MODERN PETROFILS Vs. UNION OF INDIA

JUDGEMENT

(1.) The first petitioner is a Company engaged in manufacturing of Partially Oriented Polyester Yarn (POY), texturising/Draw Twisting and dyeing of the said yarn. According to the petitioners, its factory is situated in the backward area and there are similar other manufacturing units. Some of these units are having facility of manufacturing Partially Oriented Polyester Yarn and some other units are having only facility of for draw Twisting/texturising and dyeing yarn. The fourth respondent viz., Reliance Industries Limited is having all the three units i.e., manufacturing of Partially Oriented Polyester Yarn, texturing/Draw Twisting and dyeing but all these three manufacturing units are at different places. In the budget proposal of 1997-98, the basic excise duty was fixed at 30% ad valorem on dyed yarn along with 15% additional duty of excise on basic duty which comes to 4.5% and the total comes to 34.5% ad valorem on dyed yarn and whosoever is engaged in Dyeing of Polyester Yarn are supposed to make the payment of excise duty @ 34.5% ad valorem. A number of manufacturing units have made representations to the Government of India regarding the higher rate of excise duty and on 14-4-1997, the Government of India issued a notification which is produced at Annexure "A" to the petition. As per Annexure "A", the unit which does not have facilities of producing single or draw twisted or texturising yarn attracts specific basic rate of duty of Rs. 6.00 per kilogram along with 15% AED on BED, which works out to Rs. 6.90 per kg. By virtue of the notification, manufacturing units having only dyeing plants were subjected to a specific rate of excise duty of Rs. 6.00 per kg. Thereafter, a notification was issued, and the units which are engaged in the dyeing are charged at the lower rate of excise duty and the units which are having integrated facility, have to pay higher rate of excise duty on their dyed yarn. The petitioners in this Special Civil Application challenge the Notification No. 34/97, dated 6-6-1997 on the ground that it is violative of Article 14 of the Constitution of India. According to the petitioners, by a Notification No. 34/97, dated 6-6-1997, the fourth respondent alone is benefitted, whereas petitioner is a Unit who has to pay duty at a higher rate. Petitioners have contended that they are manufacturing POY, and conduct texturising and dyeing operations at one site and as per the impugned notification, they are required to pay duty on the clearance of their dyed yarn @ 34.5% as against the specific rate of Rs. 6.90 per kg. According to the petitioners, 4th respondent, which is having dyeing unit at a different location are required to pay excise duty @ Rs. 6.90 per kg. and this being a hostile discrimination, the impugned notification is liable to be struck down.

(2.) On behalf of third respondent, an affidavit is filed wherein allegations made in the Special Civil Application are denied. It is submitted by the respondent that in the Union Budget of 1997-98, exemption on Dyed Yarn has been withdrawn, but the industries engaged in the manufacturing of Dyed, Texturised and spun yarn were required to pay Central Excise Basic Duty at the rate of 30% ad valorem plus 15% additional duty, aggregating to 34.50% ad valorem. Subsequently, another notification was issued on 11-4-1997 wherein it is stated that those industries which do not have in-house facilities for production of POY, Texturising/Draw twisting were allowed to clear their Dyed Yarn on payment of Excise Duty at the rate of Rs. 6.90 per kg. Further, there was another notification on 6-6-1997 amending the earlier notification dated 19-1-1997 wherein it was prescribed that the Units which are having facility for producing single yarn will not be allowed to clear the Dyed Yarn at the concessional rate of Rs. 6.90 per kg.

(3.) In a subsequent affidavit filed on 19-2-1998, position has been explained in detail. It is clarified that in Notification No. 4 of 1997, exemption was granted on certain conditions, one of the conditions is that dyed yarn manufactured out of texturised or draw twisted yarn falling under Chapter 54 on which appropriate duty of excise or additional duty must have been paid. It was also one of the condition that no credit under Rule 57A or 57O of the Rules has been availed of in the process of dyeing, printing, bleaching or mercerising in the manufacture of the said yarn. It is stated in the Affidavit that a composite unit undertaking manufacture of dyed yarn right from the stage of single yarn is required to pay duty for the first time only at the stage of dyed yarn, by virtue of various exemption notifications. Therefore, it is submitted that the classification is based on rationale basis and the notification is not liable to be struck down on the ground of Article 14 of the Constitution.