India, Represented by Secretary, Ministry
of Financ Vs. Dhanalakshmi Paper  INSC 365 (12 December 1988)
L.M. (J) Sharma, L.M. (J) Mukharji, Sabyasachi (J)
1989 AIR 665 1988 SCR Supl. (3)1051 1989 SCC Supl. (1) 596 JT 1988 (4) 677
Excises and Salt Act, 1944 Central Excise Rules 1944: First Schedule Item No.
17(3)/Rule 8(1) and Notification dated March 1, 1964 Strawboard and pulpboard--
Exemption from duty--Clause (a) proviso (3) of Notification held Ultra vires--Choice
of date-- Relevancy of.
respondent-assessee built up a factory for the manufacture of paper and paper
boards, which started production on 7.5.1964. The respondent claimed that the
duty in respect of the paper boards manufactured in the factory during the
period 7.5.1964 to June 1966 was payable at the concessional rates allowed by
the Government of India notification dated 1st March, 1964. The claim was
however rejected by the Revenue on the ground that the factory had not come into
existence on or before the 9th day of November, 1963 as stipulated in clause
(a) of Proviso (3) of the said notification.
respondent's writ application before the High Court was allowed by the Single
Judge and the appellant's Letters Patent appeal was dismissed in limine. The
High Court has accepted the respondent's contention that the date '9th of
November, 1963' mentioned in the notification was arbitrary.
behalf of the Revenue it was contended that the date (9.11.1963) was selected
because an earlier notification bearing No. 110 had required applications to be
made on or after 9.11.1963. It was further contended that a statutory provision
had necessarily to be arbitrary in the choice of date and it could not be
challenged on that ground.
of the respondent it was contended that the said date did not have any
significance whatsoever and did not bear any rational relationship to the
object sought to be achieved by the notification.
1051 PG NO 1052 Dismissing the appeal, it was
1. A rule which makes a difference between past and present cannot be condemned
as arbitrary and whimsical. [1056D]
cases where choice of the date is not material for the object to be achieved. the
provisions are generally made prospective in operation. [1056D]
Revenue has not been able to produce notification No. l 10. Unless the nature
and contents of notification No. 110 and its relevance with reference to the
present notification are indicated, it is futile to try to defend of the choice
of the date in clause (a) on its basis. [1055A;1056E]
the present case, the benefit of concessional rate was bestowed upon the entire
group of assesses referred therein and by clause (a) of Proviso (3) the group
was divided into two classes without adopting any differentia having a rational
relation to the object of the Notification. [1057F]
Clause (a) of the Proviso (3) of the Notification was ultra vires and the
benefit allowed by the Notification would be available to the entire group including
the respondent. [1057G] Union of India v. M/s. P. Match Works 2 SCR 573 Jagdish pandey v. The
chancellor, University of Bihar.
I SCR 237 and U.P. M. T. S.N.A. Samiti, Varanasi v. State of U.P.,2 SCR 453, distinguished.
Sharma v. State of Rajasthan,  Supp.SCC 45; and D.S. Nakara
v. Union of lndia,  I SCC 365 referred
APPELLATE JURISDICTION: Civil Appeal No. 6 of 1976.
the Judgment and Order dated 12.11.1973 of the Madras High Court in Writ Appeal
No. 390 of 1969.
C.V. Subba Rao and K.M.M. Khan for the Appellants K.N. Bhat and Vineet Kumar
for the Respondent.
1053 The Judgment of the Court was delivered by SHARMA, J. This appeal arises
out of a writ application allowed by the Madras High Court striking down Clause
(a) of the Proviso (3) of the Notification dated the 1st March, 1964 issued by
the Union of India in the Ministry of Finance, under Rule 8(1) of the Central
Excise Rules, 1944 and granting consequential relief. The aforesaid
notification granted certain exemptions from payment of excise duty, but the
benefit was denied to the writ petitioner, respondent before this Court, in
view of the impugned clause.
respondent assessee, a business concern functioning under the name of M/s. Dhanalakshmi
Paper and Board Mills, decided to set up a factory for the manufacture of paper
and paper boards and allied products, and obtained a lease of certain premises
in June 1963 and put up a suitable structure for the factory by August 1963.
The necessary machineries for running the factory, however, were received in
April 1964 and application for licence therefor was filed on 27.4.1964. The licence
was granted on 6.5.1964 and production in the factory started the next day, i.e.
respondent claimed that the duty in respect of the paper boards manunactured in
the factory during the period 7.5.1964 to June 1966 was payable at the concessional
rate allowed by the Notification, relevant portion whereof reads as follows:
OF lNDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) NEW DELHI,THE 1ST MARCH,
1964/PHALGUNA 11, 1885 (SAKA) NOTIFICATION CENTRAL EXCISE CSR: In exercise of
the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules,
1944, and in supersession of the notification of the Government of India in the
Ministry of Finance (Department of Revenue) No. 57/60 Central Excise dated 20th
April. 196() and No. 37/63 Central Excise dated the 1st March, 1963 the Central
Govt. hereby exempts strawboard and pulpboard including, greboard, calling
under Sub-item (3) of Item No. 17 of the First PG NO 1054 Schedule to the
Central Excises and Salt Act, 1944 (1 of 1944), takes together up to the
quantity prescribed in column (1) of Table 1 (omitted), cleared by any
manufacturer for home consumption during any financial year, from so much of
the leviable thereon as is in excess of the amount specified in the
corresponding entry in column (2) of the same Table:
1 (being not relevant, omitted) Provided that--
(being not relevant, omitted) (3) nothing contained in this notification shall
apply to a manufacturer who applied or applies for a licence on or after the
9th day of November 1963, unless he satisfies the Collector of Central Excise--
(a) that the factory for which the licence was or is applied for was owned on
the 9th day of November, 1963, by the applicant;" The benefit of the
Notification claimed by the respondent assessee was denied by the appellants on
the ground that the factory did not come into existence on or before the 9th
day of November, 1963, the date mentioned in the impugned clause (a). The
respondent moved the High Court in its writ jurisdiction under Article 226 of
the Constitution, and the application was allowed by a learned Single Judge. An
appeal therefrom under Clause 15 of the Letters Patent was dismissed in limine.
The appellants have by special leave challenged the decision before this Court.
ground urged on behalf of the assessee which found favour with the High Court
is arbitrary nature of the date, '9th of November, 1963' mentioned in the
impugned clause (a). It has been contended that the said date does not have any
significance whatsoever and does not bear any rational relationship to the
object sought to be achieved by the Notification. The learned counsel for the
appellant defended the validity of the impugned provision on the ground that
the date (9.11.1963) was selected because an PG NO 1055 earlier notification
bearing no. 110 had required applications to be made on or after 9.11.1963.
This notification is not on the records of the case and the learned counsel has
stated th8t he has also not been able to examine the same inspite of his
unsuccessful request to the Department concerned for a copy thereof. He has
mentioned about this notification in his argument on the basis of the reference
in the judgment of the High Court. The High Court judgment does not throw any
light on the nature of the notification no. 110, and the learned counsel could
not draw any inference about its provisions from the judgment. It is not
claimed that the said notification was before the High Court or the Judges had
any occasion to examine it. The present appeal was filed in 1976 and even now
the learned counsel for the appellants is not in a position either to produce
it or to tell us what it was about. The result is that no explanation for the
choice of the date in clause (a) is forthcoming.
V.C. Mahajan, learned counsel for the appellants, contended that a statutory
provision has necessarily to be arbitrary in the choice of date and it cannot
be challenged on that ground. He relied upon the observations of this Court in
Union of India v. M/s Parmeswaran Match Works etc., 119751 2 SCR 573 (at page
578) as quoted below:
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.
is inevitable" Reliance was also placed on Jagdish Pandey v. The
Chancellor, University of Bihar and Another,  1 SCR 237 and U.P.M. T.S.N.A. Samiti, Varanasi v. S ate of U. P.
Others,  2 SCC 453. We are afraid, the argument has no merit and has to
5. In Union of India v. M/s
P. Match Works, (supra) the question related to concessional rate of excise
duty leviable on the manufacture of match boxes. Match factories were classified
on the basis of their output during the financial year and matches produced in
different categories of factories were subject to varying rates of dutyhigher
rate being levied on matches produced in factories having higher output. In
pursuance of a change in the policy, the match factories were later classified
as mechanised units and non-mechanised units and by a notification dated July '
PG NO 1056 l, 1967 a concessional rate of duty was allowed in respect of units
certified according to the provisions therein.
notification also contained a proviso. The purpose of these provisions was to
grant the benefit of concessional rate of duty only to small manufacturers.
This Court while analysing the notification observed that the proviso
"would have defeated the very purpose of the notification, namely, the
grant of concessional rate of duty only to small manufacturers". In order
to cure this self-defeating position, the notification dated July 21, 1967 was amended by Notification No. 205
of 1967 dated September
4, 1967. The latter
notification mentioned the
4th September, 1967 as
the cut-off date. The attach on the choice of this date was met by the
observations relied upon by the learned counsel for the appellants and quoted
earlier. It will be observed that the date, September 4, 1967, was the date on which the amending
Notification itself was issued. The crucial date, therefore, could not be
condemned as one "taken from a hat' . It was the date of the notification
itself. A rule which makes a difference between past and present cannot be
condemned as arbitrary and whimsical. In cases where choice of date is not
material for the object to be achieved, the provisions are generally made
prospective in operation. In that sense this Court observed in M/s P. Match
Works case that the date chosen would to a certain extent be arbitrary and this
was inevitable. In the present case the relevant Notification was dated March
1, l964 and not 9.11.1963. It is true that as mentioned in the High Court
judgment some other notification required applications referred therein to be
made on or after ',h 11.1963, but unless the nature and contents of that
notification and its relevance with reference to the present notification are
indicated, it is futile to try to defend the choice of the date on its basis.
appellants have miserably failed to do so. inspite of more than a decade
available to them
other two cases relied upon On behalf of the appellants instead of supporting
their case. indicate that the view taken by the High Court is correct in
U.P.P.M.T.S.N.A. Samiti,Varanasi v. State of U.P.. and Others (supra) this Court observed in paragraph
l of the judgment: "The legislature could not arbitrarily adopt January
1984, as the cut-off date ......" After examining the circumstances of the
case it was held in paragraph 2:
agree with the High Court that fixation of the date January 3 1984 for purposes of regularisation was not arbitrary or
irrational but had a reasonable nexus with the object sought to be achieved."
PG NO 1057 Similarly in Jagdish Pandey v. The Chancellor, University of Bihar and Another it was held:
is no doubt that if the dates are arbitrary, s. 4 would be violative of Art. 14
for then there would be no justification for singling out a class of teachers
who were appointed or dismissed etc. between these dates and applying s.4 to
them while the rest would be out of the purview of that section .
Court then proceeded to examine the purpose of the legislation and the
attendant circumstances and upheld the section
Another learned counsel who appeared on behalf of the appellants for the final
reply placed reliance on paragraphs 38, 44 and 45 of the judgment in Dr. Sushma
Sharma and Others v. State of RaJasthan and Others,  SUPP. SCC 45. In
paragraph 38 it was said that wisdom or lack of wisdom in the action of
Government or Legislature is not justiciable by the Court, and to find fault
with the law is not to demonstrate its invalidity. We are afraid, this aspect
is wholly irrelevant in the case before us. In paragraph 44, the Case of Union
of India v. M/s. P. .Match Works Ltd., already discussed above. was mentioned.
In paragraph 45 the case of D.S.Nakara v. Union of India,  I SCC 305, was
distinguished in the following words:
as we have mentioned hereinbefore, Nakara case dealt with the problem of
benefit to all pensioners. The choice of the date of April l. 1979 had no nexus
with the purpose and object of the Act. The facts in the instant case are,
however, different." In the present case also benefit of concessional rate
was bestowed upon the entire group of assesses referred therein and by clause
(a) of Proviso (3) the group was divided into two classes without adopting any
differentia having a rational relation to the object of the Notification, and
the benefit of one class was withdrawn while retaining it in favour of the
other. It must, therefore, be held that the impugned clause (a) of the Proviso
(3) of the Notification in question is ultra vires and the benefit allowed by
Notification is available to the entire group including the respondent.
therefore, hold, There is no merit in this appeal which is dismissed without