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2002 DIGILAW 32 (JK)

National Industrial Corp. Ltd. v. State Of J. &K.

2002-02-26

H.K.SEMA, S.K.GUPTA

body2002
PER H.K. SEMA. CHIEF JUSTICE: 1. We have heard Mr. Sunil Sethi, learned counsel for the appellant, Mr. M.A. Goni, learned Advocate General for respondents No. 1 to 4 and Mr. P. Kohli, learned Senior Counsel for private respondent No. 5. at length. 2. This appeal is directed against the judgement and order dated: 21-09-2001 passed by the learned Single Judge in OWP No. 620/2001. dismissing the writ petition filed by the appellant. 3. Shorn of necessary details, few facts leading to the filing of the present appeal may be recited. 4. Appellant is a limited Company incorporated under the Companies Act. 1956 having its registered office at Delhi and other offices and manufacturing unit at SIDCO Industrial Complex. Phase-I, Lane IV, Bari Brahmanaa Jammu, They established a bottling Unit for manufacture of Indian Made Foreign Liquor (IMFL) at SIDCO Industrial Complex, Bari Brahamana. Jammu. By Notification dated: 26-04-2000 vide SRO No. 123 issued by the Government of Jammu and Kashmir, the local manufacturing units were given exemption from the payment of excise duly to the extent of 25%. However, by another Notification SRO No. 254 daled: 17-07-2001. the exemption is allowed subject to the conditions that 100% of the allotted quota shall be lifted from the local distilleries. The distinction between SRO 123 dated: 26-04-2000 and SRO 254 dated: 17-07-2001 is that SRO 123 granted exemption to the extent of 25% to the local manufacturing units", whereas SRO 254 dated: 17-07-2001 granted exemption to the extent of 100% to the local distilleries. These two SROs have important bearing for proper adjudication of the present controversy at hand and it shall be dealt with at length at the appropriate time. 5. Mr. Sunil Sethi, appearing for the appellant raises two contentions before us. These are:- (a) that SRO 254 dated: 17-07-2001 is contrary to the policy decision of the Government projected in the Budget speech of the Finance Minister and therefore, is bad; (b) that SRO 254 dated: 17-07-2001 is discriminatory and violative of Article 14 of the Constitution, in as much as two equals are being treated unequally. 6. Before we advert further, we may at this stage point out that the appellant is not questioning the legislative competence or the rule making authority in issuing SRO 254 dated: 17-07-2001. 7. 6. Before we advert further, we may at this stage point out that the appellant is not questioning the legislative competence or the rule making authority in issuing SRO 254 dated: 17-07-2001. 7. We shall now proceed to deal with two SROs, SRO 123 dated: 26-04-2000 is quoted in extenso; " NOTIFICATION JAMMU THE 26TH APRIL. 2000. SRO 123: In exercise of the powers conferred by the proviso to section 16 read with Clause (c) of Section 63 of the Jammu and Kashmir Excise Act. Samvat 1958. the Government hereby exempt 7.5 lakhs (Seven lacs fifty thousand) L.P. Litres of Rum to be imported into the Slate or purchased locally within the Stale by the Canteen Stores Department for bonafide use of the Armed Forces stationed in the forward areas of the Jammu and Kashmir State, during the year 2000-2001 from payment of Excise duty leviable under the said Act, Provided that the Headquarters. Northern Command shall furnish a statement to the Excise Commissioner showing the distribution of the aforementioned quantity amongst the Armed Forces and thereupon the Commissioner shall authorise the Deputy Commissioner Excise (Executive) Jammu and Srinagar to issue import permits in such a manner as he may deem fit. Provided further that the exemption is allowed subject to the condition that 25% of the allotted quota shall be lifted from the local manufacturing Units. (Underline is ours). 8. Thus, proviso of the SRO provides exemption to the extent of 25% to the "local manufacturing Units. 9. SRO 254 dated: 17-07-2001 is in pari materia with SRO 123 dated: 26-04-2000 in all respects except the second proviso, which is aggrieved by the appellant. The second proviso of SRO 254 reads: "Provided further that the exemption is allowed subject to the condition that 100% of the allotted quota shall be lifted from the.local distilleries." (Underline is ours). 10. From the perusal of aforesaid two SROs, it is evident that marked difference between SRO 123 dated: 26-04-2000 and SRO 254 dated: 17-07-2001 is that in SRO 123 exemption was given to the extent of 25% to the local manufacturing units, whereas in SRO 254 dated: 17-07-2001. exemption to thc extent of 100% has been granted to the "local distilleries. 11. Precisely the case of the appellant is that SRO 254 dated: 17-07-2001 has raised a quota of duty-free Rum from 25% to 100%. exemption to thc extent of 100% has been granted to the "local distilleries. 11. Precisely the case of the appellant is that SRO 254 dated: 17-07-2001 has raised a quota of duty-free Rum from 25% to 100%. but instead of giving the benefits to the local manufacturing units as granted in the previous SRO 123 dated: 26-04-2000 and the Budget Speech of the Finance Minister on 12-03-2001, thc benefit to the extent of 100% has been granted to local distilleries". Therefore, it is argued that the impugned SRO is in contrast of the scheme proposed in the Budget Speech of the Finance Minister. In this connection Mr. Sethi has referred to the Budget Speech of the Finance Minister, particularly to the following effect: "xxxxx 1 had stipulated a condition for the first time that the defence forces should lift, at least 25% of their duty-free quota of rum from the local manufacturers. The experiment has been quite successful. Therefore, I propose to extend this stipulation to cover 100%. quota of the duty-free run during Ihc next financial year." (Underline is ours) 12. According to Mr. Sunil Sethi, 100% exemption proposed by the Finance Minister in the Budget Speech is relatable to the local manufacturing units and not to localdistilleries. As against this Mr. M.A. Goni. learned Advocate General for respondents No 1 to 4 and Mr. P. Kohli, learned Senior Counsel for respondent No. 5 contended that in order to gather the intention of the legislature, the whole paragraph of the Finance Ministers speech has to be read and not the particular line, which does not reflect the full meaning of the intention of the legislature. Heading (c) paragraph 36, deals with the "Export of Beer and IMFL". Para 36 is extracted: "C) Export officer and IMFL. 36. There are just a few Distilleries and Breweries operating in our State. These units help in boosting the economy of the State in their limited area of operation and also generate some employment in the process. Some of them have able to carve out a share of the market for their products in other States, However because of the protectionist policy followed by most of the States in respect of their local Distilleries and Breweries, our units have been finding it increasingly difficult to compete in those markets. Some of them have able to carve out a share of the market for their products in other States, However because of the protectionist policy followed by most of the States in respect of their local Distilleries and Breweries, our units have been finding it increasingly difficult to compete in those markets. The industry in general is entitled to toll tax exemption on exports of their incentives. However, the liquor industry has been placed in the negative list. Therefore. I propose to remove the liquor industry from the negative list for purpose of improving their exports for a period of two years with the hope that the industry shall avail of this opportunity to generate more employment through the expected increase in its exports. For the same reasons, I also propose to abolish export fee on lMFL for the next two years. In order to support__the local industry, 1 had stipulated a condition for the first time that the defence forces should lift at least 25% of their duty-free quota of rum from the local manufacturers. The experiment has been quite successful. Therefore. I propose to extend this stipulated to cover 100% quota of the duty free nun during the next financial year." (Underline is/ours). 13. A reading of the entire paragraph 36. it is noticed that the very first striking sentence is related to "Distilleries and Breweries" operating in the Slate. Reference has also been made lo generate employment in the process. The words to "generate some employment" have been used in paragraph 36 more than once and from this itself the intention of the legislature is clearly discernible that the concession of 100% is aimed at to extend to the "local distilleries" as an incentive to generate more employment and increase its export. 14. Counter on behalf of the respondents has been filed. In para 11 (c) of the counter, respondents specifically stated that the Budget Speech of the Finance Minister as quoted above intended to generate employment for the non-employed youth of the State through the process of giving incentive and other support to the local industries and distilleries. According to the respondent, therefore, the impugned SRO 254 dated: 17-07-2001 is in consonance with the intended policy of the Government reflected in the Budget Speech of the Finance Minister. 15. According to the respondent, therefore, the impugned SRO 254 dated: 17-07-2001 is in consonance with the intended policy of the Government reflected in the Budget Speech of the Finance Minister. 15. As already noticed in paragraph 36 of the Budget Speech of the Finance Minister, the first sentence start with Distilleries and Breweries operating in the State. In the speech, "to generate employment for the un-employed youth has been used more than once. The operation of the distilleries and bottling plants are quite distinct. The distilleries manufacture spirit out of the molasses and liquor from the spirit, whereas the bottling plants blend the spirit for producing liquors by editing colour and essence. The distilleries undertake the complete process of manufacture from fermentation, distillation and blending/bottling, whereas the bottling plants undertake only one process which is blending/bottling- Therefore, the local distilleries are at advantageous position to generate more employment avenues for unemployed youth. We are therefore, of the view that Budget Speech of Finance Minister reflected in para 36 of the speech is aimed and intended to give concession to the local distilleries so as to enable them to generate more employment avenues to unemployed youth. The rational behind the Notification SRO 254 dated: 17-07-2001, impugned in the writ petition is to give concession to the local distilleries" to the extent of 100% as a moral booster to generate more employment avenues for unemployed youth and more production. We are. therefore, of the clear view that the Budget Speech of Finance Minister reflected in para 36 of the speech is aimed at and intended to give concession to the local distilleries and there is a rational behind the SRO 254 dated: 17-07-2001 and it does not suffer from vires being contrary to the Budget Speech of the Finance Minister, it has been validly issued and in consonance with the policy decision of the Government reflected in the Budget Speech of the Finance Minister. 16. Mr. P. Kohli. learned Senior Counsel appearing for respondent No. 5 also contended that it is a fiscal policy of the Government and such policy decision is always permitted, keeping in view the changing circumstances for the fiscal year and such policy decision is outside the purview of the judicial review. We are in entire agreement with the contention of the learned counsel. 17. In Stale of U.P. and another Vs. We are in entire agreement with the contention of the learned counsel. 17. In Stale of U.P. and another Vs. Kamla Palace, (2000) 1 SCC 557, Three Judge Bench of the Apex Court field in paragraph 12 as under:- "12. The legislature gaining wisdom from historical facts, existing situations, matters of common knowledge and practical problems and guided by considerations of policy must be given a free hand to devise classes- whom to tax or not to tax, whom to exempt or not to exempt and whom to give incentive and lay down the rates of taxation, benefits or concessions. In the field of taxation if the test of Article 14- is satisfied by generality of provisions the Courts would not substitute judicial wisdom for legislative". 18. This lead us to consider the second leg of argument of Mr. Sunil Sethi, on the ground of discrimination. It is contended by Mr. Sethi that in SRO 254 dated: 17-07-2001 instead of giving concession to "local manufacturing units, the "local distilleries" has been incorporated and by the same SRO 100% concession has been extended to the local distilleries, whereas in the previous SRO 123 dated: 26-04-2000, the exemption granted to the "local manufacturing units7 was only 25%. It is also contended by Mr. Sethi that instead of local manufacturing units" the words local distilleries have been incorporated in SRO 254 dated: _ 17-07-2001, without assigning any reason and the same on the face of it is in violation of the scheme proposed by the Government and hit by Article 14 of the Constitution of India. In our view, this submission is thoroughly mis-placed. 19. We have already hold that the Budget Speech of the Finance Minister is aimed at and intended to give incentive to local distilleries. Secondly, the local distillery is a class by itself and by giving concession to the local distilleries as a class, we do not see how it amounts to discriminatory treatment to the local manufacturing units. At the same time, there is no functional similarity between the local distilleries" and "local manufacturing units. Local distilleries undertake the complete process of manufacture from fermentation, distillation and blending/bottling, whereas the bottling plants undertake only one process which is blending/bottling. Again the local distilleries require more labour and men-power and generate employment avenues for un-employed youth, whereas this requirement is absent in the local manufacturing units. Local distilleries undertake the complete process of manufacture from fermentation, distillation and blending/bottling, whereas the bottling plants undertake only one process which is blending/bottling. Again the local distilleries require more labour and men-power and generate employment avenues for un-employed youth, whereas this requirement is absent in the local manufacturing units. Equality clause enshrined in Article 14 of the Constitution can be invoked only in equal circumstances. Therefore. two unequals cannot be equated. It would amount to discrimination in reverse. The case of the appellant could have been different if by the impugned SRO some concession is given to local manufacturing units but such benefit is denied to the appellant- local manufacturing unit. This is not the case of the appellant. 20. For the aforesaid reasons, this appeal being devoid of merit and is accordingly dismissed.