BANNER AND CO Vs. UNION OF INDIA UOI

JUDGEMENT

(1.) This judgment disposes of the only issue raised in a series of writ petitions. The facts in the writ petitions are, for the purposes of this decision, identical. Each of the writ petitioners is a Small Scale Industry manufacturing and supplying goods to large scale units after putting the brand name of such large scale unit on such goods. For example, the writ petitioner in the first writ petition, manufactures flood light reflectors and flame proof fittings which are supplied by the petitioner to M/s. Bajaj Electricals Ltd. The sale between the petitioner and M/s. Bajaj Electricals Ltd. is on a principal to principal basis. The petitioner produces the goods according to the specifications of M/s. Bajaj Electricals Ltd. This includes putting the brand name of Bajaj Electricals on the goods manufactured by the petitioner.

(2.) The subject matter of challenge in the writ petitions briefly stated is Notification No. 223/87-C.E., dated 22nd September, 1987 (referred to hereafter as the impugned Notification). By the impugned Notification an earlier Notification No. 175/86-C.E., dated 1st March, 1986 was sought to be amended by denying an exemption of Excise duty granted under the earlier notification, to Small Scale Industries which manufactured specified goods for persons not eligible for the exemption and which also affixed the brand name of such persons on the specified goods.

(3.) The petitioners have submitted that the Small Scale Industries were normally ancillary to Large Scale Units and exemption of Excise Duty was given to Small Scale Industries with the object of encouraging the setting up of such industries. It is submitted by the petitioners, that the avowed object of the impugned notification was not to allow large industrial houses or Large Scale Units to benefit from the exemption granted to Small Scale Industries. It is submitted that the impugned notification did not achieve the object. It is argued that the putting of the brand name could not be a relevant factor in seeking to restrain Large Scale Units from availing of the benefit of the exemption under the earlier notification because marking of the brand name did not amount to manufacture. Therefore, according to the petitioners when the unmarked goods were supplied to the Large Scale Unit by the Small Scale Industry, the manufacture was already complete and the question of levy or exemption of Excise Duty settled at that point. All that the impugned notification resulted in, was the Large Scale Unit putting on their own brand name subsequently on the goods manufactured by the SSI without being subjected to payment of Excise Duty. It is submitted that the impugned notification discriminated between Small Scale Industrial Units putting on the brand name and Small Scale Units not putting on the brand name on specified goods for supply to large scale units. It is stated that the classification of Small Scale Industries on the basis of the marking or not marking of specified goods or by any other activity which did not amount to manufacture was, for the purposes of levying Excise Duty, arbitrary.