Full Judgment Text
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PETITIONER:
COMMISSIONER OF CENTRAL EXCISE & CUSTOMS
Vs.
RESPONDENT:
M/S VENUS CASTINGS (P) LTD.
DATE OF JUDGMENT: 05/04/2000
BENCH:
S.N.Phukan, S.R.Babu
JUDGMENT:
RAJENDRA BABU, J. :
These appeals are filed under Section 35-L(b) of the
Central Excise Act, 1944 (hereinafter referred to as ‘the
Act’]. The background facts leading to these appeals are
that the manufacturer, who is a respondent herein, having
availed of the procedure for payment of duty under the Act
in terms of Rule 96ZO(3) of the Central Excise Rules cannot
claim the benefit of Section 3A(4) for determination of
actual production and re- determination of amount of duty
payable by him with reference to the actual production at
the rates as specified in the said Section. Earlier on
several occasions when the matter reached the Tribunal the
view taken is that the Collector (Appeals) had to follow the
orders made by the Tribunal and the order made by the
Collector is not in accordance with law inasmuch as no duty
is payable by the manufacturer otherwise than on actual
production and clearance and no demand of duty could be made
or recovered on the basis of production capacity alone
without verification. In case of M/s Minakshi Castings (P)
Ltd., one of the respondents before us, it is held that the
right vested in the assessee under Section 3A(4) cannot be
denied on the ground that he had opted for payment of duty
under Rule 96ZO(3). The matter is remanded to the
Commissioner for determination of the actual production and
re-determination of duty liable to be paid with reference to
the actual production in accordance with the provisions of
Section 3A(4). Hence these appeals.
In another batch of matters writ petitions have been
filed before the High Court of Delhi and certain orders have
been obtained thereto at the interim stage which are subject
matter of another appeal before us and in those
circumstances the Delhi High Court had ordered that "it will
be open to the manufacturers to submit applications on the
basis of actual production and, if any such application is
submitted, the same shall be duly considered by the
competent authority in accordance with the Rules." Now we
are informed at the bar that the very questions arising in
the cases before us stand referred to a Larger Bench by the
Tribunal for deciding (i) whether there is any conflict
between the provisions of sub-section (4) of Section 3A of
the Act and sub- rule (3) of Rule 96ZO of the Central Excise
Rules ?, and (ii) whether a manufacturer who has exercised
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the option to make payment of amount based on total furnace
capacity installed in his factory under sub-rule (3) of Rule
96ZO and not on the basis of annual capacity of production
can make an application for determining the actual
production during the period his aforesaid option is in
operation ?
An objection has been raised that these appeals do not
involve determination of any question having a relation to
the rate of duty of excise or to the value of the goods for
purpose of assessment and, therefore, even if at all
aggrieved by the order of the Tribunal ought to have
followed the procedure in Section 35- L(a) of obtaining a
reference to the High Court and on its decision to approach
this Court under certificate. The learned Attorney General
without entering into the controversy as to whether an
appeal in this case is maintainable or not made it clear
that he would seek conversion of these appeals into
petitions for grant of special leave under Article 136 of
the Constitution of India. Appropriate applications in this
regard have also been made.
When the wind out the same sails set in by the
respondents has been taken off by the astute stand of the
learned Attorney General, the learned counsel for the
respondents addressed arguments that these are not fit cases
where this Court should exercise its discretion under
Article 136 to grant leave and entertain these appeals.
It is no doubt true that a Larger Bench of the
Tribunal itself is now seized of the very question raised in
these appeals. However, the learned Attorney General
pointed out that there are at least two decisions of the
Andhra Pradesh High Court and Allahabad High Court on this
issue. In Sathavahana Steels & Alloys (P) Ltd. vs.
Government of India, 1999n (114) ELT 787, the Andhra Pradesh
High Court has taken the view that Rule 96ZO(3) of the
Excise Rules has been framed for the facility of assessees
and being at the volition and option of the assessee to
avail of the said procedure instead of the procedure under
sub- rules (1) and (2) thereof and once such option is
availed of he takes advantages and disadvantages associated
with it. An assessee who comes under the purview of
sub-rule (3) of the scheme cannot obviously avail of the
reliefs provided to the assessee who preferred to pay duty
in accordance with sub-rule (1) thereof. The High Court
further stated that it is not probable that the assessee
will not be aware of the adverse factors which affect
production. He cannot, therefore, claim that provisions for
abatement of duty and re-determination of the capacity as
contained in the proviso to sub- sections (3) and (4) of
Section 3A should be imported to Rule 96ZO(3). When once
the assessee opts for lumpsum payment under Rule 96ZO(3) he
forgoes the benefit under the proviso to sub-sections (3)
and (4) of Section 3A as laid down in express and
categorical terms by sub-rule (3) of Rule 96ZO of the Excise
Rules. The Allahabad High Court in Pravesh Castings (P)
Ltd., Kanpur Nagar vs. Commissioner of Central Excise,
Allahabad & Anr., 2000 (36) RLT 239, directed the
Commissioner to re- determine the production capacity afresh
and to follow the orders of the Tribunal. There is no
discussion as to the scope of the relevant rules or the
provisions of the enactment. Again another Bench of the
Allahabad High Court considered this question in Civil
Miscellaneous Writ Petition No. 1127 of 1999 M/s Jalan
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Castings (P) Ltd. vs. Commissioner of Central Excise &
Ors.. wherein the view taken is that when a manufacturer
has asked for a lumpsum method of assessment as provided
under Rule 96ZO(3) of the Excise Rules, the manufacturer
cannot back out and claim that he should be assessed in the
normal mode under Section 3A(4) of the Act and such a course
is not available to him. In these circumstances, when
different Benches of the same High Court have taken
different views and another High Court has taken a view
contrary to what has been stated by the Tribunal and when
there is uncertainty as to the state of law, it is eminently
proper for this Court to grant leave in such a matter and
settle the legal position. We thought over the matter as to
whether we should ourselves consider the questions raised
before us or set aside the order impugned before us and
remand the matter to the Tribunal for a fresh consideration.
We are of the view that when there is uncertainty in law so
far as the High Courts are concerned, it is not at all
proper to allow the Tribunal to re- examine the matters as
it would not be in the interest of either the assessee or
the Department. In this special background, we do not think
we can accede to the objection raised on behalf of the
respondents that we should not entertain the special leave
petitions and reject these matters. On the other hand, we
would grant leave and proceed to deal with these appeals.
In these proceedings the validity of the provisions of
the Rules is not in challenge but only their interpretation
and application have to be examined.
Section 3A of the Act enables the Central Government
to charge excise duty on the basis of capacity of production
in respect of notified goods. This clause came to be
inserted in the Act by the Finance Act, 1997. The intention
to introduce this provision appears to be that in certain
sectors, like induction furnaces, steel re-rolled mills,
etc. evasion of excise duty on goods is substantial and the
production is not disclosed accurately and collection of
excise duty on the basis of their production capacity is
thought of as appropriate. Under the scheme evolved in this
provision the annual production capacity of mills and
furnaces is determined by the Commissioner of Central Excise
in terms of the Rules to be framed under Section 3A(2) of
the Act by the Central Government. Thereafter, the assessee
would be liable to pay duty based on such determination. If
the annual production capacity determined by the
Commissioner is disputed by the assessee, the Commissioner
is required to re-determine the same as provided in Section
3A(4).
Rules 96ZO and 96ZP provide for procedure to be
followed by the manufacturer of ingots and billets and hot
re-rolled products respectively. The scheme envisaged under
these provisions is identical. These two Rules come into
play after the Commissioner of Central Excise determines the
annual capacity of the factory or mills manufacturing ingots
or billets and hot re-rolled steel products under Section
3-A of the Act read with the relevant annual capacity
determination rules. Rules 96ZO and 96ZP proceed to lay
down the manner of payment of duty, claim for abatement
non-payment, payment of interest/penalty and such other
incidental matters. Rule 96ZO classifies the manufacturers
into two classes, those whose furnace capacity is 3 tonnes
and other manufacturers with high capacity of furnaces. The
rate of duty payable, except for period from 1.1.1997 to
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31.3.1998 which was the transitional period, is Rs. 750/-
per tonne, at the time of clearance. Total amount of duty
should be paid by the 31st March of relevant financial year,
otherwise interest at the rate of 18 per cent per annum is
payable and if the duty has not been paid by this date
penalty is also payable which is equal to outstanding duty
or Rs. Five thousand whichever is greater. Sub-rule (2)
thereof provides that if no ingots and billets are produced
for a continuous period of seven days, the manufacturer may
claim abatement by following appropriate procedure.
Sub-Rule 3 thereof envisages a composition method of payment
of duty. Manufacturers of ingots and billets with furnace
capacity of 3 tonnes have an option of paying duty of Rs.
Five lakhs per month in two equal instalments prior to 15th
of a month and by last date of that month. Such payment is
treated to be in full discharge of duty liability. The Rule
specifically excludes application of Section 3A(4). But
manufacturers opting for this composite scheme cannot claim
abatement. If the furnace capacity is less than or more
than 3 tonnes payment of Rs. 5 lakhs can be varied on
pro-rata basis. The manufacturer opting for this composite
scheme has to give a declaration to the Jurisdictional
Assistant Commissioner as provided under the Rules. There
are similar provisions in relation to hot re-rolled
products. By reason of the assessee having exercised his
desire of paying duty based on total furnace capacity the
determination of annual capacity of production is not
determined by the Revenue as the procedure adopted obviates
determination of production. In the absence of
determination of production the question of its
determination on the basis of actual production as detailed
in Section 3A(4) of the Act does not arise.
The schemes contained in Section 3A(4) of the Act and
Rule 96ZO(3) or Rule 96ZP(3) of the Excise Rules are two
alternative procedures to be adopted at the option of the
assessee. Thus the two procedures do not clash with each
other. If the assessee opts for procedure under Rule
96ZO(1) he may opt out of the procedure under Rule 96ZO(3)
for a subsequent period and seek the determination of annual
capacity of production. An assessee cannot have a hybrid
procedure of combining the procedure under Rule 96ZO(1) to
which Section 3A(4) of the Act is attracted. The claim by
the respondents is a hybrid procedure of taking advantage of
the payment of lumpsum on the basis of total furnace
capacity and not on the basis of actual capacity of
production. Such a procedure cannot be adopted at all, for
the two procedures are alternative schemes of payment of
tax.
The learned counsel for the respondent contended that
the Rule 96ZO(3) is contrary to Section 3A(4) of the Act
and, therefore, should be held to be ultra vires or read the
relevant rules in such a manner as to allow the procedure
prescribed under the provisions of Section 3A(4) to be
followed. Section 3A of the Act provides for levy and
collection of the tax arising under the Act in such manner
and at such rate as may be prescribed by the Rules. Section
3A provides special procedure in respect of the power of the
Central Government to charge excise duty on the basis of
capacity of production in respect of notified goods. If
such interpretation is not accepted, it is contended, that
the levy of tax is in the nature of a license fee and not on
production of goods at all. Schemes of composition are
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available in several other enactments including the Sales
Tax Act and the Entertainment Tax [ See : State of Kerala &
Anr. vs. Builders Association of India & Ors., 1997 (2)
SCC 183]. In this context, the learned counsel for the
respondents referred to several decisions. However, in our
opinion, all these decisions either arising under the Income
Tax Act in relation to special mode of collection of tax or
excise duty on timber dealers or other enactments have no
relevance. What can be seen is that the charge under the
Section is clearly on production of the goods but the
measure of tax is dependent on either actual production of
goods or on some other basis. The incidence of tax is,
therefore, on the production of goods. It cannot be said
that collection of tax based on the annual furnace capacity
is not relatable to the production of goods and does not
carry the purpose of the Act. In holding whether a relevant
rule to be ultra vires it becomes necessary to take into
consideration the purpose of the enactment as a whole,
starting from the preamble to the last provision thereto.
If the entire enactment is read as a whole indicates the
purpose and that purpose is carried out by the rules, the
same cannot be stated to be ultra vires of the provisions of
the enactment. Therefore, it is made clear that the
manufacturers, if they have availed of the procedure under
Rule 96ZO(3) at their option, cannot claim the benefit of
determination of production capacity under Section 3A(4) of
the Act which is specifically excluded. We find that the
view taken by the Andhra Pradesh High Court in Sathavahana
Steels & Alloys (P) Ltd. vs. Government of India (supra)
and the similar view expressed by the Division Bench of the
Allahabad High Court in Civil Miscellaneous Writ Petition
No. 1127 of 1999 M/s Jalan Castings (P) Ltd. vs.
Commissioner of Central Excise & Ors. disposed of on
February 28, 2000 is reasonable and correct. We overrule
the view taken by the Allahabad High Court in Pravesh
Castings (P) Ltd., Kanpur Nagar vs. Commissioner of Central
Excise, Allahabad & Anr. (supra).
On the reasoning adopted by us and bearing in mind
that in taxation measures composition schemes are not
unknown and when such scheme is availed of by the assessee
it is not at all permissible for him to turn around and ask
for regular assessment, we think, there is no substance in
the contention urged on behalf of the respondents.
There are a few peripheral submissions made on behalf
of the respondents that in several cases the Commissioners
have wrongly fixed the furnace capacity and that aspect has
to be examined by the Tribunal in such cases. In these
cases, therefore, we set aside the orders made by the
Tribunal and direct the Tribunal to bring the orders in
conformity with the view expressed by us and pass
appropriate orders.
We allow these appeals accordingly. However, in the
circumstances of the case there shall be no orders as to
costs.
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