' and 'D' was extent in the industry roughly corresponding to the
techniques of production and the use of power adopted by each. The Tariff
Commission explained this aspect and reported on the operation of the
differential excise levy system on production and trade practices. Counsel for
the appellants has rested his case of discrimination by subversive equality or
rather non-discrimination where a deserving differentiation is the desideratum,
on the findings of the Tariff Commission report. We might as well give copious
but relevant excerpts from it to discern the foundation. of the argument. The
Report runs on to state "As indicated in Appendix 11, according to the
excise tariff classification units in the match industry now stand grouped into
four classes, namely 'X,'B','C'and'D' not on any technological differentiation
but on the basis of output-'A' class comprising factories whose annual output
exceeds 4,000 million match sticks, 'B' class comprising factories whose annual
output exceeds 500 million match sticks but does not exceed 4,000 million match
sticks, 'C' class comprising factories whose annual output exceeds 50 million
match sticks but does not exceed 500 million match sticks and 'D' class
comprising factories whose arm, all output doesnot exceed 50 million match
sticks. According to this classification the factories belonging to WIMCO, AMCO
and ESAVI fall under category 'A, the rest comprising the units 124 in the non-mechanised
sector fall under the other three categories, namely 'B', 'C', and 'D',
"selling system (iv) Small
producers.-The system of selling adopted by these manufacturers varied
according to their status and financial resources. The system almost
universally followed by such producers is to make outright sales, without any
discount or commission to wholesalers, both out-station and local. The bigger,
among such producers belonging to category 'B' are reported in some case s to
sell as well through dealers and sole selling agents. Many of them have also
got their own depots and regular stockists in a limited number of out-station
centres. As regards 'C' and 'B' class producers, the system of sales covert the
following variants according to facilities available to them : (i) outright
,sales to wholesale merchants, local or outstation; (ii) sales through joints
schemes of depots which stock different brands from several producers; (iii)
sales by sending goods in their own vans in bulk to distributors and dealers in
nearby states; and (iv) .sales through their own salesman who deliver goods in
local markets on the shopkeepers on bicycles (a special feature of 'D' class
From the replies received by us from units in
the small scale sector it would appear that those in category 'B' situated in
the Shivakasi/Sattur/Kovilpatti area have over some years in the past
established contacts and developed a fairly wide selling system enabling them
to cater to the markets in distant States including West Benga l, U.P., Delhi,
Gujarat and practically all the States in the South. The size of their
operations has all along ,enabled them to undertake supply in wagon loads at
the concessional rates, which is an important consideration for developing
distant markets to be served by rail transport." "Although they are
not comparable to WIMCO in having a country-wide distributive Organisation,
these units evinced till recently all the symptoms of a steady and healthy
development, some of them having reached the maximum limit (4,000 million
sticks) of Category 'D' with a reputation for their brands in far off markets.
They had the resources to support this progressive development and a few of
them have represented that with an improvement of the climate of the trade
which has been completely vitiated by the slab system of excise duties (see
paragraph 11) and given necessary facilities they would be able to reestablish
the markets they had assiduously built up and even initiate a scheme of gradual
mechanisation of important processes in their factories for the betterment of
the quality of their products.
In the present context, it is worth taking
note of the fact -that the credit for an expanding market for matches produced
in -the non-mechanised sector is attributable largely to the sales endeavours
of factories which had grown to be 'B'class units that had necessary resources
for the purpose and were able the maintain quality." * * * * 125 "In
contrast to the 'B' class units, the selling system of those in category 'C'
betokens a position of serious weakness.
Except the C' class units which have been
brought into existence by fragmentation of bigger units and still operate under
the protecting wing of the sponsor (see paragraph 11), the new-comers in this
class who have no tradition, functions mostly with meagre financial resources
and have no comparable advantage. Unable to sell their output in wagon loads
they are compelled to dispose of it to local financing-cum-trading agencies at
rock bottom prices dictated by the latter for what has now come to be called
consignments of "assorted labels". This, in effect, involves a
complete surrender by the 'C' class producers to the benefit of differential
excise rebate allowed to them to the detriment of others as well. The low
purchase prices of the goods enable such agencies to send consignments of mixed
brands to distant places in wagon-loads and find a market by of fering to the
wholesalers there extremely competitive rates vis-a-vis the usual rates charged
by'B'class units, the retail selling prices being the same for both. Our
examination of the problem of the small scale units in category 'C' indicates
that basically their problem is not different from other small industries
suffering similar exploitation by middlemen. As in other cases they can best be
extricated from the grip of the middlemen by the establishment of suitable
sales cooperatives. We draw the attention of the State Governments to this
problem for initiating necessary measures for the purpose, particularly of the
Government of Madras, as the concentration of such units is in that State where
the problem presents itself in the most acute form, but offers favourable
prospects for the establishment of several full-fledged sales cooperatives with
adequate membership." * * * * "There is sufficient evidence to
indicate that the effects have been quite widespread and recourse has been
taken to fragmentation on a fairly extensive scale." * * * * The Sivakasi
Chamber has stated as follows "In the face of such unhealthy competition
from 'C' factories and the disadvantages over 'A', the 'B' is unable to market
its production resulting in heavy accumulation of stocks. It is now felt by 'B'
class factories that there is no other salvation for them except to convert 'B'
into 'C' class factories in benami names, as few have since done. It may be
pointed out that 16 long established 'B' factories have reduced themselves to
'C' class with effect from 1st April, 1963 in this Division alone in addition
to the numerous factories who have already converted from 'B'to'C'."As
regards similar fragmentation of the larger units in category 'C' almost
identical views have been expressed by the Tirunelevely Match Association,
representing 150 'C' class match factories,in the following words : "In
view of the vast difference of excise duty between. 1st and 3rd slab of excise
duty in 'C'.Class there is a tendency and practice among the manufacturers to
work in the first slab only and to stop therewith.
In this way starting of small new units with
the motive to enjoy rebate in the first slab 126 of excise duty has become
common and this has clearly resulted in loss of revenue, as well as working of
units in less than the permitted Capacity. It has been brought to our.
notice that the situation has deteriorated to
such an extent as a result of the slab system that some erstwhile 'B' units
have suspended their manufacturing activities altogether and instead found it
more profitable to patronise a number of newly established 'C' class units.
Their taking over the products of the latter
in their new role as a trading-cum-financing agency has been facilitated by
their established market connections and resourcefulness. Instances of 'B'
category units owned by individual proprietors downgrading themselves into
category 'C' and having a number of 'C' class units set up in the name of near
relations have also been noticed by us in the course of our visits to factories
in the Sivakasi/Sattur/ Kovilpatti area. The allegations about extensive
fragmentation were not denied by anybody at the public inquiry." * * * * *
"The volume of evidence, both direct and indirect, that we have received
in this connection fully testifies to the fact that 'large scale fragmentation
of 'B' and 'C' class units has taken place directly as a result of the slab
system-all motivated by the attraction offered by the large duty differential
of 65 np for the lowest slab rate under category 'C"'.
* * * * * "From the evidence received by
us "B" and "C" class units 'have to offer their match boxes
generally at a discount of Rs. 2 to Rs. 3 per bundle of 5 gross boxes, i.e. at
about 40 to 60 nP. per gross less than the price charged by WIMCO. While the
quality of matches produced by 'B' class manufacturers has the reputation of
being generally good and comparable to WIMCO's matches, the 'C' class units do
not have such reputation in the market. The 'C' class manufacturers are
handicapped by a further disadvantage on account of the lower scale of their
production, inasmuch as they cannot usually offer a wagon-load of matches at a
time for despatch to the upcountry markets for sale and have generally to bear
the central sales tax.
After carefully considering all aspects of
the case including estimates of costs of the manufacturers, we are of opinion
that a differential of 20 nP. in the rates of excise duty per gross of match
boxes between 'A' and 'B' class units and a differential of 30 nP.
between 'B' and 'C' class manufacturers would
be quite adequate to safeguard their respective interests. On similar
considerations a differential of 35 nP.
between 'C' and 'D' class units would also be
justified. For reasons stated in paragraph 11 and as stressed therein, we are
definitely against continuance of the slabs introduced in classes 'A' 'B' and
'C' carrying dif ferential rates of excise duty, which have entailed serious
repressions on the entire industry.
We, therefore, recommend the following scales
of excise duty to be levied for the four classes respectively :
'For 'A' class................Rs 4.60 per
gross boxes 'For 'B' class................Rs.4.40 per gross boxes For 'C'
class.................Rs.4.10 per gross boxes 'For 'D'
class................Rs.3.75 per gross boxes 127 The Tariff Commission
recommended the abolition of subclassification for the purposes of excise duty
and suggested separate scales of excise duty to be levied for the four classes
of units, namely, 'A', 'B' ' C' and 'D'. Based on these recommendations, the
slab system of excise duty was abandoned by Government and the category-wise
rate was adopted. The impact on production of the differential duty scheme was
a process of splintering of the 'B' group to inhale the advantages offered to
the 'C' group resulting in a reduction in total production, thanks to the
thinning tendency in the 'B' group. Indeed, the fiscal misdirection, by showing
concessional rates to the 'C' category as against 'B' category, generated
pseudo-'C' category producers from out of the erstwhile 'B' category so that the
bona fide small scale manufacturers falling in the C' category were flooded
out. Moreover, the genuine C' category manufacturers were exploited by the
middlemen who snapped up the margin of tax concession for themselves, defeating
the object of concessional duty for the small producer. This dilemma induced
Government to revise its fiscal thinking and led to the impugned notification
which withdrew the tax concession to the C' category and equated it with the
Section 3 of the Central Excise and salt Act,
1944 empowers the levy and collection of duties on goods produced or
manufactured in the State, the rate being set forth in the First schedule to
the Act. Item 38 in the First Schedule relates to matches. Section 37 contains
the rulemaking power and S. 37(1) confers power on the Central Government by
rules to exempt any goods from the whole or any part of the duty imposed by the
Act. Under this power the Central Government issued a notification adopting a
"classification" approach for extending concessional rates.
Originally, a broad classification was made as between matches manufactured by
use of machinery and those by other means.
Among the second category a
sub-classification was made as 'B', C' and ID' for the purposes of concessional
rates. In 1966, a uniform leavy of Rs. 4.15 per gross of match boxes was made
doing away with 'B' to ID' classes. In 1967 this position was revised by
notification No. 162 of 1967, which is challenged before us. It reads "In
exercise of the powers conferred by subrule (1) of rule 8 of the Central Excise
Rules, 1955, and in supersession of the Notification of the Government of India
in the Ministry of Finance (Department of Rev enue and Insurance) No. 115/67
Central Excise, dated the 8th June, 1967, the Central Government hereby exempts
matches specified in column (2) of the Table below, falling "under Item
No. 38 of the First Schedule to the Central Excise and Salt Act, 1944 (1 of
1944) and cleared by any manufacturer for home consumption, from so much of the
duty of excise leviable thereon as is in excess of the rate specified in the
corresponding entry in column (3) of the said table:
128 TABLE Category Description of matches
Rate (Rs per gross of boxes 50 matches each)
1. Matches in or in relation to the
manufacture of which any process is ordinarily carried on with the aid of power
.. 4 .60
2. Matches in or in relation to the
manufacture of which no process is ordinarily carried on with the aid of power
.. 4 .30 -----------------------------------------------------------Provided
that-(1) Matches referred to in category 2 and cleared for home consumption
during the financial year from a factory from which the total clearance of
matches during that year is not, as per declaration made by the manufacturer
under this notification ' estimated to exceed 75 million matches, shall be
allowed to be cleared at the rate of Rs.
3.75 per gross of boxes 5O matches each, upto
75 million matches and the quantity of matches, if any, cleared in excess, and
upto 100 million matches shall be allowed to be cleared at the rate of Rs. 4.30
per gross of boxes of 50 matches each; and if the clearance in such factory
exceeds 100 million matches during the financial year, the manufacturer shall
be required to pay at the rate of Rs. 4 30 per gross of boxes of 50 matches
each, on the entire quantity cleared during the financial year........"
The upshot of this system of duty is that 'B' and 'C' categories of old will
now be treated equally and the grievance of the petitioners, who are 'C'
category manufacturers is that clubbing them together with the far stronger 'B'
type manufacturers is virtually condemning them to gradual extinction. Treating
unequals as equals and compelling both to bear equal burdens is to show the 'C'
type manufacturers the way out. It is urged that the test of capacity of each
group in the industry to bear the levy, recognised in the past and approved in
the Tariff Commission Report, is given the go-bye now.
The contention, in reply, by the State is
that at present the classification of the manufacturers is based on the use of
power which in turn has a rational relation to the techniques and processes of
production and their ability to bear the burden of the levy. It is further
argued that the Government did give effect to the recommendations of the Tariff
Commission regarding the four-fold classification but, finding certain evils
developing, the Central Excise Re-organisation Committee went into the subject
and suggested methods to re-orient the scale and scope of excise duty. This
Committee's report led to the current notification and the dichotomy between
mechanised and nonmechanised industry proceeds on a rational differentia which
has a substantial relation to the legislative end.
There is no doubt that in the past among the
non-mechanised manufacturers of matches a further classification based on
viability 129 had been made. It is also true that the financial resources, the
capacity to command a market on their own without depending on intermediaries,
etc., marked off the 'B' category from the 'C' category. But then experience
gathered subsequently disclosed certain evils which the State took note of and
endeavoured to set right. Ulitmately the present notification was issued
obliterating the distinction which gave a concessional edge to the 'C' group
over the 'B' group.
The learned counsel for the appellants
persuasively pleaded that this unsocialistic step has left the small producers
like his clients in the cold and virtually compelled them to retire from the
industry. May be, there is force in this grievance. Instead of protecting the
tiny manufacturer from the injurious intermediary and inhibiting the larger producer
from resorting to the device of self-division and other make believe tactics, the
State has resorted to a policy of equal levy from both which, according to the
counsel, hits the poor and helps the better-off. This is a criticism of
legislative judgment, not a ground of judicial review.
We agree that bare equality of treatment regardless
of the inequality of realities is neither justice nor homage to the
constitutional principle. Anatole France's cynical statement comes to our mind
in this context "The law, in its majestic equality, forbids the rich as
well as the poor to sleep under bridges, to beg in the streets, and to steal
bread." The forensic focus turns on unconstitutional nonclassification of
the 'B' and 'C' categories and the vice of lugging all non-mechanised
'Producers together into one mass. The Court is being invited to compel the
legislative and executive wings to classify, but we feel that from the judicial
inspection tower the Court may only search for arbitrary and irrational
classification and its obverse, namely, capricious uniformity of treatment
where a crying dissimilarity exists in reality.
Right at the threshold we must warn ourselves
of the limitations of judicial power in this jurisdiction. Mr. Justice Stone of
the Supreme Court of the United States has delineated these limitations in
United States v. Butler(1) thus :
"The power of courts to declare a
statute unconstitutional is subject to two guiding principles of decision which
ought never to be absent from judicial consciousness. One is that courts are
concerned only with the power to enact statutes, not with their wisdom. The
other is that while unconstitutional exercise of power by the executive and
legislative branches of the government is subject to judicial restraint, the
only check upon our exercise of power is our own sense of selfrestraint For the
removal of unwise laws from the statute books appeal lies not to the courts but
to the bellot and to the processes of democratic government." In short,
unconstitutionality and not unwisdom of a legislation is the narrow area of
judicial review. In the present case unconstitu(1) 297 U.S. 1=56 Sup.Ct.312=80
L. ed.477 (1936)=American Constitutional Law--hird edn. by Tresolini and
130 tionality is alleged as springing from.
lugging together two dissimilar categories of match manufacturers into one
compartment for like treatment.
Certain principles which bear upon
classification may be mentioned here. It is true that a State may classify
persons and objects for the purpose of legislation and pass laws for the
purpose of obtaining revenue or other objects.
Every differentiation is not a
discrimination. But classification can be sustained only if it is founded on
pertinent and real differences as distinguished from irrelevent and artificial
ones. The constitutional standard by which the sufficiency of the differentia
which form a valid basis for classification may be measured, has been
repeatedly stated by the courts. If it rests on a difference which bears a fair
and just relation to the object for which it is proposed, it is constitutional.
To put it differently, the means must have nexus with the ends.
Even So, a. large latitude is allowed to the
State for classification upon a reasonable basis and what is reasonable is a
question of practical details and a variety of factors which the court will be
reluctant and perhaps ill-equipped to investigate. In this imperfect world
perfection even in grouping is an ambition hardly ever accomplished. In this
contest, we have to remember the relationship between the legislative and
judicial departments of government in the determination of the validity of
classification. Of course, in the last analysis courts possess the power to
pronounce on the constitutionality of the acts of the other branches whether a
classification is based upon substantial differences or is arbitrary, fanciful
and consequently illegal, At the same time, the question of classification is
primarily for legislative judgment .and ordinarily does not become a judicial
question. A power to classify being extremely broad and based on diverse considerations
of executive pragmatism, the judicature cannot rush in where even the
legislature warily treads. All these operational restraints on judicial power
must weigh more emphatically where the subject is taxation.
One facet of the equal protection clause,
upheld by the Indian Courts and relevant to the present case, is that while
similar things must be treated similarly, dissimilar things should not be
treated similarly. There can be hostile discrimination while maintaining a
facede of equality. Procrustean cruelty cannot be equated with guarantee of
constitutional equality, and we have to examine whether such is the lot of the
This Court has in several rulings highlighted
this sensitive under-side of equal protection. Indeed, the complaint of the
petitioners is that by abolition of the difference in fiscal burden between
categories 'B' and 'C' an insidious subversion of equal treatment has been
Another proposition which is equally settled
is that merely because there is room for classification it does not follow that
legislation without classification is always unconstitutional. The court cannot
strike down a law because it has not made the classification which commends to
the court as proper. Nor can the legislative power be said to have been
unconstitutionally exercised because within the class a sub-classification was
reasonable but has not been made.
131 It is well-established that the-modern
State, in exercising its sovereign power of taxation, has to deal with complex factors
relating to the objects to be taxed, the quantum to be levied, the conditions
subject to which the levy has to be made, the social and economic policies
which the tax is designed to sub serve, and what not. In the famous words of
Holmes, J., in Bain Peanut Co. v. Pinson(1) :
"We must remember that the machinery of
Government would not work if it were not allowed a little play in its
joints." In the present case, a pertinent principle of differentiation,
which is visibly linked to productive prowess, has been adopted in the broad
classification of power-users and manual manufacturers. It is irrational to
castigate this basis as unreal. Indeed, the soundness of this distinction is
not denied. The challenge is founded on the failure to miniclassify between
large and small sections of manual match manufacturers. But ours is not to
reason why, that being a policy decision of Government dependent on pragmatic
wisdom playing on imponderable forces at work.
Our jurisdiction halts where the
constitutional touchstone of a rational differentia having a just relation to
the legislative and of revenue raising is satisfied. Gratuitous judicial advice
on the socialistic direction of fiscal policy is de trop. We desist from that
enterprise and leave the petitioners and men of his ilk to seek other
democratic remedies in that behalf, it being beyond our area normally to
demolish the tax structure because micro-classification among a large group has
not been done by the State.
Absolute justice to every producer is a self-defeating
adventure for any administration and genera I direction, not minute
classification, is all that can be attempted. For these reasons we find
ourselves in agreement with the High Court in its refusal to strike down the
notification under S. 3 of the Central Excise and Salt Act, 1944.
Before concluding we may make a passing
reference to the few decisions cited by appellants' counsel. In K. T. Moopil
Nair v. State of Kerala(2), Sinha, C.J., emphasized that art. 14 may be
violated even though the law may, on the face, be equal if in substance unequal
things are treated equally. In State of Kerala v. Haji K. Haji Kutty Nahia(3),
Shah J., observed :
"There objects, persons or transactions
essentially dissimilar are treated by the imposition of a uniform tax,
discrimination may result, for, in our view, refusal to make a rational
classification may itself in some cases operate as denial of equality.
A similar view has been taken in Khandige
Sham Bhat v. The Agricultural Income Tax Officer (4).
it is sound law that refusal to make rational
classification where grossly dissimilar subjects are treated by the law
violates the mandate of art. 14. Even so, where the limited classification
adopted in the present case is based upon a relevent differentia which has a
nexus to the (1)  282 US 499; 501.
(2)  3 S.C.R. 77.
(3) C.As. Nos. 1052 etc. of 1968; judgment
dated August 13, 1968.
(4)  3 S.C.R. 809,817.
132 legislative and of taxation, the. court
cannot strike down the law on the score that there is room for further
classification. Refusal to classify is one thing and it bears on
constitutionality, not launching on micro classification to work out perfect
justice is left to executive expediency and legislative judgment and not for
forensic wisdom. "The relationship between the legislative and judicial
departments of government in the. determination of the validity of
classification is wellsettled...... the authorities state with unanimity that
the question of classification is primarily for the legislature and that it can
never become a judicial question except for the purpose of determining, in any
given situation, whether the legislative action is clearly unreasonable. The
legislative classification is subject to judicial revision only to the extent
of seeing that it is founded on real distinctions the subjects classified, and
not on artificial or irrelevant ones used for the purpose of evading the
constitutional prohibition." (American Jurisprudence 2d : vol. 16; para
"In a classification for governmental
purposes there cannot be an exact exclusion or inclusion of persons and things.
The constitutional command for a state to
afford equal protection of the law sets a goal not attainable by the invention
and application of a precise formula.
Classification in law as in the other
departments of knowledge or practice, is the grouping of things in speculation
or practice because they agree with one another in certain particulars, and
differ from other things in those particulars. It is almost impossible in some
matters to foresee and provide for every imaginable and exceptional case, and a
legislature ought not to be required to do so at the risk of having its
legislation declared void, although appropriate and proper upon the general subject
upon which such legislation is to act, so long as there is no substantial and
fair ground to say that the statute makes an unreasonable and unfounded general
classification, and thereby denies to any person the equal protection of the
laws. Hence, a large latitude is allowed to the states for classification upon
any reasonable basis, and what is reasonable is a question of practical details
into which fiction cannot enter." (ibid para 504).
We have said enough to delineate the finer
frontiers of the jurisdiction of the court and-the legislature. Having
sensitive regard to the obligation of the State to bring the law, including the
tax law, into pulsing relationship with life, including the life of the
country's economy, we see nothing so grossly unfair as to attract the lethal
power of the court to strike down the notification under challenge.
We dismiss the appeals but in the
circumstances without costs to the respondents.