The Judgment of the Court was delivered by

Raghavan, C.J:— The appellant is the Western India Plywoods Ltd. Baliapatam, Cannanore District, a company registered under the Companies Act, manufacturing hardboard by what is known as the ‘wet process’. There is a similar concern manufacturing hardboard by the same wet process in Bombay, which has, though the company was not a party to the writ petition, applied for leave to intervene in the appeal; and we have allowed the prayer. There is a third company in Assam, not a party to these proceedings, manufacturing hard-board by what is known as the ‘dry process’. The hardboard produced by the appellant and the Bombay company by the wet process in known as ‘SIS’, smooth on one side, whereas the hardboard produced by the Assam company by the dry process is ‘S2S’, smooth on both sides. It is not necessary to go into the details regarding these two processes.

2. Under S. 3 of the Central Excises and Salt Act 1944, duties shall be levied and collected on all excisable goods (other than salt) produced or manufactured in India at the rates set forth in the First Schedule. (Provision is also made for levying duty on salt, with which we are not concerned in this case.) Item 16B of the First Schedule prescribes a duty of 15 per cent ad valorem on the tariff value of hardboard. S. 37(1) of the Act confers power on the Central Government to frame rules to carry in to effect the purposes of the Act; and sub-s. 2 thereof provides that, in particular and without prejudice to the generality of the foregoing power, the rules may provide for the several things mentioned in the several clauses in the sub-section. Clause (xvii) of sub-s. 2 provides that such rules may “exempt any goods from the whole or any part of the duty imposed by this Act”. And the Central Government framed rules, of which rule 8 reads:

“Power to authorise exemption from duty in special cases—

(1) The Central Government may, from time to time, by notification in the Official Gazette, exempt, subject to such conditions as may be specified in the notification, any excisable goods from the whole or any part of duty leviable on such goods.

(2) The Central Board of Revenue may by special order in each case exempt from payment of duty, under circumstances of an exceptional nature, any excisable goods.”

3. The Central Government issued a notification (Ext. P1) under rule 8(1) above on 1st February 1968; and the notification exempted hardboard manufactured by dry process involving air felting of fibres from duty in excess of 5 per cent ad valorem and exempted other types of hardboard from duty in excess of 10 per cent ad valorem. The result was that the appellant and the Bombay company were given exemption of 5 per cent while the Assam company was given exemption of 10 per cent: in other words, the appellant and the Bombay company had to pay a duty of 10 per cent, while the Assam company had to pay only 5 per cent. The appellant filed the writ petition giving rise to the appeal praying that this Court be pleased to declare the notification mentioned above (Ex. P1) as violative of Article 14 of the Constitution and void, besides being ultra vires the powers of the Union of India; to quash the said notification by the issue of a writ in the nature of certiorari; to issue a writ of prohibition and/or mandamus directing the Union of India and the other respondents, namely, the Collector of Customs and Central Excise and the Inspector of Central Excise, to forbear from collecting the excise duty from the appellant in excess of 5 per cent of the tariff value; and also to direct the respondents to refund the amounts so collected in excess of 5 per cent.

4. Evidently, Ex. P1 cannot be quashed: it will not be in the interest of the appellant himself to have the notifications quashed, because, if the notification goes, the appellant will have to pay duty at 15 per cent instead of at 10 per cent-Moreover, the notification cannot be quashed without having the Assam company also on the party array. Therefore, the prayer of the appellant has necessarily to be confined to a declaration that the appellant should not be directed to pay anything more than 5 per cent, the duty collected from the Assam company. A learned Judge of this Court dismissed the writ petition and hence the appeal.

5. Shri M. Natesan, the counsel of the appellant, has drawn our attention to a few American decisions and also to authorities like Corpus Juris Secundum, American Jurisprudence, etc. But, we do not think there is any need to consider any of these authorities, because, on the main question in dispute, we have several decisions of our own Supreme Court.

6. The first contention of Shri Natesan is that rule 8 is ultra vires the powers of the Central Government. According to the counsel, exemption from duty has to be given by the rule itself and not by a notification like Ex. P1. In support of this contention, the counsel has drawn our attention to the several clauses in sub-S. 2 of S. 37: for instance, some of the clauses provide for something, while others prohibit something, while yet others regulate something, while still others require something to be done. From the difference in language of these several clauses, the counsel argues that exemption should be by a rule, because the language in clause (xvii) of sub-section 2 is that such rule may “exempt any goods from the whole or any part of the duty”.

7. We do not find any force in this argument. For instance, the language used in clauses (xviii) and (xix) is that such rules may “define an area”, which cannot be done by the rule itself: it has evidently to be done, as and when the occasion arises, by a notification under the relevant rule. Therefore, what is contemplated by S. 37(2)(xvii) is only to exempt, from time to time, by notification in the Official Gazette: too rigid an adherence to the language of the clauses of S. 37(2) should not be insisted upon, nor should a hyper-technical view of the language be taken. Moreover, in the light of the observations of the Supreme Court in Orient Weaving Mills (P.) Ltd. v. Union of India (AIR. 1963 SC. 98) also, this contention cannot bear any scrutiny. In paragraph 7 of the judgment, Sinha, C.J has said that a notification issued under rule 8(1) will become part of the Act itself, because S. 38 of the Act provides that all rules made and notifications issued under the Act “shall have effect as if enacted in this Act.” But Shri Natesan urges that the notification mentioned in S. 38 is not a notification issued under the rules, but a notification issued under the Act itself. For instance the counsel points out S. 30 of the Act, wherein the Central Government may, by notification in the Gazette, exempt carriage of excisable goods within any local limits, etc. The argument of the counsel, in other words, is that both rules and notifications are contemplated by the provisions of the Act and such rules and notifications under the Act alone are made part of the Act by S. 38, while a notification issued under a rule does not get that sanctity. Whether this argument of the counsel is right or not we cannot consider in this case, because the Supreme Court has said in unequivocal language that a similar notification issued under rule 8(1) formed part of the statute in the decision mentioned above. As pointed out by Sinha, C.J again, the appellant in this case also has not challenged the vires of the Act: and therefore, this contention has only to be rejected.

8. The next argument of Shri Natesan is that what is mentioned in clause (xvii) of S. 37(2) is “exempt any goods”, and therefore, the goods cannot be differently treated by a classification as is done in this case. That this argument has also no force will be evident when we come to the main contention in the case under Article 14 of the Constitution.

9. In fact, the argument of Shri Natesan on this aspect of the case is that rule 8 suffers from the vice of excessive delegation of powers to the Central Government as was the contention in the Orient Weaving Mills case. And this question has also been decided by the Supreme Court in the said decision: Sinha, C.J has considered this question in paragraph 8 of the judgment. The learned Chief Justice has held that there is no excessive delegation—that rule 8 does not “suffer from this defect.

10. Now we come to the main contention—the contention under Article 14 of the Constitution that there has been discrimination between the two types of companies, the companies which adopt the wet-process and the company in Assam which adopts the dry process. As already indicated at the commencement of this judgment, we have a series of decisions of our Supreme Court on this question; and we shall refer only to some of them—the main decisions.

11. In Budhan Choudhry v. State Of Bihar (AIR. 1955 SC. 191), it has been laid down that while Article 14 forbids class legislation, it does not forbid reasonable classification for purposes of legislation: then the principles of classification have also been laid down—that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and that the differentia must have a rational relation to the object sought to be achieved by the statute in question. Das, C.J, who pronounced the judgment of the Court, has observed further that the classification may be founded on geographical grounds or according to objects or occupations or the like; and that what is required is that there must be a nexus between the basis of classification and the object of the statute. In Kunnathat Thathmni Moopil Nair v. State of Kerala (AIR. 1961 SC. 552), the matter has again been considered. And it has been laid down that a taxing statute is not wholly immune from attack on the ground that it infringes the equality clause in Article 14, though the courts are not concerned with the policy underlying the statute or whether a particular tax could not have been imposed in a different way, etc., that a classification of persons or properties into different categories for subjecting them to different rates of taxation would not be open to the attack of inequality on the ground that the total burden resulting from such classification is unequal; that different kinds of property may be subjected to different rates of taxation so long as there is a basis for the classification; and that the law may be struck down if the same class of property similarly situated is subjected to an incidence of taxation, which results in inequality. In East India Tobacco Co. v. State of Mdhra Pradesh (AIR. 1962 SC. 1733), Veukatarama Aiyar, J. who spoke for the Court has quoted Willis on Constitutional Law saying:

“A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably,………The Supreme Court has been practical and has permitted a very wide latitude in classification for taxation.” (Underlining is ours.)

12. In that case, the Supreme Court was considering whether a classification of tobacco into two types, Virginia and Nattu, was a valid classification; and the Supreme Court has accepted the classification.

13. In 1963, there were two decisions of the Supreme Court on the question, the one we have already referred to (Orient Weaving Mills Case) and the other in Khandige Sham Bhat v. Agricultural Income-tax Officer, Kasaragod (AIR. 1963 SC. 591). In the earlier case, Sinha, C.J has observed that the legislature is the best judge to decide as to the incidence of taxation, as also to the amount of tax to be levied in respect of different classes of goods; that the Central Excises and Salt Act recognises and only gives effect to the well established principle that there must be a great deal of flexibility in the incidence of taxation of a particular kind; and that it must vary from time to time, as also in respect of goods produced by different processes and different agencies. The same principle has been reiterated in the second decision, wherein Subba Rao, J. has observed that a taxation statute shall not also be arbitrary and oppressive, but, at the same time, the court cannot, for obvious reasons, meticulously scrutinize the impact of its burden on different persons or interests; and that, where there are more than one method of assessing tax and the legislature selects one out of them, the court will not be justified in striking down the law on the ground that the legislature should have adopted another method. His Lordship has also observed that it is not the phraseology of a statute that governs the situation, but the effect of the law that is decisive; and that, “if there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment”. In Andhra Sugars Ltd. v. State of Andhra Pradesh (AIR. 1968 SC. 599), the Supreme Court has approved the classification of factories producing sugar by means of vacuum pans differently from khandasari units producing sugar by the open pan process as also from cane growers using cane for manufacturing jaggery. This decision has also laid down that the question whether; exemption should be granted to any factory, and if so, for what period, etc. has to be decided with reference to the facts of each individual case; and that the delegation of such function to the Government was only proper. In V. Venugopala Ravi Varma Rajah v. Union of India ((1969) 1 SCC 681 : AIR. 1969 SC. 1094) again, the Supreme Court has had occasion to consider the same question. And the Supreme Court has observed that the equal protection clause of the Constitution (Article 14) does not enjoin equal protection of the laws as abstract propositions; that the courts admit, Subject to adherence to the fundamental principles of the doctrine of equality, a larger play to legislative discretion in the matter of classification; and that “the power to classify may be exercised so as to adjust the system of taxation in all proper and reasonable ways”. The Supreme Court has pointed out that, “if the classification is rational, the legislature is free to choose objects of taxation, impose different rates, exempt classes of property from taxation, subject to different classes of property to tax in different ways and adopt different modes of assessment”: and that a taxing statute may contravene Article 14 of the Constitution “if it seeks to impose on the same class of property, persons, transactions or occupations similarly situate, incidence of taxation which leads to obvious inequality”. In T.G Venkataraman v. The State of Madras ((1969) 2 SCC 299 : AIR. 1970 SC. 508), the classification into cane jaggery and palm jaggery has been approved by the Supreme Court and taxing one and exempting the other has also been approved. Their Lordships have referred, inter alia, to their earlier decision in Venugopala Ravi Varma Raja's case and have followed the same. In Jaipur Hosiery Mills Pvt. Ltd. v. The State of Rajasthan ((1970) 2 SCC 26 : AIR. 1971 SC. 1330) again, the Supreme Court has considered the question and has observed that a taxing statute is not open to attack merely on the ground that it taxes some persons or objects and not others; and that it is only when within the range of its selection the law operates unequally and cannot be justified on the basis of a valid classification that there would be a violation of Article 14.

14. For the sake of completeness, we shall refer to the latest decision as well on the topic, viz., Vivian Joseph Ferreira v. The Municipal Corporation of Greater Bombay ((1972) 1 SCC 70), where the Supreme Court has referred in to the earlier decisions and has observed that a tax, to be valid, should firstly be within the competence of the legislature imposing it, secondly be for a public purpose, and thirdly, should not violate the fundamental rights; and that the taxing statute is as much subject to Article Has any other statute, but, in view of the inherent complexity of fiscal adjustment of diverse elements, a larger discretion has to be permitted to the legislature for classification, so long as there is no transgression of the fundamental principles underlying the doctrine of classification; and that the power to classify must be wide and flexible so as to enable the legislature to adjust its system of taxation in all proper and reasonable ways: The Supreme Court has also observed that a taxing statute is not invalid on the ground of discrimination merely because other objects could have been, but are not, taxed; that the mere fact that a tax falls more heavily on some in the same group or category is by itself not a ground for its invalidity; and that the legislature can pick and choose districts, objects, persons, methods and even rates of taxation as long as it does so reasonably.

15. It is abundantly clear, from the several decisions referred to above, that, for the purpose of taxation, the State has wide powers of classification; and that Article 14 will come into play only if, within the same class or category, obvious discrimination is made. The State can also pick and choose districts, objects, persons, methods, etc., and tax some of them and exempt others if this is done reasonably. In this regard, there is a wide latitude for the State; and even the fact that a tax falls more heavily on some in the same group or category, by itself, is no ground for holding that the tax is discriminatory. Of course, it is not the phraseology of the taxing statute that matters, but what governs is the effect of the statute. And if the effect of a taxing statute is to maintain equality and uniformity in the same group, the fact that due to some “fortuitous circumstance” some in the group get an advantage over the others will not make the statute bad. We may recapitulate at this stage that this covers the second argument too of Shri Natesan under S. 37(2)(xvii) that the goods regarding which exemption is given should not be differently treated.

16. In the case before us, hardboard manufactured by the dry process and hardboard manufactured by the wet process are classified as two different categories for the purpose of taxation. Such classification is quite proper and valid; and the classification has also a nexus with the purpose for which the classification is made. In the counter-affidavit filed by the State, it is averred that the Assam company following the dry process requires a special treatment in view of the fact that raw materials are available in plenty in the State, which have to be utilised for making hardboard. We have also indicated that the two types of hardboard manufactured by the wet and the dry processes are different, in the sense that the latter is smooth on both sides while the former is smooth only on one side: in other words, the latter is ‘S2S’ while the former is ‘S1S’ in the technical language. The counter-affidavit has also stated that the Central Government instituted an enquiry; and that it was after considering the report of the expert body that this higher relief by way of higher exemption was given to the Assam company.

17. Only one more thing remains—a minor matter. In the course of the discussion, Shri Natesan has suggested that sub-s. 2 of S. 37 is in the nature of a special provision and sub-s. 1 of S. 37 is in the nature of a general provision, so that the former controls the latter. This contention may not stand scrutiny, in view of the decision of the Privy Council in Emperor v. Sibnath Baner ji (AIR. 1945 PC. 156), where a provision similarly worded has been considered by the Privy Council. The provision in sub-s. 2 is the relevant section of that statute contained the same expression, “without prejudice to the generality of” etc.; and Lord Thankerton has observed that, in such a case, the several heads enumerated under sub-s. 2 are only by way of illustration. In other words, sub-s. 2 in such a case is not a special provision which controls the general provision contained in sub-s. 1, i.e, in the language of the learned Law Lord, sub-s. 2 is not restrictive of sub-s. 1. In the light of the foregoing discussion, it is quite clear that the impugned notification (Ex. P1) is valid and does not offend Art. 14 of the Constitution. Nor does rule 8 involve any excessive delegation. The decision of the Single Judge is therefore confirmed and the appeal is dismissed. However, we do not pass any order regarding costs.

18. Dismissed.