2000 Supreme(SC) 718

2000(3) Supreme 257
SUPREME COURT OF INDIA
(From Central Excise Customs and Gold (Control) Appellate Tribunal, New Delhi)
S. Rajendra Babu & S.N. Phukan, JJ.
Commissioner of Central Excise & Customs -Appellant
versus
M/s. Venus Castings (P) Ltd. etc. etc. -Respondents
Civil Appeal No. 4998 of 1999
With
Civil Appeal Nos. 5716-5720/99, 2292-2293 of 2000
(Arising from C.A. No. D 12969/99), 7146/99, 668-669/2000, and 1461-1462/2000
Decided on 5-4-2000
Counsel for the Parties :
For the Appearing Parties : Soli J. Sorabjee, Attorney General, Harish N. Salve, Solicitor General, C.S. Vaidyanathan, Additional Solicitor General, Ms. Sunita Inna, P. Parmeswaran, Jaideep Gupta, Ms. Nisha Bagchi, R. Santhanam, Rajendra Singhvi, Ashok K. Singh, A. Subba Rao, K. Swamy, C.N. Sree Kumar, Ms. Shipra Ghose, P.C. Jain, Sandeep Jain, R. Krishnan, Manmohan, Dhirendra Negi, Advocates.

Headnote:(i) Central Excise Act-Section 3A(4)-Central Excise Rules-Rule 96ZO(3)-Composition method of payment of duty-Scheme contained in Section 3A(4) and Rule 96ZO(3) or Rule 96ZP(3) are two alternative procedures to be adopted at option of assessee-If assessee opts for procedure under Rule 96ZO(1) he may opt out of procedure under Rule 96ZO(3) for subsequent period and seek determination of annual capacity of production-If procedure under Rule 96ZO(3) availed of a manufacturer cannot claim benefit of determination of production capacity under Section 3A(4).

       Held : 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). (Para 8)

       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 determine 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 annaul 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 manufactures 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 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 manufcturers 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. (Para 9)

       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 opinion 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. (Para 10)

       (ii) Central Excise Rules-Rule 96ZO(3)-Vires of-Challenge that Rule 96ZO(3) is contrary to Section 3A(4) of Act and therefore ultra vires-Untenable-Collection of tax is on production of goods-Collection of tax based on annual furnace capacity is relatable to production of goods-Rule not ultra vires Section 3A(4).

       Held : 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. 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. 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. (Paras 11 and 12)