Civil Writ Jurisdiction Case No. 6088 of 2015. Case: Prabhat Zarda Factory India Pvt. Ltd. Vs The Union of India and Ors.. High Court of Patna (India)
| Case Number | Civil Writ Jurisdiction Case No. 6088 of 2015 |
| Counsel | For Appellant: Prabhat Ranjan and Chandan Kumar, Advocates and For Respondents: S.D. Sanjay, Additional Solicitor General and Anshay Bhadur Mathur, C.G.C. |
| Judges | Hemant Gupta, Actg. C.J. and Dinesh Kumar Singh, J. |
| Issue | Central Excise Act, 1944 - Sections 3, 3A; Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 - Section 3(p); Constitution of India - Articles 14, 19(1)(g), 19(1)(a); Customs Tariff Act, 1975 - Section 3 |
| Citation | 2017 (347) ELT 208 (Pat) |
| Judgement Date | February 08, 2017 |
| Court | High Court of Patna (India) |
Judgment:
Hemant Gupta, Actg. C.J.
1. The petitioner has sought quashing of the Chewing Tobacco and Un-manufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules 2010 (for short, 'the Rules') notified on 27th February, 2010 and also the amendment in the said Rules vide Notification dated 1st March, 2015 on the ground that it is violative of its fundamental rights under Article 19(1) (g) of the Constitution of India.
2. The petitioner is a manufacturer and exporter of Zarda and Chewing Tobacco (Schedule Tobacco Products) in the State of Bihar and has extensive market throughout India and foreign countries within the meaning of Section 3(p) of the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (for short, 'the Act').
3. The Central Government in exercise of the powers conferred under Section 3A of the Central Excise Act, 1944 (for short, 'the Excise Act') published a Notification on 27th February, 2010 notifying Chewing Tobacco as notified goods. As a consequence of such Notification, the levy and collection of the excise duty was to be done in accordance with the provisions of Section 3A of the Excise Act. In terms of the Rules so notified, the levy and collection of the excise duty on the goods in question was to be done not on the basis of the actual production by the manufacturing unit, rather it was to be done on the basis of total manufacturing capacity of the unit. The total manufacturing capacity was dependent upon number of packing machines installed in the factory by the manufactures. The rates of duty as per packing machines per month was initially prescribed vide Notification published on 27th February, 2010, but subsequently, another Notification was issued on 24th January, 2014 prescribing new rates of duty per packing machine per month by increasing the same substantially. It is thereafter, within 13 months, another Notification was published on 1st March, 2015 whereby factors relevant to production and the quantity of Notified goods have been re-defined/re-determined. As per the new amended Rules, factors relevant to production of notified goods shall be the number of packing machines in the factory of the manufacturers and the maximum packing speed at which such packing machines can be operated for packing of Notified goods of various retail prices.
4. The grievance of the petitioner is that in terms of the earlier Notification, there was uniformity throughout the country with regard to levy of excise duty on production of the goods in question. The tax impact although was heavy but was bearable. But now, some States, including Bihar, have issued notifications whereby the Chewing Tobacco have been prohibited from being manufactured and treating them to be food products. The stand of the petitioner is that on one hand, the Central Government is significantly raising the excise duty on the product, but on the other hand, even the manufacturing and trading is being prohibited treating them to be food products. Thus, on account of issuance of Notifications by the State Government one after another, the market trend with regard to these products has become very uncertain. The actual production has declined many times on account of loss of market and simultaneously, the manufactures are required to pay the excise duty as per the original deemed production. Therefore, it is alleged that the impugned Notification is violative of Article 19(1) (g) of the Constitution of India.
5. In the counter affidavit, it is contended that Section 3A of the Excise Act empowers the Central Government to charge excise duty on the basis of capacity of production in respect of notified goods. The Parliament has delegated the power to the Central Government to notify some goods for the purpose of levy and collection of duty of excise on such goods on basis of capacity of production. It is asserted that rationale of classification as also the legislative intent, policy and the guidelines have been laid down in the Act itself. The Excise Act itself provides for safeguards that where a factory producing notified goods did not produce for a continuous period of 15 days or more, then the duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fulfills such conditions as may be prescribed. It is also pointed out that vide Notification dated 27th February, 2010, the factor relevant to production of the notified goods have been made as the number of packing machines in the factory of the manufacturers. However, by the amendments carried out vide Notification dated 1st March, 2015, not only the number of packing machines, but the maximum packing speed have also been inserted as a relevant factor for determination of the production capacity. It is also pointed out that Section 3A of the Excise Act provides for alternative schemes of levying duty for specifically notifying certain goods/class of goods. Such scheme is in respect of excisable commodities which are evasion prone and, therefore, instead of levying excise duty on the basis of quantum of production, the power of levy of excise duty under this provision is for notified goods on the basis of relevant factors of production. The rationale for notification of...
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